Bitcoin and Cryptocurrency Technologies

Bitcoin, Alice can remotely transfer ownership to Bob with the block chain used by the car, and Bob
can drive away with his new car.
However, such transactions carry a certain risk. If Bob sends payment first, Alice might keep the
money and not transfer ownership. If Alice transfers ownership first, Bob might drive away without
paying for the car. Even if Alice is physically present, one party might abort and it could be difficult for
a third party who was not present to mediate the dispute.
We’ve encountered this problem several times before, including in Coinjoin (Chapter 6), and in
Namecoin (Chapter 10). The solution in all these cases uses the same principle. As long as the
currency used for payment and the car ownership co‐exist on the same block chain, Alice and Bob can
form a single atomic transaction that simultaneously transfers ownership of the car and the payment
for the car. Specifically, the transaction would specify two inputs: Alice’s ownership and Bob’s
payment; and specify two outputs: the ownership to Bob and the payment to Alice. The transaction
requires both parties to sign because both are providing inputs. If one signs and the other does not,
the transaction is not valid. Once one party signs, the transaction details cannot be changed without
invalidating the signature. Once the signed transaction is broadcast to the block chain, the car will
wait for a preset number of confirmations (say, 6) and then allow Bob access. Simultaneously, Bob’s
payment to Alice will be confirmed. One cannot happen without the other.
The diligent reader might notice a subtle problem. Bob could accept a transaction signed by Alice, sign
it, but not actually broadcast it (yet). If the price of what Alice is selling changes, Bob can then
broadcast the old transaction at the original price. More complicated atomic transactions have been
proposed that include a time‐out. Alice can also simply spend the input to a new address she controls
to invalidate the signed transaction she gave to Bob as a means of revoking it.
This is the first of many examples that we’ll see in this lecture that allows us to use block chain
technologies to decentralize a variety of different types of real‐world protocols, and we’ll achieve
different types of decentralization. But this idea of ​atomicity​is common to most of them, that is,
coupling together the deliverables of each side of a transaction so they all happen simultaneously (or
not at all). Atomicity is an important security concept with applications outside of block chain
technology.
11.2 Routes to Block Chain Integration
Because Bitcoin’s block chain has been tailored for currency, it can be challenging to repurpose it to
represent the semantics of other applications. In the Bitcoin community, you will find many people
who are quite partial to either Bitcoin or alternative block chains as a platform for decentralization.
We will try to neutrally examine the two alternatives in this section.
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