Introduction to Bitcoin

Transcript

1. BITCOIN Jas Chhabra James Wood
2. What is Money?
3. Should be hard to counterfeit
4. Maybe Good store of Value ??
5. But, today we mostly deal with money electronically
6. For all electronic transactions, we need somebody to maintain the records/Ledger
7. Typically it is a Bank or Financial institution
8. Banks can be thought 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 to Counterfeit - Gone if stolen
11. Imagine an electronic cashsystem E$: Just bits
12. Cash +Anonymous + Hard to Counterfeit - Gone if stolen
13. Background: Digital signatures
14. Electronic Cash Double Spending ? Transaction Amount Reference Signed Joe->John 2E$ Previous Transaction Transaction Signed by Joe Joe->Jane 2E$ Previous Transaction Transaction Signed by Joe Previous transaction sending E$ to Joe
15. Ledger to prevent double spending Transaction Amount Balance Status Joe->John X$ 0 Accepted Joe->Jane X$ -X Rejected
16. Who maintains this ledger? Who do we trust?
17. Bitcoin network maintains a Decentralized, distributed, p2p payment ledger
18. First let us understand what is a Ledger entry in Bitcoin network or a transaction
19. What is a Bitcoin 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 by Bob 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 everybody agree on the same version of ledger? Brilliant solution by Satoshi Nakamoto
22. Background: Hash based proof 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 based proof 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 Previous Block’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 transaction that 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 to ensure 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 This causes forks Longest chain is hardest to reverse So it Wins
29. How does this prevent 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 a platform 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. Bitcoin: Future
34. GPU Mining Rig picture
35. Using Bitcoins: Demo • Resources: https://www.weusecoins.com/en/getting- started
36. Questions?