Invest in Bitcoin 2018!!!!

Bitcoin is the world’s first digital currency and continues to grow as people discover their potential for a digital peer-to-peer payment system.

Bitcoin White Paper, Bitcoin: a point-to-point electronic payment system, was published in 2008 by Satoshi Nakamoto.

Bitcoin is revolutionizing the global payments industry of $ 1.8 billion, and people around the world are reconsidering the importance of their money. In addition, the underlying technology and the network that handles bitcoin transactions, called blockchain, transform industries as diverse as banking, agriculture, logistics, health, elections and manufacturing, to name just a few. only a few.

All this is possible thanks to the innovative work of Satoshi Nakamoto from 2008, which describes what Bitcoin is and how it works. Now there are many projects with the word "Bitcoin" in it. The real Bitcoin fits best with the original Bitcoin vision, as shown in the technical document.

a. Introduction

The founder of Bitcoin, Satoshi Nakamoto, explains the dependence of the Internet on reliable third parties, such as banks and credit card companies, to process electronic payments. The traditional method can work for most transactions, but problems arise when financial institutions facilitate the purchase and sale of products over the Internet.

Here are some of the weaknesses of traditional electronic payments with third parties:

1.Transactions can be reversed because banks must arbitrate inevitable disputes.

Think about the conflicts that are regularly shared between merchants, consumers and other parties, such as: As payment processors, PayPal or the tax authorities, they are carried out.

2.Bank intervention (ie, mediation) increases transaction costs and also limits the minimum size of the practical transaction. The reversibility of transactions becomes a problem when a provider has provided non-reversible services.

Consumers often buy cheap items on the Internet, for example. For example, $ 5 key chains and $ 10 glasses. However, bank participation is very expensive and these costs are transferred to consumers through transaction fees and other fees. Consider all mediation and litigation costs accrued in a given year, and you may find that transaction costs can be significant. When a provider completes a service, he must receive a fair payment. However, the current system may reverse transactions, which may not be paying to a service provider.

3.The ability to reverse a transaction is suspended above all. And this requires that people from a third party, such as banks, trust in resolving payment disputes.

Many merchants and consumers do not want to trust a financial institution. They are expensive; it may not be reliable; they are often pirated; and often gives too much information to the government without informing the affected party. All this also creates confidentiality problems. In this section, Nakamoto describes the limitations of the traditional payment system and educates the public about its solutions.

4.The system accepts a certain percentage of fraud as inevitable. However, fraud increases the cost of doing business. Nakamoto offers an electronic payment system based on cryptographic evidence instead of trust.

Cryptography involves the use of codes and protocols to establish secure communication.

Such a system would allow two parties to trade directly with each other. The new method, Bitcoin, offers the following features:

1.Peer-to-peer payments in an online network.

2.The elimination of third parties and the replacement of trust through verification.

3.The transactions would be irreversible and Nakamoto argued that the irreversibility would protect the seller against fraud. Escrow mechanisms can be implemented to protect buyers.

4.A point-to-point Distributed Time Stamp server would generate mathematical proof of the chronological order of the transactions. The system is safe, provided honest participants collectively control more processing power as an attacker / hacker.

Bitcoin has more value than any paper currency.

BETTER VALUE THAN YOU DOLLARS?

Nakamoto believes that it is better to check transactions rather than using external third parties, especially when it is an activity as important as money. The irreversibility of transactions gives the certainty that the payment system is globally sound. Second, irreversibility minimizes fraud, he argues. The remote computers would test the exact order of these irreversible transactions, thus creating the trust of the user that the records in the electronic audit trail, the blockchain, are valid and accurate.

b. Transactions

In this section, Nakamoto’s description of the electronic transaction process, that is, the chain of blocks, becomes technical. In simple terms, it defines an electronic "currency" as a chain of digital signatures. The owners digitally sign a hash of the previous transaction and add the public key of the next owner to the end of the coin. A recipient of the currency, a beneficiary, can verify the signatures to verify the chain of ownership.

Bitcoin does not exist anywhere, at least not in the traditional sense of physical cash. Rather, Nakamoto’s concept of an electronic "currency" is a chronological series of verified digital signatures. As an example, think of Nakamoto’s virtual currency as a UPS or FedEx package that signs on your front door before sending it to a redirect address. The difference is that a ledger available to the public is directly in the delivery note, showing the complete history of all previous shipments of the same package. The information includes all the addresses of origin, as well as the timestamps that indicate exactly where and when exactly each delivery was made. Such a thorough audit trail would provide assurance to both the receiver and the entire network that the delivery / transaction chain is accurate and secure.

