This blogpost contains some of the points mentioned in a course on Udemy titled ‘Blockchain and Bitcoin Fundamentals’, taught by George Levy

  • Blockchain - Ledger, constantly growing, permanent record of all transactions, secure, chronological and immutable
  • As of [2021-12-20 Mon], there are 14712 nodes around the world, that store Blockchain ledger
  • Sending an image over email - There are two copies now. Every digital asset is thus replicated when shared. So, the basic problem that must be solved is - Double spend problem
  • Bitcoin miners build the Blockchain of records that form the Blockchain ledger
  • Genesis block was created on Jan 3, 2009
  • On an average 250k transactions are added in a day
  • On an average Bitcoin is designed to mine 144 blocks per day (24 hours times 6 blocks per hour, one block every 10 minutes)
  • Nonce - Number used once. Called the Proof of work.
  • Difficulty level is adjusted every two weeks(approx)
  • Four components of Bitcoin
    • Software
    • Cryptocurrency
    • Hardware
    • Gaming theory
  • Every 10 minutes, the Blockchain software issues a new hash challenge. There are two cycles
    • Miners are competing each other for a solution
    • Miners are then cooperating to validate the block
  • Current Mining reward - 6.25 BTC
  • Each block has coinbase transaction
  • Miners get the mining fees as well as transaction fees for all the transactions included in the block
  • Mining hashrate is a key security metric. The more hashing power the network has, the greater its security and its overall resistance to attack
  • As of [2021-12-20 Mon], Bitcoin has 160M TH/second
  • Unconfirmed transactions for Bitcoin can be seen here
  • Bitcoin - transfer of value done via
    • Distributed
    • Decentralized
    • Disintermediated
    • Trustless Consensus protocol
  • Satoshi published paper on Bitcoin Oct 31, 2008
  • Predecessors to Bitcoin
    • Ecash - 1983
    • Hashcash Proof of work - 1997
    • b-money - 1997
    • Bitgold - 1998
  • Three values of Blockchain
    • Value: Enables a unique asset to be transferred over the Internet without a centralized agent
    • Trust: Enables permanent, secure and unalterable record of ownership
    • Reliability: No single point of failure
  • Cryptocurrency is a type of digital asset which can used as an exchange of value
  • Litecoin - 2.5 min per block
  • Digital tokens is a digital asset that can represent anything.
    • Audiocoin
    • Golem - Shared economy computing power
    • VeChain - tracking supply chains on Blockchain
    • Steemit - rewards platform for content publishers
    • CryptoKitties
  • In 2017, using ICO’s community raised $6.22B. In 2018, $7.8 was raised
  • Smart contract automates all the functions of a contract on a Blockchain. It disintermediates the operations relating to a smart contract
  • Nick Szabo wrote about smart contracts in 1994
  • DAO - Decentralized Autonomous Organization: Collection of smart contracts
  • DAC - Decentralized Autonomous Corporation
  • Example of DAO - Uber with self diving cars
  • Business usecases of Blockchain
    • Walmart establish Blockchain trial with IBM: Tracking pork products across China, reduce the time to track items
    • ANZ and Westpac, in partnership with IBM: Digitize commercial property lease guarantees
    • Maersk in partnership with Microsoft: Shipping insurance
    • Impact on Certificates of authenticity
    • Humanitarian Aid: UN used ethereum network to aid Syrian refugees
  • Common Misconceptions
    • Anonymous
      • It is not. It is pseudonymous. Much like the artist having a stage name, it is not completely anonymous
    • Bitcoin is for money laundering
    • Blockchain is a better database
      • Not limited by the specific data structure of a Blockchain
    • Blockchain is bitcoin
    • You need to buy a full bitcoin to get in to bitcoin
  • Bitcoin cash - Different cryptocurrency developed from a Hard Fork in the bitcoin Blockchain
    • Hard Fork Aug 1, 2017
    • Increase the block size to 8 MB
    • Segregated witness is not slated to be incorporated
  • Fork takes place when blockchain splits in to two paths
  • Hard Fork forces everyone to upgrade whereas soft fork is backward compatible
  • Soft fork - SegWit soft fork locked in on Aug 8 2017 and officially activated on Aug 24, 2017
  • SegWit
    • Protocol upgrade
    • Improves Scalability
    • Addresses Transaction Malleability
    • Does not require upgrading the Blockchain network
    • Did not cause a split in the Blockchain
  • Transaction can be visualized as a cheque that contains input address, output address, the transaction amount and a digital signature
  • SegWit - The Signature data is segregated in to an extended block thus saving the space for adding more transaction data(60% of space is freed up). It includes input and amount as a part of digital signature
  • Current block weight limit is 4 million weight units - Block weight is measured in bytes
  • It is possible for the block to have just a coin base transaction but it is more common to have a block with many more transactions as miners get a fee on all the transactions included in the block
  • More on SegWit

Segwit was added to the Bitcoin (BTC) protocol in 2017 as a “soft fork” with backwards compatibility. The main function of segwit is removing the signature data (witness) from transactions and storing them in a separate area of the block that legacy nodes (nodes running bitcoin software from before segwit) cannot see. Segwit also removes the block size limit of 1mb (1,000,000 bytes), and replaces it with a “weight limit” of 4mwu (4,000,000 weight units), giving bitcoin a slight increase in transaction throughput, if utilized. However, it is not a simple 4x increase because the way in which the weight limit operates is complex.

Since segwit was a soft fork, both legacy nodes and segwit nodes can continue to operate on the same network. Both legacy transactions and segwit transactions can be relayed by all nodes. However, segwit transactions cannot be validated by legacy nodes, since they do not have access to the signature data, and have to assume that they are valid transactions. The main difference is how each node interprets and stores the data from each transaction

  • Number of bitcoins capped to 21 million. Reward gets halved at periodic interval. Currently it is 6.25 BTC
  • Bitcoin generation will stop in 2140 and there would be about 21 million bitcoins
  • Miners will still be doing be work beyond 2140 as the miners will earn transaction fees
  • Important dates in Bitcoin history
    • Oct 31, 2008 - Bitcoin paper
    • Jan 3, 2009 - Genesis Block
    • May 22, 2010 - First retail purchase - Pizza day
    • Nov 28, 2013 - 1 BTC > 1000 USD
    • Mar 2, 2017 - 1 BTC > 1 Oz of Gold
  • Merkle tree is a mathematical data structure composed of hashes of different blocks of data and which serves as a summary of all transactions in a block
  • Merkle tree was invented by Ralphe Merkle
  • Fancy visualizations of bitcoin Blockchain
  • Hot Storage - The keys are connected to the internet
  • Cold Storage - Store keys offline, brain wallet, paper wallet, USB Drive, Hardware wallet
  • Converting bitcoin to fiat currency
    • Use a cryto exchange
    • Bitcoin debit card
    • local trading site
    • sell at bitcoin atm

The course gives a 10,000 ft view of the relevant components of Blockchain and Bitcoin. It is a 3 hour course and one that can be easily digested. As a total beginner in this space, I found the content and presentation useful.