More Than You Need To Know About Bitcoin Technology

More Than You Need To Know AboutBitcoin Technology

Kenji Saito

Senior Visiting Researcher, Keio Research Institute at SFC

[email protected]

More Than You Need To Know About Bitcoin Technology — 2014-12-13 – p.1/46

And you are. . .?

Kenji Saito, Ph.D. (Media and Governance)Senior Visiting Researcher of Keio Research Institute at SFCRepresentative Director of Academy Camphttp://twitter.com/ks91020 http://www.facebook.com/ks91media

Doing research on the Internet and SocietyFocus :Human digital currencies and applications

Organizing camps for children in Fukushima


http://twitter.com/ks91020

http://www.facebook.com/ks91media

And you are. . .?

Kenji Saito, Ph.D. (Media and Governance)Senior Visiting Researcher of Keio Research Institute at SFCRepresentative Director of Academy Camphttp://twitter.com/ks91020 http://www.facebook.com/ks91media

Doing research on the Internet and SocietyFocus :Human digital currencies and applications

Organizing camps for children in Fukushima

→ Well-connected in my mind


http://twitter.com/ks91020

http://www.facebook.com/ks91media

Bibliography (1)

“NEO in Wonderland”(2009)

Genre:“Sci-Fi Monetary Fantasy”

Digital currency thatchanges money

Which creates a drama

Free English translation

http://grsj.jp/neo.pdf(CC-BY-SA 3.0)


http://grsj.jp/neo.pdf

Bibliography (2)

“Now You Understand Bitcoin”(2014)

Genre:“Stealth Marketing”

Looks like a book onBitcoin. . .

A 180-degree differentconcept

A Trojan horse(that you can read)


Bibliography (3)

“The Internet Changes‘Money’ ” (2014)

Genre:“Short Story”

A fantasy on who SatoshiNakamoto is

And how the Internetchanges everything

And how quick a Ubertaxi comes


What’s Bitcoin?


What’s Bitcoin Anyway?

“What is needed is an electronic payment systembased on cryptographic proof instead of trust”

Satoshi Nakamoto, “Bitcoin: A Peer-to-Peer Electronic

Cash System”, 2008

As if putting the first button in the wrong hole

P2P digital currency developed based on the belief

http://bitcoin.org/

Hostility against inflation

Traded as a commodity

Made a fuss late 2013 when 1 BTC > 1,100 USD


http://bitcoin.org/

Market Price (USD)


User Software (Wallet)

Easy transfer using QR code

Screenshots from “Bit Osaifu” by Mr. HoshinoMore Than You Need To Know About Bitcoin Technology — 2014-12-13 – p.9/46

What’s Bitcoin System?


Beaker Model (1)

21 million cm3 useless fluid

in a tank

Can use any number ofbeakers that can measuredown to 1

100,000,000cm

3

Every 10 minutes on average,a selected party can scoop25cm

3 (as of today) to theirbeaker

Selected by a speciallottery

Winning tickets are ineveryone’s box


Beaker Model (2)

Can move fluids amongbeakers with simple rules

The ‘selected party’ mustaudit the moves and addrecords in the ledger

Can have leftovers too

Sometimes, someone breakstheir beaker

Implemented above digitallyto call it a currency

→ Bitcoin


Technology Basics


Basics - Cryptographic Hash Functions


Basics - Digital Signature

Assures the authenticity of the originator and the content

ECDSA (Elliptic Curve DSA) is used in Bitcoin


Overview


Overview of Bitcoin System


Realizing Digital Coins (1)

A referred output (=coin) is spent, and cannot be double-spent


Realizing Digital Coins (2)


What A Wallet Does


Maintaining the Blockchain

1. Miners collect correct transactions and each make a datablock, and participate in a lottery

2. Who won the lottery broadcasts the block as the new tail

3. Other miners, if they approve, go back to 1 to append a newblock to the blockchain


Transaction Chain


Quantitative Limit

Rewards (besides fees) are halved at every 210 thousand blocks(about 4 years)

The limit is therefore 21 million BTC

Rewards (besides fees) will become none around year 2140,because the smallest unit is 1

100,000,000BTC

20,999,999.9769 BTC in total to be exact


Mining (Lottery)


Miners’ BehaviourEfficiency is pursued

Dedicated hardware rose

Mining costsIf the benefit is (expected to be) greater than thecost, more miners join and more invest on thehardwareIf the benefit is (feared to be) less than the cost,miners leave

