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TM112: Block 3 > part 3.5, Bitcoin case study > Flashcards

part 3.5, Bitcoin case study Flashcards

1
Q
  1. alice wants to send 10 bitcoin to bob so Alice creates a message containing details of the payment including: (her address, bobs address, amount to be transferred, time of the transaction)
  2. The message is then signed with Alice’s private key that is held by Alice’s bitcoin wallet and sent out to every user on the network
  3. Every user then decrypts the message using Alice’s public key. If it can be decrypted then the message must have come from alice and is considered authentic, otherwise the message is discarded
  4. If the message was authentic, it is added to the current block in the blockchain and bob must wait until the block has been finalised until he can spend his bitcoin (usually baout 10 mins)
A

what are the 4 steps of a

bitcoin transaction

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2
Q

describe in 5 steps the process of

finalizing a block

A
  1. All participants will hash the block using the SHA-2 hash algorithm. All producing an identical hash
  2. Each user will then add a random 32-bit value to the block known as a nonce and then hash it again.
  3. If the new hash has a value lower than the target value that the bitcoin network is currently looking for then this nonce value is sent to every user on the network and they will verify the claim that it is indeed lower
  4. When the claim is verified the block is locked and added to the blockchain
  5. All the transactions the block holds are then carried out
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3
Q

what is a

bitcoin address

A

this is an address made up of a random sequence of characters which hides the details of the individual user and provides anonymity for users making transactions with bitcoin

it is this that is used to exchange bitcoin between users

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4
Q

what are the

weaknesses of having a central authority for digital currencys

A

some weaknesses of this implementation include:

  1. being vulnerable to having records changed (double-spend problem)
  2. vulnerable to outages
  3. vulnerable to attacks
  4. vulnerable to nation states taking control
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5
Q

this will:

  1. generate an address for a user
  2. generate a key pair for the user
  3. keep record of how much bitcoin they own
  4. hold a copy of every bitcoin transaction ever made (bitcoin blockchain / ledger)
A

what information will a

bitcoin wallet

generate for a user and store

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6
Q

this is a value that is periodically decided by the bitcoin network.

it is there so that the bitcoin mining process can be bitcoins proof of work

during the mining process users must add a nonce to the block and try and find a hash value lower than this value. if the value they find is to high miners must try another nonce

A

what is the

target value

used by the bitcoin network

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7
Q

this value is re evaluated every time 2016 blocks have been verified

A

after how many blocks is the

target value

re evaluated

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8
Q
  1. authenticating personal identities such as employee records, CVs, birth certificates or immigration permits
  2. managing the issue and revocation of public keys and digital certificates
  3. tracking changes of ownership for vehicles and property
  4. digital voting to prevent multiple voting or tampering with final tallies
  5. creating tamper-proof records of products from manufacture through distribution to final consumption.
A

what are five areas where

blockchain technology can be further used

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9
Q

what is

digicash

and

webmoney

A

these are digital currencys that were developed in the 1990s

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10
Q

how large is

1 block of the bitcoin blockchain

and how many transactions can it hold

A

this has a size of 1MB and can hold between 800 and 2200 transactions

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11
Q

This paper was posted onto bitcoin.org and describes an electronic and peer to peer currency with no central authority that also avoids the double-spend problem

No significant errors or fundamental problems have been found in bitcoins concept

A

what did

Satoshi Nakamoto white paper

describe and have any major flaws been found within it

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12
Q

August 2008 - bitcoin.org is registered

November 2008 (3 months later) - a paper titled ‘Bitcoin: A Peer-to-Peer Electronic Cash System’ (Nakamoto, 2008) was published onto the website and shared on cryptographic mailing lists

2009 - an application is released by nakamoto that allows the transfer and creation of bitcoin

May 2010 - the first recorded transaction occurs. A pizza was purchased for 10, 000 bitcoin about $30 at the time

A

describe the

origins of bitcoin

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13
Q

what is a

bitcoin wallet

A

this is an application that is able to create bitcoin addresses and carry out bitcoin transactions

