Bitcoin

Bitcoin

Bitcoin is a cryptocurrency and a digital payment system invented by an unknown programmer, or a group of programmers, under the name Satoshi Nakamoto. It was released as open-source software in 2009.

The system is peer-to-peer, and transactions take place between users directly, without an intermediary. These transactions are verified by network nodes and recorded in a public distributed ledger called the blockchain. Since the system works without a central repository or single administrator, bitcoin is called the first decentralized digital currency.

 

Besides being obtained by proof-of-work (PoW) "mining", bitcoins can be exchanged for other currencies, products, and services.

 

As of February 2015, over 100,000 merchants and vendors accept bitcoin as payment. According to a research produced by University of Cambridge in 2017, there were 2.9 to 5.8 million unique users actively using a cryptocurrency wallet, most of them using bitcoin.

History

Pioneering work on digital currencies prior to bitcoin was done by David Chaum, who published on blind signatures as the basis for untraceable electronic cash and mail throughout the 1980’s. Wei Dai proposed B-money in 1998, which contained the idea of generation of money through the solving of computational puzzles as well novel methods for reaching consensus among network participants. Adam Back introduced the Hashcash algorithm. Hal Finney later utilized Back’s hashcash when he introduced a reproducible proof of work (RPOW) token in 2005. Nick Szabo proposed Bit gold in 2008, a digital currency which utilizes a proof of work puzzle that is securely timestamped and contains links between transactions.

On October 31st 2008, an individual or group of individuals under the pseudonym Satoshi Nakamoto published the bitcoin whitepaper called “Bitcoin: A Peer-to-Peer Electronic Cash System". The open source code for bitcoin was released on January 9, 2009. The identity of Satoshi Nakamoto remains unknown, however they are thought to retain the largest known bitcoin wallet containing approximately 1 million bitcoins. No bitcoins have ever been transferred from this account to date.

CBOE launched Bitcoin futures trading on December 10, 2017. After experiencing a surge in price almost immediately the exchange halted trading for two minutes due to the volatility. CME group announced on October 31, 2017 that it intends to launch bitcoin futures in the fourth quarter of 2017. The futures will be based on the CME Bitcoin Reference Rate and will be cash settled.

Architecture

Public Key cryptography

Control of the Bitcoin currency BTC is governed by a pair of cryptographic digital keys known as the public and private keys. The public key is open to the public and can be used to create a unique Bitcoin Address where individuals may receive funds. The private key represents control and ownership over these funds enabling the private key holder to produce a digital signature which is essential for the transfer of bitcoins.

Private keys are a number chosen at random from numbers between 1 and 2256. The method used to generate this random number must not be reproducible by another party or the security of the key could be compromised. Good sources of entropy include the getnewaddress command on the Bitcoin Core client or flipping a coin. Pseudorandom methods, which appear to produce randomness but are created by a deterministic algorithm which can be reproduced and are not appropriate for private key generation.

Public keys are generated utilizing an elliptic-curve cryptography based multiplication of the private key. It is practically impossible to reverse engineer the private key from the public key without trying all 2256 possible values. Finally, the Bitcoin address is created by performing a one-way cryptographic hashing. The SHA256 hash is used on the public key, followed by a RIPEMD160 hash and then a base58 encoding. This outputs the Bitcoin address itself, which is a string of 34 numbers and letters which can safely be made available to the public. Anyone can send Bitcoin directly to this public Bitcoin Address.

Transactions

The creation & validation of transactions on the Bitcoin blockchain, along with the appending of these transactions to the Bitcoin blockchain, is the core feature of the Bitcoin network and most cryptocurrency in general. Transactions are created by the owner of the bitcoins, who generate a specific digital signature using the private keys to create a valid transaction. Any transaction broadcast to the network without a valid digital signature will not be validated and propagated by the honest nodes in the network and will fail to be added to the blockchain. All transactions in the Bitcoin blockchain are globally and publicly visible.

UTXO

The Bitcoin transaction system is based on the unspent transaction outputs (UTXOs) model. A new UTXO is created each time a transaction is created in a new Bitcoin block with a new output. The UTXO is eliminated when the owner of the keys initiates a transaction which empties all of the Bitcoin.

Security

There are a variety of assumptions made by the Bitcoin protocol with regards to transaction security and validity. The double spend attack or majority attack is possible when the attacker controls a larger portion of the mining power in the network, most effective at >50%. To date, no double spending attacks have occurred on Bitcoin, however multiple attacks on smaller chains such as Bitcoin Gold, Zencash, monacoin, and others have been successful. During the time that the attack controls this ability they are able to reverse specific arbitrary transactions by re-mining blocks with those transactions excluded. Thus cryptocurrency exchanges and others who accept large Bitcoin transactions typically wait for additional confirmation of blocks before relying on payment, as the cost to rewrite a transaction becomes larger the further back in the blockchain history it lies. The economic incentives for whether or not miners will benefit from attacking the network through a double spend rely on a number of factors and are actively debated.

