Press "Enter" to skip to content

Bitcoin White Paper Explained Study Session

Bitcoin White Paper Explained Study Session

Bitcoin White Paper Explained Study Session TruStory 2018 and I want to start off by spending just like five minutes on giving you a quick overview of trustory and someone else asked a really good question this morning of what is our vision and mission with this experts program like whats the point of this so I really quickly want to go through that and then well jump into the white paper right after that so Ill share my screen which is really quickly okay so quick overview of what is trustory oops as you guys know were really tackling the misinformation problem on the Internet but its a little bit more than that I think as a whole the internet used to be a place where you can come and actually learn and and gain a lot of information and knowledge but I think its really become this place where people are all about spreading news and propaganda and opinions and its less about like having concrete discussions about knowledgeable topics and theres very niche places where that happens today and even thats like very centralized so we really want to change that and what we are essentially doing is we are crowdsourcing knowledge sharing and theres incentives in that play so you all are people who are really motivated by this information specifically crypto information and then what you get is you get rewarded in tokens and reputation and other kind of perks on the platform so think of it as in the early days of Stack Overflow for example there was like a very small community of developers who had had passion for coding and programming and they wanted to share their knowledge they wanted to answer questions and by by hopping on Stack Overflow and answering questions for other developers they earned a bunch of Stack Overflow points and those are actually incredibly valuable like um like recruiters and other companies really look at peoples contributions on the Stack Overflow except Stack Overflow did a poor job of actually making those points valuable I think we trustory we really want to turn that around and actually create a system where theyre the things that you contribute to this network you actually get to use in the real world and well talk about this more and more in the slack channels I dont want to take up too much time of exactly what that means so in in a nutshell our mission is to 1 make easy whats to not and really like the core of it is when were doing when it really trying to identify this misinformation we want to make civilized discourse a default because to really understand and get to the truth of something you have to actually have a educational debate about it you have to be able to willing to see all sides up see all sides of the argument put all sides on the table see all the evidence and like really just like understand the claim being made so that we can all collectively agree on what is the right thing that we want to believe and so in the process of trying to figure out whats true and were not whats not you actually have you actually start to realize that you need to think critically to do that and so not only is it a platform to figure out whats true and whats not but its also a platform to really just share your knowledge and think critically with your peers so we can all come to an understanding of like what is the truth that we want to believe right um and so Ill quickly explain how this works and we have a beta App that were building right now and we actually love to get some of your feedback on on user testing that were doing today but Ill talk about how a story works in trustory quickly and you might you might already know this because you read the blog post when you applied so when a story first gets created lets say someone creates a story saying tether was actually used to manipulate Bitcoin prices during a during the 2017 peak prices that the story is considered unconfirmed when it first gets created people can start to back and challenge a story at this at this face backing means you put up a bunch of tokens on it if you believe its a true story and then you get like inflationary rewards for putting for backing that story because youre giving us a signal that you think this is a true story but if you actually think its false then have a chance to challenge it and if enough people challenge it with enough tokens it enters a voting period and this is a chance for other people in the network to see that theres like an actual ongoing debate going on and now people are really trying to decide if this is a true story or not so backers have already put up their stakes challengers have put up their stakes and now other people can come in and start participating in the voting in the discussion and the arguments then the once a voting period is over the story either gets confirmed or rejected a little bit deeper dive same same same flow but a little bit deeper dive into the actual UI of what this looks like so when a story gets first created you can back or challenge it and if it enters the voting phase then you can figure out whether its true or false put your arguments I kind of deleted a bunch of space below where you have option to add evidence and arguments and all that and then it either goes into a confirmed state or rejected state so what is it exactly good for trustory is not really meant for invalidatable or claims and what I mean by that is theres no point in arguing about stuff that shouldnt be argued about so an example is Bitcoin is the best cryptocurrency like thats very opinionated you cant prove it like who who in the world gets to decide what the definition of best is thats very very subjective and this is why sometimes you see arguments on Twitter and youre just like what are they even arguing about this makes no sense so this is not a valid story on trustory another thing is ethereum will never scale okay so this is a future prediction and with the future prediction you cant really deem it true or false until the future happens so for the time being this is not a valid story On trustory because its invalidatable another invalidatable claim is the sky is blue like as much as we want to be as truthful as that is like its too obvious no one really cares about this no one wants to come to trustory and see that the sky is blue like everyone already knows that right so theres no point in having a debate