Blockchain exam 1

When was silk road shut down?

In october 2013 the FBI shut down silk road seizing $3.5m in bitcoin -created by ross ulbricht

Referencing Transactions

-Hash pointers for blocks -Hash pointers for transactions Within a transaction, refer to a particular output via serial numbers

first bitcoin transaction for tangible assets

-Laszlo Hanyecz bought $25 worth of pizza for 10,000 BTC

How is bitcoin deflationary?

-Reward for bitcoin is cut in half every 4 years -tokens can be irrevocably destroyed

Minting for proof of work

-Solve a computationally difficult puzzle -find x such that H(x|y) <t -solver guesses values for x until finding a valid one -different string for y given different puzzles -target t determines the the difficulty and average time to solve

The transaction data which is put through the SHA-256 function is composed of the following:

-Transaction Hash - Reference to the transaction containing -the UTXO being spent -version -size(number) on inputs -size of outputs -lock time size of transaction

top 5 alt coins

ethereum, bitcoin cash, riple, litecoin and dash

public key is used for what

recieving

private key is used for what

redeeming

Bitcoin/blockchains underpinned by

scientific and academic innovation )rsa invented digital currencky, proof of work introduced by research...)

Although an accepted chain can be considered a list, the block chain is best represented with a

tree

What confirms that the block, and every block before it, is legit?

unbroken hash (seal)

bitcoin has a ___ transaction fee

-nominal (very small and always the same)

First bitcoin transaction

Jan 12 2009

Can we ICO now?

"The ICO cycle now appears to be dying down to some extent and it's much harder to raise funds than it was in late 2017. But with so much money made and lost, the events of 2017 and early 2018 are not likely to be quickly forgotten."

using ICOS has allowed Ethereum to earn a profit of ____ made entirely of digital assets the created out of thin air

$12.8 billion

ICOs

*ICOs act as fundraisers of sorts; a company looking to create a new coin, app, or service launches an ICO. Next, interested investors buy in to the offering, either with fiat currency or with preexisting digital tokens like ether. In exchange for their support, investors receive a new cryptocurrency token specific to the ICO. Investors hope that the token will perform exceptionally well into the future, providing them with a stellar return on investment. -Way for people to invest Ether into startups of companies being built on top of Ethereum -Permissionless, effortless way to invest in a good company (think Kickstarter) -VCs trending worried Bancor ICO $150million Tezos ICO $200 million Filecoin ICO $253 Million

Silk Road

*In Feb 2011: Silk Road opens as the anonymous "eBay of Drugs", using Tor and Bitcoin -Drugs and black market goods become the use case for bitcoin

Satoshi Nakamoto:

*anonymous creator of Bitcoin, wrote the white paper -based on cryptographic proof instead of trust -Solution to distributed consensus: Proof-of-Work, "one-CPU-one-vote"

difference between bitcoin and ethereum

*bitcoin is coincentric. Its primary purpose is to be an alternative to existing currency *Ethereum is a Turing-complete protocol that uses its coin ether as "fuel". Primary Purpose: Platform for decentralized applications + Smart Contracts

example to early attempts at crypto currency: digi cash

*digi cash: "blind signatures" public key cryptography -allowed users to sign off on transactions without revealing identity -failed due to centralization

What did mt.gox blame their "technical glitch" on?

-A problem they said was within the bitcoin protocol itself called: *Transaction malleability -apparently lost only 386 bitcoins from transaction malleability

OP_CHECKMULTISIG

-Built in support for joint sigs -specifi n public keys -specify t verification requires t signatures

Difference between centralized, decentralized and distributed

-Centralized: One database, one owner, not resilient to organizational failures, resilient to tech failures -Distributed: Many database copies, one owner, resilient to tech failure, not resilient to organizational failure - Decentralized: many database copies, many owners, no one is the "master", resilient to tech failure, resilient to organizational failure

7 key principles of why people chose to use blockchain?

-Transparent & visable (no one can cover their tracks) -Accountability (every action is attributable to its owner) -privacy (security is given without having to provide confidential user info) -Scalaibility (must be able to scale to trillions of digital assets) -Portability(security moves with data wherever data goes) -permanence (security last as long as data does, ideally longer) -open (doesn't rely on traditional closed trust anchors)

Bitcoin scripting language (scripts) goals

-built for bitcoin -simple compact -support for cryptography -stack-based -limits on time/memory -no looping

how is bitcoin counterfeit resilient?

