Introduction to Bitcoin

Karl R. Heintz
Speech 100
Prof. Smith

Main Points
Short history of Bitcoin
Brief description of Bitcoin
Recent developments

Where did Bitcoin come from?

Basic idea came from a group now known as the crypto-punks (Ever heard
of BitTorrent?)

1998 Wei Dai first suggests a form of currency using cryptography to

control its creation and transactions (Bitcoin Foundation)

Satoshi Nakamoto
Publishes the famous paper
Bitcoin: A Peer-to-Peer Electronic
Cash System in 2009

Later released the code for Bitcoin

through mailing lists, left the
Bitcoin project to others in 2010

What is Bitcoin?

The short, geeky answer is BitCoin is the world's first

distributed electronic currency. If you are not a geek, some of
those words probably don't make any sense to you. The nongeeky short answer is that it is a new kind of money that we are
using on the Internet.
Gavin Andresen, principal of the BitCoin Foundation, on a 2009 EconTalk interview

Whats so unique?
P2P (Peer-to-peer) technology
Open-source
Decentralized

Open source means that the source code, the computer

programming language code, is available for anybody to look at;
in this case it's available for anybody to take and modify, do
whatever you like with it. Completely free and open.
Gavin Andresen on Bitcoin as an open-source currency

Decentralized
No central organization manages or
controls the movement of Bitcoins

Recent Developments
IRS Decision

Mt. Gox Crash

Mt. Gox Crash

February of this year
One of the largest online Bitcoin exchanges lost 850,000 BTC (Bitcoins),
valued at $425 million USD

Statement from Karpeles

There was a weak area in the
system, and, as a result, we lost
Bitcoins. I am deeply sorry that I
have caused trouble to everyone.
(Mark Karpeles, CEO of Mt. Gox)

2014 IRS Ruling

March 2014 Internal Revenue Service ruled that Bitcoin will be considered
property rather than currency for all legal and taxation purposes

The IRS has officially stated that bitcoin is a property similar

to any other valuable commodity rather than a currency.
What does this mean? Not much. In short, if you pay someone
in bitcoin in the same way you could pay them in gold the
wages are taxed accordingly. It is also not considered legal
tender but a capital asset.
John Biggs, IRS Rules Bitcoin Is Property, Not Currency (25 Mar 2014)

IRS on the legal status of Bitcoin

In some environments, virtual currency operates like real currency but
it does not have legal tender status in any jurisdiction

A payment made using virtual currency is subject to information reporting

to the same extent as any other payment made in property.