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Bitcoin principle explanation

We don't understand Bitcoin and its basic knowledge. We only know that Bitcoin exists, and the price soars, why Bitcoin appears and its basic properties. The following information is collected from the Internet.

First, the evolution of currency

Let us first review the evolution of human currency, which is divided into the following stages:

a. Original version: natural currency (shells, animals, gold and silver...)

At this stage, the currency is based on the rarity or practicability of the general equivalent, and the currency is unlikely to be artificially manipulated.

b. Mingguo version: early banknotes, silver tickets to standard banknotes

When the volume of trade is getting bigger and bigger, the physical currency is too inconvenient, and everyone finds that it does not care about the value of the currency itself. It is only that so many currencies can be exchanged for enough goods, so the credit currency of banknotes gradually Born, the bank and the local government gradually went to the central bank to issue and plan.

The paper currency itself has no value at all. At this stage, currency confidence is based on national credit or state violence. We believe that the value of money can be stable. Although this is often not the case, it has to be accepted.

c. Modern version: credit card era

This stage is actually not fundamentally different from the paper money era. It is just that the cash is digitized. The national currency is also more and more simple. You only need to add a few zeros to the PBC database, and then transfer it to the accounts of major banks. It is.

d. Future version: cryptocurrency

But when national credit is blown up, what else can we believe? In fact, anything that relies on people to participate in decisions will inevitably prevent shady and selfishness.

In fact, there is indeed one thing that can really be believed, that is, math! However, even if we all think that mathematics is sufficiently credible, how can we create a currency based on mathematics? In an era when there is no Internet, this issue remains unsolved. Now, the true third-generation currency has indeed been born, although it is still in the conceptual stage that most people cannot understand.

Second, what exactly is bitcoin?

a. Essence: a cryptographic-based public accounting system

Baidu Encyclopedia is written like this: Bitcoin is an electronic currency generated by open source P2P software, which is a kind of network virtual currency. Bitcoin does not rely on a specific currency institution for distribution. It is generated by a large number of calculations of specific algorithms. The Bitcoin economy uses a distributed database of nodes in the entire P2P network to confirm and record all transaction behavior. The decentralization of P2P and the algorithm itself ensure that the currency cannot be manipulated by mass-produced bitcoins.

At first glance, it’s all black, and it’s hard for non-professionals to read. Simply put, the essence of the Bitcoin system is a public accounting system. The flow of each amount for each account is recorded. And everyone has a complete account book on hand, you can count every flow of each account in history, of course, you can also calculate the current balance of a particular account.

The most important point here is that each person has a complete account book, and no one in this system has the sole decision. This means that no one can decide to add money to the system or change the rules, because individual modifications will be rejected by the entire network. Unless someone can modify the books in more than 50% of the accounts, this is the so-called 51% attack in the Bitcoin system. Obviously this is unlikely to occur, and the difficulty increases as the network grows.

b. What is mining (BTC) doing?

With Bitcoin, you have to mine and mine what mine. This is really puzzling, what is mining? Where did Bitcoin be dug? This is really a sci-fi thing!

In fact, the essence of mining is to compete for the right to write. In the world of Bitcoin, every 10 minutes, a block of data is recorded on the public ledger, which contains the globally verified trades within the ten minutes. But who is responsible for submitting this record, it is necessary to grab, how to grab will be explained in the mathematical part of the following. Why do you want to compete for billing rights? Because the person who grabs the billing right is allowed to add an amount to his account, the current amount is 25 bitcoin.

c. How to limit the number of issues

As mentioned earlier, when Bitcoin was created, it was limited in the rules to issue only about 50 people who robbed the billing rights every ten minutes, and this amount would be halved every four years, and now it has been reduced to 25. Using mathematics to find the limit, it can be calculated that by 2140, a total of 21 million will be issued, and the current circulation is about 16 million. To change the rules, you still need 51% of attacks. The current circulation can be found here: https:// blockchain info/

d. What is the mine pool?

