School of Computing Science & Engineering

Course Code: BTCS9404  Course Name: Block Chain

Bitcoin
MODULE 3

Faculty Name: Nikhil Ranjan Program

 Contents

 Introduction to Bitcoin - Wallet - Blocks

 Merkley Tree

 hardness of mining , transaction verifiability - anonymity

 forks- double spending

 Mathematical analysis of properties of Bit coin.

 Block:- A bitcoin is a type of digital assets which can be bought,
sold, and transfer between the two parties securely over the
internet. Bitcoin can be used to store values much like fine gold,
silver, and some other type of investments. We can also use
Introduction to bitcoin to buy products and services as well as make payments
Bitcoin and exchange values electronically.

• Satoshi Nakamoto introduced A bitcoin is different from other traditional currencies such

the bitcoin in the year 2008. as Dollar, Pound, and Euro, which can also be used to buy
Bitcoin is a things and exchange values electronically. There are no physical
cryptocurrency(virtual coins for bitcoins or paper bills. When you send bitcoin to
currency), or a digital someone or used bitcoin to buy anything, you don’t need to
currency that uses rules of use a bank, a credit card, or any other third-party. Instead, you
cryptography for regulation
can simply send bitcoin directly to another party over the
and generation of units of
currency. A Bitcoin fell under internet with securely and almost instantly.
the scope of cryptocurrency
 and became the first and most
valuable among them. It is
commonly
called decentralized digital
currency.
 How Bitcoin
Works ?
• When you send an email to another person,
you just type an email address and can
communicate directly to that person. It is the
same thing when you send an instant
message. This type of communication
between two parties is commonly known as
Peer-to-Peer communication.

• Whenever you want to transfer money to

someone over the internet, you need to use
a service of third-party such as banks, a
credit card, a PayPal, or some other type of
money transfer services. The reason for using
third-party is to ensure that you are
transferring that money. In other words, you
need to be able to verify that both parties
have done what they need to do in real
exchange.
 Merkley Tree
Merkle tree also known as hash tree is a data structure used for data
verification and synchronization.

 It is a tree data structure where each non-leaf node is a hash of it’s
child nodes. All the leaf nodes are at the same depth and are as far left
as possible. 

It maintains data integrity and uses hash functions for this purpose.
 Hash Functions
 So before understanding how Merkle trees work, we need to
understand how hash functions work. A hash function maps an
input to a fixed output and this output is called hash. 

 The output is unique for every input, and this enables

fingerprinting of data. So, huge amounts of data can be easily
identified through their hash. 
Hashing
 Message Authentication and Hash Functions

Message authentication is concerned with:

Protecting the integrity of a message
Validating identity of originator
Non-repudiation of origin (dispute resolution)
Will consider the security requirements
Then three alternative functions used:
Message encryption
Message authentication code (MAC)
Hash function
 Hardness of mining

MINERS:- A computer of group of computers that do bitcoin

transactions (adding new transactions or verifying blocks created by other miners.
Miners are rewarded with transactions fees.

Bitcoin mining is the process of adding transaction records to Bitcoin's

public ledger of past transactions. This ledger of past transactions is
called the blockchain as it is a chain of blocks. Bitcoin mining is used to
secure and verify transactions to the rest of the network.
 Hardness of mining

Role of Bitcoin Miners

Within the bitcoin networks, there are a group of people known as Miners. In miners, there was a process and
confirm transactions. Anybody can apply for a minor, and you could run the client yourself. However, these
minors use very powerful computers that are specifically designed to mine bitcoin transaction. They do this by
actually solving math problems and resolving cryptographic issues because every transaction needs to be
cryptographically encoded and secured. These mathematical problems ensure that nobody is tampering with that
data.
Additionally, for this task, the minors are paid in bitcoins, which is the key component in bitcoin. In Bitcoin, you
cannot create money as like you create regular fiat currencies such as Dollar, Euro, and Yuan. The bitcoin is
created by rewarding these minors for their work in solving the mathematical and cryptographical problems.
 Transaction verifiability - anonymity

Blockchain is pseudonymous, not anonymous. This means that while

transactions are public, the identities of the parties involved are not. This can
be beneficial for privacy and security, but it also has some drawbacks. For
example, if someone knows your blockchain address, they can see all of your
transaction history.
In some cases, blockchains require that you create a wallet with a username
and password, in order to prevent blockchain networks from being abused
for malicious purposes. This is typically not a pseudonymous identity
because users must give up their real identities in order to create the wallet.
 
Blockchain is the most secure digital database available. It can’t be hacked or
corrupted, and the information stored on it is highly resistant to tampering.
All of this makes blockchain a perfect tool for recording transactions
involving things like cryptocurrency, contracts, and digital art.
 
 forks- Double Spending

The delayed implementation of a Bitcoin Core update by a small number of the network's
miners resulted in the addition of invalid transaction blocks to the bitcoin blockchain this
weekend.

The result was a fork in the network that created two versions of the bitcoin blockchain,
which continued for six blocks on 4th July. An additional three invalid blocks were added to
the blockchain in a repeat of the issue the following day.

As a result, Core developers issued a warning on Bitcoin.org requesting that wallet

providers place increased scrutiny on incoming transactions due to the risk that funds could
be double spent as a result of the discrepancy between chains.
 Mathematical analysis of properties of Bit coin

Elliptic curves:

An elliptic curve is represented algebraically as an equation of the form:

y2 = x3 + ax + b
For a = 0 and b = 7 (the version used by bitcoin), it looks like this:

Elliptic curves have useful properties. For example, a non-vertical line intersecting two non-tangent points on the
curve will always intersect a third point on the curve. A further property is that a non-vertical line tangent to the curve
at one point will intersect precisely one other point on the curve.
We can use these properties to define two operations: point addition and point doubling.
 Elliptic curve cryptography

Elliptic Curve Cryptography (ECC) is a key-based

technique for encrypting data. ECC focuses on
pairs of public and private keys for decryption and
encryption of web traffic. ECC is frequently
discussed in the context of the Rivest–Shamir–
Adleman (RSA) cryptographic algorithm.
Elliptic curve cryptography
Thank You