Bitcoin

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Bitcoin

  1. 1. Bitcoin Peer to peer Electronic cash, V1 Puneet Kumar
  2. 2. Why  doCommerce(mymoney, myFinancialInstitution)  assert(myFinancialInstitution.isTrustWorthy())  doCommerceFI(myMoney){  if(dispute)  myMoney -= transactionCost; fiMoney ++; bankerProfit++;  doCommercePost()  loseMoney; sulk;
  3. 3. What if  doCommerce(mymoney, you, useCrypto= true)  assert(preventDoubleSpending)  preventDoubleSpending()  createCryptoProof(timeStampServer)
  4. 4. How  Transactions  TimeStamp Server  Proof of Work  Network  Incentive  Reclaiming Disk space  Payment Verification  Combining and Splitting Value  Privacy  Calculation  PRINT MONEY
  5. 5. Transactions  I have an electronic coin. I want to give to you.  I will digitally sign the coin, with my private key.  Anyone can verify that its my signature, with my public key.  The digital signature will contain your public key; so everyone knows you received the coin.  Issue: What if I double spend.
  6. 6. Timestamp Server  Input: electronic coin, timestamp of previous transactions  Process: Hash the input, use currentTime.  Output: Publish the hash. This is proof that this coin existed at this time; (thisTime is after previous Timestamp)  Timestamp server create proof that this transaction took place at this time, in correct order.
  7. 7. Proof of Work  Find a nonce which when hashed, creates a hash staring with zero bits.  This takes CPU effort.  The Proof of Works’ form a chain. This chain is the fraud deterrent. To defraud, spend exponential CPU effort(dependent on chain length). Not worth it for long chains.
  8. 8. Network  Broadcast new transactions.  Each node collects transactions, in a box/block.  Creates Proof of Work. Publishes it.  Creates chain of proof of work. As long as most nodes know about longest chain of proofs, it must be the correct transaction history.
  9. 9. Incentive  Why should honest nodes participate  Block is started with a coin. Later, when this coin is in circulation, it creates chain of proofs.  If a node own coins, it better keep the system running with growing chain, and discouraging rogue nodes from taking over.
  10. 10. Reclaiming Disk Space  So many proofs. What about my disk space.  Practically, there should not be need to prune the block.  But it can be done. Note to self: Study Merkle tree
  11. 11. Payment verification  Verify the longest chain. How.  Combining and Splitting values!
  12. 12. Privacy  Don’t link public key to identity  Create multiple public keys
  13. 13. Calculations  Binomial Random Walk  Gamblers Ruin problem  Exponentially difficult
  14. 14. references  Bitcoin: A Peer-to-Peer Electronic Cash System, Satoshi Nakamoto bitcoin.pdf  Hashcash

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