about it so it cannot it cannot be opinions future predictions too obvious or moral claims thats not the point instead what we want to focus on are validateable knowledgeable claims so an example is this is something mn said the other day or last month I think he said Before proof of work and proof of stake are not consensus algorithms they are Sybil resistance mechanisms and this is such a good story for trustory because this is so true but this is a this is a common misconception in the blockchain world that proofofwork and proof of stake or actually consensus algorithms this would be an amazing story for a community of experts like us to come in and show to show like how and why proof of stake and proof of work or actually not consensus algorithms and actually Sybil resistance mechanisms another example is when Venezuela created the petro road to circumvent donald trumps sanctions and there was one of the experts in our in our group that actually did a bunch of analysis to prove that this is actually not 100 true and thats an really interesting debate for people to have on true story because this is the type of information that needs to come out right like these are the types of debates that were not having on twitter instead were having dog fights over nothing so in a nutshell what makes a story and trustory validated well is its falsifiable and theres a large number of people who can actually verify it I kind of covered this I dont want to take up too much more time on this so so with the experts program really we honestly cant do this without you just like any community driven Network it it works because of you and so if you think about the early days of Bitcoin in Bitcoin we trusted the early engineers And with Bitcoin as we trusted the cryptographers who kind of really designed the protocol and we trusted the miners to really build up a trustworthy network and same here we choose joy were trusting you like the experts to really do a good job of curating this content and so the fundamental goals for us and why we want you to be part of this is one we want you to learn because if you can learn then you can contribute back to the platform and as youre learning and if you find something really interesting or really debatable we want you to post it on trustory and then you want you to actually debate about it because this is how we learn if we cant debate about it if you cant put all sides on the table then theres no way to see all the perspectives and learn and then once we kind of collectively come to an understanding of what we want to believe then you start to get a understanding of it and now we can share that knowledge with the rest of the world so thats that in a nutshell and I will answer any other questions you might have about this and slack but I do just want to jump into the Bitcoin white paper which I pulled up here okay can you see this thanks all right one sec Im gonna Im gonna share just this browser so that I can do other stuff okay can you see this I think so sweet I highlighted a bunch of things that I thought would be really important to go through in the Bitcoin white paper because as much as like this is like the start of it all theres a lot of things in here that I think a lot of people take for granted and I want to go through them and I also try to go through some of the questions that you guys posted okay so to start off with I lost my page theres a lot going on in here one of the things that the abstract of the story the introduction first talks about is it says Commerce on the internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments while the system works well enough for most transactions it still suffers from the inherent weaknesses of the trust based model completely nonreversible transactions are not really possible since financial institutions cannot avoid mediating disputes the cost of mediation increases transaction costs limiting the minimum practical transaction size and cutting off the possibility for small casual transactions when he says theres a broader cost in the loss of ability to make nonreversible payments for nonreversible services with the possibility reversal the need for trust spreads merchants must be wary of their customers harassing them for more information than they would otherwise need and when I reread this like I was like just like fascinated because I think we always forget that this is actually where it started it start this very myopic viewpoint of the fact that like we want non reversible transactions and someone actually asked a really good question and the in the in the Google Doc they said let me pull it up okay they said arent transactions arent transactions that are reversible by a trusted party used to prevent fraud isnt it good to be able to reverse one fraudulent transaction isnt Bitcoin only better for people who dont trust a third party these are all amazing questions okay so if you look at the what he actually says in this paper he says he wants the ability to make non reversible payments so basically if see its not saying that theres no fraud what hes trying to say is that if you can build a system like think about why fraud hat why are there fraudulent transactions so if I go to Macys and I buy some shirt but actually it is actually a fraudulent transaction usually what that means is that person was able to scam like he either like either steal a credit card and use someone elses credit card or he was able to use a fake credit card somehow and then it doesnt even go through or hes able to use a credit card it doesnt have funds in it whatever it is and so hes saying that like because theres all these cases of someone a person being able to make fraud we need a bank or or some entity to be able to reverse those payments in case of those frauds and what Satoshi is saying is what if we can actually just make the system fraudulent free in the first place right like a Bitcoin like its built so that you like you you dont theres its like its actually like if you believe in the concept of Bitcoin like you you have to believe that Fraudulent transactions are not actually possible like that thats the the reason bitcoin is so phenomenal is because it it really solves a double spend problem and that a double spend problem essentially is essentially a fraud problem and if you dont have fraud then you dont have to worry about a middleman like a bank or some entity reversing these fraudulent