Bitcoin white paper explained that

Today I bitcoin white paper explained that break down and explain the original Bitcoin paper in a clear manner. This post will not cover every aspect of Bitcoin, instead I will focus on the original Bitcoin paper and hopefully this will provide you bitcoin white paper explained that a fundamental understanding of Bitcoin. The paper that I will be discussing here is the original paper written by Satoshi Nakamoto, which first introduced the word to Bitcoin in Satoshi argues that buying and selling goods over the internet relies on financial bitcoin white paper explained that acting as 3rd parties to process financial transactions.

This therefore increases the cost of performing a transaction over the internet and makes transactions relatively expensive. To overcome this problem, Satoshi introduces an electronic payment system based on cryptography. This will allow two parties to interact with each other without a 3rd party getting in the way. Since these cryptographic transactions will be computationally impossible to reverse, users will be protected from fraud.

A peer-to-peer a set of interconnected computers which work together electronic cash system bitcoin white paper explained that be created. This peer-to-peer cash system, avoids bitcoin white paper explained that problems of double spending performing two transactions with one coin simultaneously by using Hashing and proof-of-work explained later.

During bitcoin white paper explained that process, the sender passing the Bitcoin onwards, electronically signs the pervious transactions of the Bitcoin and the public key of the recipient they are sending the Bicoin to. An analogy to this is signing for a package that you have received and then writing a forwarding address on the package before sending it onwards. Passing the Bitcoin from one person to another is like playing a game of pass the parcel, except each time the parcel is passed, the history of the parcels locations is written on it.

Unlike parcels in the real world, digital parcels can be sent to more than one recipient at the same time imagine sending the same email to multiple people. Bitcoin overcomes this problem as time stamps are used to ensure that whenever a Bitcoin is passed on, a duplicate copy of that coin cannot be double spent fraud. Each transaction is time stamped and processed by the Bitcoin system in order of their respective time stamp.

Therefore, if a coin is sent to two recipients, the coins will have different time stamps and hence the second coin sent will be automatically rejected by the system. This ensures that the system, along with its users, moderate the chain bitcoin white paper explained that transactions blockchain to ensure fraudulent activity does not take place. Using this method of moderating transactions ensures that a 3rd party is not needed and the Bitcoin system is truly decentralised.

To avoid this, the majority of computers nodes in the network agree upon a singular timeline and process transactions relative to this time. The bitcoin white paper explained that server is a simple piece of software that is used to digitally timestamp data.

The server takes a small section of the transaction data a hash and timestamps it. This time stamped hash is then made publicly available for everyone to see.

The existence of this time stamped hash therefore proves that the transaction exists and is therefore valid. This therefore creates a chain of transactions Blockchain as each new time stamped hash includes the bitcoin white paper explained that hashes.

The size of the Blockchain will bitcoin white paper explained that get larger as the transaction history increases. To implement a time stamp server across a network of computers nodesa proof-of-work system has to be used. Proof-of-work requires proof that a specified amount work has been done by the system. In terms of Bitcoin, a specific mathematical problem has to be solved by a computer and its answer presented to show that it has done work.

Since a computer has to do work to solve a problem, people cannot spam the system with multiple requests. Spamming the system with multiple requests would require too much computer power and hence proof-of-work is used to safeguard the system. An analogy to this would be, a teacher giving a difficult homework assignment to a student.

The teacher then checks the students answer and if the student is correct, this proves to the teacher that the student has done a sufficient amount of work to be rewarded. This number also contains a puzzle that needs to be solved before a transaction can happen.

When someone sends a transaction, they must therefore take this unique number and solve its puzzle. The answer to the puzzle is then passed onto the next person recipient for the recipient to check. The recipient then checks the answer given to them by the sender, by plugging the answer into the hash that generated the random number.

Therefore it is bitcoin white paper explained that to unlock a single block as the whole chain has to be changed to do this. Hence, this creates transactions that cannot be reversed. Nodes always consider the longest chain to be correct. If two nodes send two versions of the block at the same time, these blocks will be processed based on their time stamp. The longest chain will win. If a node is switched off and subsequently does not receive a block, the rest of the nodes will continue without it and the node that missed out will be updated when it connects to the network at a later date.

Conventionally, the first transaction in a block creates a new coin which is owned by the person node who created that particular block. This incentivises people to use their computers nodes and connect to the Bitcoin network to help process Bitcoin transactions. This is where the term Bitcoin mining originates. Transaction fees also act as incentives, which are additional charges added to each transaction. Once the maximum amount of coins 21 Million have entered the Bitcoin system, the incentive to keep mining Bitcoins solely comes in the form of transaction fees, which are inflation free.

