BITCOIN

Peer-to-Peer System 

Why? 

  • Direct transaction, without resortin to the third party (fin.institutions)
  • Avoiding Double-spending (reproducing the currency) by forming a record that can be changed without redoing the proof-of-Work by miners 

What happens?

  • Each owner transfers the coin to the next by digitally signing a hash (a process of turning large quantities of data to fixed one) of the previous transaction 

How to avoid attackers?

  • Each transaction must be publicly announced, timestamped, and in a system that agrees on a single history of the order in which they are received -> reinforcing the ones before it
  • The longer the chain of CPU power - the safer 
  • To modify, the attacker has to redo the Proof of Work of the block, all blocks after and then surpass the subsequent work of miners 
  • Faster generation of blocks-> increased difficulty (more blocks to work on)

How the work get verified?

  • When a node (miner) find a PoW , he broadcasts it to others. If it is valid, they have to accept it by creating the next block in th chain, using the hash of the accepted block as the previous hash. 
Nodes will always consider the longest chain to be correct one and will work on its extension.

Why they do it?

  • The first transaction in the block creates a new coin for the creator of the block (a way to initially distribute coins into circulation )
  • It is more profitable to generate a new coin then to defraud by stealing back the payments
  • Collecting Transaction fee - the difference when the output value of a transaction < its input value

How can you do it effectively?

  • Graphic Processor - more effective in automation as it is programmed to do repetitive tasks and  process larger amount of data