Bitcoin and Cryptocurrency Technologies

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7.2: Bitcoin Core Software Bitcoin Core is a piece of open‐source software which is a focal point for discussion and debate about Bitcoin’s rules. Bitcoin Core is licensed under the MIT license which is a very permissive open‐source license. It allows the software to be used for almost any purpose as long as the source is attributed and the MIT license is not stripped out. Bitcoin Core is the most widely used Bitcoin software and even those who don't use it tend to look to it to define what the rules are. That is, people building alternative Bitcoin software typically try to mimic the rule‐defining parts of the Bitcoin Core software, the parts that check validity of transactions and blocks. Bitcoin Core is the de‐facto rulebook of Bitcoin. If you want to know what’s valid in Bitcoin, the Bitcoin Core software — or explanations of it — is where to look. Bitcoin Improvement Proposals.Anyone can contribute technical improvements via “pull requests” to Bitcoin Core, a familiar process in the world of open‐source software. For more substantial changes, especially protocol modifications, there is a process called Bitcoin Improvement Proposals or BIPs. These are formal proposals for changes to Bitcoin. Typically a BIP will include a technical specification for a proposed change as well as a rationale for it. So if you have an idea for how to improve Bitcoin by making some technical change, you're encouraged to write up one of these documents and to publish it as part of the Bitcoin Improvement Proposal series, and that will then kick off a discussion in the community about what to do. While the formal process is open to anyone, there’s a learning curve for participation like any open‐source project. BIPs are published in a numbered series. Each one has a champion, that is, an author who evangelizes in favor of it, coordinates discussion and tries to build a consensus within the community in favor of going forward with or implementing a particular proposal. What we said above applies to proposals to change the technology. There are also some BIPs that are purely informational and exist just to tell people things that they might not otherwise know, to standardize some part of the protocol previously only specified in source code, or that are process oriented, that talk about how things should be decided in the Bitcoin community. In summary, Bitcoin has a rulebook as well as a process for proposing, specifying, and discussing rule changes, namely BIPs. Bitcoin Core developers.To understand the role of the Bitcoin Core software we also have to understand the role of Bitcoin Core developers. The original code was written by Satoshi Nakamoto, who we’ll return to later in the chapter. Nakamoto is no longer active, but instead there are a group 196
of developers who maintain Bitcoin Core. As of early 2015 there are five with “commit” access to the Core repository: Gavin Andresen, Jeff Garzik, Gregory Maxwell, Wladimir J. van der Laan, and Pieter Wuille. The Core developers lead the effort to continue development of the software and are in charge of which code gets pushed into new versions of Bitcoin Core. How powerful are these people? In one sense they’re very powerful, because you could argue that any of the rule changes to the code that they make will get shipped in Bitcoin Core and will be followed by default. These are the people who hold the pen that can write things into the de‐facto rulebook of Bitcoin. In another sense, they’re not powerful at all. Because it's open‐source software, anyone can copy it and modify it, in other words, fork the software at any time, and so if the lead developers start behaving in a way that the community doesn't like, the community can go in a different direction. One way of thinking about this is to say that the lead developers are leading the parade. They’re out in front of the parade marching and the parade will generally follow them when they turn a corner, but if they try to lead the parade into an action that is disastrous, then the parade members marching behind them might decide to go in a different direction. They can urge people on, and as long as they seem to be behaving reasonably, the group will probably follow them, but they don't have formal power to force people to follow them if they take the system in a technical direction that the community doesn't like. Let’s think about what you as a user of a system can do if you don't like the way the rules are going or the way it's being run, and compare it to a centralized currency like a fiat currency. In a centralized currency if you don't like what's going on you have a right to exit, that is, you can stop using it. You’d have to try and sell any currency you hold, and you might have to move to someplace with a different fiat currency. Whether or not it’s easy, with a centralized currency that's really your only option. With Bitcoin, you certainly have the right to exit, but because it operates in an open‐source way, you additionally have the right to fork the rules. That means you, and some of your friends and colleagues can decide that you would rather live under a different rule set, and you can fork the rules and go a different direction from the lead developers. The right to fork is more empowering for users than the right to exit, and therefore the community has more power in a system like Bitcoin which is open source than it would in a purely centralized system. So although the lead developers might look like a centralized entity controlling things, in fact they don't have the power that a purely centralized manager or software owner would have. Forks in the rules.One way to fork the software and the rules is to start a new block chain with a new genesis block. This is a popular option for creating altcoins, which we’ll discuss in Chapter 10. But for now let’s consider a different type of fork in the rules, one in which those who fork decide to fork the block chain as well. If you recall the distinction between a hard fork and a soft fork from Chapter 3, we’re talking about a hard fork here. At the point when there’s a disagreement about the rules, there will be a fork in the 197
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Bitcoin and Cryptocurrency Technolo
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Preface — The Long Road to Bitcoi
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work, there is also the issue of co
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Finally, CyberCash has the dubious
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This was the first serious digital
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and so on — powers of two. That w
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Figure 3 shows the user side of the
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initial cost to acquire all the equ
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the system is to record the relativ
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original design. However, after Bit
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A final reason that’s often cited
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Chapter 1: Introduction to Cryptogr
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Figure 1.2 Because the number of
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Property 2: Hiding The second pr
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ecome: ● ● Hiding: Given H(
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SHA‐256 uses a compression functi
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Figure 1.5 Block chain.A block c
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Figure 1.7 Merkle tree. In a Mer
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throughout this book. 1.3 Digital S
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Figure 1.9 Unforgeability game.
