Where did Bitcoin came from?
category: Cryptocurrencies

Working in the field of electronic Commerce, you begin to realize that many people still do not understand what Bitcoin is and how this "miracle" works. A little googling of the Bitcoin, it is becoming clear, because so many clever words and it`s really hard, for people without minimal knowledge in this field. We will try to tell you what it is Bitcoin. So all the explanation will be based on several fictional characters and their situations. Well go directly to the beginning.

 The enterprising merchant of Eugene sells sneakers via the online store, and at one point, decides to accept Bitcoin as a payment. The customer Morris, just have a couple of Bitcoin’s, and decides to buy the new sneakers at Eugene`s online shop.

Addresses and wallets

Morris is the owner of a Bitcoin wallet installed on his computer. The wallet is a program that provides access to multiple Bitcoin addresses. The address is a string consisting of letters and numbers. It looks as follows "1Bс8qza6fn7snSCyJcB2ZcN46biBtkТ4ее".

"Although the idea of Bitcoin addresses, which act as a Bank is very tempting, their work is arranged quite differently. Bitcoin users can create an unlimited number of new addresses. Considering this fact, the scheme of the type: "New address -> New transaction", allows you to remain anonymous. Thus to prove any connection of Morris and the address of the wallet is simply impossible."


Eugene creates a new Bitcoin address that soon Morris will be able to send a pay for sneakers.

 "At the time of creating a new address for Eugene, there was generated several cryptographic keys, which consist of the personal and the public. If you sign a message with a private key (known only to you), it is confirmed by any third-party user with a public key. The new Bitcoin address of Eugene is a unique pair of public and private keys, the last of which is in his wallet. In fact the public key needed to verify the signature with the private key."

The administration of the payment

Morris with his Bitcoin client gives the command to transfer the exact amount (cost of shoes) payment to the address, which is owned by Eugene. The Morris wallet has the private keys for each of its unique addresses. In turn, Bitcoin client confirms with the signature request for the transaction with the private key of that address from which withdrawals Bitcoin. Any member of the network at this point can use the public key to confirm the legality of the transaction, the owner of the wallet.

Confirmation of the transaction

So, go on. Funny people Bob, Dim, and Sylvester engaged in production, or in other words the creation of new Bitcoin. Yet these people called the miners (from the English. mining). Their computers link together transactions in the last 10 minutes, thus forming a new transaction block. Computers-generators are used to calculate cryptographic hash functions.

 Cryptographic hash functions transform a dataset into a string consisting of letters and numbers of a certain length called a hash value. The slightest change in input data dramatically changes the hash value. When it determine which dataset belongs to a particular hash value, is almost impossible. For example, take the phrase "Bitcoin user" as the source data, you can see how it will change the hash value with a little change:

 Bitcoin user>>> 6d0a 1889 084b... (56 characters)

Bitcoin vser >>> 521d 8bg4 6cca...

Bitcoin vcer>>> n1jk 9dd7 2810...

To create different hash values from one set of data in the Bitcoin system uses a disposable number. An arbitrary number that is  added to the source data before encryption plays this role. Change the number completely changes the hash value.

Imagine the following scheme:

The hash value + transaction + number -> hash value

A new hash value + transaction + number -> hash value

A new hash value + transaction + number -> hash value

Creation of hashes is trivial (banal) from the standpoint of calculations, but in Bitcoin system, a new hash value has a certain form. In particular, it must start with a certain number of zeros.

Or more clearly:

Bitcoin user???>>> 0000 0000 0000...

Creators have no way of knowing which of the one-time numbers will create the hash value with the desired number of zeroes. This causes them to create many hashes that have different numbers until it is picked up by the hash required to complete the circuit.

Each unit includes monetary transaction and monetary transaction from which shall be paid Bitcoin to the winner, Sylvester. One of the gay people, which the miners call. The new address is created Bitcoin balance in the wallet is created Sylvester.

 The final. The transaction has received confirmation

Over time, the payment of the Morris - Eugene, lost deep in the thread for more recent transactions. To change the end amount of payment to any of the recipients have successfully pick up the hash in the amount of work equal to the sum of the works of Sylvester and others. This process is equivalent to finding the grains of gold in a ton of sand. User who managed to accomplish such a feat can be called Great.

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