BITCOIN EXPLAINED
Download as PPTX, PDF0 likes3,513 views
Bitcoin is a cryptocurrency that was created in 2009 as a decentralized digital currency not controlled by any central authority like a bank. It uses cryptography to secure transactions and generate new units of currency. Transactions are recorded on a public ledger called the blockchain. New bitcoins are "mined" by solving complex math problems, and the total number that can ever be created is limited to 21 million. While bitcoin offers advantages like instant transactions and anonymity, it also has risks like high volatility and the inability to recover funds if private keys are lost.
BITCOIN EXPLAINED
- 3. BITCOIN THE FUTURE OF CRYPTOCURRENCY MURLIDHAR SARDA IEEE #93133683 CSE A 13311A0544 SNIST
- 4. Intro to Cryptocurrencies • A crypto currency is a medium of exchange using cryptography to secure the transactions and to control the creation of new units. • Cryptocurrencies are a subset of alternative currencies or specifically of digital currencies. • Bitcoin became the first decentralized cryptocurrency in 2009. • Other eg: Litecoin, Peercoin, Namecoin. • Cryptocurrencies typically feature decentralized control (as opposed to a centralized electronic money system, such as PayPal) and a public ledger (such as bitcoin's block chain) which records transactions.
- 5. BITCOIN • Bitcoin or BTC is an online currency that holds value in all countries. • isn't controlled by banks. • “A new kind of money” - Bitcoin.org • Instant Peer-to-Peer transactions • Zero or low processing fees • Can be divided into 0.00000001 BTC
- 7. Who created it? • Satoshi Nakamoto (31 oct ’ 2008) • Introduced as open-source software in 2009. • Transactions are verified by network nodes and recorded in a public distributed ledger called the block chain.
- 9. Storing coins • Online Wallets. • Mobile Wallets (BlockchainWallet)
- 10. Buying Bitcoin ?? • https://quickbitcoin.co.uk/ • https://bitbargain.co.uk/buy • http://www.coindesk.com/information/how-can-i-buy-bitcoins/ • REALLY DIFFICULT!
- 11. Mining Bitcoin • Mining is the process of adding transaction records to Bitcoin's public ledger of past transactions. • Miners keep the block chain consistent, complete, and unalterable by repeatedly verifying and collecting newly broadcast transactions into a new group of transactions called a block. • Finally, the new block must contain a so-called proof-of-work.The proof-of-work consists of a number called a difficulty target and a number called a nonce, which is jargon for "a number used only once". Miners have to find such a nonce that gives a hash of the new block smaller than the difficulty target.When the new block is created and distributed to the network, every network node can easily verify the proof. On the other hand, finding the proof requires significant work, since for a secure cryptographic hash there is only one method to find the requisite nonce: miners try different integer values one at a time, e.g., 1, then 2, then 3, and so on until the requisite output is obtained.The fact that the hash of the new block is smaller than the difficulty target serves as a proof that this tedious work has been done, hence the proof-of-work name. • Smaller target numbers reduce the range of accepted nonces, and hence will increase the average time required to find a nonce.The bitcoin system periodically (every 2016 blocks) adjusts the difficulty target so that the average time the entire network needs to find a nonce is about ten minutes.That way, as computer hardware gets faster over the years, the bitcoin protocol will simply adjust the mining target to make mining always last about ten minutes. • The proof-of-work system, with the chaining of blocks makes modifications of the block chain extremely hard, as an attacker must modify all subsequent blocks in order for modifications of one block to be accepted. As new blocks are mined all the time, the difficulty of modifying a block increases the higher number of subsequent blocks there are.
- 12. In Simple…. 1. New transactions are broadcast to all nodes. 2. Each miner node collects new transactions into a block. 3. Each miner node works on finding a difficult proof-of-work for its block. 4. When a node finds a proof-of-work, it broadcasts the block to all nodes. 5. New bitcoins are successfully collected or "mined" by the receiving node which found the proof-of-work. 6. Nodes accept the block only if all transactions in it are valid and not already spent. 7. Nodes express their acceptance of the block by working on creating the next block in the chain, using the hash of the accepted block as the previous hash. 8. Repeat.
