Eli5 reddit bitcoin tip

In Part 1 we took a look at the incentives involved in Bitcoin mining and how they are used guarantee a single transaction history needed to prevent bitcoins from being double spent. In this post we will take more a technical look at the cryptography involved and how it is used to secure the network. As Eli5 reddit bitcoin tip said previously, Bitcoin is very accessible. Before eli5 reddit bitcoin tip forward we should take a moment to learn about hash functions since they are used all throughout the Bitcoin protocol.

To put it simply, a hash function is just a mathematical algorithm that takes an input and turns it into an output. For example, suppose we have an algorithm which just adds all the digits in the input string together.

If our input is we would get an output of However, there are certain properties of really good hash functions that make them suitable to use in cryptography. Keep these properties in mind as they are vital to the operation of the Bitcoin protocol. The output should be the same length regardless of whether the input has 10 characters or 10 thousand characters.

A tiny change in the input should produce an entirely different output that in no way relates to the original input. You might wonder how we can trust something that came from the NSA. The consensus is that they are secure. Now that we have the preliminaries out of the way eli5 reddit bitcoin tip can start focusing in on the protocol. If you read Part 1 you will recall that all Bitcoin transactions are relayed to each of the peers in the network.

The first step in the process is to eli5 reddit bitcoin tip each transaction in the memory pool using SHA The raw transaction data may look something like this:.

These hashes are then organized into something called a Merkle Tree or hash tree. The hashes of the transactions are organized into pairs of twos, concatenated together, then hashed again. The same is done to each set of outputs until something like a tree is formed or an NCAA bracket. In the above example there are only four transactions tx stands for transaction. A real block will contain hundreds of transactions so the bracket tree will be much larger. The hash at the very top of the tree is called the Merkle Root.

The block header will look something like this:. Now having done all this can we go ahead and relay the eli5 reddit bitcoin tip to the rest of the network? If you recall the last post, the answer is no. We still need to produce a valid proof of work. The output must be less than the specified number. Another way of saying this is that the hash of the block header must start with a certain number of zeros.

For example a valid hash may look like this: Any block whose header does not produce a hash that is less than the target value will be rejected by the network. The target value is adjusted by the protocol every two weeks to try to maintain an average block time of 10 minutes. This is where the nonce comes in. The nonce is simply a random number that is added to the block header for no other reason than to give us something to increment in an attempt to produce a valid hash.

If your first attempt at hashing the header produces an invalid hash, you just add eli5 reddit bitcoin tip to the nonce and rehash the header then check eli5 reddit bitcoin tip see if that hash is valid. This is Bitcoin mining in a nutshell. This is essentially what Bitcoin mining is, just rehashing the block header, over, and over, and over, and over, until one miner in the network eventually produces a valid hash.

When he does, he relays the block to the rest of eli5 reddit bitcoin tip network. If so, they add the block to their local copy of the block chain and move on to finding the next block. However, the more hashes that you can perform per second, the greater the probability that you will mine a block and earn the eli5 reddit bitcoin tip reward.

CPU mining quickly gave way to GPU mining graphics processing units which proved much more efficient at calculating eli5 reddit bitcoin tip functions. Basically, these are purpose built computer chips that are designed to perform SHA calculations and do nothing else. At present, the total hashing power in the network is about terrahashs per second and closing in eli5 reddit bitcoin tip one petahash per second.

Because each miner is sending these 25 eli5 reddit bitcoin tip to his own address, the first transaction in each block will differ from miner to miner. Now remember the properties of a cryptographic hash function? If an input changes even in the slightest, the entire output changes.

Since the hash of the coinbase transaction at the base of the hash tree is different for each miner, the entire hash tree including the Merkle root will be different for each miner. That means the nonce that is needed to produce eli5 reddit bitcoin tip valid block will also be different for each miner. This is the reason why the Merkle tree is employed after all. Any change to a single transaction will cause an avalanche up the hash tree that will ultimately cause the hash of the block to change.

If an attacker wants to alter or remove a transaction that is already in the block chain, the alteration will cause the hash of the transaction to change and spark off changes all the way up the hash tree to the Merkle Root. Given the probabilities, it is unlikely a header with the new Merkle Root will produce a valid hash the proof of work. Eli5 reddit bitcoin tip, the attacker will need to rehash the entire block header and spend a ton of time finding the correct nonce.

