The Era of Cryptocurrency
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This is a tremendous introduction to Bitcoin. If you are not technically minded, it’s as good as you could possibly hope for.
On the other hand, if you are a bit of a technophile, perhaps you may want to look for the fine detail somewhere else.
First comes all the necessary background. You get a thorough introduction on what money is, or rather what it is that that turns something into money, you get an introduction to the biosphere out of which Bitcoin sprung, including a long list of its predecessors.
Next comes an explanation of the Blockchain.
Problem #1 with digital money is “how do I know this money is good money” and problem #2 is “how do I know that you are not presenting this good money twice at the same time to make two purchases.”
The Blockchain is a technology that puts together four pre-existing technologies in an inventive way, to incentivize independent agents to solve these two problems:
1. Public-key encryption
2. The hash
3. The peer-to-peer network of “nodes”
4. Proof of work
First, public-key encryption:
This is a fantastic new way to write coded messages. The simplest one, RSA, works out as follows:
1. Take two prime numbers and multiply them with one another 3 x 23 = 69
2. Subtract one from each and multiply them again with one another 2 x 22 = 44
3. Add one to the second number 44 + 1 = 45
4. Find two numbers that don’t have any common factors and multiply to this third number 9 x 5 = 45
5. You’re done. The public key is (9, 69) and the private key is (5, 69). To encrypt do mod(x⁹,69) and it turns out that (mod(mod(x⁹,69))⁵,69) = x
So, for example, suppose I want number 20 to be my message
2⁰⁹= 512000000000 and mod(512000000000,69) = 5. So the coded way to say “20” is “5”
But ⁵⁵ = 3125 and mod (3125,69) = 20, so, lo and behold, “5” is decoded as “20”
The beauty of this code is that if I pick two very large prime numbers a and b, NOBODY has the computing power to factorize a x b. And if they are very big, then (a -1) x (b — 1) can have a very wide choice of co-prime numbers c and d such that c x d = (a — 1) x (b — 1) + 1.
Ergo, if I give away (d, a x b) nobody has the computing power to figure out what c is. So I can put out there (d, a x b) as a code for anybody in the world to send me a message. They can post it on the Internet. And only I can break the code. Even better, even if somebody out there rats me out and says: “here’s how to encode messages for me to read” that still does not help the CIA read my messages.
More prosaically, you can send me Bitcoin and you can sign it with my public key. Everybody can verify that it is my Bitcoin, because my Bitcoin addresss is (or is derivable from) my public key. But only I can turn around and assign the Bitcoin to somebody else, because only I have the private key that is necessary to do so. Neat, huh?
It all kind of breaks down if somebody one day writes a computer that can calculate hyper-fast and goes through all the numbers in the world, but the fastest computers on earth would currently take longer to break a good-enough code than mankind has existed! (It helps that raising to a power is not cake)
N.B. The above is merely an example; Bitcoin does not use RSA, it uses elliptic curves-based encryption, which (among other advantages) obviates the need to change private key every time you’ve changed your public key
Recommended Books and Application to learn more about Cryptocurrency
1. The Basics of Bitcoins and Blockchains: An Introduction to Cryptocurrencies and the Technology that Powers Them
2. The Blockchain and the New Architecture of Trust (Information Policy)
3. Blockchain Basics: A Non-Technical Introduction in 25 Steps
4. CryptoTrend mobile Application
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