RECAP View of someone who wants to make a transaction Block = #… Prev = #… B 1 B 2 ... B 8 B 9 B 10 B’ ... B’’ … Txn #871 … t Wait a few blocks until you Txn=#871 George Anna 1 …. can say that the transaction is confirmed WHY WHY? Want some assurance that this block will be on the longest chain in the long run!
PROOF OF WORK: RECAP View of a miner B 1 B 2 ... B 8 Block = #8ae1… Prev = B 8 …. SHA256 ( ) = 0x0b39d9ca51f07fef3429ae15… Txn #123 = … …. nonce
PROOF OF WORK: RECAP View of a miner B 1 B 2 ... B 8 Block = #8ae1… Prev = B 8 …. SHA256 ( ) = 0x000000ef34244s1jd99a533g… Txn #123 = … …. 0 nonce'
PROOF OF WORK: RECAP View of a miner B 1 B 2 ... B 8 Block = #8ae1… Prev = B 8 …. SHA256 ( ) = 0x1104000gf4jd8011889mdk3c… Txn #123 = … …. 0 nonce’’
PROOF OF WORK: RECAP View of a miner B 1 B 2 ... B 8 Block = #8ae1… Prev = B 8 …. SHA256 ( ) = 0x1104000gf4jd8011889mdk3c… Txn #123 = … I n c l u …. d e t h i s t r a n nonce’’ s a 0 c t i o n Txn=#871 George Anna 1 ….
PROOF OF WORK: RECAP View of a miner B 1 B 2 ... B 8 Block = #8ae1… Prev = B 8 …. SHA256 ( ) = 0x0000000aa38md69nb11efg48… Txn #123 = … I n c l u d …. e t h i s t r a n s a Txn #871 =… c t i o n Txn=#871 Georgios Arvind 1 …. nonce’’’
PROOF OF WORK: RECAP View of a miner You lost the race B 1 B 2 ... B 8 B 9 9 Block = #8ae1… Prev = B 8 …. SHA256 ( ) = 0x0000000aa38md69nb11efg48… Txn #123 = … …. Txn #871 =… nonce’’
PROOF OF WORK: RECAP View of a miner You lost the race B 1 B 2 ... B 8 B 9 Block = #8ae1… Update pointer to previous block Prev = _ å …. SHA256 ( ) = 0x0000000aa38md69nb11efg48… Txn #123 = … …. Remove transactions in B 9 Txn #871 =… nonce’’ I
PROOF OF WORK: RECAP View of a miner You lost the race B 1 B 2 ... B 8 B 9 Block = #8ae1… Update pointer to previous block Prev = _ å …. SHA256 ( ) = 0x0000000aa38md69nb11efg48… Txn #123 = … …. Remove transactions in B 9 Txn #871 =… nonce Keep trying!
RECAP OF BITCOIN Transactions: At any time, any buyer b can • Tr generate a transaction to pay d BTC to seller s. • Blo Block: ck: A block consists of ◦ A set of transactions ◦ A cryptographic hash of the previous block (pointer to previous block ◦ An ID of the miner for this block ◦ A nonce. valid if • A set of properly signed transactions is va no account ever overspent its limit. • A block is valid if ◦ It points to a valid block. ◦ All transactions on the chain to B are valid. ◦ SHA256(nonce|| info in block) has k leading zeros.
RECAP OF BITCOIN II • Mi Mini ning ng: : the process of extending the blockchain from some block B. • Longest Chain Protocol (for miners): ◦ Choose B to be the block furthest from the root, tie- breaking in favor of the first block you heard about. ◦ Include all valid transactions you’ve heard about. ◦ As soon as valid block created, announce it to the network. • Miners are paid for creating valid blocks with freshly minted Bitcoins and with transaction fees. • Difficulty of the puzzle is adjusted every 2016 blocks with the objective of making it so that a block takes 10 minutes to make in expectation.
KEY IDEA • Trust the ledger that has the most “computational work” put into it. • Ensure that fraudulent transactions/conflicting ledgers would require an infeasible amount of computation to create.
BITCOIN • Is a mechanism. • Question for us: are there beneficial deviations that can help a miner earn more than his fair share of rewards?
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