transactions in the first place so thats really what he gets at in this paragraph okay and then he goes on to talk about like you know we dont need trust and I kind of want to go on to a little deeper into the paper and he goes okay so we define an electronic coin 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 and adding these to the end of the coin a payee can verify the signature to verify the chain of ownership okay when I looked at this diagram I was honestly very very confused the first time and really all thats happening here let me take a second to put up okay its its really hard to understand but all thats happening here is that its the diagram is basically illustrating a transaction flow from owners 0 to owner 1 to owner 2 and the idea is that before owner two can accept the transaction from owner one owner one needs to show proof that he is entitled to these funds and in this case what that means is that proof and the proof that he oh he actually owns that fund is actually recorded here in this transaction and how that works is okay so in this transaction in the first box you see that theres an arrow coming in and this is coming from owner zero unless the owner zero wants to transfer some funds to owner one and what he does is he takes he takes the previous transaction he signed he take and that he takes owner one public key and hashes them together and creates a hash then the output of that hash is and he didnt signs that hash with his own private key this this private keys and used before that owner zero was indeed actually the person who put together a transaction and that owner zero sends that transaction to owner one and owner one follows the same protocol to keep sending this transaction all the way through so its its basically like to verify owner two the owner for example to verify owner 3 actually owns those funds you have to check the owner two owns those funds to check to verify that owner two owns those funds you have to check that owner 1 owns those funds check the owner of one on those Funds you check that owner 0 owns those funds and then its a recursive its a recursive transaction and so really like theres theres like and this is really easy to do because its done in code and you dont actually need to do this manually but thats all all Bitcoin is is all an electronic coin is this its a chain of digital signatures and thats fascinating because like basically all when you think of what a Bitcoin is its just like literally a chain of chain of hashes and thats thats representative as money and then there was another there was an interesting question where they asked about lets see what are nodes okay what I know its okay thats obvious what it knows means nodes just means all the computers in the network that are that are running this Bitcoin software thats all that means what is the chain what is the longest chain what are time stamps okay what are timestamps this is a great question its going to the timestamp section so he says a timestamp server works by taking a hash of a block of items to be timestamped and widely published a hash hash of a block of items to be time stamped and widely publishing the hash such as in the newspaper of Usenet okay the reason we need timestamps and he says is right here the timestamp proves that the data must must have existed at the time obviously in order to get into the hash each time stamp includes the previous time stamp in the hash forming a chain we see eat with each additional timestamp reinforcing the ones before it honestly the only the only thing that you really need to take away from this is that all every transaction is timestamped and this is important because if we want to go back and check that that transaction actually existed at that time it allows us to do that if you didnt have timestamps we wouldnt be able to check that oh thats thats all the timestamp is doing lets see and then the other thing I highlighted here is the proof of work involves scanning for a value that when hashed such as the sha256 the hash begins with the number of 0 bits I think a lot of you may already know what this exactly means but I want to quickly explain what he means by this so how the proofofwork puzzle works is in a nutshell theres a bunch of miners right and theyre incentivized to solve this Proof of work puzzle and what theyre doing is theyre hashing a certain a certain value and theyre in there hashing it to get a hash that begins with a certain number of leading zeroes and it actually takes a lot a lot a lot of tries to get this hash to match this exact number of zeroes in the beginning and that is all proof of work is and the reason and the reason like and one of the questions that they people asked was like ok so I have a CPU and I can run this hash a million times does that mean that the more CPU I have the more chances I have to actually get this hash right thats exactly right and thats exactly what these mining poles do so they they have a bunch of CPUs meaning a bunch of computers and theyre all trying to solve this hash at the same exact time because again as I said you need to try like millions of times to get to get the hash to match this exact value that were looking for and so if you have if you have two computers doing it then thats much slower than having maybe a thousand computers all doing all solving the puzzle at once and thats the concept of basically what you call like these mining pools and these mining pools exist because they pull together all their CPUs and theyre just like mining together so that their chance of winning the proofofwork solution is actually higher thats exactly thats all that is and thats why it says one CPU one vote so lets say in a network we have a thousand a thousand nodes each because its probabilistic every node has the same chance of winning this proofofwork solution but lets say if One person owns 100 of those nodes then they have a tenth of a chance of winning versus just having one over a thousand chance of winning and thats all this one CPU one vote means means like the more CPU you there were more CPUs you have the more of what power you have in the algorithm okay and then he goes on to say if a majority of CPU power is controlled by honest nodes the the honest chain will grow fastest and Im pasting competing chain oh wow one thing I want to go into that now I kind of want to get into a little bit of the questions okay I answered whatever pools