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14
Q

these two issues are solved by having the hash of the current block being added to the blockchain stored inside the next block of the chain

since all users hold a copy of the blockchain if any changes were made by an individual then their copy of the blockchain would differ from everybody elses on the network

in such a case their copy of the blockchain would be viewed as untrustworthy and discarded

A

what keeps bitcoin transactions

secure from tampering

and at the same time

solves the double-spend problem

How well did you know this?
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3
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15
Q

this is an application that is able to create bitcoin addresses and carry out bitcoin transactions

A

what is a

bitcoin wallet

How well did you know this?
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16
Q

what information will a

bitcoin wallet

generate for a user and store

A

this will:

  1. generate an address for a user
  2. generate a key pair for the user
  3. keep record of how much bitcoin they own
  4. hold a copy of every bitcoin transaction ever made (bitcoin blockchain / ledger)
How well did you know this?
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17
Q

this will contain:

  1. a block version number used by the Bitcoin network when verifying blocks
  2. the SHA-256 hash of the previous block, to check that block has not been altered
  3. the time the block was created
  4. the target value set by the network when the block was mined
  5. the successful nonce used when the block was mined.
A

what five pieces of information will you find inside the

header of a block

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18
Q

what happens after

210,000 blocks have been added to the blockchain

A

when this event occurs the amount of bitcoins that are awarded for finalising a block is halved

19
Q

this has a size of 1MB and can hold between 800 and 2200 transactions

A

how large is

1 block of the bitcoin blockchain

and how many transactions can it hold

20
Q

this is an address made up of a random sequence of characters which hides the details of the individual user and provides anonymity for users making transactions with bitcoin

it is this that is used to exchange bitcoin between users

A

what is a

bitcoin address

21
Q

what was the failure of

digicash

and

webmoney

A

both of these digital currencys failed because they relied on a central authority to keep a record of all transactions and user balances

22
Q

some weaknesses of this implementation include:

  1. being vulnerable to having records changed (double-spend problem)
  2. vulnerable to outages
  3. vulnerable to attacks
  4. vulnerable to nation states taking control
A

what are the

weaknesses of having a central authority for digital currencys

23
Q
  1. All participants will hash the block using the SHA-2 hash algorithm. All producing an identical hash
  2. Each user will then add a random 32-bit value to the block known as a nonce and then hash it again.
  3. If the new hash has a value lower than the target value that the bitcoin network is currently looking for then this nonce value is sent to every user on the network and they will verify the claim that it is indeed lower
  4. When the claim is verified the block is locked and added to the blockchain
  5. All the transactions the block holds are then carried out
A

describe in 5 steps the process of

bitcoin mining / finalizing a block

24
Q

what five pieces of information will you find inside the

header of a block

A

this will contain:

  1. a block version number used by the Bitcoin network when verifying blocks
  2. the SHA-256 hash of the previous block, to check that block has not been altered
  3. the time the block was created
  4. the target value set by the network when the block was mined
  5. the successful nonce used when the block was mined.
25
Q

these are digital currencys that were developed in the 1990s

A

what is

digicash

and

webmoney

26
Q

this is a technique used to mitigate the abuse of computer resources. The idea is to have a computer carry out a computational intense task before it can carry out its task

example

to mitigate spam email, email agents can force the sender to carry out an intense calculation before the email is sent. making the process of sending spam email a labourious task

A

what is

proof of work

27
Q

what is the

target value

used by the bitcoin network

A

this is a value that is periodically decided by the bitcoin network.

it is there so that the bitcoin mining process can be bitcoins proof of work

during the mining process users must add a nonce to the block and try and find a hash value lower than this value. if the value they find is to high miners must try another nonce

28
Q

describe the

origins of bitcoin

A

August 2008 - bitcoin.org is registered

November 2008 (3 months later) - a paper titled ‘Bitcoin: A Peer-to-Peer Electronic Cash System’ (Nakamoto, 2008) was published onto the website and shared on cryptographic mailing lists

2009 - an application is released by nakamoto that allows the transfer and creation of bitcoin

May 2010 - the first recorded transaction occurs. A pizza was purchased for 10, 000 bitcoin about $30 at the time