- 13. What is a wallet? • A wallet is a computer file which holds Bitcoins. Bitcoins are sent between wallets; each is represented by one or more addresses. • A wallet's Bitcoin address is a public identifier for sending money to that wallet, just like an email address directs email to your account. • Bitcoin addresses look like this: 1LF7MLgPVVTfa9ySp5UUWA7y4TGpNc6ny6. • Private key stored in wallet. Public key is your address. • Lose your private key, you’re doomed. Lose all bitcoins. • Who controls private key, controls the bitcoins.
- 14. Wallets…
- 15. Transactions: A transaction must have one or more inputs. For the transaction to be valid, every input must be an unspent output of a previous transaction. Every input must be digitally signed. The use of multiple inputs corresponds to the use of multiple coins in a cash transaction. A transaction can also have multiple outputs, allowing one to make multiple payments in one go. A transaction output can be specified as an arbitrary multiple of satoshi. Similarly as in a cash transaction, the sum of inputs (coins used to pay) can exceed the intended sum of payments. In such case, an additional output is used, returning the change back to the payer. To send money to a Bitcoin address, users can click links on webpages; this is accomplished with a provisional Bitcoin URI scheme using a template registered with IANA. Bitcoin clients like Electrum and Armory (software) support Bitcoin URIs. Mobile clients recognize Bitcoin URIs in QR codes, so that the user does not have to type the bitcoin address and amount in manually. The QR code is generated from the user input consisting of the payment amount. The code is displayed on the mobile device screen and can then be scanned by a second mobile device
- 16. More On Mininig Details.. • Difficulty is a measure of how difficult it is to find a new block compared to the easiest it can ever be. • Changes every 2016 blocks.Blocks just keep getting added to the end of the chain at an average rate of one every 10 minutes. • The hash rate is the measuring unit of the processing power of the Bitcoin network • Current network hash rate is 6,618,000 GH/s • 1 GH/s is 1,000,000,000 hashes per second.
- 17. HARDWARE REQUIREMENTS • ASIC (Application-specific integrated circuits) chipsets – do one thing and one thing only. • No-one uses GPU / CPU now (Very slow – 2 to 5 KILOHASH) • CPU < GPU < ASIC.(1500 GIGAHASH) • 30 GH/s = 0.0213 BTC in 24 hours. • 14TB of sized Harddisks are introduced every 85 hours. • HugeAmount of Electricity. • High speed internet.
- 19. SUPPLY • The successful miner finding the new block is rewarded with newly created bitcoins and transaction fees. • To claim the reward, a special transaction called a coinbase is included with the processed payments. • All bitcoins in circulation can be traced back to such coinbase transactions. • The bitcoin protocol specifies that the reward for adding a block will be halved approximately every four years. • Eventually, the reward will be removed entirely when an arbitrary limit of 21 million bitcoins is reached.
- 20. Transaction fees • Paying a transaction fee is optional, but may speed up confirmation of the transaction. • Payers have an incentive to include such fees because doing so means their transaction will likely be added to the block chain sooner; miners can choose which transactions to process and prefer to include those that pay fees. • Fees are based on the size of the transaction generated, which in turn is dependent on the number of inputs used to create the transaction. • Furthermore, priority is given to older unspent inputs.
- 21. PROS.. • No unpredictable inflation by ”printing more money” by political decision. • Transactions travel instantly • Send money in seconds to anyone with internet access – with zero transaction costs. • Highly anonymous. • If you memorize your private key, the only way to steal your bitcoins (even for the authorities) is to torture you (or spy or hack your computer). • Easy to use.
- 22. CONS.. • Bitcoin is rather new and its still in marginal use -> high volatility. • It’s currency for the internet – take down the internet, and you cannot use bitcoins. • Perhaps not suitable for any country’s official currency. • Lose your private key -> lose your bitcoins. • No means to cancel the transaction!