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Bitcoin Blockchain en

The document discusses Bitcoin and blockchain technology. It provides an overview of Bitcoin, including how Bitcoin addresses work, how transactions transfer ownership of coins, and how new coins are created through mining blocks. It then explains how blockchain provides a distributed ledger to record all transactions without a central authority, by linking blocks together in a chain where each block contains a hash of the previous block. This allows everyone on the network to validate transactions and reach consensus on the valid transaction history through proof-of-work mining.

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Raimundo Nonato
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0% found this document useful (0 votes)
145 views31 pages

Bitcoin Blockchain en

The document discusses Bitcoin and blockchain technology. It provides an overview of Bitcoin, including how Bitcoin addresses work, how transactions transfer ownership of coins, and how new coins are created through mining blocks. It then explains how blockchain provides a distributed ledger to record all transactions without a central authority, by linking blocks together in a chain where each block contains a hash of the previous block. This allows everyone on the network to validate transactions and reach consensus on the valid transaction history through proof-of-work mining.

Uploaded by

Raimundo Nonato
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 31

dit-upm

bitcoins & blockchain

José A. Mañas < http://www.dit.upm.es/~pepe/>


Information Technology Department
Universidad Politécnica de Madrid

27 October 2017
index
dit
1. bitcoins
2. blockchain

bitcoin & blockchain 2


money
dit
 what is money?
 an amount
 signed by the issuer

 who is the owner?


 the holder

 if you lose the token


the money goes to the finder

+ integrity
+ authenticity
cash  anonymity

bitcoin & blockchain 3


bitcoin
dit
 what is a crypto coin? value
 an amount
address
 for an owner (address)
signed by previous
 signed by the previous owner

 who is the owner?


digital signature
 the one who knows the private key Ks + integrity
that matches the verification key Kp + authenticity
 tech: hash(Kp) = address  anonymity
 that is, a proof of possesion

 if Ks is lost, there is no owner


 if P guesses Ks, P becomes the owner

bitcoin & blockchain 4


cryptography
dit
 256 bits elliptic curve
 secp256k1
 y2 = x3 + 7 over Zp
 p = 2256 – 232 -29 – 28 - 27 – 26 – 24 -1
 G = 04 79BE667E F9DCBBAC 55A06295 CE870B07 029BFCDB
2DCE28D9 59F2815B 16F81798 483ADA77 26A3C465 5DA4FBFC
0E1108A8 FD17B448 A6855419 9C47D08F FB10D4B8

http://www.secg.org/sec2-v2.pdf

bitcoin & blockchain 5


example
dit

bitcoin & blockchain 6


paper bitcoin
dit
 for you to receive money,
you need the owner to sign the transfer
 the owner can provide the signing key
for you to transfer yourself

bitcoin & blockchain 7


addresses
dit
 A = ripemd160(sha256(public)) (160 bits)
 base58check encoding

 e.g. 174sG4urSK4zoqFw6T8AQwMuhLj6u2wL9W

https://en.bitcoin.it/wiki/Technical_background_of_version_1_Bitcoin_addresses

bitcoin & blockchain 8


transaction
dit
 change hands (that is, change address ownership)

https://bitcoinfees.21.co/

bitcoin & blockchain 9


value moves from address(es)
dit to address(es)

proof of ownership: source signs

bitcoin & blockchain 10


anonymity
dit
 very difficult to trace

bitcoin & blockchain 11


derived keys
dit
 https://iancoleman.github.io/bip39/
 mnemonic  root key  address tree

bitcoin & blockchain 12


copay wallet
dit

bitcoin & blockchain 13


money creation
dit
 out of nothing
 the network subsidizes blockchain maintenance
 you build a block, you get some coins

bitcoin & blockchain 14


money creation
dit
 The number of Bitcoins generated per block starts at 50
and is halved every 210,000 blocks (about four years).
 28.11.2012: 210.000 blocks: 50 BTC  25 BTC
 10.7.2016: 420.000 blocks: 25 BTC  12.5 BTC
 expected: x.x.2020: 630.000 blocks: 12.5 BTC  6.25 BTC