of CPU power where did the one megabyte limit per block come from I couldnt find it in the white paper thats a great question so theres a lot of so the white paper really just outlines an idea and if you notice its actually very limited on specs like to really actually code this you you need to ya actually need to define a much much deeper set of specs so that engineers can actually take it and code it and this is this is the work that the Bitcoin core engineers do and so they take this this white paper or any white paper and they actually turn it into specs like how big a block should be how fast or and how or what what hashing algorithm should we use how big how many transactions should fit in a block like all these things are definitions and specs that the engineers who actually code the protocol define and thats not necessarily defined in this white paper some white papers do a good job of actually defining these things in advance but I dont think that was necessary for Bitcoin because these are these are not that like theyre important for the protocol but they are not like makeorbreak decisions in the sense that like if you dont define it in the white paper no one can figure it out and Bitcoin white paper is pretty simple to understand so adding these like specs like this like how big a block should be is is actually its its hard but its not like impossible okay I kind of want to jump to the and theres an interesting question here okay what are the odds that two nodes broadcast different versions of the next block simultaneously does this mean that if someone were to double spend within the time a block is completed its possible thats a transaction that happened second would actually end up being recorded as the first transaction can the blockchain be out of sync by more than one node if these ties occur multiple times in a row great question and i wanna i wanna i want to mention i dont know if that he shows a diagram of this and here he doesnt okay so the reason okay i think he says it here yes okay if two nodes broadcast different versions of the next block simultaneously some nodes may receive one or the one or the other first in that case they work on the first one they received but save the other branch in case it becomes longer the tie will be broken when the next proof of work is found and one branch becomes longer nodes that were working on one branch will then switch to the longer one so alright so we have a chain right we have a bitcoin chain that we believe is honest and the question is lets say two people two miners produce a proof of work solution at the exact same time so they produce two different blocks at the exact same time this happens all the time in the Bitcoin network okay so they once as soon as a miner produces a solution he broadcast it to the rest of the network right so network is all listening to okay whos going whos gonna produce a next transaction and Some might hear party a producing it some might hear party two producing the block first so whichever they hear first they they add it to their own chain and they start building on that and the the network keeps doing that and basically that thats and then you just keep building on the one that you think is the most honest and this is the exact reason why you have to actually wait six blocks before a Bitcoin transaction is confirmed because if for example these two chains are tied we need to wait for at least like a few more blocks to know that which one is actually the honest one that the majority of the people are building on because if in that in that in that first transaction in that first tie lets say on 5050 or 50 and network where the first block the other 50 heard the second block then no one knows what the honest chain is but as the chain as new blocks get added then it starts to the probability weight starts to actually divert and like one chain will always end up being longer than the other and so thats why you have to keep waiting at least like six blocks until we know that one chain is definitely the most honest one and we can keep building on that and thats why the Bitcoin transactions verification are times take a long time because if you send a transaction but you have to actually wait for like several several blocks before you can actually confirm that your Bitcoin is sent or received and so thats how ties are resolved and this is this is why theres the whole like orphan network if you ever look into the the orphaned Bitcoin transactions and where theres like a bunch of blocks who who which were solved and there were ties but they never got included in the main chain because they got out competed by another chain and and in ethereum they do a really good job of actually incentivizing the miners to pick up these blocks and include them in future chains but Bitcoin their orphan rate I think pretty pretty high um lets see says if the system relies on having a majority CPU power wouldnt it be possible to take control by shutting off other computers that is a brilliant question absolutely so Bitcoin 100 relies on the majority of honest nodes that are online being honest its not a majority of nodes that are online or offline and this is this is a really really nuanced and important point point to get right its possible that uh if an attacker has somehow enough power and he can somehow shut off a bunch of nodes who were trying to mine yes its totally possible that he now can get a majority of the compute power but the possibility and the cost of that kind of attack at least like in this day and age where all the miners are incredibly distributed all over world and I didnt I have a hard time figuring out if this kind of talk is actually feasible but its definitely like its definitely not impossible let me put it that way um lets see has anyone tried emailing Satoshi no I have not I think thatd be a great experiment please try how much would a 51 attack cost oh this is a brilliant question okay Ill be honest like I dont know the answer but theres a lot of analysis and I want to dig these up for you Ill try to dig these up for you later and slack and closest to you because this is a this is an incredible question and the reason its interesting is because like the mining pools right now in Bitcoin are actually pretty large like theres some mining pools that literally owned twenty to thirty percent of the network which is which is pretty scary which means like all all that