As the computing power of the entire network becomes more and more powerful, the computing power of ordinary computers has almost no chance to grab the billing rights. Then everyone will team up to form a mining pool. If the mining pool grabs the bookkeeping right, then the money is distributed according to the calculated contribution.

Third, the mathematical foundation of Bitcoin

a. What is the payment address?

The person who is new to Bitcoin is most impressed by the garbled address. What it is? Will it be repeated with others? What are the private keys mentioned in many articles?

The first important cryptography concept is introduced here: Asymmetric encryption algorithm.

Usually, the encryption and decryption in the concept is only one password. For example, when you compress a file and add a password, you can unlock the same password when you extract it. In fact, until the 1970s, cryptography stayed at this level, and the scientific name was called symmetric encryption algorithm.

Until the 1970s, two outstanding mathematicians appeared, and they proposed a new cryptography idea, that is, encryption and decryption use different passwords. By mathematical means, a pair of keys A and B are generated. When using A to encrypt a piece of data, B must be used for decryption; and using B to encrypt data must be solved by A; and it is easy to calculate B according to A. The reverse is not the case. A is called a private key, and B is called a public key. As the name suggests, A is confidential and B is public. It sounds like there is nothing special about it!

If you think about it carefully, you will find that two problems are solved here:

1) Anyone wants to send an encrypted file to me, only need to use my public key B to encrypt and then put it on the network publicly, and don't tell me what password is from a hidden channel at the same time, because only the private key A is mastered. I can decrypt it.

2) When I want to prove that one thing is really released by me, I only need to encrypt it with private key A, and then publish it. Everyone finds that I can decrypt it with my public key B. It is enough to believe that this is indeed announced by me because The private key is only owned by me. This process is also called digital signature.

That's right, the wallet address is the public key! Because the public and private keys need to be generated in pairs using a special algorithm, they cannot be set up like ordinary passwords, and they don't seem to have regularity. It is usually generated automatically by the system after the Bitcoin client is installed. The private key is hidden in the wallet file. To learn more about Bitcoin's asymmetric algorithm, please copy the link: Elliptic Curve Algorithm (http://

So how many addresses? Will it run into contact with others? Describe it this way: If there is an earth in each grain of sand, the number of addresses is roughly equal to the sum of the sands of the earth in all the sand on the earth. If you have generated an address where someone else has a balance, congratulations on winning the prize! If you like, the money will be yours!

b. How to pay for bitcoin

The metaphor of the image, the payment method of Bitcoin is actually sending Weibo, the private key is the Weibo password, and the Weibo user name is the public key. When A wants to pay for B, he only needs to say “I will pay @Bbit 1 bitcoin” on his Weibo, and then the classmate who mines will verify that you have enough money. If the verification is passed, you will be taken. This Weibo is forwarded together with other verified Weibos in ten minutes. When there are enough people to forward (usually think 6 is enough), the payment is considered successful.

And if you send Weibo to say 'DL pays me 1 bitcoin', this is obviously illegal, no one will help you forward, because only the private key of B has the right to say this.

Of course, this forwarding behavior is required to meet certain conditions, so that you can get 6 numbers to help you forward yourself. See the next article for details.

c. How to compete for billing rights

The way to compete for the bookkeeping right is actually to play a cryptography game. This game is called: hash, and then specifically called: SHA-256.

The characteristic of the hash is that a large value can be calculated from any piece of data, and the calculation result is quite random and cannot be predicted. What everyone compares is to see who finds a number and the hash of the previous block in ten minutes and the microblog that has been verified in ten minutes to calculate the minimum hash value. Whoever calculated the smallest one grabbed the bookkeeping right. It is also allowed to have forwarding rights at least less than a certain value. The smaller the value, the higher the difficulty coefficient of the bitcoin network.

Due to the randomness of the calculation results, there is no way to optimize the algorithm. It can only be counted up from 0. At this time, whoever counts faster will have the opportunity to find this number first.

If you do not grab the billing right within ten minutes, you will forget it and re-enter the next round.

Worried that SHA-256 is cracked? In fact, worrying about this is not as good as worrying about the destruction of the universe.

Fourth, the characteristics of Bitcoin

a. Where is my currency?