Mining becomes collective, and mining becomes aservice

Easier for individuals to join and leave


Retargeting

A target is usually copied from the previous block


Proof Of Work

Nonce and the digest in a block prove a work has been done


State Machine of a Coin

Paler the arrows are, less probable they are actually taken


Overlapped State Machines

Major state transfers only


Technological DetailYes, those were just overview


Transaction Data Structure

Field Description Size (bytes)

Version Currently 1 4# of inputs Positive var-int 1∼9List of inputs Variable# of outputs Positive var-int 1∼9List of outputs VariableLock time 4


Output Data Structure


Amount Value in 10−8BTC 8

Script length Positive var-int 1∼9Script Variable


Input Data Structure


Referred TX Double SHA-256 value 32Referred output Index of the output 4Script length Positive var-int 1∼9Script VariableSequence # 4


Major Script Operators

Operator Code Description

OP_0 0 Push 0 byte

N/A 1∼0x4b Push # bytes

OP_PUSHDATA1 0x4c Push length specified by 1-byte suffix

OP_PUSHDATA2 0x4d Push length specified by 2-byte suffix

OP_PUSHDATA4 0x4e Push length specified by 4-byte suffix

OP_NOP 0x61 Do nothing

OP_VERIFY 0x69 TX invalid if not true

OP_DUP 0x76 Copy 1 item

OP_EQUAL 0x87 If 2 items match

OP_EQUALVERIFY 0x88 OP_EQUAL → OP_VERIFY

OP_HASH160 0xa9 Apply SHA-256→RIPEMD-160

OP_CHECKSIG 0xac If signature for TX verified

OP_CHECKMULTISIG 0xae If multiple signatures for TX verified

Script is a stack-oriented language with postfix notation


Script (General)

Output:

OP_DUP OP_HASH160

OP_PUSHDATA* <Public-key digest>

OP_EQUALVERIFY OP_CHECKSIG

Input:

OP_PUSHDATA* <Signature>

OP_PUSHDATA* <Public key>

TX output addressed to a public-key digest and referring

input


Script Processing

Concatinates scripts: input → output

Stack-based processing


Script (Generation)

Output:OP_PUSHDATA* <Public key> OP_CHECKSIG

Input:OP_PUSHDATA* <Signature>

Gen. TX otuput and referring input

No need to specify public key by its digest

Can avoid compromising security down to 160bit


Block Data Structure


Block header 6 items 80

# of TXs Positive var-int 1∼9

List of TXs Variable


Block Header Data Structure


Version 4

Digest Double SHA-256 value 32

Merkle root Double SHA-256 value 32

Time Seconds (since 1970-01-01T00:00 UTC) 4

Target Compressed format 4

Nonce Appropriate value 4

Merkle root is the digest of all TXs


Merkle Tree

Digest = double SHA-256 value


Networking

No structure

All TCP, default port number: 8333

IPv6 supported since v0.7 of referenceimplementation (v0.9.3 as of Dec. 2014)

Can use IPv4, IPv6 or Tor

In reference implementationMax # of outbound connections : 8

Max # of all connections : 125 (by default)

Only one outbound connection to an address groupHigh 16bit in IPv4High 32bit in IPv6


Major Messages

Category Name Function

Connection version Sends version and block #

verack Acknowledges version

addr (address) Sends list of IP address/port #

getaddr Requests addr

Data inv (inventory) Sends (new) blocks and/or txs

transfer getblocks Requests inv for all blocks within range

getdata Requests block/tx by the digest

block Sends block replying to getdata

tx (transaction) Sends tx replying to getdata

Header getheaders Requests headers for all blocks within range

transfer headers Sends block headers up to 2,000

Others alert Broadcasts alert

ping Confirms connection

pong Acknowledges ping


Message Structure


Magic number 0xd9b4bef9 4

Command Message name (ASCII string) 12

Payload length Size of payload in bytes 4

Checksum Double SHA-256 value of payload First 4

Payload Message data Variable

All integers are encoded in Little Endian except IP address

and port #

We’ve just seen the payloads for block and tx messages


DNS Seed

seed.bitcoin.sipa.be

dnsseed.bluematt.me

dnsseed.bitcoin.dashjr.org

seed.bitcoinstats.com

seed.bitnodes.io

bitseed.xf2.org

Maintained by volunteers

None of these uses DNSSEC


Transfer Protocol

block message is handled in the same mannerMore Than You Need To Know About Bitcoin Technology — 2014-12-13 – p.45/46

Discussion
