1. Advanced Computer Communications PROFESSOR:STUDENT: PROF. DR. ING. BRAD REMUS STEFAN FEILMEIER - 10.04.2014 - FACULTATEA DE INGINERIE HERRMANN OBERTH MASTER-PROGRAM „EMBEDDED SYSTEMS“

2. Bitcoin Open Source P2P money

3. General idea and targets  „peer-to-peer payment system“ ➔ „Internet money“  Decentralized ➔ no controlling central bank  Secure ➔ cryptography  Anonymous ➔ like cash  Fast ➔ compared to bank transfers  Cheap ➔ low transaction fees  Limited ➔ no inflation

4. It has a value ?  Like traditional currencies ➔ no intrinsic value ➔ only trust

5. It has a value ?  Like traditional currencies ➔ no intrinsic value ➔ only trust

6. It has a value ?  Like traditional currencies ➔ no intrinsic value ➔ only trust

7. Purpose of this presentation  Infrastructures and technologies for decentralized, cryptographic, anonymous, fast and cheap transactions with complete strangers

8. Decentralized structure

9. Decentralized Ledger copy and synchronize

10. Transaction Message: Alice ➔ Bob 5.0 BTC Alice -5.0 BTC Bob +5.0 BTC Alice -5.0 BTC Bob +5.0 BTC Alice -5.0 BTC Bob +5.0 BTC

11. Transaction signature Message: Alice ➔ Bob 5.0 BTC Signature create Private KeyPublic Key verify Mathematical „Trapdoor function“: -Computation in one direction is easy -Finding the inverse is difficult

12. Transaction Message: Alice ➔ Bob 5.0 BTC Signature Private Key Public Key Personal password

13. Transaction Message: Alice ➔ Bob 5.0 BTC Signature Private Key Public Key Recipient / Destination address

14. Transaction Message: Alice ➔ Bob 5.0 BTC Signature Private KeyPublic Key „proof, that I own the private key – without showing you my private key“ Different for every message Modification of message is not possible, because verification would fail

15. Decentralized Ledger

16. Decentralized Transaction Chain Alice: 2.0 + 3.0 = 5.0 Alice: 2.0 + 3.0 = 5.0

17. A real Transaction InputsOutputs Total Sum

18. A real Transaction Chain Total Sum Output 2 Output 1 Source: https://blockchain.info Everybody knows everything

19. My balance TransactionFromToAmount TXN#001PK#1PK#25.0 TXN#002PK#1PK#310.0 TXN#002PK#2PK#33.0 Sum over all unspent outputs, which I own the private key for If I loose my private key, the bitcoins are lost forever

20. Transaction order  Timestamp?  Strangers!  The Block Chain

21. The Block Chain

22. A new block

23. A new block: collision

24. Block puzzle

25. Block puzzle: SHA256 Prevous block ID Transaction IdsRandom guess SHA256 8FA839,A76,91C,3830000001 36d1ee2d501508328ac1a40b64c00c5d28a7fbf297663f7c7fc5541c43d521a1 8FA839,A76,91C,3830000002 75e519b730f2c9aaf462040035cd56a4847c34aa1056be85ab7a6e06a8c9c707 8FA839,A76,91C,3830000003 … 8FA839,A76,91C,383??????? 000000000000000006ac0710b125e489b0261f1d23694c6d3bf692c24c925d2a1

26. A new block was found 000000000000000006ac0710b125e489b0261f1d23694c6d3bf692c24c925d2a1

27. Collision can still happen Rule : always switch to the longest chain

28. „End of chain insecurity“

29. Financial reward  „ mining “ ➔ receive bitcoins for solved blocks  Transaction fee ➔ small fee per transaction

30. Recap: Transaction chain and Block Chain

31. Bitcoin challenges  Difficult to exchange  Used for illegal activities  Solving blocks uses large amounts of energy  Time duration too long for certain applications http://www.ibtimes.co.uk/500000-bali-villa-biggest-bitcoin-purchase-ever-1441101

32. Questions?  Sources:  ImponderableThings (Scott Driscoll's Blog) „ How Bitcoin Works Under the Hood ” http://www.imponderablethings.com/2013/07/how-bitcoin-works-under- hood.html http://www.imponderablethings.com/2013/07/how-bitcoin-works-under- hood.html  Satoshi Nakamoto „ Bitcoin: A Peer-to-Peer Electronic Cash System ” https://bitcoin.org/bitcoin.pdf https://bitcoin.org/bitcoin.pdf  Bitcoin „Protocol specification“ https://en.bitcoin.it/w/index.php?title=Protocol_specification https://en.bitcoin.it/w/index.php?title=Protocol_specification  Wikipedia „ Bitcoin “, „ Trapdoor Function “ http://en.wikipedia.org/wiki/Bitcoin http://en.wikipedia.org/wiki/Trapdoor_function http://en.wikipedia.org/wiki/Bitcoin http://en.wikipedia.org/wiki/Trapdoor_function