Bitcoin and Cryptocurrency Technologies

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Figure 1.6 Tamper‐evident log. If an adversary modifies data anywhere in the block chain, it will result in the hash pointer in the following block being incorrect. If we store the head of the list, then even if the adversary modifies all of the pointers to be consistent with the modified data, the head pointer will be incorrect, and we will detect the tampering. Merkle trees. Another useful data structure that we can build using hash pointers is a binary tree. A binary tree with hash pointers is known as a Merkle tree, after its inventor Ralph Merkle. Suppose we have a number of blocks containing data. These blocks comprise the leaves of our tree. We group these data blocks into pairs of two, and then for each pair, we build a data structure that has two hash pointers, one to each of these blocks. These data structures make the next level up of the tree. We in turn group these into groups of two, and for each pair, create a new data structure that contains the hash of each. We continue doing this until we reach a single block, the root of the tree. 34
Figure 1.7 Merkle tree. In a Merkle tree, data blocks are grouped in pairs and the hash of each of these blocks is stored in a parent node. The parent nodes are in turn grouped in pairs and their hashes stored one level up the tree. This continues all the way up the tree until we reach the root node. As before, we remember just the hash pointer at the head of the tree. We now have the ability traverse down through the hash pointers to any point in the list. This allows us make sure that the data hasn’t been tampered with because, just like we saw with the block chain, if an adversary tampers with some data block at the bottom of the tree, that will cause the hash pointer that’s one level up to not match, and even if he continues to tamper with this block, the change will eventually propagate to the top of the tree where he won’t be able to tamper with the hash pointer that we’ve stored. So again, any attempt to tamper with any piece of data will be detected by just remembering the hash pointer at the top. Proof of membership. Another nice feature of Merkle trees is that, unlike the block chain that we built before, it allows a concise proof of membership. Say that someone wants to prove that a certain data block is a member of the Merkle Tree. As usual, we remember just the root. Then they need to show us this data block, and the blocks on the path from the data block to the root. We can ignore the rest of the tree, as the blocks on this path are enough to allow us to verify the hashes all the way up to the root of the tree. See Figure 1.8 for a graphical depiction of how this works. If there are nnodes in the tree, only about log(n)items need to be shown. And since each step just requires computing the hash of the child block, it takes about log(n)time for us to verify it. And so even if the Merkle tree contains a very large number of blocks, we can still prove membership in a relatively short time. Verification thus runs in time and space that’s logarithmic in the number of 35
Page 1 and 2: Bitcoin and Cryptocurrency Technolo
Page 3 and 4: Preface — The Long Road to Bitcoi
Page 5 and 6: work, there is also the issue of co
Page 7 and 8: Finally, CyberCash has the dubious
Page 9 and 10: This was the first serious digital
Page 11 and 12: and so on — powers of two. That w
Page 13 and 14: Figure 3 shows the user side of the
Page 15 and 16: initial cost to acquire all the equ
Page 17 and 18: the system is to record the relativ
Page 19 and 20: original design. However, after Bit
Page 21 and 22: A final reason that’s often cited
Page 23 and 24: Chapter 1: Introduction to Cryptogr
Page 25 and 26: Figure 1.2 Because the number of
Page 27 and 28: Property 2: Hiding The second pr
Page 29 and 30: ecome: ● ● Hiding: Given H(
Page 31 and 32: SHA‐256 uses a compression functi
Page 33: Figure 1.5 Block chain.A block c
Page 37 and 38: throughout this book. 1.3 Digital S
Page 39 and 40: Figure 1.9 Unforgeability game.
Page 41 and 42: andomness just in making a signatur
Page 43 and 44: 1.5 A Simple Cryptocurrency Now let
Page 45 and 46: The first key idea is that a design
Page 47 and 48: Figure 1.13 A PayCoins Transa
Page 49 and 50: Perusing the NIST standard that def
Page 51 and 52: Chapter 2: How Bitcoin Achieves Dec
Page 53 and 54: state of the system. The implicatio
Page 55 and 56: consensus is somewhat pessimistic,
Page 57 and 58: Implicit Consensus. This assumpt
Page 59 and 60: Figure 2.2 A double spend attempt.
Page 61 and 62: In general, the more confirmations
Page 63 and 64: Figure 2.4 The block reward is c
Page 65 and 66: puzzle‐friendliness property from
Page 67 and 68: possible outcomes, and the probabil
Page 69 and 70: theory problem that’s not easily
Page 71 and 72: this interlocking interdependence b
Page 73 and 74: Further reading The Bitcoin whitepa
Page 75 and 76: Chapter 3: Mechanics of Bitcoin Thi
Page 77 and 78: In this example, Alice specifies tw
Page 79 and 80: 3.2 Bitcoin Scripts Each transactio
Page 81 and 82: the Bitcoin language and one has to
Page 83 and 84: 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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to provide an effective solution, t
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Chapter 9: Bitcoin as a Platform In
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means that if you actuallydo
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CommitCoin exploits this property.
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features without needing to change
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would just look like a dollar bill.
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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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