In addition to the majority attack, there are lower thresholds of mining power required potentially only 33% of the network has rate to to perform other attacks such as selfish mining.

Timeline

December 10, 2017

Bitcoin futures start trading

The Chicago Board Options Exchange (CBOE) launches Bitcoin futures trading, enabling investors to speculate on the price of BTC without actually owning Bitcoins themselves. After experiencing a surge in price almost immediately the exchange halted trading for two minutes due to the volatility.

December 2017

Bitcoin got close to $20,000 in December 2017 in a retail-led bubble that grabbed the attention of investors worldwide.

October 24, 2017

Bitcoin Gold (BTG) forks from Bitcoin (BTC)

The Bitcoin Gold forks on block 491406 from the Bitcoin network.

August 1, 2017

The Bitcoin network forks into Bitcoin (BTC) and Bitcoin cash (BCH)

The controversial hardfork of Bitcoin and Bitcoin Cash into two separate blockchains occurs on block 478558. The split results from an inability of the Bitcoin community to resolve debates over a proposed increase to the 1megabyte limit on the maximum block size. Bitcoin Cash increases the block limit to 8MB and removes segregated witness.

Bitcoin and Bitcoin cash blockchain forks

May 19, 2017

Bulgarian officials seize 213,519 bitcoins worth more than their national debt

The bitcoins are seized from a criminal group. The rapidly growing price of BTC makes the estimated value of those Bitcoins approximately $3.3 billion dollars on Dec 7, 2017, more than Bulgaria's annual national debt.

May 12, 2017

WannaCry ransomware attack

The WannaCry ransomware attack cryptoworm infects computers worldwide. Payment in Bitcoin is required in order to restored data encrypted by the attack. Marcus Hitchins discovered a kill switch that shut down the software before it executes simply by registering a specific domain.

2017

Bitcoin hits its record high of $19,666 on cryptocurrency exchange Bitstamp, the high water mark of a frenzied year that sees bitcoin climb by more than 1,300 percent as retail investors scramble to buy.

January 25, 2016

The Bitcoin network hash rate exceeds 1 Exa hash per second

The Bitcoin network exceeds 1 Exa Hash/s, making the Bitcoin network around 300 times more powerful than the worlds fastest supercomputer at the time tianhe-2.

January 20, 2015

Coinbase raises record $75M funding round for its bitcoin exchange

The round includes notable investors such as Andreessen Horowitz, Tim Draper, Union Square Ventures, and others.

October 2, 2013

FBI seizes and shuts down the online black market called the Silk Road

The Silk Road, an online marketplace best known for selling illegal materials like drugs, is shut down by the FBI. The operation to catch the owner of Silk road named Ross William Ulbricht, using the pseudonym Dead Pirate Roberts, is called Operation Onymous. The FBI seized approximately 26k BTC from the Silk Road.

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People

Name
Role
LinkedIn

Adam Back

Andreas Antonopoulos

BtcDrak

Cory Fields

Eric Lombrozo

Gavin Andresen

Gregory Maxwell

Hal Finney

Jameson Lopp

Jeff Garzik

Johnson Lau

Jorge Timon

Luke Dash jr

Michal Ford

Nicolas Dorier

Patric Strateman

paveljanik

Peter Todd

Pieter Wuille

Roger Ver

Satoshi Nakamoto

Suhas Daftuar

Further reading

Title
Author
Link
Type
Date

Bitcoin network effects

Elad Gil

Bitcoin-NG

Ittay Eyal, Adem Efe Gencer, Emin Gun Sirer, Robbert van Renesse

Academic paper

Bitcoin: A Peer-to-Peer Electronic Cash System

Satoshi Nakamoto

Bitcoin’s academic pedigree

Arvind Narayanan and Jeremy Clark

CABRA — Comprehensive Academic Bitcoin Research Archive

Christian Decker

CME Group Announces Launch of Bitcoin Futures

News release

How the bitcoin protocol actually works

Michael Nielsen

Information Propagation in the Bitcoin Network

Christian Decker, Roger Wattenhofer

Academic paper

Mastering Bitcoin

Andreas M. Antonopoulos

Seasonality and Interconnectivity Within Cryptocurrencies - An Analysis on the Basis of Bitcoin, Litecoin and Namecoin

Martin Haferkorn, Manuel Quintana Diaz

Academic paper

U.S. Bitcoin Futures Climb in First Day of Trade

Alexander Osipovich and Gabriel T. Rubin

Why bitcoin matters

Marc Andreessen

Documentaries, videos and podcasts

Title
Date
Link

Banking on Bitcoin

2016

Bitcoin - Proof of work by Khan Academy

May 1, 2013

Bitcoin Halving Vs Bitcoin Cash Halving Price Prediction 2020 Forecast

April 7, 2020

Bitcoin in Uganda - Empowering People

May 16, 2014

Bitcoin Paper Annotated/Explained

Bitcoin: What is it?

