Blockchain: The Tech Behind Bitcoin
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Bitcoin, a peer to peer decentralized open digital currency, and the technology behind it.
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Blockchain: The Tech Behind Bitcoin
- 1. Blockchain The Technology Behind Bitcoin Nitin Kumar Jain
- 2. Agenda ● Bitcoin - Where all started ● Blockchain - What it offers ● Blockchain beyond bitcoin ● Tech dive into blockchain
- 3. Bitcoin - Where it all began Who is Satoshi Nakamoto?
- 4. Bitcoin- What is it? Bitcoin is a peer to peer decentralized open digital currency.
- 5. Bitcoin - Transactions Where are the coins? We see only transactions. Each transaction contains hash of previous transaction, public key of payee and amount digitally signed by payer.
- 7. Bitcoin - blockchain - Public distributed ledger Where are all transactions recorded? What if somebody double spends?
- 8. Bitcoin - Mining - who adds transactions Have you earned the right to add transactions? Vote based on hashing power
- 10. Bitcoin - how it works ● All transactions are broadcasted to nodes ● Each node collects all valid transactions into a block ● Node solves a problem for proof of work ● On successfully solving, node broadcast block to all nodes. ● All nodes checks if all transactions in block are valid. ● Nodes work on building new block on current block. And Process repeats every ten minutes
- 11. Blockchain - What it offers ● Immutable transaction ● Distributed ledger ● Timestamping server ● Distributed consensus process ● Automatic conflict resolution ● Trustless trust ● Permissioned / unpermissioned
- 12. Blockchain - beyond bitcoin What can we do more with blockchain?
- 13. Blockchain - Etherum Ethereum is an open blockchain platform that lets anyone build and use decentralized applications that run on blockchain technology.
- 14. Blockchain- Blockstack Blockstack provides services for naming, identities, authentication built over bitcoin blockchain
- 15. Blockchain- openbazaar An online peer to peer marketplace built around bitcoin
- 16. Blockchain- Tieron Tieron helps in creating verifiable record of any data in bitcoin blockchain
- 17. Blockchain- Everledger Everledger is immutable ledger for diamond certification and related history, providing verification for insurance companies, law enforcement and owner claimant.
- 18. Tech Dive - Transaction Input - Outpoint, Signature script Output - Value, public key script, addresses
- 20. Tech Dive - Block Hashing
- 21. Further Reading ● Bitcoin white paper ● Bitcoin developer documentation ● Explore blocks- Blockchain.info / webbtc
Editor's Notes
- Question - Does anybody know about Satoshi Nakamoto? Talk about Satoshi Nakamoto and white paper he/ they wrote.
- Evolution of money - Barter system, Commodity currency, Metal currency, Paper currency, Plastic currency, Digital currency. Bitcoin is a peer to peer decentralized digital currency. It implements a open public
- Describe Transaction in bitcoin. Payee gives its bitcoin address to payer. Payer creates a new transaction. Transaction will have one more input pointer to previous transaction which it has right to spend. Transaction will have output which has address of payee, amount to be paid and digital signed by payer. This transaction will be then relayed to network. Address is derived from public key of ECDSA.
- All transactions are recorded in an open ledger database called blockchain. Transactions are grouped in a block. And then blocks are chained to form a blockchain. A new block is added to blockchain at an average of 10 minutes. And then Anybody who is running full bitcoin node can record transactions in this block. Before recording transaction in block, it is node’s responsibility to ensure all the transactions are valid in block. So, it checks if address is valid address (doesn’t necessarily means that correct address). It checks if input points to an unspent output. It checks if amount is correct. It checks if transaction is created by somebody who has permission to spend that unspent output. Also, when a new block is added and it is relayed to all other nodes, it is responsibility of each node to ensure that transactions added in that block is valid. Any invalid transaction will make complete block invalid. While creating new block, a node should always choose longest chain available. We are not dependent on any trusted party to validate the transaction. Anybody who is running bitcoin node can include new transaction in database. Even we can do it ourselves if we are running full node. And there are lighter clients which can validate a confirmed transaction. This makes blockchain distributed and open.
- As I said earlier, anybody can add blocks (and thus transactions) to blockchain database. So, what if some malicious guy creates series of block from a block where his coins were unspent? Bitcoin solves this with a concept of proof of work. Every node has to solve a difficult problem which is going to take enough time and cpu to solve problem. Solution to this problem has to be stored along with block. This will ensure that he can’t creates more block alone than rest of nodes in network. Since, his chain will not be anytime longer than network chain, his blocks will be ignored. This holds true only to extent that honest nodes hold more than 51 percent of hashing power. As soon as malicious guy holds more than 51 percent, honest guys will lose contest. But what happens in this case? Bitcoin will lose value and all reason for dishonest guy to invest so much is lost. With proof of work, blockchain gives an electronic process to have network consensus. Everybody in network agrees on valid transactions electronically. There is no central authority. There is no trusted party.
- How are transactions and blocks made immutable forever? They cannot be changed. This is ensured by cryptographic hash functions. So, if somebody changes even one transaction, who chain needs to be redone. Which means he needs to have new proof of work.
- Blockchain is new technology. Different people have different opinion about.
- Etherum is another blockchain platform with idea to support smart contract. Bitcoin meant specifically for financial transaction has some limitation in what you can do with its scripting. Etherum provides more flexibility in its scripting. It also stores account instead of transaction. And every change in account is stored. Ether is mined and used as exchange medium for work done on Etherum.