Bitcoin: A Peer-to-Peer Electronic Cash System.pptx

Bitcoin: A Peer-to-Peer Electronic Cash System

1. Bitcoin: A Peer-to-Peer Electronic Cash System by Satoshi Nakamoto

2. Agenda Introduction Overview of Cryptography and Peer-to-peer (P2P) Problem Motivation and the Challenges Technical Breakdown Transactions and Verification System Proof-of-Work and Security . Network Mechanism Proposed Solutions Evaluation and Results Conclusion References Q&A

3. Background Knowledge

4. Problem Motivation The Challenges in the Traditional Payment Systems Double-Spending Problem In traditional systems, central authorities prevent double-spending. Bitcoin introduces a decentralized solution via blockchain.  Trust Issues Trust in the third-parity institutions is needed to resolve disputes, increasing transaction costs and risks of fraud.

5. Transactions

6. Timestamp Server Purpose of Timestamp Server: To prove that specific data existed at a certain point in time. Achieved by taking a hash of the data block and publicly publishing it. Building the Chain: Each timestamp includes the hash of the previous one. This forms a chain where each new timestamp reinforces the validity of previous ones. This chaining prevents altering data without breaking the subsequent timestamps.

7. Proof-of-Work What is PoW? A mechanism where participants solve a computational problem to add a new block to the blockchain. The problem requires finding a value that, when hashed, results in a hash with a specified number of leading zero bits. Role of Nonce: A nonce is a unique value that is adjusted until the hash meets the required criteria. The computational challenge is finding the correct nonce that results in the desired number of zero bits.

8. Security and Consensus in PoW Computational Challenge: Modifying a block requires redoing the PoW for that block and all subsequent blocks. This makes it impractical to alter the blockchain as more blocks are added. Network Security: The more blocks are chained together, the more secure the blockchain becomes. Re-computing all the hashes would require immense computational power. Consensus Mechanism: Every CPU in the network has one vote in confirming the chain. The longest chain represents the most computational work and is considered the valid chain by the network.

9. Network Works Public Announcement: New transactions are announced and collected into blocks. Proof of Work: Nodes work to solve a computational puzzle (hash with a nonce) to create a valid block. Block Broadcasting: Once solved, the node broadcasts the new block and proof of work to the network. Block Validation: New blocks are accepted only if all transactions are valid and not double-spent. Chain Extension: Nodes express acceptance by linking the new block to the existing chain. Longest Chain Rule: The longest chain with the most work is the valid one. Incentive Structure: Rewards encourage nodes to maintain and secure the network.

10. Proposed Solutions Proof-of-Work A public ledger that records all transactions in an immutable chain, solving the double-spending issue without a central authority. The network's security is maintained through a consensus algorithm requiring computational effort, ensuring block integrity.

11. Evaluation and Results Assessing the Security and Efficiency The network remains secure as long as the majority of computational power is controlled by honest nodes. The proof-of-work mechanism, while secure, is energy-intensive.

12. Conclusion and Implications The paper has introduced a system that operates without centralized control, changing the future of digital currencies. PoW and Timestamping : Secure and validate transactions. Longest Chain Rule : Ensures the integrity of the network. Incentives : Encourage participation and network security. Result : A resilient, decentralized, and trustworthy system

13. References Nakamoto, S. (2008). Bitcoin: A peer-to-peer electronic cash system. Satoshi Nakamoto.

14. Q&A