Bitcoin
Bitcoin is a type of cryptocurrency which is nothing but "digital money". And the underlying technology that enables moving of digital coins or assets among individuals is Blockchain.
Defining Blockchain
Blockchain is simply a data structure where each block is linked to another block in a time-stamped chronological order.
It is a distributed digital ledger of an immutable public record of digital transaction.
Every new record is validated across the distributed network before it is stored in a block.
All information once stored on the ledger is verifiable and audit able but not editable.
Each block is identified by its cryptographic signature.
The first block of the Blockchain is know as the Genesis block.
Blockchain Tectonic Shift
How Trading Happens Using Current System
Problems with the Current System
Bank and other third parties take fees for transferring money.
Mediating costs increase transaction costs.
Minimum practical transaction size is limited; Cutting off the possibility for small casual transaction.
Financial exchanges are slow. Checking and low cost wire services take days to complete.
System is opaque and lacks transparency and fairness.
Also, central authority in control can overuse the power and can create money as per their own will.
What can be the Possible Solution ?
We need a system which:
- Eliminates the need of middleman or Third parties thereby making transaction costs nil or negligible.
- Enhances transaction execution speeds and can facilitate instant reconciliation.
- Is Transparent and tamper resistant in order to avoid manipulation or misuse.
- Currency creation is not in control of any central authority.
- Is regulated to maintain the value of the currency.
- All node are capable of sending and receiving messages to and from each other.
Bitcoin Address and Wallet
Bitcoin is a type of cryptocurrency which is nothing but "digital money". And the underlying technology that enables moving of digital coins or assets among individuals is Blockchain.
Defining Blockchain
Blockchain is simply a data structure where each block is linked to another block in a time-stamped chronological order.
It is a distributed digital ledger of an immutable public record of digital transaction.
Every new record is validated across the distributed network before it is stored in a block.
All information once stored on the ledger is verifiable and audit able but not editable.
Each block is identified by its cryptographic signature.
The first block of the Blockchain is know as the Genesis block.
Blockchain Tectonic Shift
How Trading Happens Using Current System
Problems with the Current System
Bank and other third parties take fees for transferring money.
Mediating costs increase transaction costs.
Minimum practical transaction size is limited; Cutting off the possibility for small casual transaction.
Financial exchanges are slow. Checking and low cost wire services take days to complete.
System is opaque and lacks transparency and fairness.
Also, central authority in control can overuse the power and can create money as per their own will.
What can be the Possible Solution ?
We need a system which:
- Eliminates the need of middleman or Third parties thereby making transaction costs nil or negligible.
- Enhances transaction execution speeds and can facilitate instant reconciliation.
- Is Transparent and tamper resistant in order to avoid manipulation or misuse.
- Currency creation is not in control of any central authority.
- Is regulated to maintain the value of the currency.
Distributed System attempts to solve the Problem
Distributed System
- A system where two or more nodes work with each other in a coordinated fashion in order to achieve a common outcome.
- It's modelled in such a way that end users see it as a single logical platform.
What is node ?
- A node can be defined as an individual processing unit in a distributed system.
- All node are capable of sending and receiving messages to and from each other.
Public Key Cryptography
This approach involves two different keys
- One-key is purposely kept private, the other is provided to the other party (or often the public)
- If you see private key to encrypt then the public key can decrypt.
- If you use the public key to encrypt then you use the private key to decrypt. This is called asymmetric encryption.
Bitcoin Address
- An identifier of 26-35 alphanumeric characters, beginning with the number 1 or 3.
- Represents a possible destination for a bitcoin payment.
Bitcoin Wallet
- A "wallet" is basically the Bitcoin equivalent of a bank account.
- It allows you to receive bitcoin, stone them, and then send to other.
- Once a bitcoin wallet is installed on your computer or mobile device, it will generate your first bitcoin address.
- Each address has its own balance of bitcoins.
- However the address can be changed whenever you want to
Sending Transaction
- Transaction is a broadcasted in the form of a Digital Message.
- Just like your signature provides the proof of ownership on the document, similarly, digital signature provides the proof that the transaction is genuine.
- Unlike a handwritten password, digital signature is unique for every transaction.
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