bitcoin
DESCRIPTION
TRANSCRIPT
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BitcoinPeer to peer Electronic cash, V1
Puneet Kumar
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Why
doCommerce(mymoney, myFinancialInstitution)
assert(myFinancialInstitution.isTrustWorthy())
doCommerceFI(myMoney){
if(dispute) myMoney -= transactionCost; fiMoney ++;
bankerProfit++;
doCommercePost()
loseMoney; sulk;
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What if
doCommerce(mymoney, you, useCrypto= true)
assert(preventDoubleSpending)
preventDoubleSpending()
createCryptoProof(timeStampServer)
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How
Transactions
TimeStamp Server
Proof of Work
Network
Incentive
Reclaiming Disk space
Payment Verification
Combining and Splitting Value
Privacy
Calculation
PRINT MONEY
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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.
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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.
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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.
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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.
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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.
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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
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Payment verification
Verify the longest chain. How.
Combining and Splitting values!
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Privacy
Don’t link public key to identity
Create multiple public keys
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Calculations
Binomial Random Walk
Gamblers Ruin problem
Exponentially difficult
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references
Bitcoin: A Peer-to-Peer Electronic Cash System, Satoshi Nakamoto bitcoin.pdf
Hashcash