29
Q

what is

proof of work

A

this is a technique used to mitigate the abuse of computer resources. The idea is to have a computer carry out a computational intense task before it can carry out its task

example

to mitigate spam email, email agents can force the sender to carry out an intense calculation before the email is sent. making the process of sending spam email a labourious task

30
Q
  1. If fewer computers are validating blocks, or if the problem is taking too long to solve, the target is raised (to produce a greater number possible nonces).
  2. But if blocks are being validated more quickly (by more miners or faster computers), the target is lowered, reducing the rate again
A

what are the two

cases that determine how the target value will be changed

31
Q

what are the 4 steps of a

bitcoin transaction

A
  1. alice wants to send 10 bitcoin to bob so Alice creates a message containing details of the payment including: (her address, bobs address, amount to be transferred, time of the transaction)
  2. The message is then signed with Alice’s private key that is held by Alice’s bitcoin wallet and sent out to every user on the network
  3. Every user then decrypts the message using Alice’s public key. If it can be decrypted then the message must have come from alice and is considered authentic, otherwise the message is discarded
  4. If the message was authentic, it is added to the current block in the blockchain and bob must wait until the block has been finalised until he can spend his bitcoin (usually baout 10 mins)
32
Q

when this event occurs the amount of bitcoins that are awarded for finalising a block is halved

A

what happens after

210,000 blocks have been added to the blockchain

33
Q

what did

Satoshi Nakamoto white paper

describe and have any major flaws been found within it

A

This paper was posted onto bitcoin.org and describes an electronic and peer to peer currency with no central authority that also avoids the double-spend problem

No significant errors or fundamental problems have been found in bitcoins concept

34
Q

what keeps bitcoin transactions

secure from tampering

and at the same time

solves the double-spend problem

A

these two issues are solved by having the hash of the current block being added to the blockchain stored inside the next block of the chain

since all users hold a copy of the blockchain if any changes were made by an individual then their copy of the blockchain would differ from everybody elses on the network

in such a case their copy of the blockchain would be viewed as untrustworthy and discarded

35
Q

what is

bitcoins proof of work

A

bitcoin implements mining to accomplish this

36
Q

what is the

bitcoin blockchain

A

this is a ledger that holds a record of every bitcoin transaction and in turn has knowledge of every bitcoin in circulation

37
Q

this is a ledger that holds a record of every bitcoin transaction and in turn has knowledge of every bitcoin in circulation

A

what is the

bitcoin blockchain

38
Q

both of these digital currencys failed because they relied on a central authority to keep a record of all transactions and user balances

A

what was the failure of

digicash

and

webmoney

39
Q

what are five areas where

blockchain technology can be further used

A
  1. authenticating personal identities such as employee records, CVs, birth certificates or immigration permits
  2. managing the issue and revocation of public keys and digital certificates
  3. tracking changes of ownership for vehicles and property
  4. digital voting to prevent multiple voting or tampering with final tallies
  5. creating tamper-proof records of products from manufacture through distribution to final consumption.
40
Q

after how many blocks is the

target value

re evaluated

A

this value is re evaluated every time 2016 blocks have been verified

41
Q

what is the

double-spend problem

A

this is a problem that faces digital currencys

the problem is that anything digital can be copied or exchanged without deleting the original

the problem faced here for digital currency is that potentially people could just create fake currency or make an exchange without deleting the currency they previously owned

42
Q

what are the two

cases that determine how the target value will be changed

A
  1. If fewer computers are validating blocks, or if the problem is taking too long to solve, the target is raised (to produce a greater number possible nonces).
  2. But if blocks are being validated more quickly (by more miners or faster computers), the target is lowered, reducing the rate again
43
Q

this is a problem that faces digital currencys

the problem is that anything digital can be copied or exchanged without deleting the original

the problem faced here for digital currency is that potentially people could just create fake currency or make an exchange without deleting the currency they previously owned

A

what is the

double-spend problem

44
Q

bitcoin implements mining to accomplish this

A

what is

bitcoins proof of work

TM112: Block 3 (7 decks)

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