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Advanced Computer Communications PROFESSOR:STUDENT: PROF. DR. ING. BRAD REMUS STEFAN FEILMEIER - 10.04.2014 - FACULTATEA DE INGINERIE HERRMANN OBERTH MASTER-PROGRAM EMBEDDED SYSTEMS

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Bitcoin Open Source P2P money

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General idea and targets peer-to-peer payment system Internet money Decentralized no controlling central bank Secure cryptography Anonymous like cash Fast compared to bank transfers Cheap low transaction fees Limited no inflation

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It has a value ? Like traditional currencies no intrinsic value only trust

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It has a value ? Like traditional currencies no intrinsic value only trust

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It has a value ? Like traditional currencies no intrinsic value only trust

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Purpose of this presentation Infrastructures and technologies for decentralized, cryptographic, anonymous, fast and cheap transactions with complete strangers

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Decentralized structure

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Decentralized Ledger copy and synchronize

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Transaction Message: Alice Bob 5.0 BTC Alice -5.0 BTC Bob +5.0 BTC Alice -5.0 BTC Bob +5.0 BTC Alice -5.0 BTC Bob +5.0 BTC

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Transaction signature Message: Alice Bob 5.0 BTC Signature create Private KeyPublic Key verify Mathematical Trapdoor function: -Computation in one direction is easy -Finding the inverse is difficult

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Transaction Message: Alice Bob 5.0 BTC Signature Private Key Public Key Personal password

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Transaction Message: Alice Bob 5.0 BTC Signature Private Key Public Key Recipient / Destination address

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Transaction Message: Alice Bob 5.0 BTC Signature Private KeyPublic Key proof, that I own the private key without showing you my private key Different for every message Modification of message is not possible, because verification would fail

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Decentralized Ledger

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Decentralized Transaction Chain Alice: 2.0 + 3.0 = 5.0 Alice: 2.0 + 3.0 = 5.0

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A real Transaction InputsOutputs Total Sum

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A real Transaction Chain Total Sum Output 2 Output 1 Source: https://blockchain.info Everybody knows everything

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My balance TransactionFromToAmount TXN#001PK#1PK#25.0 TXN#002PK#1PK#310.0 TXN#002PK#2PK#33.0 Sum over all unspent outputs, which I own the private key for If I loose my private key, the bitcoins are lost forever

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Transaction order Timestamp? Strangers! The Block Chain

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The Block Chain

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A new block

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A new block: collision

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Block puzzle

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Block puzzle: SHA256 Prevous block ID Transaction IdsRandom guess SHA256 8FA839,A76,91C,3830000001 36d1ee2d501508328ac1a40b64c00c5d28a7fbf297663f7c7fc5541c43d521a1 8FA839,A76,91C,3830000002 75e519b730f2c9aaf462040035cd56a4847c34aa1056be85ab7a6e06a8c9c707 8FA839,A76,91C,3830000003 8FA839,A76,91C,383??????? 000000000000000006ac0710b125e489b0261f1d23694c6d3bf692c24c925d2a1

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A new block was found 000000000000000006ac0710b125e489b0261f1d23694c6d3bf692c24c925d2a1

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Collision can still happen Rule : always switch to the longest chain

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End of chain insecurity

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Financial reward mining receive bitcoins for solved blocks Transaction fee small fee per transaction

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Recap: Transaction chain and Block Chain

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Bitcoin challenges Difficult to exchange Used for illegal activities Solving blocks uses large amounts of energy Time duration too long for certain applications http://www.ibtimes.co.uk/500000-bali-villa-biggest-bitcoin-purchase-ever-1441101

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Questions? Sources: ImponderableThings (Scott Driscoll's Blog) How Bitcoin Works Under the Hood http://www.imponderablethings.com/2013/07/how-bitcoin-works-under- hood.html http://www.imponderablethings.com/2013/07/how-bitcoin-works-under- hood.html Satoshi Nakamoto Bitcoin: A Peer-to-Peer Electronic Cash System https://bitcoin.org/bitcoin.pdf https://bitcoin.org/bitcoin.pdf Bitcoin Protocol specification https://en.bitcoin.it/w/index.php?title=Protocol_specification https://en.bitcoin.it/w/index.php?title=Protocol_specification Wikipedia Bitcoin , Trapdoor Function http://en.wikipedia.org/wiki/Bitcoin http://en.wikipedia.org/wiki/Trapdoor_function http://en.wikipedia.org/wiki/Bitcoin http://en.wikipedia.org/wiki/Trapdoor_function