Bitcoin: A Peer-to-Peer Electronic Cash System
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Questions and Answers

What is the purpose of the proof-of-work in the Bitcoin network?

  • To provide a way to timestamp transactions
  • To make it computationally expensive to modify a past block
  • To ensure that the majority decision is represented by the longest chain with the greatest proof-of-work effort invested in it (correct)
  • To allow anyone with an IP address to participate in the decision-making process
  • What is the relationship between the number of zero bits required in the hash and the average work required?

  • The average work required is inversely proportional to the number of zero bits required
  • The average work required is linearly proportional to the number of zero bits required
  • The average work required is exponential in the number of zero bits required (correct)
  • The average work required is constant, regardless of the number of zero bits required
  • How does the proof-of-work solve the problem of determining representation in majority decision making?

  • By making it one-CPU-one-vote, rather than one-IP-address-one-vote (correct)
  • By providing a way to timestamp transactions
  • By making it computationally expensive to modify a past block
  • By allowing anyone with an IP address to participate in the decision-making process
  • What is the purpose of chaining blocks together after a block has satisfied the proof-of-work?

    <p>To make it more difficult to modify past blocks</p> Signup and view all the answers

    What is the relationship between the honest nodes and the longest chain in the Bitcoin network?

    <p>The longest chain is the one with the greatest proof-of-work effort invested in it</p> Signup and view all the answers

    What is the role of the nonce in the proof-of-work process?

    <p>To increment until a value is found that gives the block's hash the required zero bits</p> Signup and view all the answers

    What is the main benefit lost if a trusted third party is still required in electronic cash transactions?

    <p>Security</p> Signup and view all the answers

    How is the double-spending problem addressed in the proposed solution?

    <p>Using a peer-to-peer network with proof-of-work</p> Signup and view all the answers

    What role does the longest chain play in the Bitcoin system?

    <p>Serves as proof of CPU power control</p> Signup and view all the answers

    Why is it essential for a majority of CPU power to be controlled by non-cooperating nodes in the Bitcoin network?

    <p>To prevent double-spending</p> Signup and view all the answers

    What characteristic of the network allows nodes to leave and rejoin at will?

    <p>Minimal network structure</p> Signup and view all the answers

    In electronic cash transactions, what is the significant advantage of avoiding financial institutions as trusted third parties?

    <p>Increased security and independence</p> Signup and view all the answers

    Why should a greedy attacker find it more profitable to play by the rules in the blockchain system?

    <p>To generate new coins</p> Signup and view all the answers

    How are old blocks compacted to save disk space in the blockchain system?

    <p>By stubbing off branches of the Merkle Tree</p> Signup and view all the answers

    What is the purpose of hashing transactions in a Merkle Tree in the blockchain system?

    <p>To facilitate efficient verification of transaction integrity</p> Signup and view all the answers

    How much space does a block header with no transactions occupy in the blockchain system?

    <p>80 bytes</p> Signup and view all the answers

    What is the approximate yearly storage requirement for block headers if blocks are generated every 10 minutes?

    <p>4.2MB per year</p> Signup and view all the answers

    Why is storage unlikely to be a problem for block headers in the blockchain system despite increasing data?

    <p>Moore's Law predicts current growth in computer RAM</p> Signup and view all the answers

    What prevents the sender from preparing a chain of blocks ahead of time in blockchain transactions?

    <p>The receiver giving the public key to the sender shortly before signing</p> Signup and view all the answers

    Under what circumstances does the recipient wait until the transaction has been added to a block in blockchain transactions?

    <p>When z blocks have been linked after the transaction is added</p> Signup and view all the answers

    What value represents the attacker's potential progress in terms of a Poisson distribution in blockchain transactions?

    <p>$z \times q / p$</p> Signup and view all the answers

    How is the probability that the attacker could still catch up calculated in blockchain transactions?

    <p>$z 1 - \sum_{k=0} \frac{\lambda^k e^{-\lambda}}{k!}$</p> Signup and view all the answers

    Which parameter is used to convert the calculation of the probability for the attacker catching up into C code?

    <p>$\lambda$</p> Signup and view all the answers

    What action does the dishonest sender take after sending a transaction in blockchain transactions?

    <p>Start working on a parallel chain with an alternate version of the transaction</p> Signup and view all the answers

    What is the main purpose of simplified payment verification as described in the text?

    <p>To allow users to verify transactions without running a full network node</p> Signup and view all the answers

    What is the main vulnerability of the simplified payment verification method?

    <p>It is more vulnerable if the network is overpowered by an attacker</p> Signup and view all the answers

    What is the purpose of the Merkle branch mentioned in the text?

    <p>To link a transaction to the block it is timestamped in</p> Signup and view all the answers

    What strategy does the text suggest to protect against an attacker's fabricated transactions?

    <p>Accept alerts from network nodes when they detect an invalid block</p> Signup and view all the answers

    What is the purpose of the longest proof-of-work chain mentioned in the text?

    <p>To ensure the integrity of the blockchain</p> Signup and view all the answers

    How does the simplified payment verification method described in the text differ from a full network node?

    <p>It does not require users to download the entire blockchain</p> Signup and view all the answers

    Study Notes

    Proof-of-Work

    • Involves scanning for a value that when hashed, meets a required number of zero bits
    • The average work required is exponential in the number of zero bits required
    • Can be verified by executing a single hash

    Implementation of Proof-of-Work in Timestamp Network

    • Implemented by incrementing a nonce in the block until a value is found that gives the block's hash the required zero bits
    • Once the CPU effort has been expended, the block cannot be changed without redoing the work
    • As later blocks are chained after it, the work to change the block would include redoing all the blocks after it

    Proof-of-Work and Majority Decision Making

    • Solves the problem of determining representation in majority decision making
    • Prevents anyone from allocating many IPs to subvert the system
    • Essentially, it's one-CPU-one-vote, where the majority decision is represented by the longest chain

    Bitcoin: A Peer-to-Peer Electronic Cash System

    • A purely peer-to-peer version of electronic cash that allows online payments to be sent directly from one party to another without going through a financial institution
    • Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending

    Network Timestamps and Double-Spending

    • Network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work
    • The longest chain serves as proof of the sequence of events witnessed and proof that it came from the largest pool of CPU power

    Simplified Payment Verification

    • Possible to verify payments without running a full network node
    • User only needs to keep a copy of the block headers of the longest proof-of-work chain
    • Can obtain the Merkle branch linking the transaction to the block it's timestamped in

    Merkle Tree and Disk Space

    • Transactions are hashed in a Merkle Tree, with only the root included in the block's hash
    • Old blocks can then be compacted by stubbing off branches of the tree
    • Interior hashes do not need to be stored

    Key Pair and Transaction Integrity

    • Receiver generates a new key pair and gives the public key to the sender shortly before signing
    • Prevents the sender from preparing a chain of blocks ahead of time
    • The recipient waits until the transaction has been added to a block and z blocks have been linked after it

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    Description

    Explore the key concepts outlined in the whitepaper by Satoshi Nakamoto introducing Bitcoin as a decentralized digital currency system. Learn about the mechanism proposed to prevent double-spending and enable direct online transactions without the need for intermediaries.

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