Blockchain Bitcoin Introduction - How a decentralised crypto currency network work

1. Blockchain
How does a decentralised
crypto currency network work?

2. Money
Centralised vs Decentralised
Issued and processed by
central bank
Issued and processed by
anyone by predefined rules

3. Peer to peer network
Signed by pkAlice
Pay to pkBob H( ) broadcast
No central authority to censor user’s transactions
The network abides to the predefined rules.

4. Who can become the bank?
Who?
A node may crash
A node maybe malicious
Not all is connected Faulty in network
Latency
Global time

5. Lottery Game – Each round everyone try to find a block
Chance to find a
valid block is
proportional to the
computing power
found
Anyone can
have a
chance to find
a valid block
Broadcast

6. Lottery Game – Mining & Proof of Work Consensus
Accepted!!!
found
Other nodes accept
new block or reject it

7. Lottery Game – Start a new round, new block
Who next?

8. It is like buying lottery tickets for each round…
But only 1 winner
Winner?
The more tickets
you buy, the more
chance you win.
But anyone can
win with 1 ticket.

9. Probabilistic block generation time
A new block can be expected
any time from 0 to infinity
Mean time to find a block =
10 minutes / fraction of hash power

10. Question:
The chance of getting a block before 10 minutes is:
• More than 50%
• Less than 50%
• Exactly 50%

11. Crypto currencies - How it works

12. References
• https://www.youtube.com/watch?v=6WG7D47tGb0
• Bitcoin and Cryptocurrency Technologies, Princeton, various
authors