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andomness just in making a signatur
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1.5 A Simple Cryptocurrency Now let
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The first key idea is that a design
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Figure 1.13 A PayCoins Transa
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Perusing the NIST standard that def
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Chapter 2: How Bitcoin Achieves Dec
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state of the system. The implicatio
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consensus is somewhat pessimistic,
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Implicit Consensus. This assumpt
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Figure 2.2 A double spend attempt.
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In general, the more confirmations
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Figure 2.4 The block reward is c
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puzzle‐friendliness property from
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possible outcomes, and the probabil
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theory problem that’s not easily
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this interlocking interdependence b
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Further reading The Bitcoin whitepa
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Chapter 3: Mechanics of Bitcoin Thi
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In this example, Alice specifies tw
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3.2 Bitcoin Scripts Each transactio
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the Bitcoin language and one has to
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exactly the same script, which is i
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in the normal case, this isn’t th
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Technically all of these transactio
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The header mostly contains informat
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in turn sends it to all of its peer
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Figure 3.10 Block propagation ti
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that actually affect them. So they
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that the old version would accept a
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Exercises 1. Transaction validation
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Chapter 4: How to Store and Use Bit
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software can automatically turn the
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The cryptographic magic that makes
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may never know (or care) who the co
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Given this stringent requirement, s
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There is a formula called Lagrange
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Ideally, the site will encrypt thos
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seen exchanges that fail due to bre
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Figure 4.5: Proof of liabilities.
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crypto and we won’t cover it here
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Figure 4.8: Payment process involvi
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transaction can't create coins, but
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of U.S. dollars per day pass throug
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Now if you look at a particular sec
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alance of 500,000 BTC. It then sign
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Chapter 5: Bitcoin Mining This chap
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In most cases you'll try every sing
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You can see in Figure 5.3 that over
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steady‐state, the period to find
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TARGET=(65535
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Disadvantages of GPU mining. GPU
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may be the fastest turnaround time
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Page 175 and 176: Figure 6.5. Labeled clusters.
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you. In particular, you can’t use
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To solve this problem we can once a
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NBA draft lottery.One example th
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that there’s no way for anyone to
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to predict the low‐level fluctuat
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design, because miners have to veri
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Here's another example, this time f
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You can also trade shares for futur
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Order books.The final piece o
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Chapter 10: Altcoins and the Crypto
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Attracting miners has special impor
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with the launch date of the altcoin
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Namecoin is technically interesting
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10.3 Relationship Between Bitcoin a
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Switching costs are certainly not z
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If our altcoin is merge‐mined, we
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When we think about a rational mine
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DepositA [Altcoin block chain] Refu
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Sidechains. The sidechains vision i
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lock themselves could tell us. This
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written in bytecode and executed by
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Bitcoin. In particular, there are c
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The simple binary Merkle tree used
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Chapter 11: Decentralized Instituti
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Bitcoin, Alice can remotely transfe
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only these signatures of limited fo
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11.3 Template for Decentralization
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Sidebar: trust.Some people in th
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competition among intermediaries. P
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To drive home the mismatch between
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Conclusion to the book Some people
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