Bitcoin Transactions & Script Applications

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Questions and Answers

What does the input part of a Bitcoin transaction refer to?

The originator's signature and public key. (correct)

The hash of the previous transaction.

The amount of Bitcoin being transferred.

The public key of the recipient.

Which instruction is associated with a Multisig M of N Bitcoin transaction?

OP_Hash160

OP_CheckmultiSig (correct)

OP_PaytoHash

OP_CheckSig

In Bitcoin transactions, what does 'Proof of Burn' entail?

Sending Bitcoin to an unredeemable address. (correct)

Transferring Bitcoin to a specific address.

Creating a permanent record of a non-redeemable transaction.

Specifying a recipient to redeem the Bitcoin.

Which aspect of Bitcoin transactions is verified to ensure the originator has sufficient funds?

The OP_HASH160 instruction. Signup and view all the answers

What is indicated by the 'Pay to Script Hash' instruction in Bitcoin transactions?

It enables payments based on a script's hash rather than a public key. Signup and view all the answers

Which component of a Bitcoin transaction provides the previous transaction's output?

Current transaction input. Signup and view all the answers

What allows efficient micro-payments in Bitcoin transactions?

Scripts that automate payment workflows. Signup and view all the answers

What is the main purpose of an escrow transaction in Bitcoin?

To hold funds until predefined conditions are met. Signup and view all the answers

What is the primary challenge faced by miners when trying to propose a new block in Bitcoin?

Miners are unaware of each other and their proposed blocks. Signup and view all the answers

Which type of fault is characterized by a system component completely ceasing to operate?

Crash Fault Signup and view all the answers

What is the function of the Proof of Work mechanism in Bitcoin?

To avoid Sybil attacks and determine block acceptance. Signup and view all the answers

What is the recommended number of confirmations to counter the double spending attack in Bitcoin?

6 Confirmations Signup and view all the answers

Which method allows miners to prove that they have completed a challenge posed by the network?

Hash Function Verification Signup and view all the answers

What problem does the Proof of Work mechanism aim to address?

Sybil attacks Signup and view all the answers

What is a key observation regarding the block acceptance procedure in Bitcoin?

Any valid block can be accepted regardless of its origin. Signup and view all the answers

What incentive is provided to miners alongside transaction fees in the Bitcoin network?

Block Reward Signup and view all the answers

Study Notes

Bitcoin Transaction Details & Types

Bitcoin Script is a scripting language used within Bitcoin transactions.
Transaction Structure is based on a Pay to Public-Key Hash system.
UTXO Model is used, where transaction outputs become inputs for new transactions, ensuring a history of transactions is recorded.

Bitcoin Script Applications

Pay to Public-Key Hash is a commonly used script that verifies an individual's ownership of Bitcoin funds.
Multisig allows for multiple parties to control a transaction, requiring a minimum number of signatures (M) out of a total number of parties (N).
Pay to Script Hash allows for the use of more complex and adaptable scripts, giving flexibility to transaction requirements.
Proof of Burn involves sending Bitcoin to an address that cannot be redeemed, demonstrating a permanent commitment to the network and potentially storing information.
Escrow Transactions use third-party accounts to facilitate secure transactions involving multiple parties, ensuring funds are held in escrow until specific conditions are met.
Green Addresses optimize transaction fees by leveraging the Bitcoin Script, providing efficient processing when compared to traditional Bitcoin addresses.
Efficient Micro-Payments can be performed using Bitcoin Script, enabling the efficient transfer of small amounts of Bitcoin, facilitating economic activities typically associated with microtransactions.

Distributed Consensus in Bitcoin

Bitcoin leverages a consensus mechanism to determine which block to include next in the blockchain.
Miners, unaware of each other, may propose different blocks.
Consensus is achieved through a broadcast mechanism and proof of work.
Any valid block, regardless of its source, can be accepted.
The protocol operates in rounds, where accepted blocks are broadcast to peers, and a new set of transactions is collected.
Each miner attempts to solve a network-posed challenge.
The miner proving the solution first wins the right to add the resulting block to the chain, gaining the associated reward.

Double Spending Attacks

A double-spending attack occurs when a malicious actor attempts to spend the same Bitcoin twice.
The attacker can achieve this by broadcasting different versions of the same transaction to different nodes.
The solution: requiring 6 confirmations (blocks) for a transaction to be considered final, making it significantly harder for an attacker to double-spend.

Incentives and Proof of Work

There are two key incentives for miners:
- Block reward: Miners who successfully add a block to the blockchain receive a reward in Bitcoin.
- Transaction fees: Miners also earn fees from users who include their transactions in the block.
Proof of work is a fundamental component of the Bitcoin consensus mechanism.
Proof of work ensures that every transaction added to the blockchain is valid and that the chain is secure.
It involves miners solving complex computational puzzles, consuming resources and time.
The more computational power a miner has, the higher their likelihood of winning the block reward.
This system avoids Sybil attacks, where a vast number of fake identities may attempt to influence the system.
Proof of work, represented by a hash function, is a cornerstone of Bitcoin’s consensus mechanism.
The hash function, denoted as Hash(r|x) = y, takes the nonce (r), previous hash (Prev_Hash), and transactions (tx) as input.
Miners continually adjust the nonce until they find a hash output that meets the network's difficulty requirements.
This process ensures consensus and security by requiring a considerable amount of energy and effort to create and maintain the blockchain.
Proof of work incentivizes honest behavior and protects the system against malicious actors.

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Description

Explore the intricacies of Bitcoin transactions, focusing on the Bitcoin Script and its various applications like Pay to Public-Key Hash and Multisig. Understand the UTXO model and how it ensures the integrity and history of Bitcoin transactions. Dive into the flexible options available for creating varied transaction scripts.