mindful really needs to do is purchase another twenty to thirty percent of the CPU power and they can essentially control the network and I think theres even papers in the past that showed that I cannot i can i can also say to share these papers against paper that I couldnt analysis and showed that its not even 51 its actually theoretically possible to to undermine Bitcoin even under a thirty three percent majority dishonest ah pool and thats pretty scary because that means were pretty darn close to someone being able to do it but it again these are theoretical assumptions I dont even I dont know if thats actually practically real well have to see um I think theres a few other things to go over in the bitcoin white paper Ill go back to the questions in a bit okay I want to talk about this point so and this is also a question that was brought up its about like why are there only 21 million million coins and what happens when theres actually no more block rewards okay so it says once a predetermined number of coins have entered circulation the incentive can transact can transition entirely to transaction fees and be completely inflation free okay so as you know miners get rewarded so if you are the block producer you get rewarded a certain number of coins and that reward is actually codified into the protocol and that reward halves the reward keeps decreasing over time until a point where at some point when once all the Bitcoin is insert all 21 Bitcoin have been mined Bitcoin have been mined theres actually no more block rewards because theres no more mining of new Bitcoin happening and so what hes what what Satoshi is saying in this is like once all those bitcoins have in mind the incentive for miners is no longer gonna be the block reward its actually gonna be entirely the transaction fees and this is this is a really this is something that actually a lot of people dont think about its like do you do we like what do you think happens when miners are no longer incentivized by mining rewards like are there are the incentives high enough for them to do it and did the obvious implication is that the fees are gonna go up right like for them to be incentivized enough to mine and put in all this work into into buying this computer power and and spending all their time and after doing this like that they need to have enough incentive and that me and if the incentive is only coming from the fees that mean fees on the Bitcoin network could go up right its either that or we have much much fewer miners because only the people who are willing to take really small margins are gonna be mining in that case the security of the Bitcoin network goes down because if you dont have a large number of miners then thats bad so thats not good either so the alternative solution is maybe once all the Bitcoin is mined what what we end up having to do is actually put inflation back in again at least to a small amount and this is something thats like you know its really unclear what will happen and since I think something that a lot of people are not thinking about because its so far out in the future but something Im Ive actually really thought about for a long time I was like okay what happens when theres no more block rewards or the transaction fees like either we have to just suck up suck it up and pay the transaction fees pay really high transaction fees or suck it up and have a really unsecured network or just go back to inflationary tokens and this is this is interesting because this is actually why a lot of them newer coins like ethereum or other other block chains have actually stuck with inflationary currency because they realized that its used to like you need to somehow provide an incentive for these miners if that incentive doesnt exist like how do you how do you secure the network so this is this is a very very fundamental question that I think Id love to discuss more at some point but something that I thought was important to bring up oh okay heres another point that I thought was interesting okay so satoshi says this block block reward incentive helps encourage knows to stay honest if a greedy attacker is able to assemble more CPU power than all the honest nodes he would have to choose between using using it to defraud people by stealing back his payments or using it to generate new coins he ought to find it more profitable to play by the rules such rules that favor him with more new coins and everyone else combined then to undermine the system and the validity of his own wealth this is this took me a few a few times do you really understand what he was trying to say here basically what hes trying to say is okay so as as a as a as a miner as a lets say you an attacker and youre trying to attack the Bitcoin network because of how Bitcoin works theres actually no way that you can you can reverse someone elses transaction or you can spend money that you never had like thats just not possible because that where as we said earlier transaction is a linked chain of different hashes and we can easily tell you tell whether a coin existed or not but what an attacker can do is he can reverse his own own transactions thats all he can do he can reverse his own transactions because he has his own private key he signed that transaction so he has the ability to sign it with a different amount so what Satoshi is saying is its possible for an attacker to do that sure but if they do that then they undermine the whole Bitcoin system system as a whole because if he double spends and people end up finding out which they will then the Bitcoin system as a whole has no value right and its like okay so as an attacker would I rather do that would I rather undermine a system and and undermine all my wealth or would I rather use that money and power that I have to just mine so that I can earn more Bitcoin and Satoshi argues in this case that actually the the attacker would rather just mine because in why wouldnt you spend all that compute power to to debase his own currency that doesnt make any sense he would just mine and thats thats really the point hes trying to make in this in that sentence I would love to go into Merkle trees thats very technical I want to save that for another topic basically in a nutshell what a Merkle tree the reason that we use Merkle trees is because as you know theres like thousands and thousands of transactions happening in a Bitcoin blockchain and what a Merkle tree does is