This document discusses Bitcoin, a digital currency that uses cryptography and a decentralized network to allow for secure transactions without a central authority. It provides an overview of how Bitcoin works, including how transactions are broadcast across the network and collected into blocks, how miners compete to validate blocks by solving cryptographic puzzles, and how the difficulty of these puzzles is adjusted to control block creation times. Key aspects like the blockchain, block headers, mining hardware, and the increasing network hash rate over time are also summarized.

1. Bitcoin Tech
Talk
Zehady Abdullah Khan (Andy)
Graduate Assistant,
Computer Science Department,
Purdue University.

2. Bitcoin
2
Bitcoin
Digital
Currency
Public Key
Cryptograp
hy
Internet
Security
Cryptography
Financial
Transaction
E-Cash
Complex Network
Intro

3. What is Bitcoin?
• A digital currency
o Unit: BTC (1 BTC = 110 USD).
o Buy or sell goods.
o Exchange with Yen, USD etc.
• Differences
o Decentralized and Distributed.
o Very low fee.
o Very Fast Transaction.
o Non-reversible: Requires less trust .
o Pseudo-anonymous: Address <=> Address.
o Value increase (Only 21,000,000 Bitcoin)
• How do you get and use bitcoin?
o Bitcoin exchanges to buy and sell bitcoin.
o Bitcoin wallets to use bitcoin to purchase or send bitcoin.
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4. Bitcoin Network protocols
• Steps to run the bitcoin network.
o New transactions are broadcast to all nodes.
o Each node collects new transactions into a block.
o Each node works to find a difficult proof-of-work for its
block. These nodes are called Bitcoin Miners.
o When a node finds a proof-of-work, it broadcasts the
block to all nodes.
o Other nodes accept the block only if all transactions in
it are valid and not already spent.
o Nodes express their acceptance of the block by
introducing the next block, using the hash of the
accepted block.
• Bitcoin uses SHA256 cryptographic hash function.
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5. How Bitcoin looks like?
• Not a physical object like gold or paper-money.
• A chain of digital signatures in a block-chain.
o Block header
o Transactions
• https://www.youtube.com/watch?v=3ujUIz9hQ7c
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6. Block: Human Readable format
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/blockexplorer.com/block/00000000000000001588d80f3cb1d593cb198f485aef33ca926b58a62b
https://blockchain.info/tree/15296863

7. Validation of a Block
• Condition for a hash to validate a block
o Hash of block header Target
• Block Reward(B)
o 50(25) bitcoin per valid block
o Halves every 4 year
• Target(T) is a 32 byte(256 bit) number
o Current target(Tcur): “Bits” field of the block header in compact format.
o Maximum target(Tmax): 0x1d00ffff =
0x00000000FFFF0000000000000000000000000000000000000000000000000000
• Which hash will validate the block ?
• A given hash validating a block is a Random Event
o Independent of the validity of any other calculated hash
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£
Nonce
Time
Stamp
Change
A completely
different hash of the
block header

8. Block Header
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Change of Nonce Resulting Hash
3590836561 000000000000004b6cca89a20a6287dd423bbec
48d901755dfe888bc9fa948d4
0972783904 00000000000000497fc8294f1f1ba9c24c5edf016
e2e066772f7794e33b372cf
(3590836561)d=(100001011100010011100010110100101010)2
(0972783904)d=(000000111001111110111000000100100000)2
There are 2^32 different Nonces to try.

9. Block Difficulty
• Difficulty(D): A measure of how difficult it is to find a new block
compared to the easiest.
• Maximum Difficulty is set when = 1 , Tmax is defined as 0x1d00ffff
• Exp: If = 0x1b0404cb,then
o Desired rate of finding a block: 1 block / 10 minutes.
o Difficulty is adjusted after every 6*24 * 14 = 2016 blocks to maintain
the rate.
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Tcur
D =
0x1d00 ffff
0x1b0404cb
= ? =16307.669773817162
D =
Tmax
Tcur
if Tcur = 0 , D = infinity
Tcur

10. Network Hash Rate Calculation
• To find a block, the hash must be less than the target. The hash is
effectively a random number between 0 and 2^256 – 1.
• 0x00000000FFFF0000000000000000000000000000000000000000000000000000
The offset for difficulty 1 is (2^16-1) * 2^208
and for difficulty D is ((2^16-1)* 2^208) / D
• The expected number of hashes we need to calculate to find a
block with difficulty D is
D * 2^256 / ((2^16-1) * 2^208)=D * 2^48 / (2^16 – 1) = D*2^32
• Difficulty is set such that previous 2016 blocks would have been
found at the rate of 1 every 10 minutes. So, the network hash rate,
H = D * 2^48/(2^16-1)/(60* 10) = D*2^32/600
10
208 bits16bits
Tmax

11. Difficulty Graph

12. Network Hash Rate
Graph

13. Bitcoin Mining War
• https://en.bitcoin.it/wiki/Mining_hardware_comparison
• https://bitcoinwisdom.com/bitcoin/calculator

14. Bitcoin's Development
Visualized
• https://www.youtube.com/watch?v=cVGEbtIBxIE