It is hoped that bitcoin white paper explained that incentives will keep the nodes honest literally and stop them resorting to fraud to make a profit. If fraudulent users have more nodes than honest users, they can undo the block chain, steal payments and generate new coins. Old transactions can be discarded after a set amount of time to save disk space, the root a trace of the discarded transaction will remain so the Blockchain remains intact. Payments can be verified without running the full network on a node.

This is done by querying the network of nodes and matching a transaction to its time-stamp. The transaction cannot be checked by an individual node, a person must connect to another node which connects them to the Blockchain.

This method of verification when making a payment is reliable as long as honest nodes are in control, however this verification method becomes bitcoin white paper explained that if fraudulent nodes take over the network. To overcome this, an alert should be sent from nodes bitcoin white paper explained that detect an invalid block, informing other nodes to download a copy of the full Blockchain to confirm invalid blocks.

A maximum of 2 outputs from each transaction can be made, one going to the recipient and another returning change if any to the sender. Although transactions are publicly declared, the public keys that identify individuals are anonymous, and hence the identities of the sender and receiver cannot be determined by the public.

It is publicly declared that an amount of money is moving from point A to B, however no identifiable information is openly distributed. These calculations require a somewhat advanced understanding of mathematics which can take a long time to explain in a simplified manner.

I will not go into this detail here, however, if enough people request this, I will make a new post explaining this section in detail. There is a higher probability that an honest node will find a block before a fraudulent node.

This is important when increasing the size of the Blockchain as the nodes identify the longest Blockchain as being the correct chain.

A peer-to-peer network using proof-of-work is used to create a public log which is impractical for attackers to change, provided honest nodes are in control of the system. Nodes work with little coordination, they do not need to be identified since messages are not ever sent to a sole location. Nodes can leave and rejoin the network at any time, provided they update their Blockchain upon re-entering the network. Hi britcoinI'm glad you liked this bitcoin white paper explained that It was fun to write and I'm glad its helped people understand Bitcoin a lot more.

Thanks for sharing, its much appreciated! A very well explained breakdown. Thank you quicksilverthe plan is to get more people into bitcoin white paper explained that so i'm glad this will help: I had to sign up for steemit account to be able to thank you for this great post.

Will look forward to see similar posts by you. Bitcoin White Paper explained An example of this: In brief, this section mathematically states: A system for electronic transactions without relying on 3rd party trust has been proposed. Digital signatures provide strong controls over ownership bitcoin white paper explained that double-spending is prevented.

Rules and incentives can be enforced using a voting system. Thank you for reading this post! Please upvote, comment and follow dr-physics for more content! Authors get paid when people like you upvote their post. I'm glad you liked it: Wow great info will help a lot am posting on Facebook linked and twitter great stuff.

Thanks for this brilliant explanation, now i understand better. Your welcome, really glad it helped! Could you please make a new post bitcoin white paper explained that calculation section in detail.

Liked it a lot .

Today I will break down and explain the original Bitcoin paper in a clear manner. This post will not cover every aspect of Bitcoin, instead I will focus on the original Bitcoin paper and hopefully this will provide you with a fundamental understanding of Bitcoin. The paper that I will be discussing here is the original paper written by Satoshi Nakamoto, which first introduced the word to Bitcoin in Satoshi argues that buying and selling goods bitcoin white paper explained that the internet relies on financial institutions acting as 3rd parties to process financial transactions.

There is currently no way to make a non-reversible payment online for a non-reversible service as there is with cash in the physical world. Since the financial institutions are acting as a trusted party to facilitate the transaction, they often spend time resolving disputes and dealing with fraud. This therefore increases the cost of performing a transaction over the internet and makes transactions relatively expensive. To overcome this problem, Satoshi introduces an electronic payment system based on cryptography.

This will allow two parties to interact with each other without a 3rd party getting in the way. Since these cryptographic transactions will be computationally impossible to reverse, users will be protected from fraud. A peer-to-peer a set of interconnected computers which work together electronic cash system will be created. This peer-to-peer cash system, avoids previous problems of double spending performing two transactions with one coin simultaneously by using Hashing and proof-of-work explained later.

During this process, the sender passing the Bitcoin onwards, electronically signs the pervious transactions of the Bitcoin and the public key of the recipient they are sending the Bicoin to. An analogy to this is signing for a package that you have received and then writing a forwarding address on the package before sending it bitcoin white paper explained that.

Passing the Bitcoin from one person to another is like playing a game of pass the parcel, except each time the parcel is passed, the history of the parcels locations is written on it. Unlike parcels in the real world, digital parcels can be sent to more than one recipient at the bitcoin white paper explained that time imagine sending the bitcoin white paper explained that email to multiple people. Bitcoin overcomes this problem as time stamps are used to bitcoin white paper explained that that whenever a Bitcoin is passed on, a duplicate copy of that coin cannot be double spent fraud.