This is the most confused and incomprehensible problem for many people. There is an amount in my address, but where is it? ? On my computer? Still in the wallet?

In fact, there is no such 'one money'! It is everywhere and actually doesn't exist at all!

It exists on everyone's bills. Everyone just knows that you have such a sum of money, and you don't care where the money is. In fact, there is no form of existence. Is it like the amount of cash you care about in the bank card? In fact, as long as my card can be brushed enough. When using Bitcoin, I didn't give a certain currency to the other party, just use the private key to send a statement 'microblogging'.

b. Easy to track

Because everyone maintains their bills, they can easily track the flow of funds on any account.

For example, the recent Lushan earthquake, the fund accepts bitcoin donation, you can poke here ( query details, each time of arrival, amount and expenditure can be clearly seen, pro This is equivalent to directly querying the original bills inside the bank!

c. Privacy protection

Although we can query the flow information of each account, there is no way to match the account with the actual person. As long as you like, everyone can have almost unlimited addresses.

This is the first time in human history that the private property has been technically guaranteed to be inviolable, untrackable, and unfrozen.

d. Paper wallet and brain wallet

The private key we usually hide in the wallet file, in fact it is just a string, just a little longer than the address, we can copy it or print it on a piece of paper, and then replay it into the safe. That string carries all your bitcoin wealth!

One of the more interesting creations based on Bitcoin is the brain wallet, which is completely beyond imagination! On this website ( you can generate a pair of public and private keys in one sentence. As long as you remember this sentence, you can generate a private key from it again and extract your bitcoin anywhere you have a network connection. But you must choose a sentence that can be globally unique, otherwise the chance of collision will increase greatly. Of course, this is also very easy. For example, I would like to say: My bank card number XXXXXXXXXX is the female XXx birthday password. Probably hard to be hit.

This means that you can put all your wealth in your brain, is it enough to kill everything!

e. Certified and unprovable

Imagine that when you are using a brain wallet, there will be no evidence in the world that you have such a sum of money, unless you lose your memory or die, the money will be lost.

Similarly, you can easily prove that you have wealth at an address. Just use the private key to encrypt a message and publish it. You can confirm your ownership of the account without having to disclose the private key to prove it. The official Bitcoin client comes with this feature.

f. Lost cannot be retrieved

Many people want to know one thing. If my wallet file is lost or the private key is forgotten, can I still get the money back?

I am sorry! Immortals can't help you! There is no such thing as an ID card to retrieve this matter, and that part of the currency will disappear forever.

Other FAQs:

a. What is the difference between Bitcoin and Q coins?

Please read the above article again.

b. Is Bitcoin a scam?

If you still think that Bitcoin and Ponzi scheme have similarities after reading it, then it is a scam.

c. What challenges does Bitcoin need to face?

In general, there are 4 points: government ban, altcoin, hacking, and possible own defects.

d. If there is a problem with the network, can't Bitcoin be used?

If there is a problem with the network, the card will not be used.

e. What should the state ban?

Under the current circumstances, the state has not yet been able to legislate to prohibit a person from possessing a file on a computer or to prohibit you from remembering a certain sentence.

f. Why is the amount of the wallet address inconsistent with the query on the blockchain?

This is also a place that many people are confused. In fact, there is a batch of addresses generated in the wallet. We only see one. The other is the address used for change. The wallet payment will automatically select the most suitable amount from multiple addresses. paid. If you want to save it with a paper wallet or a brain wallet, go to the paper/brain wallet account.

g. Bitcoin goes beyond existing laws

Yes, everything should be up to date, isn’t it?

h. What does Bitcoin mean?

The so-called appreciation of the Internet fever is secondary. The real significance is that the network and algorithms begin to try to take over the functions of human beings in finance, which may have a profound impact on the future social structure. The bottom-up force built on enough connectivity and computing power is enough to reshape society!

i. What are the disadvantages of Bitcoin?

Of course, there are a lot of articles on the Internet that talk about the shortcomings. It is more appropriate to look at it from the perspective of a currency experiment.