it lets you store transactions in a very efficient way so that you can basically hash together a bunch of transactions in a treelike manner and you only need to store one hash for like all the transactions in that block and so that saves a lot of space in the block so that all youre really storing is a route hash and and the beauty of Merkle trees is that you can always if you have a transaction and you want to know whether it existed in this block you can always just take that transaction and follow it up the tree and check that it actually you can use a root hash to actually check that that transaction existed in that in that block thats thats the highlevel overview of it I cannot I can go into how it actually works and another call if nerdy people are interested but the the point of it again is that instead of storing all the transactions you just store the root hash of the transactions in the block and the the innovation with Merkle trees is that you can use you can actually verify that a transaction existed just by looking at a root hash thats all that is so he Satoshi also does an interesting calculation here he says because we can you can use Merkel trees a block header should be about only 80 bytes big and if we suppose that a block is generated every 10 minutes within which it which it is in Bitcoin then 80 bytes times six times 24 so 365 days Im 24 hours times theres six ten six blocks in an hour he calculates that thatd be four point two million megabytes per per year and he says with computer systems typically selling it to gigabytes of RAM as a two thousand eight we can definitely store the blockchain on computers lets say are given hes trying to make here I wont go into SPV because its really complicated I want to give back to the questions and possibly going to this towards the end okay has anyone uh what literature are the what literature was there around consensus algorithm before the Bitcoin white paper was released other than Hashcash what were some other precursors to Bitcoin great question Ill post that into slack I think we should next time highlight the most interesting questions I answered this question I was a determined how many bitcoins are given to the node that does it before work thats actually built into the protocol thats a codified I can say if you look in the Wikipedia page it actually shows you what the block rewards are so I would highly recommend you just google that why is there a limit of 21 million bitcoins is that a good idea I just answered that so I talked about how how that could actually be problematic in the future and we ought to be starting to think about what to do in that case How is a blockchain a specific instance of a distributed ledger whether other types of distributed ledger that do not qualify as blockchains I actually just published a post on distributed systems this week did she read letters have for a long long time the the the reason blockchain is a specific instance of a distributed ledger a distributed ledger essentially is you have a ledger that every node stores so every computer stores thats it and they all maintain the same state so if my ledger has one two three all the other computers also have the same ledger just as one two three so thats a distributed ledger the blockchain is an an instance of a distributed ledger and theres various types of distributor letters that do not qualify as a blockchain for example you can argue that lets see git is a distributed ledger basically like how we do get commits Leger lets see Im blanking right now theres like a trillion examples does anyone have any examples that they want to post in the chat oh the chat is not working awesome so what are the other examples of distributed ledgers uh Ill come back to this Im playing you right now um okay I lost my a couple of indicators of centralization is displayed here at what levels of each indicator should people be concerned thats a really really good question I would say well its already pretty concerning like if you look at some of these numbers theyre like theyre almost in the theyre in the double digits and thats pretty scary because like I said theres theres actually some people who believe that even its not 51 its actually like 33 or 35 percent that causes that could cause an attacker to undermine the Bitcoin network so this is actually one of the reasons why you know a ethereum started to get really concerned about the amount of concentration of power thats happening in Bitcoin and in the early days like thats why I Vitalik started to think about like okay how can we like to We distribute the power a little bit more and I can talk about this for ages about like whether like the reality is I think power always concentrates like thats just how economies of scale work and Im really hopeful that we can at least minimize the concentration of power but I dont really ever know if its possible to completely distribute just like decentralized power and not ever call have like even like a slight amount of concentration because every if you if you just like study networks in biology and how how how does life works like power always concentrates like networks always concentrate and we can try to minimize it but Im not sure you can eliminate it like Ill Ill just say that lets see Im gonna go back to the paper because I want to answer some of the other questions later um okay I think someone thought one of the questions I remember reading this morning someone asked like with privacy is a better is it better to actually use a new address every time and the answer is yes and theres actually a lot of different software that allow you to do this where you generate a new address based on your private key every time you transact and this helps anonymize a transactions a bit more and Id highly recommend that if youre transacting a lot with Bitcoin or any other cryptocurrency that you use this I think that theyre called HD wallets unfortunately theyre not very userfriendly today and I hope they get better but this is this is definitely possible where because all an address is like all of Bitcoin or a ethereum Address is its basically taking your public private key and and basically generating at an address out of it theres nothing special out of it its just like a hash function and and so you can you can generate different addresses for the same private key basically lets see yeah and this is exactly what Satoshi says like an