How a Bitcoin Transaction Actually Works 174
Posted
by
Soulskill
from the press-buttons-acquire-monopoly-money dept.
from the press-buttons-acquire-monopoly-money dept.
An anonymous reader writes "Michael Nielsen has written a detailed article describing the nuts and bolts of a Bitcoin transaction. He builds the concepts from the ground up, starting with a basic, no-frills digital currency. He then examines it for flaws and tweaks the currency to patch up areas where we run into technical or security problems. Eventually, he ends up with Bitcoin, and explains how a transaction works. It's an interesting, technical read; much more in-depth than any explanation I've heard. Here's a brief snippet from a walkthrough of the transaction data: 'One thing to note about the input is that there's nothing explicitly specifying how many bitcoins from the previous transaction should be spent in this transaction. In fact, all the bitcoins from the n=0th output of the previous transaction are spent. So, for example, if the n=0th output of the earlier transaction was 2 bitcoins, then 2 bitcoins will be spent in this transaction. This seems like an inconvenient restriction – like trying to buy bread with a 20 dollar note, and not being able to break the note down. The solution, of course, is to have a mechanism for providing change. This can be done using transactions with multiple inputs and outputs...'"
Bitcoin is going through another period of heavy fluctuation: it fell from a high of around $1,200 per bitcoin to roughly half that, and as of this writing trades around $760 per bitcoin.
Re:On the Early player advantage (Score:1, Informative)
>> Yes, but I'm shocked at how no one is talking about the amount >> of electricity being wasted to generate digital coins. I thought we were trying to be all green now, yet the very idea of bitcoin and the idea that we'll be running mining for the next 2 decades runs very counter to that idea
Oh, people /have/ talked about that since day one, and this objection has been pretty thoroughly debunked...
It is probably still far cheaper than the old-fashioned way of doing things. IOW, I think bitcoin is far greener than the alternatives..
To see why, imagine the cost of supporting the salaries cashiers, CEOs, of the paperwork and trees involved in supporting their ledgers, etc.
If the above don't convince you: I guess another way to see which route costs more is transaction fees. Try sending an international or even domestic wire, heck, even a check via UPS (even USPS if you want, though that's state-subsidized), and compare the fees you pay to for equivalent bitcoin transactions.
Re:On the Early player advantage (Score:4, Informative)
Re: On the Early player advantage (Score:5, Informative)
That is only the case because congress has put ridiculously onerous pension funding requirements on the USPS. They have to fund pensions for people they haven't even hired yet. It is ridiculous how badly congress has fucked over the USPS - not only did they force them to prefund pensions, but then congress went and raided those pensions as if they were part of the US general fund. If congress had not done all that shit, the USPS would be deep in the black today.
http://postalemployeenetwork.com/news/2011/08/the-big-lie-about-postal-bankruptcy/ [postalempl...etwork.com]
Re: On the Early player advantage (Score:0, Informative)
2 decades? Mining has to continue for bitcoin to be functional.
It can't and you would know, if you knew anything about bitcoins:
On average a block should be mined every 10 minutes, so every time 2016 blocks have been mined, the bitcoin protocol adjusts the difficulty. If the last 2016 blocks were mined in less than 2 week (2 weeks * 7 days/week * 24 hours/day * 60 minutes/hour * 1 block/10 minutes) , the difficulty is increased to make it take longer for the next 2016 to be mined. Vice versa, if it took longer than 2 weeks to mine the last 2016 blocks.
At the beginning the bounty for mining a block was 50 bitcoins. After every 210,000 blocks the bounty is halved and the bounty is currently 25 bitcoins per block.
Since there's a fixed maximum number of bitcoins (21 million), it's easy to calculate when mining will stop (give or take 2 weeks).
Re: On the Early player advantage (Score:5, Informative)
I know a lot about Bitcoin. "Mining" and "Verifying transactions" are the same thing.
We need the latter even when there will be "no" new coins minted (tiny block reward). The miners (= the ones who verify the transactions) will still get the transaction fees.
Re:Lets get out all of the bitching before it star (Score:5, Informative)
Who is Satoshi Nakamoto? I think that might be the big one. Remember he/they own almost 3/4's of all the bitcoins mined
There are over 12 million Bitcoins in circulation [blockchain.info]. The estimates I have found for Nakamoto indicate about 1 million Bitcoins. [theverge.com], though others have come up with as much as 1.5 million. Either way, that's obviously far from three quarters.
As for your first question, an interesting recent theory is Nick Szabo [techcrunch.com].