However, Nakamoto reports a possible double payment problem. A recipient / recipient can not verify that the owner of a currency has not sent the same currency to other recipients / recipients, which is known as a duplicate problem. For example, John owns only one Bitcoin, but he sends a coin to two different operators each, that is, two bitcoins paid with a single original currency. To solve the double issue problem without relying on a third party, Nakamoto says that all transactions must be made public. Secondly, all participants in the payment system must follow the same schedule, so that everyone accepts a single history of the order in which the transactions are received.

A chronology and a public record of all transactions prevent duplication because subsequent transactions are considered as invalid or potentially fraudulent payments of the same currency. Each piece has a unique timestamp and the previous transaction is accepted as a legitimate payment. One room, one payment. Sending the same coin to a second dealer, as in the previous example, would indicate a different timestamp that occurred later in the timeline. And that would invalidate the second payment / transaction.

c. Timestamp Server

A time stamp server hashes a block of items and publicly announces the hash. The timestamp shows the existence of the data at this time. Each timestamp contains the previous timestamp in its hash. And each additional time stamp reinforces the precedents. This sequence forms a chain.

Here we see the emerging structure of Blockchain. Timestamps are the key to avoiding duplication and fraud. It would be almost impossible to send duplicate parts because each part contains chronologically different timestamps. Think of the analogy of a UPS / FedEx package. Each delivery would have a unique timestamp on the delivery note, which would mark the exact time of each delivery in the general ledger.

The size of the Bitcoin file in bytes increases as the transaction history grows. And larger files result in longer processing times. Transaction processing (or data mining) consistently requires more processor power to verify transactions as the size of digital records increases. Continuing our example, the delivery note in the same UPS / FedEx package is increasing steadily, as more and more shipments contain more records of all shipments made.

d. Proof-of-Work

Nakamoto indicates that the work test is used to implement a point-to-point distributed time stamp network (mentioned above). The process parses a value that, if it is a hash, yields a numeric expression. The timestamping network must tune this value to the hash of a block. The performance of the processor is necessary to perform the test of the work, and the blocking can not be changed without repeating the work. The following blocks are chained behind him, and to change the block he would have to repeat all the blocks after him.

The language can be technical, but the concept is simple. The job test protects the block chain. Nakamoto says that a hash created by a timestamp server receives a unique number, which is then used to identify the hash in the blockchain. This unique number is a mathematical puzzle that a computer must solve before a transaction can take place. Once a correct answer has been given, this serves as proof that the specified work has been performed.

When someone sends an electronic piece, it has to take the unique number of a hash and solve an inherent mathematical puzzle. The response is then sent to the recipient to verify that the solution is correct, an important validation step. If the answer is correct, the payment / transaction is executed and added to the length of the block chain. Otherwise, the proposed transaction will be rejected.

The work test provides one vote per CPU, not per IP address. Otherwise, an attacker could assign multiple IP addresses when attempting to hack the network. Second, the longer block chain serves as proof that the CPUs have invested most of their work in this longest chain. This process secures the block chain by forcing potential attackers to repeat the work of the block and all the blocks that follow it (that is, solve all those mathematical puzzles) and to overcome the work of all honest computers on the network. Nakamoto says it would be an extremely difficult task for an attacker to do just that, and the likelihood of success exponentially reduces the number of blocks added to a chain.

How does the job chain protect the blockchain? In simple terms, the honest processors in the network solve the mathematical problem of every hash. When these puzzles are solved, these blocks are grouped in a chronologically ordered chain. So, the term Blockchain. This confirms to the entire system that all required "math homework" has been completed. An attacker should repeat all the completed puzzles and then overcome the work of honest processors to create a longer chain, an achievement that would be extremely unlikely, if not impossible. This sequence makes Bitcoin transactions irreversible. Nakamoto points out that honest network nodes should collectively have more CPU power than an attacker.

e. Network

Nakamoto describes the steps to run the peer-to-peer network:

New transactions are transferred to all nodes / computers on the network.

Each node collects new transactions in a block.

Each node works to find a hard work test for its block.

When a node finds a job test, it passes the block to all nodes.

Nodes accept the block only if all transactions contained in it are valid and not issued.

Nodes indicate their acceptance of the block when creating the next block in the block

string, where the hash of the accepted block is used as the previous hash.

As mentioned in the previous sections, the nodes always consider that the longest chain is the correct one and they are working to extend it.

This section shows why it is important to announce transactions to all nodes. It is the basis for verifying the validity of each transaction and for each block in the block chain. As mentioned above, each node solves a work test conundrum, always recognizing the longest string as the correct version. Over time, the block chain record expands and gives the entire network its validity.

f. Incentive

The first transaction in a block is a special transaction that starts a new currency owned by the creator of the block. This leads to two things. First, creating a new currency rewards nodes / computers to be compatible with the network. Second, it is a way of getting new currencies into circulation first, as there is no central authority to issue them.

