This document provides an overview of blockchain technology and cryptocurrencies. It begins with definitions of money, including fiat currency, e-money, and virtual currency. It then discusses key concepts related to cryptocurrencies like Bitcoin, including how they use cryptography, hash functions, digital signatures, proof-of-work, and blockchains to achieve decentralization. The document also examines common terminology in the space like miners, addresses, and wallets. Finally, it provides examples of how Bitcoin is being used in the real world, such as with ATMs, online purchases, and even lotteries and laundering.
4. The jargon
A look at some of the key concepts
in blockchain & crypto-currencies.
5. The jargon
þ Cryptography
o Hash func8ons
o Digital Signatures
o Proof of work
o Double-spending
o Blockchain
o Merkle tree
o Miners
o Address
o Wallets
Symmetric Cryptography
Image source: An Introduc8on to Cryptography – PGP Corpora8on
6. The jargon
þ Cryptography
o Hash func8ons
o Digital Signatures
o Proof of work
o Double-spending
o Blockchain
o Merkle tree
o Miners
o Address
o Wallets
Asymmetric Cryptography
Image source: An Introduc8on to Cryptography – PGP Corpora8on
7. The jargon
o Cryptography
þ Hash func8ons
o Digital Signatures
o Proof of work
o Double-spending
o Blockchain
o Merkle tree
o Miners
o Address
o Wallets
One-way Hash FuncIons
Input Hash
sanya c75491c89395de9fa4ed29affda0e4d29cbad290
SANYA 33fef490220a0e6dee2f16c5a8f78ce491741adc
Sanya 4c391643f247937bee14c0bcca9Z985fc0d0ba
8. The jargon
o Cryptography
o Hash func8ons
þ Digital Signatures
o Proof of work
o Double-spending
o Blockchain
o Merkle tree
o Miners
o Address
o Wallets
Digital Signatures
Image source: An Introduc8on to Cryptography – PGP Corpora8on
9. The jargon
o Cryptography
o Hash func8ons
o Digital Signatures
þ Proof of work
o Double-spending
o Blockchain
o Merkle tree
o Miners
o Address
o Wallets
Hash begins with 5 zeros
rn@asianlaws.org: info@lexcode.com:18032016:xxxx
input rn@asianlaws.org:info@lexcode.com:18032016:1
hash 288721860bec3a490811981c831702d4f41e54c3f8c183c5650ac73ff231659c
input rn@asianlaws.org:info@lexcode.com:18032016:2
hash 11caf434535c35cdc843e801382f0a8643a03500649a9bfa41c8e6a4be65a413
input rn@asianlaws.org:info@lexcode.com:18032016:1580661
hash 0000080602f705257e74a4e847e9ed23ab61be5b2ba4263acc90bd7c7c7ab4
... increase nonce Ill ….
CompuIng hash is not trivial, verificaIon is.
10. The jargon
o Cryptography
o Hash func8ons
o Digital Signatures
o Proof of work
þ Double-spending
o Blockchain
o Merkle tree
o Miners
o Address
o Wallets
Can you double-spend physical currency?
In case of physical currency notes, you cannot
double-spend a note because once you hand
the note over to someone, you don’t have the
note anymore to spend again.
Can you double-spend virtual currency?
Since electronic records are easily duplicated, a
“digital coin” can be spent mul8ple 8mes.
11. The jargon
o Cryptography
o Hash func8ons
o Digital Signatures
o Proof of work
o Double-spending
þ Blockchain
o Merkle tree
o Miners
o Address
o Wallets
Image source: hFps://upload.wikimedia.org/wikipedia/commons/7/7a/Bitcoin_Block_Data.png
Blockchain is a public ledger containing an ordered and
8me-stamped record of transac8ons. It prevents double-
spending as well as the modifica8on of previous transac8on
records.
12. The jargon
o Cryptography
o Hash func8ons
o Digital Signatures
o Proof of work
o Double-spending
o Blockchain
þ Merkle tree
o Miners
o Address
o Wallets
Image source: hFps://en.wikipedia.org/wiki/Merkle_tree#/media/File:Hash_Tree.svg
13. The jargon
o Cryptography
o Hash func8ons
o Digital Signatures
o Proof of work
o Double-spending
o Blockchain
o Merkle tree
þ Miners
o Address
o Wallets
• While a gold miner digs into the earth to discover
gold, a bitcoin miner uses computa8onal power to
calculate hashes.
• To add an en8re block to the block chain, a Bitcoin
miner must successfully hash a block header to a
value below the target threshold.
• Miners spend on computaIonal power and electricity
and are compensated by way of a reward for each
block they mine and transacIon fees.
• Miners usually operate as part of a large pool instead
of as individuals.
14. The jargon
o Cryptography
o Hash func8ons
o Digital Signatures
o Proof of work
o Double-spending
o Blockchain
o Merkle tree
þ Miners
o Address
o Wallets
Image source: Wikipedia
15. The jargon
o Cryptography
o Hash func8ons
o Digital Signatures
o Proof of work
o Double-spending
o Blockchain
o Merkle tree
þ Miners
o Address
o Wallets
Image source: Wikipedia
16. The jargon
o Cryptography
o Hash func8ons
o Digital Signatures
o Proof of work
o Double-spending
o Blockchain
o Merkle tree
þ Miners
o Address
o Wallets
Image source: bitcoin.com
17. The jargon
o Cryptography
o Hash func8ons
o Digital Signatures
o Proof of work
o Double-spending
o Blockchain
o Merkle tree
o Miners
þ Address
o Wallets
There are currently two address formats in common use:
Common P2PKH which begin with the number 1
1BvBMSEYstWetqTFn5Au4m4GFg7xJaNVN2
Newer P2SH type star8ng with the number 3
3J98t1WpEZ73CNmQviecrnyiWrnqRhWNLy
19. The jargon
o Cryptography
o Hash func8ons
o Digital Signatures
o Proof of work
o Double-spending
o Blockchain
o Merkle tree
o Miners
o Address
þ Wallets
• Collec8on of private keys.
• These collec8ons are stored digitally in a file, or
can even be physically stored on pieces of paper.
• Although it’s called a wallet, a Bitcoin wallet does
not store bitcoins. The wallet is a collec8on of
public-private key-pairs.
20. The jargon
o Cryptography
o Hash func8ons
o Digital Signatures
o Proof of work
o Double-spending
o Blockchain
o Merkle tree
o Miners
o Address
þ Wallets
The simplest Bitcoin wallet is a program, which performs
these func8ons:
• it generates private keys,
• derives the corresponding public keys,
• helps distribute those public keys as necessary,
• monitors for outputs spent to those public keys,
• creates and signs transac8ons spending those outputs,
• broadcasts the signed transac8ons.
21. The jargon
o Cryptography
o Hash func8ons
o Digital Signatures
o Proof of work
o Double-spending
o Blockchain
o Merkle tree
o Miners
o Address
þ Wallets
Source: hFps://bitcoin.org/en/choose-your-wallet
22. Bitcoin in the real world
A look at how Bitcoin, the most popular
crypto-currency is being used in the real world.