-cannot add coins arbitrarily -coins cannot be double spent

example to early attempts at crypto currency: hashcash

-coins are minted by expending resources instead of by a central bank -solve puzzle using cryptographic hash function -originally designed as a mechanism to limit email spam

Bitcoin theft: mt.gox

-created by jed mcCaleb in 2010 as the biggest online bitcoin exchange -had security breach in 2011 that caused fraud trading -mt.gox handled 70% of transactions -in 2014 it lost 744 hundred thousand bitcoins and it went unnoticed for years -later declared bankrupt

Bitcoins currency is a ____ divisible currency and supports ___ decimal places

-infinitely dividable currency units that support 8 decimal places

public ledger

-is used as a record keeping system that maintains participants' identities in secure and (pseudo-)anonymous form, their respective cryptocurrency balances, and a record book of all the genuine transactions executed between network participants. -transactions are placed in blocks which are linked by SHA256 hashes

Identity in bitcoin: few things to note

-no personal information is required -no limits to amount of accounts you can create -no restrictions on keys that have been taken

privacy vs secrecy

-privacy is something you dont want anyone to know aka the power to selectively reveal oneself to the world (a cypherpunks manifesto) -secrecy is something you only want select few to know

What makes a transaction valid?

-proof of ownership (a signature) -available funds -no other transactions using the same funds

Each entity is represented with a unique___ and corresponding ___

-public key with corresponding private key -private key acts as a key to unlock the public key and your money

Goals of bitcoins currency:

-scarcity: finite units for maintaining value -fungiblitiy: interchangeable and identical units for preserving equal value between all units -divisibility: sub units for every major unit for ease and precision of payments -durability: long lasting units -transferablity: liquidy, for ease in transacting *but most importantly* -legitimacy: we can trust bitcoin because of the mathematical accumulation of several years of research without trusting individuals.

benefits of altcoin

-solves some of bitcoins problems (speed, scale) -has unique features (anonymity, gpu resistant, powerful programming language) -different distribution model (give away to system)

Turning complete

-term used in computability theory to describe abstract machines, usually called automata. Such an automaton is Turing complete, if it can be used to emulate a Turing machine. It is also called computationally universal -Most modern programming languages are Turing-complete -A Turing Complete system means a system in which a program can be written that will find an answer (although with no guarantees regarding runtime or memory). So, if somebody says "my new thing is Turing Complete" that means in principle (although often not in practice) it could be used to solve any computation problem. - So he created "Universal Turing Machine" that can take ANY program and run it. Programming languages are similar to those machines (although virtual). They take programs and run them. Now, a programing language is called "Turing complete", if that it can run any program(irrespective of the language) that a Turing machine can run given enough time and memory

Hype train

-this is how ethereum bounced back -indian war on cash aka bitcoin crypotcurrency hype

Common complaints about blockchain

-underdeveloped ecosystem -moving assets to blockchain could be hard -few poster companies -lack of understanding -trusting networks -gov interference

UTXO Model

-unspent transaction outputs -quantities of bitcoin sent to this account have not been spent yet -can contain any quantity & is spent in entirety -can only be redeemed once

Idenity in bitcoin: role of it

-used to receive money -claim/spend money -blame -public key and private key

key challenges solved by blockchain

1. no stealing money 2. minting: fair money creation 3. no double spending

first altcoin happened in

2011 called namecoin.litecoin

when was ethereum talked about in whitepapers

2013 created by vitalik Buterin -in summer 2014 ethereum crowdsale -in july 2015 etherum was launched in 2016 etherum tokens were worth more than a billion dollars

Max amount of bitcoin

21 Million

how many opcodes are in bitcoin script instructions

256 *opcodes: the portion of a machine language instruction that specifies the operation to be performed. -has arithmetic, if/then/logic/data handeling and crypto(hashes, sig varification, multi sig verification)

How many bitcoin did mt.gox lose in total?

850,000 BTC -750,000 being their customers and 100,000 being their own

DAO

A DAO is a Decentralized Autonomous Organization. Its goal is to codify the rules and decision making apparatus of an organization, eliminating the need for documents and people in governing, creating a structure with decentralized control.

