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Bitcoin and the

Blockchain Technology

Written by Ivan On Tech

Learn more at youtube.com/c/ivanontech

Introduction
Hi there !

We are living in truly exciting times and blockchain technology is one of the main technological
trends that can change our societies forever. Therefore I’m so glad you stumbled upon my small
ebook on Bitcoin and the blockchain technology.

This is a book for people who are very new to the field of cryptocurrencies and the blockchain
technology. I understand that entering this space is very tough and overwhelming, I’ve been
there myself and I’m writing this book to help you and your family secure a firm understanding of
how this new exciting technology works.

A lot of this confusion has to do with the word cryptocurrency itself. Today we have over 1000
such currencies listed on https://coinmarketcap.com and they are all different from each other in
one way or another. The reason why the word cryptocurrency is confusing is because many of the
coins and tokens existing today are not really currencies - instead they are assets, voting rights in
decentralized organizations, fuel for decentralized applications etc.

I know that the words in the last sentence might have sounded complex and confusing. This is
because the concepts such as decentralized applications and decentralized organizations were
not widely used until the launch of Ethereum in 2015.

The first step is to learn and understand the basics. This book will focus on Bitcoin - the grandpa
of all modern cryptocurrencies and will give you all the knowledge necessary to understand cryp-
tocurrencies and the blockchain technology in their basic form. Having this solid foundation of
knowledge will make it easier for you to understand Ethereum, smart contracts and Blockchain
2.0 which will be explained in the sequel to this book.

I hope you enjoy and learn a lot!

“Blockchain is the tech. Bitcoin is merely the first mainstream

manifestation of its potential.”

- Marc Kenigsberg

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What you will learn

Being very active within the cryptocurrency space there are a number of recurring
questions I get from people who are new to Bitcoin. Questions such as:

1) What is Bitcoin?
2) What is the blockchain technology?
3) Who are the miners?
4) What is the social and economic impacts of Bitcoin?
5) Why is Bitcoin associated with crime?
6) Who is the creator of Bitcoin - Satoshi Nakamoto?
7) How is Bitcoin developed currently?
8) What are Ethereum, ICOs, Smart Contracts and Blockchain 2.0?

The aim of this book is to make the onboarding process for people interested in these
technologies easier by explaining step by step how the blockchain revolution started
back in 2009 with Bitcoin and the journey from there to today’s cryptocurrency
industry with over a thousand cryptocurrencies listed on different exchanges.

My goal is that by finishing this book you will be able to answer all of the questions
above.

What if I can answer all of the questions already?

If you feel that you already can answer all of the questions above, pass this book
to your family or your friends who you think would benefit from the knowledge
presented in this book.

However, I would like to add that this book might broaden your perspectives and
knowledge even if you think you already have a good overview of blockchain
technology.

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Who am I?

Why should you trust this book as a valid source of knowledge and spend your precious time reading it?

Let me introduce myself.

My name is Ivan Liljeqvist and I’m a software developer and computer engineer from Sweden. Program-
ming is my biggest passion in life and I’ve been coding since I was 9 years old. Currently, I am mostly
known for my YouTube channel called Ivan On Tech, youtube.com/c/ivanontech, where I educate peo-
ple about cryptocurrencies, programming, blockchain, career advice, etc.

Software development, blockchain, programming and technology as a whole are topics I care deeply
about and the fact that I get to work within tech and educate people about the things I am passionate
about is a blessing to me.

