This document discusses Bitcoin, a peer-to-peer electronic cash system. It outlines problems with traditional financial institutions, such as the risk of disputes and transaction fees. It then introduces Bitcoin as an alternative that allows for direct peer-to-peer transactions using cryptography to prevent double spending, through techniques like digital signatures, timestamping, proof of work, and an incentive-driven network. The document provides high-level explanations of these core Bitcoin concepts and technologies.

1. Bitcoin
Peer to peer Electronic cash, V1
Puneet Kumar

2. Why
 doCommerce(mymoney, myFinancialInstitution)
 assert(myFinancialInstitution.isTrustWorthy())
 doCommerceFI(myMoney){
 if(dispute)
 myMoney -= transactionCost; fiMoney ++; bankerProfit++;
 doCommercePost()
 loseMoney; sulk;

3. What if
 doCommerce(mymoney, you, useCrypto= true)
 assert(preventDoubleSpending)
 preventDoubleSpending()
 createCryptoProof(timeStampServer)

4. How
 Transactions
 TimeStamp Server
 Proof of Work
 Network
 Incentive
 Reclaiming Disk
space
 Payment
Verification
 Combining and
Splitting Value
 Privacy
 Calculation
 PRINT MONEY

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. 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. 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. 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. 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. 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. Payment verification
 Verify the longest chain. How.
 Combining and Splitting values!

12. Privacy
 Don’t link public key to identity
 Create multiple public keys

13. Calculations
 Binomial Random Walk
 Gamblers Ruin problem
 Exponentially difficult

14. references
 Bitcoin: A Peer-to-Peer Electronic Cash System,
Satoshi Nakamoto bitcoin.pdf
 Hashcash