2012

Bitcoins in Argentina

2013

Ever wonder how bitcoin (and other cryptocurrencies) actually work?

Jul 7, 2017

How the Bitcoin protocol actually works | DDI

Life on Bitcoin

2017

The Bitcoin Doco

2014

The importance of layer two — an HTTP of bitcoin and blockchains

Aug 11, 2017

The Rise and Rise of Bitcoin

2014

What is Bitcoin? (v1)

Mar 22, 2011

Companies

Company
CEO
Location
Products/Services

Bittrex

Bill Shihara

Nevada, US

Cryptocurrency exchange

Coinbase

Brian Armstrong

San Francisco, US

Cryptocurrency exchange

Gemini

Tyler Winklevoss

New York, US

Cryptocurrency exchange

LocalBitcoins.com

Nikolaus Kangas

Finland

In person bitcoin exchange

News

Title
Author
Date
Publisher
Description
The Associated Press
September 3, 2020
CTVNews
A Swiss region that has billed itself as a hub for high-tech finance said Thursday that it plans to accept cryptocurrencies Bitcoin and Ether for tax payments starting next year.
Our Foreign Staff
August 14, 2020
The Telegraph
Officials described it as the largest-ever seizure of virtual currency funds related to terrorism
John Naughton
August 1, 2020
the Guardian
The GPT-3 has swallowed an awful lot of information - much of it from the internet. Photograph: Getty
Associated Press
July 31, 2020
Boston Herald
MIAMI (AP) -- A British man, a Florida man and a Florida teen hacked the Twitter accounts of prominent politicians, celebrities and technology moguls to scam people around globe out of more than $100,000 in Bitcoin, authorities said Friday.
Kate Conger and Nathaniel Popper
July 31, 2020
www.nytimes.com
The authorities arrested a 17-year-old who they said ran a scheme that targeted the accounts of celebrities, including former President Barack Obama and Elon Musk. Two others were also charged.
Sky
July 31, 2020
Sky News
A teenager from Bognor Regis is one of three people accused over the Twitter hack that saw the accounts of politicians and celebrities compromised.
Alexandra Mae Jones
July 31, 2020
CTVNews
Twitter says they are reviewing their internal access tools in an update into their investigation of the massive Bitcoin scam launched on the platform after it was hacked in mid-July.
Edward Browne
July 27, 2020
Express.co.uk
BITCOIN prices have leapt to more than $10,000 USD for the first time in weeks amid a sudden weekend surge.
Daily
July 23, 2020
Mail Online
According to Down Detector, which aggregates user reports of issues with apps and websites, 352 users reported being unable to access the site, instead getting an error page.
BBC News
July 23, 2020
BBC News
Steve Wozniak says the reliance on algorithms to stop such scams is not working.
Nathaniel Popper and Kate Conger
July 17, 2020
www.nytimes.com
Several people involved in the events that took down Twitter this week spoke with The Times, giving the first account of what happened as a pursuit of Bitcoin spun out of control.
JD Alois
July 17, 2020
Crowdfund Insider
Click HERE to find out ⭐ Twitter Hack - Security Researcher Points to Notorious Sim Swap Fraudsters. | Crowdfund Insider: Global Fintech News, including Crowdfunding, Blockchain and more.
BBC News
July 17, 2020
BBC News
Authorities urge people to be vigilant after accounts of high-profile US figures were taken over.
Bloomberg
July 16, 2020
@bsindia
Others whose Twitter accounts were caught up in the security incident included Bill Gates, Elon Musk, Kanye West, Uber Technologies Inc, Apple, and Michael Bloomberg
Sharon Marris
July 15, 2020
Sky News
Hackers break into the accounts of technology moguls, politicians, celebrities and global companies in an apparent Bitcoin scam.
BBC News
July 15, 2020
BBC News
Posts have appeared on a number of Twitter accounts requesting transfers in the cryptocurrency.
Sheera Frenkel
July 15, 2020
www.nytimes.com
The accounts tweeted that they would double payments in bitcoin sent to a certain cryptocurrency wallet.
Lucas Matney
July 15, 2020
TechCrunch
Twitter's stock slid as much as 4% in after-hours trading as the company tried to swat down hackers that had taken over the accounts of multiple high-profile users. Accounts belonging to Barack Obama, Elon Musk, Jeff Bezos, Kanye West, Joe Biden, Warren Buffet, Apple and many others had their accounts compromised Wednesday afternoon, all posting [...]
Omar Faridi
July 12, 2020
Crowdfund Insider
Bitcoins used to pay for products are taxable income, wages paid in virtual currency are subject to witholding, Turbo Tax explains.
Peter Aitken
July 12, 2020
Fox News
The scammers use a variety of techniques, and will only get more advanced.
SHOW MORE

References

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