Cryptocurrency and Bitcoin

Bitcoin protocol

• Based on secret key, i.e. each coin may be paired with a SK
• Throughput limitation: 1M bytes/block (10 min); >250 bytes/Tx; 7 Txs/sec [VISA: 2K-10K Txs/sec; PayPal: 50-100 Txs/sec]
• Cryptographic limits: only one algo (ECDSA/P256); hard-coded hash functions
• Changes that require a “hard-fork” update (not accepted by the community):
  1. New op codes
  2. Chenges to size limits
  3. Changes to mining rate
  4. Many small bug fixes e.g. TODO

Bitcoin P2P network

• Ad-hoc protocol (runs on TCP port 8333)
• Ad-hoc network with random topology
• All nodes are equal
• New nodes can join at any time
• Forget non-responding nodes after 3 hr
• Node relays Tx if:
  1. Tx is valid with current block chain
  2. script matches a whitelist
  3. Haven`t seen before
  4. Doesn’t conflict with others it has already realyed
• Race conditions are natural:
  1. Default behavior: accept what came first
  2. Network position matters
  3. Miners may implement other logic
• Thin/SVP clients validate only a part of the blockchain (just to verify incoming payment) can perform even on a mobile phone (requires 1000 times less memory than the whole blockchain)

Bitcoin wallet

• Typically split into hot and cold ends, where hot is an online wallet (aka cash) and cold – is a offline permament storage
• paper wallet
• secret splitting == multi-sig
• in case K-out-of-N splitting each part will have size equal to the secret

Bitcoin for Business (aka Blockchain platform)

• Identity over anonymity
• Selective endorsment over Proof-of-Work
• Assets over cryptocurrency
• Requirements for a blockcahin in a business environment
  1. Shared ledegr (permissions i.e. participant sees only what is allowed)
  2. Privacy (Txs must be authenticated, cryptography)
  3. Smart contract (encoded in a programming language, verifiable, signed)
  4. Trust (consensus, provenance, immutability and finality)
• Developer consideration: integration with existing systems:
  1. via events
  2. via direct call (may require transformation)
  3. blockchain platform may call exeisting system directly (cautions required e.g. constanctly changed value must be treated carefully in this case)
• Performance:
  1. the amount if shared data
  2. number and location of peers
  3. latency and throughput
  4. batching characteristics (how many Txs submitted to a block)
• Security:
  1. type of the data being shared and with whom
  2. how is identity achieved
  3. confidentiallity of Tx queries
  4. who verifies (endorses) Txs
• Resiliency
  1. resource failure
  2. malicious activity
  3. non-determenistic

More content is coming soon…