Bitcoin and Cryptocurrency Technologies

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guarantees Bob can’t claim the bond before some time t. Since Alice plans to reveal her committed value before then and recover the bond, it is safe for her sign this transaction. Now if Alice leaves without revealing her value, Bob can claim the bond at time t. This doesn’t force Alice to reveal her commitment but she willlose the entire bond that she put up. So the guarantee that she'll reveal her secret value depends on the amount of money she's willing to put in the bond. scriptPubKey: OP_IF OP_CHECKSIGVERIFYOP_CHECKSIG OP_ELSE OP_CHECKSIGVERIFYOP_HASHOP_EQUAL OP_ENDIF scriptSig for Case 1: 0 scriptSig for Case 2: x1 Figure 9.7: The transaction output scriptPubkey and scriptSigs used in a timed hash commitment. How can we use this timed hash commitment to implement our secure lottery? We'll have almost the exact same structure as before, except instead of using the simple hash commitments, we’ll use these timed commitments. Whoever does not reveal their random value before the deadline will forfeit a security deposit that’s used to compensate the other two players. Revealing the random value is now simply a matter of recovering the bond by providing the correct secret input x. This lottery scheme can be implemented on top of Bitcoin. But it’s a bit complicated and the timed hash commitments require multiple non‐standard transactions. When there are nparties in the lottery, n 2 commitments are needed since each party needs to put up a bond for each other party. The players have to escrow more money in total than they are even betting. But it is reasonable for a small number of participants, and there are variants with better efficiency. Most importantly, it serves as an existence proof that seemingly impossible protocols such as flipping a virtual coin over the internet and penalizing a party for aborting the protocol are possible in the Bitcoin world. 9.4: Bitcoin as Public Randomness Source In the last section, we showed how a group of people can jointly choose a fair random value. In this section we’ll talk about using Bitcoin to generate random values that are fair to anyonein the public. Why would we want this? Let’s discuss a few examples of applications that already rely on public sources of random values. 250
NBA draft lottery.One example that occurs every spring in the U.S. is the NBA draft lottery. All 30 teams in the NBA get together and randomly choose — with some weighting based on how each team performed in the previous season — the order in which teams get to select the top amateur players in the country who are ready to turn professional. This was first done in 1985. The lottery was conducted over live television, and involved picking envelopes after they’re shuffled in a transparent spinning drum. This lottery generated a bit of controversy then, because the New York Knicks won in the first year and were able to draft the highly sought‐after center Patrick Ewing (an eventual member of the Basketball Hall of Fame). Since the lottery was filmed in New York City, some fans of other teams alleged that the process was rigged in favor of the Knicks. There are numerous conspiracy theories for how the NBA might have rigged this process, such as the famous “bent corner” theory suggesting that the Knicks’ envelope had its corner bent so the commissioner could distinguish it from the others by touch. Another theory suggests the Knicks’ envelope was kept in a freezer and the commissioner simply grabbed the one cold envelope. These theories show why it is very hard to hold a drawing like this and prove that it was fair — there are many plausible avenues to cheat. Just think of what professional sleight‐of‐hand magicians can appear to do! Even today, this lottery occurs every year and each time it leads to a variety of conspiracy theories and rumors that the lottery isn’t a fair random drawing. Figure 9.8:Images from the 1969 (Vietnam war) military draft lottery. U.S. military draft lottery.A more serious example comes from 1969, when there was a conscription lottery in the United States to determine which young men would be required to join the armed services. Most of them were sent to fight in the Vietnam War. A procedure similar to the NBA lottery was used, carried out by several representatives from the US Congress and broadcast on live television (Figure 9.8). They dumped small capsules labeled with each day of the year into a large plastic drum, and then took turns reaching in with their hands to pull the numbers out. Men eligible to be drafted were given a priority number based on the day of the year their birthday fell on. The priority number determined the order in which they would be drafted. 251
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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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Figure 5.10: Evolution of mining
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Hopefully, over time the embodied e
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Still, if we could replace Bitcoin
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Figure 5.11: Illustration of uncert
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Figure 5.13: Mining rewards. Thr
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Some mining hardware even supports
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By April 2015, the situation looks
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Figure 5.15 Forking attack.A mal
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Temporary block‐withholding attac
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the transaction from address X
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Chapter 6: Bitcoin and Anonymity
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Unlinkability. To understand unl
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eason is that use cases that we cla
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But this reveals something. The tra
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the other hand, are often not new a
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Figure 6.5. Labeled clusters.
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Luckily, this is a problem of commu
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they are unhappy with anonymity pro
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Fees should be all-or-nothing. M
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Somebody looking at this transactio
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a single transaction that combines
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just minting one doesn’t automati
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Efficiency. Recall the statement
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We start with Bitcoin itself, which
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An alternative design to Zerocoin i
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elieve the same thing. So consensus
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of developers who maintain Bitcoin
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Page 201 and 202: eing effectively bankrupt. As of ea
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Page 207 and 208: arrest. So although Ulbricht was th
Page 209 and 210: kind of business that will handle l
Page 211 and 212: een enough time for sellers to buil
Page 213 and 214: The text refers to “activities in
Page 215 and 216: A book that looks at the history of
Page 217 and 218: It’s easy to see how Bitcoin’s
Page 219 and 220: Why might memory‐hard and memory
Page 221 and 222: Until recently, it wasn’t known i
Page 223 and 224: meaning the exponential growth peri
Page 225 and 226: Next, consider the problem that SET
Page 227 and 228: In Permacoin, each miner Msto
Page 229 and 230: Interestingly, these concerns have
Page 231 and 232: they can perform the signatures on
Page 233 and 234: schemes also require a small amount
Page 235 and 236: to provide an effective solution, t
Page 237 and 238: Chapter 9: Bitcoin as a Platform In
Page 239 and 240: means that if you actuallydo
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Page 243 and 244: features without needing to change
Page 245 and 246: would just look like a dollar bill.
Page 247 and 248: you. In particular, you can’t use
Page 249: To solve this problem we can once a
Page 253 and 254: that there’s no way for anyone to
Page 255 and 256: to predict the low‐level fluctuat
Page 257 and 258: design, because miners have to veri
Page 259 and 260: Here's another example, this time f
Page 261 and 262: You can also trade shares for futur
Page 263 and 264: Order books.The final piece o
Page 265 and 266: Chapter 10: Altcoins and the Crypto
Page 267 and 268: Attracting miners has special impor
Page 269 and 270: with the launch date of the altcoin
Page 271 and 272: Namecoin is technically interesting
Page 273 and 274: 10.3 Relationship Between Bitcoin a
Page 275 and 276: Switching costs are certainly not z
Page 277 and 278: If our altcoin is merge‐mined, we
Page 279 and 280: When we think about a rational mine
Page 281 and 282: DepositA [Altcoin block chain] Refu
Page 283 and 284: Sidechains. The sidechains vision i
Page 285 and 286: lock themselves could tell us. This
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Page 291 and 292: The simple binary Merkle tree used
Page 293 and 294: Chapter 11: Decentralized Instituti
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Page 297 and 298: only these signatures of limited fo
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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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