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Bitcoin
Bitcoin: an electronic peer to peer version of money. Bitcoins can be sent from buyer to seller without the overhead of financial institutions.
It also solves the the problem of double spending without using a »man in the middle« (such as a financial institution).
Bitcoin is based on cryptographic proof rather than trust .
Bitcoin has three main components:
P2P among clients
The distributed consensus
The selection of the node responsible for creating the next block
Because bitcoin is decentralized and has no government, (central-!) bank or company regulating it, there is nobody than can prevent the payment to anyone nor does anyone need someone's permission to send
bitcoins . This is a good thing.
Fundamental Principles
There will never be more than 21 million
bitcoins .
No organization (such as governments!) must be able to reject (censor?) valid txs from being confirmed or to prevent someone to use the network (be it as user, node, miner etc.)
No one should have to identify himself with his/her name when using bitcoin.
No bitcoins are special, rather, they're all equal.
Confirmed
blocks cannot be changed. The history of the
blockchain cannot be changed, either.
Achieving decentralization
The following five questions need to be addressed:
Who maintains the ledger of transactions (blockchain )?
Who has authority over which transactions are valid?
Who creates new Bitcoins ?
Who determines how the rules of the system change?
How do bitcoins acquire exchange value?
See Narayanan, Bonneau, Felten, Miller, Goldfeder: Bitcoin and Cryptocurrency Techologies , p. 52.
Proving the ownership of a bitcoin
The bitcoin technology allows someone to prove he is actually in possession of a specific bitcoin.
In order to do that, they have to send their public
address , signed with their private key.
If this message can be decoded, the ownership of their
account is proven. Then it's possible to check the balance and the
transaction history.
Upgrading the Bitcoin network
There are four ways to upgrade the Bitcoin network (for example to handle more transactions, improve scalability etc.):
minor activated hard fork
minor activated soft fork
user activated hard fork
user activated soft fork (UASF)
Misc
BIPs
BIPs are Bitcoin Improval Proposals.
No encryption
Although called a
crypto currency , there is no encryption in Bitcoin: nothing needs to be encrypted.
Historic snippets
The earliest ideas of applying cryptography to cash came from David Chaum in 1983.
1988, along with Fiat and Naor, proposed offline electronic cash.
A paper by Okamoto and Ohta describe Merkle trees to subdivide coins.
Nakamoto started programming on Bitcoin around May 2007.
Compare Printeton bitcoin book , p. 9 ff
Bitcoin systems/networks
The main network is where people trade goods and servces. Default port: 8333. Network id: main .
The regression test (network) . It is not public with a minimum diffuclty. Default port: 18444. Network id: regtest .
See also
account ,
Bitcoin address ,
blockchain ,
block ,
Buying bitcoins ,
clients ,
consensus rules ,
coin ,
fork ,
Bitcoin mining ,
node ,
nonce ,
proof of work ,
scripting language ,
Timestamp-server ,
transactions ,
wallet