But suppose he does this, can he just relay his fraudulent block to the network and hope that miners will replace the old block with his new one or, more realistically, that new users will download his fraudulent block? The reason is because the hash of each block is included in the header of the next block. If the attacker rehashes block numberthis will cause the header of block to change, requiring that block to be rehashed as well. A change to the hash of block will cause the header of block eli5 reddit bitcoin tip change and so on all the way through the block chain.

Any attempt to alter a transaction already in the block chain requires not only the rehashing of the block containing the transaction, but all other subsequent blocks as well. Depending on how deep in the chain the transaction is, it could take a single attacker weeks, months, or years, to rehash the rest of the block chain.

The only exception to the above rule is if the attacker simply gets lucky. As we noted, it takes the entire network an average of 10 minutes to find a valid block.

The deeper a transaction is in the block chain, however, eli5 reddit bitcoin tip more times in row the attacker would need to get lucky and mine a block before the rest of the network to extend his chain longer than the main chain. From a probability standpoint, the eli5 reddit bitcoin tip of such an attack succeeding decrease exponentially with each subsequent block.

In the original white paper Satoshi Nakamoto calculated the probabilities that an attacker could get lucky and pull off a double spend. In the following table q is the percentage of the network controlled by the attacker, P is the probability an attacker could get lucky and override z number of blocks. Which is usually why it is recommended that if you are selling something expensive, you should wait until your transaction is six blocks deep six confirmations in Bitcoin lingo before actually handing over the merchandise.

This post got long in a hurry. Hope you enjoyed these posts and I hope you learned something. I found your post comments while searching Google.

It is very relevant information. Regularly I do not make posts on blogs, but I have to say that this posting really forced me to do so. Really eli5 reddit bitcoin tip and I will be coming back for more information at your site and revisit it! I still have one question though: Smart Contracts Great Wall of Numbers. Part 2 — Mechanics … Bitcoin. For the hash chaining, eli5 reddit bitcoin tip it mean if somebody get one valid hash, I need to update and download it and re-calculate based on his block?

Or can I make a new branch based on previous block? Bitcoin Online resources collected The Bitcoin Journey How Cryptocurrencies Eli5 reddit bitcoin tip Bitcoin Getter. Bitcoin has seen rapid increases during the last year and there are now those who are claiming that the bubble is soon to burst and Bitcoin crumble. Those of us continue believe in the idea of a user owned system away from the reach of the banks.

We do not believe that the currency is finished. We shall be eli5 reddit bitcoin tip with Bitcoin and I am quite confident that it will continue to rise more rapidly than before. Bitcoin Frenzy — Is eli5 reddit bitcoin tip the next gold or just a bubble? How Cryptocurrencies Work - Cryptocurrency How Cryptocurrencies Work — Bitcoin Support. Thanks for a great article. How then does the miner broadcast that to the rest of the network to eli5 reddit bitcoin tip consensus on the work if his nonce is unique from what another miner would have theoretically found?

Cryptocurrency trading is becoming a profession — The Glimpse. How Cryptocurrencies Work — Bitcoin Supports. How Cryptocurrencies Work — Blok Chn. Eli5 reddit bitcoin tip are commenting using your WordPress.

You are commenting using your Twitter account. You are commenting using your Facebook account. Notify me of new comments via email. Notify me of new posts via email. Cryptographic Hash Functions Before moving forward we should take a moment to learn about hash functions since they are used all throughout the Bitcoin protocol.

It should be very easy to compute an eli5 reddit bitcoin tip for any given input, however it should be impossible given current knowledge of mathematics and the state of computers to compute the input for a given output even while knowing the mathematical algorithm.

In this case there are many possible inputs that could add up to 10 55, etc.

Any computer that connects to the Bitcoin network is called a node. Nodes that fully verify all of the rules of Bitcoin are called full nodes. The eli5 reddit bitcoin tip popular software implementation of full nodes is called Bitcoin Coreits latest release can be found on the github page.

Full nodes download every block and transaction and check them against Bitcoin's consensus rules. Here are examples of consensus rules, though there are many more:. If a transaction or block violates the consensus rules, then eli5 reddit bitcoin tip is absolutely rejected, even if every other node on the network thinks that it is valid.

This is one of the most important characteristics of full nodes: For full eli5 reddit bitcoin tip, miners actually have fairly limited power: A powerful miner is able to execute some serious attacksbut because full nodes rely on miners only for a few things, miners could not completely change or destroy Bitcoin. Changing any of the consensus rules requires a hard forkwhich can be thought of as creating a new currency and having everyone move to it. Consensus rules are different eli5 reddit bitcoin tip policy rules, which specify how a node or miner prioritizes or discourages certain things.

