Bitcoin and Cryptocurrency Technologies

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Figure 10.8: A rebuilt Bombe machine located at the Bletchley Park museum.The Bombe was a special‐purpose computer designed by Alan Turing to crack German Enigma ciphers. Will Ethereum do to application‐specific altcoins what the general‐purpose computer did to Bombe‐like contraptions? Ethereum is an ambitious altcoin that aims to provide a Turing‐complete programming language for writing scripts or “contracts”. While there are other proposals to do this, Ethereum is the most notable: it introduced several novel technical ideas, held a successful crowd‐funding campaign, raising $20 million over several months, and adopted aggressive choices for parameters such as block time. In this section we’ll provide a brief overview of Ethereum — though the system is complex enough that we could easily devote an entire second textbook to it! Smart Contract Programming Model. The term smart contractwas first used to describe the use of computer systems (or other automated means) to enforce contracts. As an example, you could think of a vending machine as a mechanical smart contract that enforces an agreement between you and the machine’s owner involving the purchase of a candy bar. In Ethereum, a contract is a program that lives on the blockchain. Anybody can create an Ethereum contract, for a small fee, by uploading its program code in a special transaction. This contract is 286
written in bytecode and executed by a special Ethereum‐specific virtual machine, usually just called EVM. Once uploaded, the contract will live on the blockchain. It has its own balance of funds, other users can make procedure calls through whatever API the program exposes, and the contract can send and receive money. A simple example: Namecoin in Ethereum.We claimed that Ethereum can be used to implement any application‐specific altcoin’s functionality. As a simple example, we can show how to implement Namecoin‐style functionality in a very simple Ethereum contract. One example implementation is shown in Figure 10.8. It is coded in Solidity, Ethereum’s high‐level programming language for defining contracts. This contract implements a crude name/value store or name registry, in which names are assigned values once and for all. The contract defines a data variable, registryTable, which is a mapping from 32‐byte strings to public keys. initially, it maps every string to the null address 0x0000000000...000. This contract also defines a single entry point, called “claimName”. This entry point accepts a single argument, name. First, the contract makes sure that the caller has sent a value of at least 10 wei, wei being the smallest currency unit in Ethereum. If insufficient funds have been sent, the contract terminates with an error (the “throw” statement does this) and no action is taken. If sufficient funds are sent and the name is not yet taken, then it is permanently assigned the value of whichever address invoked this function. contractNameRegistry{ mapping(bytes32=>address)publicregistryTable; functionclaimName(bytes32name){ if(msg.value
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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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The interesting case is if the fork
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eing effectively bankrupt. As of ea
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In an important sense it doesn't ma
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of illegal items becomes potentiall
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arrest. So although Ulbricht was th
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kind of business that will handle l
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een enough time for sellers to buil
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The text refers to “activities in
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A book that looks at the history of
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It’s easy to see how Bitcoin’s
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Why might memory‐hard and memory
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Until recently, it wasn’t known i
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meaning the exponential growth peri
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Next, consider the problem that SET
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In Permacoin, each miner Msto
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Interestingly, these concerns have
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they can perform the signatures on
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schemes also require a small amount
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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 and 250: To solve this problem we can once a
Page 251 and 252: NBA draft lottery.One example th
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: lock themselves could tell us. This
Page 289 and 290: Bitcoin. In particular, there are c
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
Page 299 and 300: 11.3 Template for Decentralization
Page 301 and 302: Sidebar: trust.Some people in th
Page 303 and 304: competition among intermediaries. P
Page 305 and 306: To drive home the mismatch between
Page 307 and 308: Conclusion to the book Some people
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