Download to read offline
Bitcoin
- 1.
- 2.
- 3. Should be hardto counterfeit
- 4. Maybe Good storeof Value ??
- 5. But, today wemostly deal with money electronically
- 6. For all electronictransactions, we need somebody to maintain the records/Ledger
- 7. Typically it isa Bank or Financial institution
- 8. Banks can bethought of as maintaining a trusted ledger for accounts and transfers TRUST
- 9. Today’s Electronic money +Lot of protections against theft + Easy to use - Not Anonymous - Requires Trust
- 10. Cash +Anonymous + Hard toCounterfeit - Gone if stolen
- 11. Imagine an electroniccash system E$: Just bits
- 12. Cash +Anonymous + Hard toCounterfeit - Gone if stolen
- 13.
- 14. Electronic Cash Double Spending? Transaction Amount Reference Signed Joe->John 2E$ Previous Transaction Transaction Signed by Joe Joe->Jane 2E$ Previous Transaction Transaction Signed by Joe Previous transaction sending E$ to Joe
- 15. Ledger to preventdouble spending Transaction Amount Balance Status Joe->John X$ 0 Accepted Joe->Jane X$ -X Rejected
- 16. Who maintains thisledger? Who do we trust?
- 17. Bitcoin network maintainsa Decentralized, distributed, p2p payment ledger
- 18. First let usunderstand what is a Ledger entry in Bitcoin network or a transaction
- 19. What is aBitcoin transaction : One example transaction From: Joe’s Anonymous Address (pub key hash) Which contains: 50 BTC Hash: Previous transaction To: Bob’s Anonymous address (pub key hash) Send: 10 BTC To: Joe’s new Anonymous address (pub key hash) Send: Change of 40 BTC Signature: Proof that Joe is allowed to spend the 50 BTC Bob will spend using the private key
- 20. Next transaction byBob From: Bob’s Anonymous Address (pub key hash) Which contains: 10 BTC Hash: Previous transaction To : John’s Anonymous address (pub key hash) Send: 10 BTC Signature: Proof that Bob is allowed to spend the 50 BTC
- 21. How does everybodyagree on the same version of ledger? Brilliant solution by Satoshi Nakamoto
- 22. Background: Hash basedproof of work Ideal Hash Function Arbitrary length input Fixed length output • Random mapping • Same output for same input What is a Hash ?
- 23. Background: Hash basedproof of work E.g. For 128 bit hash Given X Find Y <Hash (X||Y) 00 00 00 00 FF FF FF FF FF FF FF FF FF FF FF FF
- 24. Blocks and Proofs PreviousBlock’s hash Nonce Transaction 1 Trasnsaction 2 Transaction N Previous Block’s hash Nonce Transaction 1 Trasnsaction 2 Transaction N
- 25. Block in progress/ mining Previous Block’s hash Transaction 1 Trasnsaction 2 Miner’s transaction Nonce+ Hash < Network difficulty decided target Broadcast Proof to the network
- 26. Miner’s transaction Special transactionthat transfers 25 BTC (current) to an address provided by the miner(reward going down) Makes every miner’s proof of search different Incentive for miner
- 27. Network Difficulty Adjusts toensure blocks are generated every 10 minutes Ensures that probability of you finding a block is proportional to your computing power
- 28. Multiple miners are working Thiscauses forks Longest chain is hardest to reverse So it Wins
- 29. How does thisprevent fraud? Lot of computing power needed to reverse a Tx few blocks ago. Network is moving ahead Nearly impossible to catch up.
- 30. Summary Only one history(longest)is accepted by the network Computing power == Vote Miner’s transactions provide incentive for mining
- 31. Bitcoin as aplatform for new types of transaction Standard Transaction To Spend: OP_CHECKSIG Operation in a stack based language Lots of other possible operations: For example: OP_CHECKMULTSIG, OP_ADD, OP_IF,… Combine operations to create new transactions
- 32. History and Color: James Wood http://prezi.com/4dsf-gkdyw55/bitcoins/
- 33.
- 34. GPU Mining Rigpicture
- 35. Using Bitcoins: Demo •Resources: https://www.weusecoins.com/en/getting- started
- 36.