Podcast
Questions and Answers
What is the main advantage of a greedy attacker playing by the rules in a cryptocurrency system?
What is the main advantage of a greedy attacker playing by the rules in a cryptocurrency system?
- To reduce the overall security of the system
- To generate new coins and increase his wealth (correct)
- To undermine the system and the validity of his own wealth
- To defraud people by stealing back his payments
What is the purpose of hashing transactions in a Merkle Tree?
What is the purpose of hashing transactions in a Merkle Tree?
- To facilitate discarding spent transactions without breaking the block's hash (correct)
- To increase the block size
- To reduce the block's hash
- To slow down the transaction verification process
What is the estimated size of a block header with no transactions?
What is the estimated size of a block header with no transactions?
- 80 bytes (correct)
- 320 bytes
- 40 bytes
- 160 bytes
How often are blocks generated, according to the content?
How often are blocks generated, according to the content?
What is the predicted growth of computer system RAM according to Moore's Law?
What is the predicted growth of computer system RAM according to Moore's Law?
What is the main problem that storage poses in a cryptocurrency system?
What is the main problem that storage poses in a cryptocurrency system?
How much disk space would be required per year if blocks are generated every 10 minutes?
How much disk space would be required per year if blocks are generated every 10 minutes?
What is the purpose of compacting old blocks in a cryptocurrency system?
What is the purpose of compacting old blocks in a cryptocurrency system?
Why are transactions designed to have multiple inputs and outputs?
Why are transactions designed to have multiple inputs and outputs?
What is a potential issue with fan-out in transactions?
What is a potential issue with fan-out in transactions?
How is privacy maintained in the new model?
How is privacy maintained in the new model?
What is similar to the level of information released by stock exchanges?
What is similar to the level of information released by stock exchanges?
What is the purpose of using a new key pair for each transaction?
What is the purpose of using a new key pair for each transaction?
What is typically the maximum number of outputs in a transaction?
What is typically the maximum number of outputs in a transaction?
How does the new privacy model achieve privacy?
How does the new privacy model achieve privacy?
What is the main difference between the traditional privacy model and the new privacy model?
What is the main difference between the traditional privacy model and the new privacy model?
What is a major limitation of the current electronic payment system?
What is a major limitation of the current electronic payment system?
What is the main problem that digital signatures do not solve?
What is the main problem that digital signatures do not solve?
What is the purpose of the hash-based proof-of-work?
What is the purpose of the hash-based proof-of-work?
What is the longest chain proof of?
What is the longest chain proof of?
What is required to change the record of transactions?
What is required to change the record of transactions?
Why can nodes leave and rejoin the network?
Why can nodes leave and rejoin the network?
What is the purpose of broadcasting messages on a best effort basis?
What is the purpose of broadcasting messages on a best effort basis?
What is the main benefit of a peer-to-peer electronic cash system?
What is the main benefit of a peer-to-peer electronic cash system?
What is the main limitation of mediated transactions?
What is the main limitation of mediated transactions?
What is the primary benefit of using physical currency in transactions?
What is the primary benefit of using physical currency in transactions?
What is the proposed solution to the double-spending problem?
What is the proposed solution to the double-spending problem?
What is an electronic coin defined as?
What is an electronic coin defined as?
What is the purpose of digitally signing a hash of the previous transaction?
What is the purpose of digitally signing a hash of the previous transaction?
What is the security requirement for the proposed system?
What is the security requirement for the proposed system?
What is a potential drawback of mediated transactions?
What is a potential drawback of mediated transactions?
What is the benefit of using cryptographic proof instead of trust?
What is the benefit of using cryptographic proof instead of trust?
What do nodes consider as the correct chain?
What do nodes consider as the correct chain?
What happens when two nodes broadcast different versions of the next block simultaneously?
What happens when two nodes broadcast different versions of the next block simultaneously?
Why do nodes have an incentive to support the network?
Why do nodes have an incentive to support the network?
What happens if a node does not receive a block?
What happens if a node does not receive a block?
What is added to the incentive value of the block containing a transaction?
What is added to the incentive value of the block containing a transaction?
What is the incentive for nodes to support the network initially?
What is the incentive for nodes to support the network initially?
What is the goal of the incentive mechanism?
What is the goal of the incentive mechanism?
What is the predicted outcome of the incentive mechanism once a predetermined number of coins have entered circulation?
What is the predicted outcome of the incentive mechanism once a predetermined number of coins have entered circulation?
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Study Notes
Blockchain and Security
- A greedy attacker would need to choose between defrauding people or generating new coins, making it more profitable to play by the rules.
- Honest nodes collectively controlling more CPU power than any cooperating group of attacker nodes ensures the system's security.
Reclaiming Disk Space
- Transactions can be discarded to save disk space once the latest transaction in a coin is buried under enough blocks.
- Merkle Trees are used to hash transactions, allowing old blocks to be compacted without breaking the block's hash.
Block Structure
- A block header with no transactions would be approximately 80 bytes.
- The block header contains the previous hash and nonce.
- The root hash of the Merkle Tree is included in the block's hash.
Transaction Processing
- Transactions can contain multiple inputs and outputs to allow value to be split and combined.
- Normally, there will be one input from a larger previous transaction or multiple inputs combining smaller amounts, and at most two outputs: one for the payment and one returning the change.
Privacy
- Privacy can be maintained by keeping public keys anonymous and using a new key pair for each transaction.
- The level of information released is similar to that of stock exchanges, where the time and size of individual trades are made public, but without identifying the parties involved.
Digital Signatures and Coin Ownership
- An electronic coin is defined as a chain of digital signatures.
- Each owner transfers the coin to the next by digitally signing a hash of the previous transaction and the public key of the next owner.
Network and Node Operation
- Nodes express their acceptance of a block by working on creating the next block in the chain.
- Nodes always consider the longest chain to be the correct one and will keep working on extending it.
- New transaction broadcasts do not need to reach all nodes, as long as they reach many nodes, they will get into a block eventually.
Incentive and Reward
- The first transaction in a block is a special transaction that starts a new coin owned by the creator of the block.
- This adds an incentive for nodes to support the network and provides a way to initially distribute coins into circulation.
- The incentive can also be funded with transaction fees, and eventually transition to being completely inflation-free.
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