additional firewall as an additional firewall a new key pair should be used for each transaction to keep them from being linked to a common owner and this is exactly what HD wallets do so HD wallets they have like a root key they keep generating new public private key pairs so that but that that public you can always prove that that new pair is actually linked to the root pair and so with the new pair you can always generate new addresses and so with every new transaction you basically use a new Bitcoin address to just send the transaction and this is this makes it much more anonymous and secure okay so this section I dont want to Ill give you an intuitive understanding for what this whats the same because I know some of you or not like maybe fully technical but basically what hes trying to say is he basically in this calculation calculation section hes trying to he or he or she I keep saying hes sorry about that he or she is trying to prove that it its actually it actually the probability of an attacker attacking the bitcoin system becomes negligible and the way prove is the he takes like a bunch of probabilities hes like P is a probability of an honest node finding the next block Q is the probability that the attacker finds the attacker finds the next block and QZ the probability the attacker will ever catch up from Z blocks behind and if if the probability that an honest node finds the next block is less than the probability that an attacker finds the next block then the probability that the attacker will ever catch up is one thats like less 100 if if they honest if the honest nodes have less probability of finding the next block than the attacker then we already know that the Bitcoin system is gonna be attacked so thats why this is one but if the probability that the honest node finds next block is higher is greater than probability of an attacker finding the next block then you this is how you would determine for each block you would you would say you for Z is the number of blocks so you do QP To the power of Z and what he shows in the math he that like actually as as time goes by like that probability is actually like negligible and thats why we can actually trust Bitcoin that like its actually like really negligible negligible probability that an attacker can actually find the next block faster than the honest and thats all that Math here is doing Im happy to go through this in more detail because its actually a fascinating section and if people are interested in the technical audience Ill definitely do that one time what else did I skip oh there was an also an interesting question on this I think Ill quickly read this so although it would be possible to handle coins individually it would be unwieldy to make a separate transaction for every cent in a transfer to allow value to be split and combined transactions contain multiple inputs and outputs normally theyll either be a single 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 if any back to the sender Ill be honest like this probably is super confusing to you guys and I will briefly explain what he means by this let me just pull up I had some notes on this that I want to pull up okay so basically what this what the combining and splitting footing value section is saying is that each transaction can only be forwarded as a whole and it cant be broken into smaller parts Ill say that again each transaction can only be forwarded sent as a whole and it actually cant be broken into smaller parts so lets say you wanna you want you have your Bitcoin wallet and a friend sends you ten bitcoins okay lets call that like transaction zero now you want to send two bitcoins to Alice lets call that transaction one so you got ten Bitcoin from a friend transaction zero you want to send those you know and now you want to send two of your Bitcoin to Alice Ill be transaction one in order to send only those two bitcoins to Alice you just set up transaction one so that it has one input which is the the ten Bitcoin that you got and two outputs and the outputs are two to Alice and and eight back to you does that make sense because we cant really split up a transaction so instead if you wanna if I have ten Bitcoin if I got ten Bitcoin how I sent two to Alice is I have a transaction with one input which is the ten Bitcoin and two outputs the first output is to Alice the two Bitcoin and the second output is back to me and thats why thats how thats how Bitcoin transactions work and thats basically what this section is saying well I hope that was clear Ill say that Ill just say that one more time because this is actually a really important thing to understand so transactions can only be forwarded as a whole and they cant be broken up into smaller parts so if I have ten if I got ten Bitcoin as a transaction and I want to send to Bitcoin to someone else the way I would construct that transaction is the transaction has a bunch of inputs and outputs the input would be the ten Bitcoin and the output would be two To alice and two back to me and thats how you construct a transaction of two Bitcoin to Alice okay I hope that was clear and then I also in the last five minutes I think we covered a lot of the paper or self in the last couple more minutes in going back to the questions so theres a theres a bunch of questions in here and like what are the catalyst events that led up to Bitcoin launch who are the cypher punks whats happening with Bitcoin cash what a apparently the Bitcoin has been around since 90s whats the story behind this these are all historical questions about like what is the genesis that led up to Bitcoin and I want to save actually another study session for this because this is actually a really important to understand because to understand why this is important here to understand history and I think wed be really beneficial for us to like a history lesson on on why it started so Ill save that because thats impossible to get through in five minutes let me see if theres any other things that I want to go through mmm what literature was there around algorithms when my paper was released other than hash cash what were some other papers its a big coin again well go through this in the history section how did the nodes do the proof of work besides controlling more nodes to have more CPU power is there any way for one to be better at doing the people work than others how do you do how do the nodes do proof of work for work by