How did the DAO work?

A group of people writes the smart contracts (programs) that will run the organization There is an initial funding period, in which people add funds to the DAO by purchasing tokens that represent ownership - this is called a crowdsale, or an initial coin offering (ICO) - to give it the resources it needs. When the funding period is over, the DAO begins to operate. People then can make proposals to the DAO on how to spend the money, and the members who have bought in can vote to approve these proposals.

What is bitcoin?

A protocol that supports decentralized, pseudo-anonymous, peer to peer digital currency -publicly disclosed linked ledger of transactions stored in a blockchain -reward driven system for achieving a consensus(mining) based on proof of work for helping to secure the network - a scare token economy with an eventual cap of 21M bitcoin

Exp of blockchain use: Guard time

Blockchain security company, seeking to register every update and access to healthcare records in the Blockchain. They signed a deal with the Estonian e-Health Authority to secure the country's health records, and created a network that can be used by patients, providers, private companies or the government to access information in a safe way.

Block chain has what type of ledger?

Chronological Ledger -Transactions are pseudo anonymous -transactions grouped in blocks -transactions are logged and stamped with info about time, amount and participants

transaction identifier (Tx id)

Commonly associated with Bitcoin, a transaction identifier (Tx id) is a unique 32-byte alphanumerical string of data that is used to reference a bitcoin transaction. The transaction identifier is formed by hashing transaction data through the SHA-256 hash function twice. That is: Tx id = SHA-256(SHA-256(Transaction data))

Block chains are what type of ledgers?

Distributed ledgers

Miners

Indviduals that maintain and update the blockchain and are paid a reward -solve complex math problem -send transactions to other nodes to be verified

What is Blockchain?

It's an immutable record of digital events shared peer to peer between different parties. It can only be updated by consensus of a majority of the participants in the system and, once entered, information is very hard to erased. It revolutionizes the concept of data storage.

When was bitcoin created?

Jan 3rd 2009

Mining

Mining involves attempting to find a numerical value, known as a "nonce" that when combined with all open transactions can be "hashed" into a value that satisfies a certain "difficulty" -purpose built-hardware has long since replaced the function such that its no longer productive for simple CPU based systems to compete in the mining process

Pseudo-anonymous

Most commonly, pseudo-anonymity enables anonymous posting and commenting. Pseudo-anonymous users have no visible identifier, and information that can be linked to them is only available to service providers or site administrators (unless the users themselves provide such information in their messages). However, that doesn't mean that messages can't be traced back to their sources. Users are generally required to provide some form of ID for sign up and IP addresses are typically logged and saved.

Forks

Natural in distributed systems -longest chain represents more validated path

How is each key challenge in blockchain solved?

No stealing: cryptographic signatures -no double spending: global ledgers -minting: mint for proof of work

How did blockchain get discovered?

Right after the Global Financial Crisis when people lost faith in the banks, Satoshi Nakamoto solved a very complex Game Theory conundrum called the Byzantine General Problem, which ensured that at a particular time, a block of asset could be transferred to only one other person, without the need for a third-party check.

who created silk road

Ross ulbricht "dread pirate roberts" created silk road and is serving a life sentence

bitcoin blocks are created every ___ minutes and can only hold ___ of transactions

bitcoin created every 10 minutes and can only hold 1 mb of transactions -in 2015 blocks began to run out of space and transactions were going unconfirmed

DAO Fiasco

Unfortunately, while programmers were working on fixing this and other problems, an unknown attacker began using this approach to start draining The DAO of ether collected from the sale of its tokens. By Saturday, 18th June, the attacker managed to drain more than 3.6m ether into a "child DAO" that has the same structure as The DAO. The price of ether dropped from over $20 to under $13. Several people made attempts to split The DAO to prevent more ether from being taken, but they couldn't get the votes necessary in such a short time. Because the designers didn't expect this much money, all the ether was in a single address (bad idea), and we believe the attacker stopped voluntarily after hearing about the fork proposal (see below). In fact, that attack, or another similar one, could continue at any time.

bitcoin cash

bitcoins hard fork -lower fees and fast confirmation -block size 8mb

Distributed ledger

a database that is consensually shared and synchronized across multiple sites, institutions or geographies. It allows transactions to have public "witnesses," thereby making a cyberattack more difficult. The participant at each node of the network can access the recordings shared across that network and can own an identical copy of it.