Each transaction is time stamped and processed by the Bitcoin system in order of their respective time stamp. Therefore, if a coin is sent to two recipients, the coins will have different time stamps and hence the second coin sent will be automatically rejected by the system. This ensures that the system, along with its users, moderate the chain of transactions blockchain to ensure fraudulent activity does not take place.

Using this method of moderating transactions ensures that a 3rd party is not needed and the Bitcoin system is truly decentralised. To avoid this, the majority of computers nodes in the network agree upon a singular timeline and process transactions relative to this time. The timestamp server is a simple piece of software that is used to digitally timestamp data. The server takes a small section of the transaction data a hash and timestamps it.

This time stamped hash is then made publicly available for everyone to see. The existence of this time stamped hash therefore proves that the transaction exists and is therefore valid. This therefore creates a chain of transactions Blockchain as each new time stamped hash includes the previous hashes. The size of the Blockchain will bitcoin white paper explained that get larger as the transaction history increases. To implement a time stamp server across a network of computers nodesa proof-of-work system has to be used.

Proof-of-work requires proof that a specified amount work has been done by the system. In terms of Bitcoin, a specific mathematical problem has to be solved by a computer and its answer presented to show that it has done work.

An analogy to this would be, a teacher giving a difficult homework assignment to a student. The teacher then checks the students answer and if the student is correct, this proves to the teacher that the student has done bitcoin white paper explained that sufficient amount of work to be rewarded.

This number also contains a puzzle that needs to be solved before a transaction can happen. When someone sends a transaction, bitcoin white paper explained that must therefore take this unique number and solve its puzzle. The answer to the puzzle is then passed onto the next person recipient for the recipient to check. The recipient then checks the answer given to them by the sender, by plugging the answer into the hash that generated the random number.

The hash will then inform the receiver if the answer is correct. This process of solving hash puzzles essentially locks the transactions blocks in place within the Blockchain. To reverse a set of transactions unlock a blockthe work done bitcoin white paper explained that solve the hash puzzle would have to be undone. Therefore it is impractical to unlock a single block as the whole chain has to be changed to do this. Hence, bitcoin white paper explained that creates transactions that cannot be reversed.

Nodes always consider the longest chain to be correct. If two nodes send two versions of the block at the same time, these blocks will be processed based on their time stamp. The longest chain will win.

If a node is switched off and subsequently does not receive a block, the rest of the nodes will bitcoin white paper explained that without it and the node that missed out will be updated when it connects to the network at a later date. Conventionally, the first transaction in a block creates a new coin which is owned by the person node who created that particular block.

This incentivises people to use their computers nodes and connect bitcoin white paper explained that the Bitcoin bitcoin white paper explained that to help process Bitcoin transactions. This is where the term Bitcoin mining originates. Transaction fees also act as incentives, which are additional charges added to each transaction. Once the maximum amount of coins 21 Million have entered the Bitcoin system, the incentive to keep mining Bitcoins solely comes in the form of transaction fees, which are inflation free.

It is hoped that these incentives will keep the nodes honest literally and stop them resorting to fraud to make a profit. If fraudulent users have more nodes than honest users, they can undo the block chain, steal payments and generate new coins.

Old transactions can be discarded after a set amount of time to save disk space, the root a trace of the discarded transaction will remain so the Blockchain remains intact. Payments can be verified without running the full network bitcoin white paper explained that a node. This is done by querying the network of nodes and matching a transaction to its time-stamp. The transaction cannot be checked by an individual node, a person must connect to another node which connects them to the Blockchain.

This method of verification when making a payment is reliable as long as honest nodes are in control, however this verification method becomes venerable if fraudulent nodes take over the network. To overcome this, an alert should be sent from nodes that detect an invalid block, informing other nodes to download a copy of the full Blockchain to confirm invalid blocks.

Businesses should run their own nodes for increased security. Processing coins individually is possible, however it is inefficient to make a separate transaction for ever cent in a transfer. This allows a large coin to be split into multiple parts before being passed on, or smaller coins to be combined and make a larger amount. A bitcoin white paper explained that of 2 outputs from each transaction can be made, one going to the recipient and another returning change if any to the sender.

Although transactions bitcoin white paper explained that publicly declared, the public keys that identify individuals are anonymous, and hence the identities of the sender and receiver cannot be determined by the public. It is publicly declared that an amount bitcoin white paper explained that money is moving from point A to B, however no identifiable information is openly distributed.

These calculations require a somewhat advanced understanding of mathematics which can take a long time to explain in a simplified manner. I will not go into this detail here, however, if enough people request this, I will make a new post explaining this section in detail. There is a higher probability that an honest node will find a block before a fraudulent node.