calculating a very simple formula and that formula is defined so when youre a miner you download the Bitcoin protocol software and the formula is basically defined in that software like thats really all you need to know theres nothing that like theres nothing magical that these miners are doing you dont need to be a genius to solve the proof of work problem its like its just like you just need computers and they like the protocol actually just gives you what you need to solve for and the second question is besides controlling more nodes to have more CPU power is there any way for one to be better at doing people work than others nope Oh actually I lied okay so yes one way to get better at proof of work at get better at proof of work is to have more CPU power because you increase your chances of actually solving the puzzle the other way is and this is what this is this is one of the reasons people find people find Proof of work scary is because you can actually theres manufacturers out there that are building hardware that is specifically designed to solve the proofofwork problem so theyre building machines that like you know every machine every computer is optimized to do something right and theyre building computers that are like but computers do a lot of different things and if youre just if youre just trying to use a computer to mine you dont need to do all the other things it does so what people are doing is building hardware that is specifically focused on getting really good at solving this proofofwork puzzle and so thats the other way that you can have a competitive advantage in in solving their proofofwork algorithm and this is this is really this is kind of like this like you can keep throwing the can down down the road but like like you can try it like in the way that like what I mean by that is like the way you can like try to circumvent this this From from probably becoming a problem is you can keep trying to change the algorithm for how to solve it before work so that so that the hardware that they designed doesnt get used isnt isnt usable for the new proofofwork algorithm and actually this is what monero did I think last year where they actually switched their algorithm because people were people were able to solve it much more efficiently um but this is kind of like this like kicking the can down the road problem because like manufacturers are just gonna keep trying to solve the new puzzle and the new puzzle and a new puzzle get and better and so like this is what this is actually something that Vitalik talked about in the early days hes like with specialized CPU power its actually really dangerous because people can try to try to keep producing hardware that makes it easier to solve the proofofwork solution and only people with like a lot of money you can produce buy that hardware and and start to like own a lot of a lot of compute power so thats a really good question are there any other questions well we have like two minutes in the slack if you want to post anything which vendors um thats a great question I actually read a few few articles like last month I dont know if Nvidias doing it thats a great question I will send you the the couple articles that I saw on this theyre basically a lot of manufacturers in China of course like thats not a surprise right so theres like really really topnotch manufacturers in China that are that are really trying to trying to do this and theres actually a manufacturer like you know like because proofofwork is also used in Ethereum right now there was like a manufacturer that I read about that they they dont even believe that provoked it was funny because the article basically said that the the mining the hardware producer didnt even believe that proof of stake is possible and shes like shes still building this like mining heart this CPU specialized mining hardware because shes like Im I can still make a lot of money with building this because I dont believe in proof of steak ever being possible and she thinks that miners will always just like try to still buy this special compute power you know a few people are typing so Ill wait for that it means yes youre right yeah no bit me and what is proof of stake oh this this cant be entered in five minutes I will and I will say that for another conversation but in a nutshell loaf of stake is not a consensus algorithm its just another Sybil attack Sybil sybil resistant mechanism and civil resistance just means that when you have a distributed decentralized network and nodes have dont have identities like we dont require miners to have like a lot or something right they can basically spam the network with a bunch of identity but with a bunch of accounts and and proof of work is a sybil resistance mechanism because theres no you cant like as a minor you cant really spam the account because they cost you a lot of money to mind so like theres a cost there so you cant spam with free account three mining accounts you actually have to pay a payment mechanism means proof of stake is basically another sybil resistance mechanism where instead of putting a bunch of money into hardware to mine you just put real money as the stake so that you dont have sybil attacks thats all that is okay I would so like we were a little bit flush up this morning because we wanted it to be a group article but we had some technical issues so for the next one I definitely want to do a a I definitely want to do can you see me now okay for the next one I definitely want to do a more group article so that you guys can actually come in and ask questions and also answer some of the questions here because I know some of you are engineers and I even know that theres a one or two people who are like miners I really want your input in these conversations I dont want it to be like one way well figure that out for the next one so the next conversation will actually be a livestream with Jon Choi he was an ethereum core dev for a couple years and just left and trying to figure out his new new thing he wrote a recent blog post called the crypto idea maze hes an incredibly smart guy I think you have I would come prepared with questions because he he just has a lot of insight into the etherium ecosystem because he worked there for a long time so please come prepared for that and Ill see you at the next one

Be First to Comment

Leave a Reply

Your email address will not be published. Required fields are marked *