“Bitcoin will do to banks what email did to

the postal industry.”
- Rick Falkvinge

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Bitcoin and the Blockchain Revolution
Bitcoin - the predecessor of all modern crypto-
currencies. Created in 2009 by an anonymous
person or group of people with the pseudonym
Satoshi Nakamoto.
What is Bitcoin?
Let’s first talk about what Bitcoin is and what it
offers to the world.
Bitcoin is Internet money, anyone in the world
can open an account and start sending and
receiving funds. The only thing you need in
order to open an account is a computer or
mobile phone and an Internet connection.
The Bitcoin network is operating 24/7,
enabling everyone to send and receive funds
all the time. Sending funds to anyone takes just
a few minutes, , even if the recipient is located
across the globe. There is no such concept as
“banking days” or “weekends” when it comes to
transacting with Bitcoin.
In order to truly grasp the importance of
Bitcoin one has to understand the two central
properties of the Bitcoin network, namely that
Bitcoin is decentralized and trustless.
Bitcoin is decentralized
No single entity controls Bitcoin. There is
no central bank of Bitcoin and no institution,
organisation or company has total control of
the network. This is what we mean when we say
that Bitcoin is decentralized.
Decentralization has important consequences.
For example, no one can suddenly mint additional
Bitcoins, the protocol ensures that there will
never be more than 21 million Bitcoins created.
Imagine how valuable this is to people living in
countries with unstable currencies, where you
don’t know if your hard earned money will be
worth anything in a few months.
This is something I have personal experience
with. When my family moved to Sweden from
Belarus back in 2006 you could buy 1 US dollar
with 2k Belarusian rubles, ten years later one
dollar was suddenly worth over 20k rubles and
even more on the black markets as buying US
dollars from banks and ATMs wasn’t an easy
task. This hyperinflation led to the government
performing a redenomination of the currency.
Instead of relying on the US dollar or the
Euro or whatever fiat currency your country
has you have the alternative of relying on the
Bitcoin protocol and the mathematics and
cryptography that lie at the foundation of the
Bitcoin network.
This way Bitcoin is totally outside any
government, nation state or country and
therefore is a totally new economic and social
paradigm. Bitcoin gives people an alternative
way of storing value and transacting all over
the globe.
Bitcoin is trustless
The network is structured in such a way that
there is no need to trust any other party in
the network. There is no way for anyone to lie
about the number of Bitcoin they have, there is
no way for anyone to forge transactions, there
is no way for anyone to take your Bitcoin from
you (as long as you control your private key).
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Blockchain Technology
“How can this technology ever work?” Is a common question people who are just learning about
cryptocurrencies ask. When I first heard about Bitcoin, I asked exactly the same question and
couldn’t really believe it. I think it has to do with the fact that people apply their current knowledge
and experience with computers to cryptocurrencies.

For example, It is easy to fall into the trap of instinctively thinking that because Bitcoin is this
“computer money” anyone could just multiply Bitcoin by copying and pasting them.

In this section I will briefly explain which technologies ensure the decentralized and trustless
properties of the network.

First of all, we need to understand that Bitcoin is a peer-to-peer (P2P) technology without any
central bank, server, institution, government or company managing it. If you’ve ever heard of torrent
technology - this is similar in the way that there is no single point of failure. The Bitcoin protocol
and software coordinate the entire network. This P2P technology enables the decentralized
property of Bitcoin network.

What guarantees the trustless property then? This is where the blockchain comes into play. The
blockchain is a public database of all transactions that ever happened on the Bitcoin network.
This database is constructed of blocks that are cryptographically linked together forming a chain,
therefore the name “blockchain”. Each block contains a set of transactions during a period of time.
A copy of this public database is distributed to everyone in the network (except the light clients,
but let’s ignore this for now).

I know that the paragraph above might have sounded a bit too complicated. But the consequence of
the blockchain being a chain of blocks cryptographically linked together is that if someone decides
to cheat the network and claim that they have more coins than they actually have they would need
to alter a transaction made in a previous block.

This would break the cryptographic link between the blocks in the blockchain and because everyone
else has a copy of the blockchain everyone else would be able to detect this fraud because the
cryptographic links would not match.

To recap, we can think of the blockchain as the technology that makes the implementation of
Bitcoin and its properties possible.

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Meet the miners

You may have heard of Bitcoin miners. Let me explain what miners do
in a couple of sentences without involving technical details.

They are the book keepers of the system . They process and put
transactions into blocks. Mining Bitcoin involves solving computation-
ally difficult cryptographic puzzles. The miner that manages to solve
the puzzle first gets rewarded in Bitcoin.

When a transaction is propagated through the network and reaches

a miner, the miner checks that the transaction actually is valid.
Theoretically a miner could validate non-valid transactions but other
miners would quickly notice that and the malicious miner wouldn’t be
able to claim the mining reward.

This way miners are incentivized to perform their job correctly. Today
different companies are building data centers in order to profit from
Bitcoin mining. Especially in countries where electricity is cheap, such
as Mongolia.

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Bitcoin and Crime

“Isn’t Bitcoin that thing drug dealers use?” is one of the most common reactions I get
when I try to explain Bitcoin to someone who is just starting to learn. Unfortunately
Bitcoin and cryptocurrencies are used by criminals to a large extent and this is often
used as an argument against cryptocurrencies in general.

However there is a fundamental flaw with this reasoning. We have to realize that
almost all significant technologies were early on adopted by criminals. The Internet,
cars, telephones and probably even shoes. This is simply because the criminals have
everything at stake and operate in an extremely high-risk environment. They are
forced to adopt the new technologies in order to stay ahead.

While we still have a criminal minority using cars, Internet and telephones today
most people use these technologies for in their daily lives. I think that we will see
a similar development with Bitcoin and cryptocurrencies. The more mainstream a
technology becomes the less attention will be focused on the few criminal use cases.

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Mysterious Satoshi

Bitcoin was created by a developer or a group of developers named Satoshi Nakamoto. Satoshi
Nakamoto is a pseudonym and no one knows for sure who this person or group of people is.