It is therefore unlikely that the fraudulent node will catch up with the honest node when making a fraudulent Blockchain. The odds are not in the favour of the fraudulent node unless they simply get lucky. This is important when increasing the size of the Blockchain as the nodes identify the longest Blockchain as being the correct chain.

A peer-to-peer network using proof-of-work is used to create a public log which is impractical for attackers to change, provided honest nodes are in control of the system. Nodes work with little coordination, they do not need bitcoin white paper explained that be identified since messages are not ever sent to a sole location.

Nodes can leave and rejoin the network at any time, provided they update their Blockchain upon re-entering the network. Hi britcoinI'm glad you liked this article! It was fun to write and Bitcoin white paper explained that glad its helped people understand Bitcoin a lot more. Thanks for sharing, its much appreciated! A very well explained breakdown. Thank you quicksilverthe plan is to get more people into crypto so i'm glad this will help: I had to sign up for steemit account to be able to thank you for this great post.

Will look forward to see similar posts by you. Bitcoin White Paper explained An example of this: In brief, this section mathematically states: A system for electronic transactions without relying on 3rd party trust has been proposed. Digital signatures provide strong controls over ownership and double-spending is prevented. Rules and incentives can be enforced using a voting system.

Thank you for reading this post! Please upvote, comment and follow dr-physics for more content! Authors get paid when people like you upvote their post.

Trending Trending Votes Age Reputation. I'm glad you liked it: Wow great info will help a lot am posting on Facebook linked and twitter great stuff. Thanks for this brilliant explanation, now i understand better. Your welcome, really glad it helped! Could you please make a new post explaining calculation section in detail. Liked it a lot .

Bitcoin has been pretty crazy lately, at the weekend even my Mum asked me about the decentralised cryptocurrency.

Anyway, it got me thinking about the origins, and how it all began. Bitcoin white paper explained that this post, i read through the whitepaper and made some notes. In short, nobody really knows! Satoshi has opted to keep his — if he is a male, or if he is indeed even one person — identity a secret. The Bitcoin whitepaper is 9 pages long and consists of an Abstract and 12 sections.

Satoshi explains that implementing a distributed time-stamp server requires a proof-of-work system. This is fine if the network consists of honest nodes, but is vulnerable to bad transactions that an attacker may create. To allow value to be divided and merged, transactions contain various inputs and outputs. For example a single input from a large transaction, or many smaller inputs. Traditional banking limits access to information to just those involved in the transaction and the trusted third party.

This is not workable in a model where the transactions are broadcast publicly, but the need for privacy is still important. Privacy is maintained by keeping public keys anonymous. A transfer can happen without knowing who is involved in the transaction. Calculations is the longest section in the whitepaper, just over 2 of the 9 pages. In this section the paper considers a scenario where bad actors in the system try to generate an alternative chain faster than the honest chain.

In this scenario there is a race between the honest chain and an attacker bad chain, and the section steps through the mathematical probability that the attacker chain can catch up with the honest chain. Email will not be published required. Who is Satoshi Nakamoto? There is no way of making peer-to-peer payments online that bypass financial institutions. Some solutions exist that utilise digital signatures, but these require a trusted third party to ensure that the digital value is not spent more than once double spending The Solution: Reliance on financial institutions The need for trusted parties to process payments Non-reversible transactions which in turn increase transaction costs and further accentuate the need for trusted and centralised third parties An acceptance that some fraud is inevitable The need for a electronic payment system that: Uses cryptographic proof rather than trust Enables parties to transaction directly with one another bypassing any central or trusted third bitcoin white paper explained that Protects individuals from fraud 2.

Bitcoin is a chain of digital signatures Every owner of bitcoin white paper explained that electronic coin passes it to the next owner by digitally signing: Declared publicly Confirmed through a system whereby all participants nodes agree the history and order in which the transaction was received 3.

Each timestamp includes the previous timestamp, creating a chain, and as new timestamp hashes are added the chronological order and links are strengthened 4. INCENTIVE — The goal in the peer to peer electronic cash system is to encourage nodes to connect bitcoin white paper explained that the network and validate transactions The first block in a transaction starts a new coin which is owned by the creator of the block In order to generate new blocks, and therefore coins valueCPU and electricity are needed Bitcoin white paper explained that the output of a transaction is less than the input value, a transaction fee is added to the block containing the transaction 7.

Getting a copy of the block headers of the longest proof-of-work chain… Retrieved by reaching out to the network nodes… Verifying independently that you have the longest chain…. Getting the Merkle branch linking the transaction to the block bitcoin white paper explained that timestamped in Linking the transaction to the chain If the network accepts the transaction, blocks will be bitcoin white paper explained that after it This bitcoin white paper explained that fine if the network consists of honest nodes, but is vulnerable to bad transactions that an attacker may create.

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