42 \end{center} |
42 \end{center} |
43 |
43 |
44 \noindent is signed by Satoshi Nakamoto, which however is |
44 \noindent is signed by Satoshi Nakamoto, which however is |
45 likely only a pen name. There is a lot of speculation who |
45 likely only a pen name. There is a lot of speculation who |
46 could be the inventor, or inventors, but we simply do not |
46 could be the inventor, or inventors, but we simply do not |
47 know. This part of Bitcoins is definitely anonymous. The paper |
47 know. This part of Bitcoins is definitely anonymous so far. The paper |
48 above is from the end of 2008; the first Bitcoin transaction |
48 above is from the end of 2008; the first Bitcoin transaction |
49 was made in January 2009. The rules in Bitcoin are set up so |
49 was made in January 2009. The rules in Bitcoin are set up so |
50 that there will only ever be 21 Million Bitcoins with the |
50 that there will only ever be 21 Million Bitcoins with the |
51 maximum reached around the year 2140. Currently there are |
51 maximum reached around the year 2140. Currently there are |
52 already 11 Million Bitcoins in `existence'. Contrast this with |
52 already 11 Million Bitcoins in `existence'. Contrast this with |
75 keys. There are $2^{160}$ possible addresses, which is such a |
75 keys. There are $2^{160}$ possible addresses, which is such a |
76 vast amount that there is not even a check for duplicates, or |
76 vast amount that there is not even a check for duplicates, or |
77 already used addresses. If you start with a random number to |
77 already used addresses. If you start with a random number to |
78 generate a public-private key pair it is very unlikely that |
78 generate a public-private key pair it is very unlikely that |
79 you step on somebody else's shoes. Compare this with the |
79 you step on somebody else's shoes. Compare this with the |
80 email-addresses you always wanted to register with, say |
80 email-addresses you wanted to register with, say |
81 Gmail, but which are already taken. |
81 Gmail, but which are always already taken. |
82 |
82 |
83 One major difference between Bitcoins and traditional banking |
83 One major difference between Bitcoins and traditional banking |
84 is that you do not have a place, or places, that record the |
84 is that you do not have a place, or places, that record the |
85 balance on your account. Traditional banking involves a |
85 balance on your account. Traditional banking involves a |
86 central ledger which specifies the current balance in each |
86 central ledger which specifies the current balance in each |
141 \end{itemize} |
141 \end{itemize} |
142 |
142 |
143 \noindent But for this banks would need to be trusted and |
143 \noindent But for this banks would need to be trusted and |
144 would also be an easy target for any government interference, |
144 would also be an easy target for any government interference, |
145 for example. Think of the early days of music sharing where |
145 for example. Think of the early days of music sharing where |
146 the company Napster was the single point of ``failure'' which |
146 the company Napster was the trusted third-party but also the single point of ``failure'' which |
147 was taken offline by law enforcement. Bitcoins is more like a |
147 was taken offline by law enforcement. Bitcoins is more like a |
148 system such as BitTorrent without a single central entity that |
148 system such as BitTorrent without a single central entity that |
149 can be taken offline.\footnote{There is some Bitcoin |
149 can be taken offline.\footnote{There is some Bitcoin |
150 infrastructure that is not so immune from being taken offline: |
150 infrastructure that is not so immune from being taken offline: |
151 for example Bitcoin exchanges, HQs of Bitcoin mining pools, |
151 for example Bitcoin exchanges, HQs of Bitcoin mining pools, |
152 Bitcoin developers and so on.} |
152 Bitcoin developers and so on.} |
153 |
153 |
154 Bitcoin solves the problem of not being able to rely on a bank |
154 Bitcoins solve the problem of not being able to rely on a bank |
155 by making everybody the ``bank''. Everybody who cares can have |
155 by making everybody the ``bank''. Everybody who cares can have |
156 the entire transactions history starting with the first |
156 the entire transaction history starting with the first |
157 transaction made in January 2009. This history of transactions |
157 transaction made in January 2009. This history of transactions |
158 is called the \emph{blockchain}. Bob, for example, can use his |
158 is called the \emph{blockchain}. Bob, for example, can use his |
159 copy of the blockchain for determining whether Alice owned the |
159 copy of the blockchain for determining whether Alice owned the |
160 Bitcoin he received, and if she did, he transmits the message |
160 Bitcoin he received, and if she did, he transmits the message |
161 that he owns it now to every other participant on the Bitcoin |
161 that he owns it now to every other participant on the Bitcoin |
218 transactions, but also to split outgoing transactions to |
218 transactions, but also to split outgoing transactions to |
219 potentially more than one receiver. The latter is needed. |
219 potentially more than one receiver. The latter is needed. |
220 Consider again the rightmost transactions in |
220 Consider again the rightmost transactions in |
221 Figure~\ref{txngraph} and suppose Alice is a coffeeshop owner |
221 Figure~\ref{txngraph} and suppose Alice is a coffeeshop owner |
222 selling coffees for 1 Bitcoin. Charles received a transaction |
222 selling coffees for 1 Bitcoin. Charles received a transaction |
223 from Zack over 5 Bitcoins, say. How does he pay for the |
223 from Zack over 5 Bitcoins, say. How does Charles pay for the |
224 coffee? There is no explicit notion of \emph{change} in the |
224 coffee? There is no explicit notion of \emph{change} in the |
225 Bitcoin system. What Charles has to do instead is to make one |
225 Bitcoin system. What Charles has to do instead is to make one |
226 single transaction with 1 Bitcoin to Alice and with 4 Bitcoins |
226 single transaction with 1 Bitcoin to Alice and with 4 Bitcoins |
227 going back to himself, which then Charles can use to give to |
227 going back to himself, which then Charles can use to give to |
228 Emily, for example. |
228 Emily, for example. |
250 split this amount with 1 Bitcoin going to Alice and 9 Bitcoins |
250 split this amount with 1 Bitcoin going to Alice and 9 Bitcoins |
251 going back to herself. |
251 going back to herself. |
252 |
252 |
253 I think this is a good time for you to pause to let this |
253 I think this is a good time for you to pause to let this |
254 concept of transactions to really sink in\ldots{}You should |
254 concept of transactions to really sink in\ldots{}You should |
255 see that there is really no need for a central ledger and no |
255 come to the conclusion that there is really no need for a central ledger and no |
256 need for an account balance as familiar from traditional |
256 need for an account balance as familiar from traditional |
257 banking. The closest what Bitcoin has to offer for the notion |
257 banking. The closest what Bitcoin has to offer for the notion |
258 of a balance in a bank account are the unspend transactions |
258 of a balance in a bank account are the unspend transactions |
259 that a person (more precisely a public-private key address) |
259 that a person (more precisely a public-private key address) |
260 received. That means transactions that can still be forwarded. |
260 received. That means transactions that can still be forwarded. |