Transcript of "Bitcoin: A Peer-to-Peer Electronic Cash System"
Bitcoin: A Peer-to-Peer Electronic Cash
October 21, 2008
OUTLINE FOR THE SEMINAR
1.What Is Bitcoin
5.Getting Started With Bitcoin
6.What Is Bitcoin Mining
7.How Bitcoin Works
8.Architecture From The Paper
WHAT IS BITCOIN
• First Decentralized Digital Currency
• No Bank, Very Less Fee
• P2p(no Third Party Involved)
• No Prerequisite And Limit
• Can Be Used Anywhere Across The World
• Transaction Are High Speed, Low Cost, Secured
• A purely peer-to-peer version of electronic cash
would allow online payments to be sent directly from
one party to another without going through a
• Digital signatures provide part of the solution, but
the main benefits are lost if a trusted third party is
still required to prevent double-spending.
• The network timestamps transactions by hashing
them into an ongoing chain of hash-based proof-of-
work, forming a record that cannot be changed
without redoing the proof-of-work.
• Commerce on the Internet has come to rely almost
exclusively on financial institutions serving as trusted
third parties to process electronic payments.
• Completely non-reversible transactions are not really
possible, since financial institutions cannot avoid
• What is needed is an electronic payment system
based on cryptographic proof instead of
trust, allowing any two willing parties to transact
directly with each other without the need for a
trusted third party
2008 2009 2010 2011 2012 2013 2014
October 31, 2008
January 11, 2009
First Bitcoin client released
February 6, 2010
Bitcoin Market – first
exchange – is founded
May 21, 2010
First real-world goods purchased
July 17, 2010
MtGox is established
March 21, 2011
Bitcoin user survives 3 month
road trip on bitcoin alone
March 28, 2013
Total Bitcoin market cap
passes $1 billion USD
February 28, 2013
MtGox Exchange rate
nears nearly $32 USD
September 27, 2012
GETTING STARTED WITH BITCOIN
WHAT IS BITCOIN MINNING
• Bitcoin Is A P2P Network ,No Centralized
• Bitcoin Has Miners
• To Process The Transaction The Miners
Solve The Math Problem
• After The Transaction Is Approved, Miners
Are Given Rewards(i.e. Bitcoin)
HOW BITCOIN WORKS
• During mining, your computer runs a cryptographic hashing function (two
rounds of SHA256) on what is called a block header.
• For each new hash, the mining software will use a different number as the
random element of the block header, this number is called the nonce.
• Depending on the nonce and what else is in the block the hashing function will
yield a hash which looks like this:
• Now to make mining difficult, there is what's called a difficulty target.
• To create a valid block your miner has to find a hash that is below the difficulty
target. So if for example the difficulty target is
,any number that starts with a zero would be below the target, e.g.:
TECHNICAL BACKGROUND CONT…
• Because the target is such an unwieldy number with tons of digits, people
generally use a simpler number to express the current target. This number is
called the mining difficulty. The mining difficulty expresses how much harder
the current block is to generate compared to the first block. So a difficulty of
70000 means to generate the current block you have to do 70000 times more
work than Satoshi had to do generating the first block. Though be fair
though, back then mining was a lot slower and less optimized.
• The difficulty changes every 2016 blocks. The network tries to change it such
that 2016 blocks at the current global network processing power take about 14
days. That's why, when the network power rises, the difficulty rises as well.
ARCHITECTURE FROM THE PAPER
MINING HARDWARE MINING SOFTWARE
o In the beginning, mining with a CPU was the only way to
mine bitcoins. Mining this way via the original Satoshi
client is how the bitcoin network started. This method is
no longer viable now that the network difficulty level is
so high. You might mine for years and years without
earning a single coin.
o Soon it was discovered that high end graphics cards
were much more efficient at bitcoin mining and the
landscape changed. CPU bitcoin mining gave way to the
GPU (Graphical Processing Unit)
o As with the CPU to GPU transition, the bitcoin mining
world progressed up the technology food chain to the
Field Programmable Gate Array.
oThe bitcoin mining world is now solidly in the Application
Specific Integrated Circuit (ASIC) era. An ASIC is a chip
designed specifically to do one thing and one thing only.
• BitCoin Plus
• BTC Guild
TOTAL NUMBER OF BITCOIN
STEP 1: INSTALLING THE BITCOIN WALLET
STEP 2: INSTALLING THE MINING SOFTWARE
• We have proposed a system for electronic transactions
without relying on trust.
• We started with the usual framework of coins made from
digital signatures, which provides strong control of
ownership, but is incomplete without a way to prevent
• To solve this, we proposed a peer-to-peer network using
proof-of-work to record a public history of transactions
that quickly becomes computationally impractical for an
attacker to change if honest nodes control a majority of
•  W. Dai, "b-money," http://www.weidai.com/bmoney.txt, 1998.
•  H. Massias, X.S. Avila, and J.-J. Quisquater, "Design of a secure timestamping service with minimal trust requirements," In 20th
Symposium on Information Theory in the Benelux, May 1999.
•  S. Haber, W.S. Stornetta, "How to time-stamp a digital document," In Journal of Cryptology, vol 3, no 2, pages 99-111, 1991.
•  D. Bayer, S. Haber, W.S. Stornetta, "Improving the efficiency and reliability of digital time-stamping," In Sequences II: Methods
in Communication, Security and Computer Science, pages 329-334, 1993.
•  S. Haber, W.S. Stornetta, "Secure names for bit-strings," In Proceedings of the 4th ACM Conference on Computer and
Communications Security, pages 28-35, April 1997.
•  A. Back, "Hashcash - a denial of service counter-measure,“ http://www.hashcash.org/papers/hashcash.pdf, 2002.
•  R.C. Merkle, "Protocols for public key cryptosystems," In Proc. 1980 Symposium on Security and Privacy, IEEE Computer
Society, pages 122-133, April 1980.
•  W. Feller, "An introduction to probability theory and its applications," 1957