“Aren’t you suspicious that Satoshi Nakamoto is anonymous?” is a valid question many people ask.
I understand that the fact that the creator of Bitcoin is anonymous is strange to most people.
Personally I would also be concerned if Bitcoin wasn’t an open source, decentralized and transparent
peer-to-peer network.

This makes the real identity of Satoshi completely irrelevant. Bitcoin was released as an open
source project and the Bitcoin protocol invented by Satoshi is more of a blueprint than anything
else. Satoshi has no control over the network.

Much like we don’t know for sure who Euclid, Pythagoras or Archimedes were, we can still use
their principles and ideas in our modern science. The identities of Euclid, Archimedes, Pythagoras
and Satoshi Nakamoto are completely irrelevant to us, we don’t care if they were good or bad
people, honest or dishonest - there is no connection between their personalities and the concepts
they introduced to humanity.

“It’s gold for nerds.”

- Stephen Colbert

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The development of Bitcoin

Since Satoshi Nakamoto released Bitcoin to the world it has been developed as an open source
project. You can access the code and start contributing to the development here:

https://github.com/bitcoin/bitcoin

Being an open source project, anyone can download the code, review what the code does,
contribute to the project, develop new features, fix bugs, write tests or do anything else that is
required in any software project.

Building projects in an open source manner is really at the core of the cryptocurrency space.
Anyone should be able to verify what the code is doing and suggest improvements. That is the
spirit of crypto currencies.

If you are not familiar with the open source culture, and if you’ve never been a part of an open
source project, the fact that so many people are willing to work for free and contribute to the
development of Bitcoin might sound strange. The incentive to help and contribute lies in the
prestige and recognition. All code changes and improvements you contribute to an open source
project are visible to anyone and if you manage to get your contribution accepted and merged into
the main Bitcoin codebase you can proudly call yourself a Bitcoin developer.

40 minutes of Bitcoin knowledge

If you liked the content of this chapter and want to see a 40 minute video on Bitcoin in which I
explain Bitcoin you can view it here:

https://www.youtube.com/watch?v=K5OmkcDiYXM

“Bitcoin is a technological tour de force.”

- Bill Gates
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Ethereum and Blockchain 2.0

Now that we understand the core principles and technologies behind Bitcoin we can start talking about
Ethereum, smart contracts, decentralized application and all other buzzwords that this innovation has
given humanity.

This chapter is intended as a high level overview of these concepts and I’m currently working on an e-book
that will explain everything about Blockchain 2.0 in more depth.

Bitcoin in itself is a money application running in a decentralized manner. What if we could build any
application and make it run in a decentralized manner just like Bitcoin? These decentralized applications
wouldn’t have a single point of failure, there would be no central server that executes the code and the
code itself is immutable. This idea is really revolutionary because many of the middlemen we use currently
such as AirBnb, Uber and Facebook can be eliminated completely. There would be no need to have a huge
company storing all the code and data on their centralized servers.

This is exactly what Vitalik Buterin, the founder of Ethereum was thinking. Although Bitcoin has always
had a scripting language it is very primitive and has few limited use cases. Vitalik’s vision was to add a
powerful programming language to Bitcoin and let developers build their own decentralized applications
on top of the Bitcoin blockchain.

However, this idea didn’t receive much traction within the Bitcoin community, so Vitalik decided to start
build an entirely new project that would be a platform for decentralized applications. This project is
currently known as Ethereum and Blockchain 2.0 refers to post Bitcoin projects such as Ethereum and
Lisk, focused on decentralized applications.

My favorite use cases for decentralized applications are the decentralized autonomous organizations
(DAO). All the rules a DAO lives by are encoded into smart contracts running on the blockchain. These
rules can, for example, describe how the decision process looks like, how voting in this particular DAO
works, what happens when a person is hired or fired, etc.

As I mentioned earlier, Ethereum is currently the biggest, (as of writing in 2017) but not the only
platform for decentralized applications. Lisk, NEO and EOS among others are also aspiring to become
popular platforms for decentralized applications. All of these projects, including Ethereum, are still in
the experimental phase, and we’re yet to see how Blockchain 2.0 plays out and whether it will be able to
reach the grand vision of a decentralized world.

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Final Thoughts
I want to thank you for taking your time and learning
about Bitcoin and the blockchain technology and
I hope you learned a lot and feel that you have a
better understand of this new, exciting but maybe a
bit confusing industry.

If you want to learn more about this every day - follow

my Youtube channel Ivan On Tech - https://youtube.
com/c/ivanontech.

I want to thank Andreas Antonopolous for inspiring

me to do my Youtube channel and start educating
people about the blockchain and everyone who has
helped me write this e-book.

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