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KembaraXtra- Computer Science - Bitcoin
I. Cryptocurrency Fundamentals
A. Definition
A. Origin
A. Core Concept
A. Storage
A. Definition
A. Definition
A. Genesis Block
A. Bitcoin Anonymity
I. Cryptocurrency Fundamentals
A. Definition
- A digital asset used for financial transactions, serving as an alternative to traditional currencies.
- Transactional: Spending currency on goods/services.
- Investment: Similar to gold; value is stored/speculated on.
- No single controlling organization.
A. Origin
- The first decentralized cryptocurrency, introduced in 2009.
- Most well-known cryptocurrency, with many alternatives ("altcoins") but none as dominant.
- Bitcoin (BTC).
A. Core Concept
- Information grouped into chronological "blocks" linked together.
- Blocks contain transaction records (movement of bitcoins).
- Operates over a network (e.g., the internet).
- Multiple computers ("nodes") process transactions and update the blockchain.
- No single master copy of the blockchain.
- Encryption/Decryption: Ensures transaction integrity and prevents tampering.
- Immutability: Data cannot be changed once written to the blockchain.
- Decentralized, immutable record of all Bitcoin network transactions.
A. Storage
- Bitcoins are associated with key pairs held in a Bitcoin wallet.
- The wallet holds cryptographic key pairs (private and public keys).
- Private Key: Randomly generated 256-bit number; must be kept secret. Allows spending of associated bitcoins.
- Public Key: Derived from the private key; used to receive bitcoins.
- Text string generated from the public key; used to represent the public key when receiving bitcoins.
- Example: 13pB1brJqea4DYXkUKv5n44HCgBkJHa2v1
- Sender needs the recipient's Bitcoin address (derived from their public key).
- Sender uses their private key to authorize the transaction.
- Recipient's private key is never shared.
A. Definition
- A transfer of bitcoins.
- Wallet software constructs a transaction.
- Transaction details (sender, receiver, amount) are specified.
- Digitally signed with the sender's private key.
- Broadcast to the Bitcoin network.
- Network computers verify the transaction.
- Transaction added to a new block on the blockchain.
- Inputs: Source of the bitcoins being transferred. Refers to a previous transaction's output, not directly to a Bitcoin address.
- Outputs: The address where the bitcoin is sent.
- Not explicitly stored in the wallet or directly in the blockchain.
- Calculated from the history of transactions associated with an address.
A. Definition
- The process of maintaining the Bitcoin blockchain.
- Computers around the world that add blocks of transactions to the blockchain.
- Verify Transactions: Ensure each transaction in the block is valid.
- Solve a Complex Problem: Miners must solve a computationally difficult problem (proof of work).
- Deters tampering with the blockchain.
- Altering a block requires re-solving the problem for that block and all subsequent blocks.
- The first miner to solve the problem is awarded a sum of bitcoins.
- This is how new bitcoins are created.
- Miners also claim transaction fees from transactions included in the block.
- Designed to allow only 21 million coins to be mined in total.
- After that, miners will rely solely on transaction fees.
A. Genesis Block
- The first block in the Bitcoin blockchain, mined in 2009.
- Inventor of Bitcoin (presumed pseudonym).
- Mining costs (hardware, electricity) must be less than the value of bitcoins awarded.
- Specialized hardware is used for faster mining.
- Mining is not a guaranteed profit due to costs and price volatility.
A. Bitcoin Anonymity
- The blockchain is public (all transactions are visible).
- However, personal identities are not directly linked to addresses.
- Attracts those seeking anonymity.
- Can be used beyond cryptocurrencies.
- Suitable for any system needing a tamper-resistant record history.
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