hash puzzles can only be solved using

brute-force computation which spends resources

When you sign a message with a public key what happens

a signature is generated and private key is how you take ownership for it

Byzantine General Problem

a situation where involved parties must agree on a single strategy in order to avoid complete failure, but where some of the involved parties are corrupt and disseminating false information or are otherwise unreliable.

permissioned ledgers

a type of private blockchain -not open -not trust less -no economic incentive like i bitcoin -separates blockchain from bitcoin

Altcoins

alternative to bitcoin -try to imitate bitcoin's success -try to overcome bitcoin's limitations -over 1000 out there

Cypherpunks/Crypto-anarchist

any activist advocating widespread use of strong cryptography and privacy-enhancing technologies as a route to social and political change. Originally communicating through the Cypherpunks electronic mailing list, informal groups aimed to achieve privacy and security through proactive use of cryptography. Cypherpunks have been engaged in an active movement since the late 1980s.

sybil attack

attack wherein a reputation system is subverted by forging identities in peer-to-peer networks.

brute force computation

brute-force search or exhaustive search, also known as generate and test, is a very general problem-solving technique and algorithmic paradigm that consists of systematically enumerating all possible candidates for the solution and checking whether each candidate satisfies the problem's statement.

how can someone verify that a signature is correct and with the right private key

by knowing the message and public key

How are records kept?

by storing all transactions in a Distributed database -transactions are compiled into blocks and stored in the blockchain -everyone has a copy of the blockchain

When someone generates a key pair they

create a public key which is published with a public key infrastructure -create a private key which is kept secret

Replicated state machine

general method for implementing a fault-tolerant service by replicating servers and coordinating client interactions with server replicas. The approach also provides a framework for understanding and designing replication management protocols

example to early attempts at crypto currency: b-money

had 2 protocols -practical way to enforce contractual agreements between anon actors -protocol in which every participant maintains an individual database of how much money belongs to each user

Dimon

hated bitcoin and blockchain but then begain to like blockchain and still hate bitcoin

under the utxo model, balances are

implicity the sumation of all unspent transaction outputs which you can redeem

proof of work

in order to propose a block, must include pow or solution to hash puzzle

Transactions map___ to ____

inputs to outputs

ether

is a necessary element — a fuel — for operating the distributed application platform Ethereum. It is a form of payment made by the clients of the platform to the machines executing the requested operations.

litecoin

launched in 2011 scrypt vs sha256 gpu resistant

ripple

made in 2012 -enables ripple entwork -global payments in seconds

What is one of the most controversial bitcoin exchanges the world has seen?

mt gox

Non-repudiation

once you **** up.. you done ****ed up -no resources to appeal tokens or fix user problems

dash

open source peer to peer crypto like bitcoin -instand transactions -private transactions -decentralized

How does the consensus work?

peers ast proposals via proof-of-work, an expensive voting process, to deter double spend attacks

spending bitcoin is redeeming _____

previous transaction outputs

private key is chosen at ____ public key generated from____

private key is chosen at random and public key is generated from private key

Transaction malleability

process of changing the unique identifier of a transaction by first changing the digital signature used to create it. -Transaction malleability is made possible because the unlocking script, or scriptSig, containing the digital signature can be modified by an attacker. If the unlocking script is changed, the serialized transaction data will be different, therefore, the resulting transaction id will also be different. However, a bad actor can only alter the digital signature of the unlocking script prior to the confirmation of a block. After confirmation, the digital signature, and therefore the transaction id, are immutable.

we share our public key to ___ bitcoin and use our private key to ___ it

public key to transfer bitcoin and pprivate key to redeem it

Bitcoin is hidden in the large amount of

public keys -2^160 possible addresses(keys) -what does this mean? its practically impossible for anyone to overlap using the random keys

transactions contain_____ of their own funds

signatures of their own funds

ethereum

uses Smart contracts to permit to build applications on top of Ethereum in a decentralised way eg. Filecoin allows people to rent out their computer storage to others and get paid for it. Similarly, Golem allows people to rent out their computing power. -used presale and raised 18 million in bitcoin to release etherum

block size debate

this raised questions about decentralized goverance