1.9 KiB
1.9 KiB
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| Basics of Bitcoin & Cyptocurrency |
Bitcoin is a collection of concepts and technologies that form the basis of a digital money ecosystem, including:
- A decentralized peer to peer network (enabled by the Bitcoin protocol)
- A public transaction ledger (the blockchain)
- A decentralized mathematical and deterministic currency issuance mechanism (distributed mining and the “Proof of Work” concept)
- A decentralized transaction verification system (transaction script)
The Bitcoin system is based on decentralized trust, thus it heavily relies on cryptographic technologies, such as:
- Cryptographic hash functions (i.e.SHA-256 and RIPEMD-160)
- Public Key Cryptography (i.e. ECDSA– the Elliptic Curve Digital Signature Algorithm)
Some Important Excerpts
- In Bitcoin, a transaction is a record informing the network of a transfer of bitcoins from one owner to another owner.
- You may think of a transaction as the equivalent of a single line in a notebook page
- You may think of a block as the equivalent of a page on taht notebook
- You may think of blockchain as the quivalent of the whole notebook
- All the users are able to read , write and get updated on that notebook.
- Ownership of bitcoins is established through digital keys, Bitcoin addresses, and digital signatures.
- Digital Keys are crated and stored offline and consist of a mathematically-related Private-Public key-pair, created using the Elliptic Curve Signature Algorithm(ECDSA)
- The Private key(Privkey) is initially generated at random, and is kept secret at all times. It is used by the current owner of bitcoins to digitally sign a Bitcoin transaction, when he authorizes the transfer to the new user. A transaction
- The Public Key(Pubkey) is generated from the Private Key using a one-way cryptpgraphic hash function. It is used by the owner to validate a transaction's digital signature.