bitcoin & blockchain 15


money creation
dit

bitcoin & blockchain 16


index
dit
1. bitcoins
2. blockchain

bitcoin & blockchain 17


balance (ledger)
dit
 how to know the money associated to an address now?
 so nobody pays with others’ money  digital signature
 so nobody double spends  blockchain

 traditional answer: universal balance


 traditional bank with its superhost
 the bank intermediates every transaction

 the bank has all the moves, and the last word

 I may have a local copy (e.g. excel)

bitcoin & blockchain 18


distributed ledger
dit
 everybody knows everbody’s transactions

bitcoin & blockchain 19


shared log
dit

https://www.youtube.com/watch?v=l9jOJk30eQs

bitcoin & blockchain 20


distributed ledger
dit
 no central registry
 nobody is more than anybody else
 peer-to-peer: no central authority

 how do we get everyone to have the same record?


 how to deal with transmission delays?
 how to deal with liers?

 solution: blockchain
 there is no absolute guarantee;
simply, it is highly unlikely that a lie lasts for long time
 it is settled in < 10 min

 you may be confident after ~60 min

bitcoin & blockchain 21


linked blocks
dit
 each block has a few transactions
 each block contains the hash of the previous one (linked)

 there is a starting block: The Genesis Block (hardcoded)


 1 transaction (3.1.2009)
 https://en.bitcoin.it/wiki/Genesis_block

bitcoin & blockchain 22


genesis: block #0
dit
 https://blockchain.info/en/block/000000000019d6689c085ae16583
1e934ff763ae46a2a6c172b3f1b60a8ce26f

bitcoin & blockchain 23


blocks
dit
 anyone may generate a block (it is called a miner)
 collecting fresh transactions (in order to receive the fees)
 getting a reward for building the block
 and broadcasts the new block to be chained to the previous one

 two or more miners may build a new block before simultaneously


(concurrency race) …

bitcoin & blockchain 24


merkle tree
dit
 eficient algorithm O(log n) to build (and rebuild) a hash merging N
entries
 n = sha256(sha256(n1, n2))

bitcoin & blockchain 25


SPV
dit
 Simple Payment Verification
 enables lighweight wallets (the most usual ones)
that only know the transactions affecting their addresses
 transactons have to be verified on full nodes that do have all the
blocks

bitcoin & blockchain 26


consensus
dit
 proof of work
 a block is valid if its hash is above a given threshold
 the miner tries, and tries, until a valid hash is fund
 verification is simple and fast
 generation is tuned to require 10 min(on average)
the threshold is revised reularly to adapt
 there may be 1, 2, 3, … collisions, but as ther chain grows it is
more and more difficult that two chains remain feasible
 after 6 blocks in a row, it is assumed that there is no change for ther
chain(s)
 the winner means that we trust the longest chain

bitcoin & blockchain 27


proof of work
dit
 find X such that
 hash(X | transaction_list | previous_hash) < N

 N is evaluated every 2016 blocks (~14 days)

bitcoin & blockchain 28


51% attack
dit
 if one miner (or mining lobby) controls 51% os hash calculation
power, it may overtake the others and take control of the chain
 consensus is no longer a distributed matter

 https://learncryptography.com/cryptocurrency/51-attack

bitcoin & blockchain 29


index
dit
1. bitcoins
2. blockchain

bitcoin & blockchain 30


usefulness
dit
 bitcoin is a coin without a central authority
 that fact rises strong opinions, in favor, against
 banks are looking carefully what does it mean

 blockchain is a technology that provides a distributed ledger


without a central authority
 the ledger is provably secure

 problems of centralized solutions are over

 it applies to many scenarios where an agreed ledger is needed

 it requires connectivity
 it requires to hold the complete history

Partition tolerance is
the ability of a distributed system to continue operating correctly
even in the presence of a network partition.
bitcoin & blockchain 31

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