BitcoinOpen source P2P money

By: mahdi ataeyanhttp://www.ataeyan.com

What is Bitcoin?

• no banks

• no transaction fees

• No real name

• consensus network

• completely digital money

• decentralized peer-to-peer payment

• no central authority or middlemen

Money

● a medium of exchange● a unit of account● a store of value● a standard of deferred

payment

Money must be:

● Rare● Non-scarce!● Strong

Fiat money

Bretton Woods Conference

• most countries adopted fiat currencies that were fixed to the U.S. dollar.

• The U.S. dollar was in turn fixed to gold.

Nixon Shock

Milton Friedman

Evolutionary economics

history

• pseudonymos developer

• Satoshi Nakamoto

• in april he/she saying he was moving on to other things and he disappeared from the internet.

• Cypherpunk

Cypherpunk

any activist advocating widespread use of strong cryptography as a route to social and political change

Satoshi Nakamoto?!

Single-entry bookkeeping

• one sided accounting entry

Double-entry bookkeeping

• debit entry - credit entry

• Equity = Assets − Liabilities

triple-entry bookkeeping (momentum)

• changes in balances are the recognized events

• acceleration in revenue earning

• require three entries to implement

Ledger

• the principal book or computer file

• recording and totaling economic transactions

Accounting (ledger)

• payer X sends Y bitcoins to payee Z

• public ledger (block chain)

Bitcoin & triple-entry

• changes in balances are the recognized events

• acceleration in revenue earning

• require three entries to implement

Public key crypto

Alice011010101011011101000011011010

LargeRandomNumber

KeyGenerationProgram

Public Private

An unpredictable (typically large and random) number is used to begin generation of an acceptable pair of keys suitable for use by an asymmetric key algorithm.

Public key encryption

Hello Alice!

Alice's private key

Encrypt

6EB69570 08E03CE4

Hello Alice!

Decrypt

Alice's public key

Bob

Alice

In an asymmetric key encryption scheme, anyone can encrypt messages using the public key, but only the holder of the paired private key can decrypt. Security depends on the secrecy of the private key.

Zero-knowledge proof

Hash function

hashfunctionkeys

John Smith

Lisa Smith

Sam Doe

Sandra Dee

hashes

00

01

02

03

04

05

:

15

Who Bitcoin work?

Who Bitcoin work?

• Balances - block chain

• Transactions - private keys

• Processing – mining

Balances - block chain

• a shared public ledger.

• All confirmed transactions are included in the block chain.

• The integrity and the chronological order of the block chain are enforced with cryptography.

Block chanes

Block chanes

Transactions - private keys

• a transfer of value between Bitcoin wallets.

• private key or seed is used to sign transactions.

• All transactions are broadcast between users.

• Transactions confirmed by the network in 10 minutes.

• Transactions confirmed by a process called mining.

Problem!

• Fork

• double spend

• trust

Proof-of-work system

● requiring some work from the service requester● usually meaning processing time by a computer● Asymmetry● must be moderately hard (but feasible) on the requester side ● easy to check for the service provider● Challenge-response and Solution-verification

Challenge-response

Solution-verification

Hashcash

• X-Hashcash: 1:20:1303030600:adam@cypherspace.org::McMybZIhxKXu57jd:FOvXX

• The sender prepares a header and adds an initial random number

• computes the 160 bit SHA-1 hash of the header to first 20 bits of the hash become zeros

• The recipient's computer calculates the 160-bit SHA-1 hash of the entire string and compare this hash with sender's hash.

• Integer square root modulo a large prime

• Weaken Fiat–Shamir signatures

• Ong–Schnorr–Shamir signature broken by Pollard

• Partial hash inversion as Hashcash

• Hash sequences

• Puzzles

• Diffie–Hellman-based puzzle

• Moderate

• Mbound

• Hokkaido

• Cuckoo Cycle

• Merkle tree based

• Guided tour puzzle protocol

List of proof-of-work functions

Proof-of-stake

Processing – mining

• distributed consensus system.

• including transactions in the block chain and confirm.

• enforces a chronological order in the block chain.

• protects the neutrality of the network.

• allows different computers to agree on the state of the system.

• creates the equivalent of a competitive lottery that prevents any individual from easily adding new blocks consecutively in the block chain.

Create custom address

Crisis

Economic bubble

Greater fool theory

Tulip mania

Financial crisis of 2007–08

Dot-com bubble

wallet

• Desktop wallets

• Mobile wallets

• Online wallets

• Hardware wallets

• Paper wallets

Security

• Unauthorized spending

• Double spending

• Race attack

• History modification

• Selfish mining

• Deanonymisation of clients

advantages

• Payment freedom

• Very low fees

• Fewer risks for merchants

• Security and control

• Transparent and neutral

disadvantages

• Degree of acceptance

• Volatility

• Fewer risks for merchants

• Ongoing development

legal

litecoin

Peercoin

BlackCoin

Darkcoin

BTM

BitAccess

Bitocean

BitXatm

BTCPoint

CoinOutlet

Diamond Circle

General Bytes

GenesisCoin InterWallet LamassuLocalBitcoins RobocoinNumoniSkyhook

BTM

secrecy and money laundering

Drugs

• Drugs

• Child pornography

• Hitman Network

• ...

reference

• https://www.google.com/finance

• https://litecoin.org/

• https://bitcoin.org/en/

• http://bitlegal.io/

• https://bitcoin.org

• https://bitcoin.org/bitcoin.pdf