- alice wants to send 10 bitcoin to bob so Alice creates a message containing details of the payment including: (her address, bobs address, amount to be transferred, time of the transaction)
- The message is then signed with Alice’s private key that is held by Alice’s bitcoin wallet and sent out to every user on the network
- Every user then decrypts the message using Alice’s public key. If it can be decrypted then the message must have come from alice and is considered authentic, otherwise the message is discarded
- If the message was authentic, it is added to the current block in the blockchain and bob must wait until the block has been finalised until he can spend his bitcoin (usually baout 10 mins)
what are the 4 steps of a
bitcoin transaction
describe in 5 steps the process of
finalizing a block
- All participants will hash the block using the SHA-2 hash algorithm. All producing an identical hash
- Each user will then add a random 32-bit value to the block known as a nonce and then hash it again.
- If the new hash has a value lower than the target value that the bitcoin network is currently looking for then this nonce value is sent to every user on the network and they will verify the claim that it is indeed lower
- When the claim is verified the block is locked and added to the blockchain
- All the transactions the block holds are then carried out
what is a
bitcoin address
this is an address made up of a random sequence of characters which hides the details of the individual user and provides anonymity for users making transactions with bitcoin
it is this that is used to exchange bitcoin between users
what are the
weaknesses of having a central authority for digital currencys
some weaknesses of this implementation include:
- being vulnerable to having records changed (double-spend problem)
- vulnerable to outages
- vulnerable to attacks
- vulnerable to nation states taking control
this will:
- generate an address for a user
- generate a key pair for the user
- keep record of how much bitcoin they own
- hold a copy of every bitcoin transaction ever made (bitcoin blockchain / ledger)
what information will a
bitcoin wallet
generate for a user and store
this is a value that is periodically decided by the bitcoin network.
it is there so that the bitcoin mining process can be bitcoins proof of work
during the mining process users must add a nonce to the block and try and find a hash value lower than this value. if the value they find is to high miners must try another nonce
what is the
target value
used by the bitcoin network
this value is re evaluated every time 2016 blocks have been verified
after how many blocks is the
target value
re evaluated
- authenticating personal identities such as employee records, CVs, birth certificates or immigration permits
- managing the issue and revocation of public keys and digital certificates
- tracking changes of ownership for vehicles and property
- digital voting to prevent multiple voting or tampering with final tallies
- creating tamper-proof records of products from manufacture through distribution to final consumption.
what are five areas where
blockchain technology can be further used
what is
digicash
and
webmoney
these are digital currencys that were developed in the 1990s
how large is
1 block of the bitcoin blockchain
and how many transactions can it hold
this has a size of 1MB and can hold between 800 and 2200 transactions
This paper was posted onto bitcoin.org and describes an electronic and peer to peer currency with no central authority that also avoids the double-spend problem
No significant errors or fundamental problems have been found in bitcoins concept
what did
Satoshi Nakamoto white paper
describe and have any major flaws been found within it
August 2008 - bitcoin.org is registered
November 2008 (3 months later) - a paper titled ‘Bitcoin: A Peer-to-Peer Electronic Cash System’ (Nakamoto, 2008) was published onto the website and shared on cryptographic mailing lists
2009 - an application is released by nakamoto that allows the transfer and creation of bitcoin
May 2010 - the first recorded transaction occurs. A pizza was purchased for 10, 000 bitcoin about $30 at the time
describe the
origins of bitcoin
what is a
bitcoin wallet
this is an application that is able to create bitcoin addresses and carry out bitcoin transactions
these two issues are solved by having the hash of the current block being added to the blockchain stored inside the next block of the chain
since all users hold a copy of the blockchain if any changes were made by an individual then their copy of the blockchain would differ from everybody elses on the network
in such a case their copy of the blockchain would be viewed as untrustworthy and discarded
what keeps bitcoin transactions
secure from tampering
and at the same time
solves the double-spend problem
this is an application that is able to create bitcoin addresses and carry out bitcoin transactions
what is a
bitcoin wallet
what information will a
bitcoin wallet
generate for a user and store
this will:
- generate an address for a user
- generate a key pair for the user
- keep record of how much bitcoin they own
- hold a copy of every bitcoin transaction ever made (bitcoin blockchain / ledger)
this will contain:
- a block version number used by the Bitcoin network when verifying blocks
- the SHA-256 hash of the previous block, to check that block has not been altered
- the time the block was created
- the target value set by the network when the block was mined
- the successful nonce used when the block was mined.
what five pieces of information will you find inside the
header of a block
what happens after
210,000 blocks have been added to the blockchain
when this event occurs the amount of bitcoins that are awarded for finalising a block is halved
this has a size of 1MB and can hold between 800 and 2200 transactions
how large is
1 block of the bitcoin blockchain
and how many transactions can it hold
this is an address made up of a random sequence of characters which hides the details of the individual user and provides anonymity for users making transactions with bitcoin
it is this that is used to exchange bitcoin between users
what is a
bitcoin address
what was the failure of
digicash
and
webmoney
both of these digital currencys failed because they relied on a central authority to keep a record of all transactions and user balances
some weaknesses of this implementation include:
- being vulnerable to having records changed (double-spend problem)
- vulnerable to outages
- vulnerable to attacks
- vulnerable to nation states taking control
what are the
weaknesses of having a central authority for digital currencys
- All participants will hash the block using the SHA-2 hash algorithm. All producing an identical hash
- Each user will then add a random 32-bit value to the block known as a nonce and then hash it again.
- If the new hash has a value lower than the target value that the bitcoin network is currently looking for then this nonce value is sent to every user on the network and they will verify the claim that it is indeed lower
- When the claim is verified the block is locked and added to the blockchain
- All the transactions the block holds are then carried out
describe in 5 steps the process of
bitcoin mining / finalizing a block
what five pieces of information will you find inside the
header of a block
this will contain:
- a block version number used by the Bitcoin network when verifying blocks
- the SHA-256 hash of the previous block, to check that block has not been altered
- the time the block was created
- the target value set by the network when the block was mined
- the successful nonce used when the block was mined.