The new currency reward nodes, also known as Bitcoin miners, spend their time, CPU, and power to enable the network. You can also be rewarded with transaction fees. Nakamoto provides a limited number of coins for circulation, in which case miners can only be incentivized by transaction fees without inflation. The new coins also encourage knots to play by the rules and stay honest. An attacker should spend a ton of resources to threaten the system, and being rewarded with currency and transaction fees is designed to prevent such fraud.

Gold mining requires labor, water and equipment and is similar to bitcoin mining. Electronic currency miners handle transactions, rewarding them with new bitcoins and / or transaction fees. Since a maximum of 21 million bitcoins are extracted, the system can be free of inflation. Therefore, Bitcoin can serve as a memory of lasting value, much like gold. Compare that to fiat currency, like the dollar. Due to inflation, the dollar has depreciated almost 97% since 1913.

The Bitcoin Incentive Program is a mechanism that protects the electronic point-to-point payment system. New Bitcoin spending and transaction fees keep the nodes honest. Because it would not be worth to attack the system that is the basis of your wealth. As the saying goes, do not bite the hand that feeds you.

g. Reclaiming Disk Space

To save storage space, Nakamoto says that nodes can delete data from old transactions, only the root of the rejected transaction is stored in the block’s hash. This allows the chain of blocks to remain intact, but with less data from old transactions. Briefly describe a data compression process. But with Moore’s law, Nakamoto says the future capacity of the hardware should be sufficient to operate the network without miners having to worry about storage space.

h. Simplified Payment Verification

In this section, Nakamoto provides a technical explanation for verifying payments without having to run a full network node. To do this, you must retrieve the longest test string and see if the network has accepted it. Verification is reliable as long as honest nodes control the network. However, an attacker can create fraudulent transactions while an attacker can dominate the network.

A defense against an attack is that the nodes of the network issue alerts when they detect an invalid block. This alert can cause the user to download the entire block, as well as transactions that are alerted to confirm inconsistencies. Nakamoto adds that companies that frequently receive payments may consider operating their own nodes for more independent security and faster verification.

There are Blockchain protocols that are not Bitcoin that big companies use outside the financial world. For example, a company may create an invite-only log that selects certain subscribers to join a private network of nodes. In fact, there are several ways to set up a blockchain network that follows a different set of rules for verification. Nakamoto describes one way to do this for a point-to-point payment system, but says companies want to tailor their processes to their specific situation.

i. Combining and Splitting Value

The combination of transaction amounts leads to more efficient transfers and not to a separate transaction for every cent involved.

In other words, it would be simpler and more efficient to send three bitcoins in a single transaction instead of creating three transactions of one bitcoin each, provided that the parts are sent to the same recipient.

To divide or combine transaction values (quantities), transactions can contain multiple inputs and outputs. There may be individual or multiple entries. But there can only be a maximum of two problems: one for payment and one that returns the change, if applicable, to the sender.

This process allows payments with certain amounts. A sender can send a Bitcoin payment to another party and retrieve it if necessary.

j. Privacy

Traditional payments give users privacy when banks limit the information to the parties involved and to third parties. Confidentiality can be achieved with the peer-to-peer network even when the transactions are announced. This is achieved by storing anonymous public keys. The network can see and receive payment amounts, but transactions are not tied to identities. In addition, Nakamoto suggests using a new private key for each transaction to prevent payments from being tied to a common owner.

To maintain confidentiality, Nakamoto explains that it is important for public keys to retain the identity of the anonymous user. While everyone can see the transactions, no identifiable information is distributed.

k. Calculations

It is very unlikely that an attacker will create an alternative channel faster than an honest chain. The nodes do not accept an invalid transaction or blocks that contain them. In addition, an attacker is limited in what he can do: he can only try to change one of his own transactions to obtain the coins he spent last.

The probability that an attacker succeeds decreases exponentially as more valid blocks are added to the chain. Nakamoto says that an attacker should be lucky early to have a remote opportunity. In addition, a recipient creates a new public key and delivers it to a sender just before signing it. This makes it difficult for an attacker to execute a fraudulent transaction through a parallel chain.

An honest knot is more likely to find a block faster than an attacker. It would be extremely difficult for an attacker to solve several riddles faster than other honest nodes. Every 10 minutes, the new riddles are solved by means of nodes in the network.

l.Conclusion

The electronic payments peer-to-peer system is based on a distributed network of honest nodes to validate transactions. Validation replaces the need to rely on expensive third parties such as banks. E-currencies consist of digital signatures and the functional test that makes up the block chain avoids double issues. The system remains secure, as honest nodes control more CPU power than an attacker. In addition, nodes accept longer blocks than valid and are working to extend them. This log rejects invalid blocks and possible scams in this process. Rules and incentives can be applied with a voting system.

In the last section, Nakamoto says that "the network is robust in its unstructured simplicity." Yes of course!

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