Policy rules can be changed freely, and different nodes can have different policy rules. Because all full nodes must use exactly the same consensus rules in order to remain compatible with each other, even duplicating bugs and oddities in the original consensus rules, creating a full node from scratch is extremely difficult and dangerous.

It is therefore recommended eli5 reddit bitcoin tip everyone who wishes to run a full node uses software based on the reference clientwhich is the only client guaranteed to behave correctly.

At minimum, a full node must download every transaction that has ever taken place, all new transactions, and all block headers. Additionally, full nodes must store information about every unspent transaction output until it is spent. Performance can improved by enabling -blocksonly mode and enabling pruning. A subset of full nodes also accept incoming connections and upload old blocks to other peers on the network.

Contrary to some popular misconceptions, being an archival node is not necessary to being a full node. Running a full node is the only way you can use Bitcoin in a trustless way. You will know for sure that all the rules of Bitcoin are being followed, for example that no bitcoins are spent not belonging to the owner, that no coins were spent twice, that no inflation happens outside of the schedule and that all the rules needed to make the system work e.

Full nodes are currently the most private way to use Bitcoin, with nobody else learning which bitcoin addresses belong to you. Full nodes are the most secure way to use Bitcoin, they do not suffer from many attacks that affect lightweight wallets. This is by far the most important reason for running a full node, though it is a little difficult to understand. As explained previously, full nodes enforce the consensus rules no matter what.

However, lightweight nodes do not do this. Lightweight nodes do whatever the majority of mining power eli5 reddit bitcoin tip. Therefore, if most of the miners got together to increase their block reward, for example, lightweight nodes would blindly go along with it. If this ever happened, eli5 reddit bitcoin tip network would split such that lightweight nodes and full nodes would end up on separate networks, using separate currencies.

People using lightweight nodes would be unable to transact with people using full nodes. Howeverif almost everyone on the network is using lightweight nodes in this situation, then everyone would continue being able to transact with each other, and so Bitcoin could very well end up "hijacked" by evil miners.

Eli5 reddit bitcoin tip practice, miners are unlikely to attempt anything like the above scenario as long as full nodes are prevalent because the miners would lose a lot of money. But the incentives completely change if everyone uses lightweight nodes. In that case, miners definitely do have an incentive to change Bitcoin's rules in their favor. It is only reasonably secure to use a lightweight node because most of the Bitcoin economy uses full nodes.

Therefore, it is critical for Bitcoin's survival that the great majority of the Bitcoin economy be backed by full nodes, not lightweight nodes. This is especially important for Bitcoin businesses, which have more economic weight. To contribute to Bitcoin's economic strength, you must actually use a full node for your real transactions or use a lightweight node connected to a full node that you personally control.

Just running a full node on a server somewhere does not contribute to Bitcoin's economic strength. Having eli5 reddit bitcoin tip blockchain stored on your hard drive is the most private way to have eli5 reddit bitcoin tip wallet.

All other lightweight solutions leak information about which addresses are yours because they must query third-party servers. The Electrum servers will know which addresses belong to you and can link them together. Despite bloom filtering, SPV nodes based on BitcoinJ do not provide much privacy against nodes who connected directly to the wallet [1].

For many use cases, such privacy eli5 reddit bitcoin tip not be required. But an important reason to run a full node and use it as a wallet is to get the full privacy benefits. Lightweight nodes are sometimes able to be temporarily tricked into accepting transactions or blocks that are not actually valid. This could cause serious financial damage, especially for websites that automatically process Bitcoin transactions.

Full nodes provide the maximum security possible, and so they should be used by all businesses, and also by regular users whenever doing so is convenient. This is especially important for lightweight nodes. For the most part, these services are only usefully performed by full nodes that are listening on port The more full nodes that accept incoming connections there are, the more users the Bitcoin network can support.

Although if there is ever a shortage, lots of archival nodes can be easily created by cheaply renting VPS or AWS space. Bitnodes ran a program to incentivize full node operators until eli5 reddit bitcoin tip end of If you open portyou will contribute to the network's capacity. If you actually use the eli5 reddit bitcoin tip feature, or if you use a lightweight client like MultiBit but configure it to connect exclusively to your full node, then eli5 reddit bitcoin tip will contribute to the network's economic strength and receive protection from some possible attacks against lightweight nodes.

Even very slight inaccuracies could eli5 reddit bitcoin tip serious problems for the users of these alternate clients. Example of implementations Bitcorelibbitcoinbtcd. Retrieved from " https: Technical Bitcoin Core documentation. Navigation menu Personal tools Create account Log in.

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