The Era of Cryptocurrency (Part II)
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Continued
Second, the hash:
The hash is a 26 to 34-character string that is the output of a function that generates a fixed-length alphanumeric representation of the data is received. To build it I need input (example 1: the sentence “to be or not to be”; example 2: the complete works of William Shakespeare) and I need a “hashing” algorithm. The big deal here is that “hashing” always brings the same input to the same short string of characters.
My wallet is the place where I keep my Bitcoin. At all points in time, my wallet has a public key and a private key. The rest of the planet knows my wallet by the 26 to 34 character hash (you guessed it) that is a (hash of) my public key (it’s not the public key itself, chiefly for error-correction purposes, one of the few times Bitcoin looks after you). After every time I deal my wallet changes its public key, so nobody can keep track of what I’m doing except for me.
The first input in the life of a Bitcoin is something along the lines of “WalletCrypto was legitimately awarded 1 Bitcoin at 4:59 pm on Sunday the 12th of April 2015”. That’s subsequently “hashed” into gobbledygook that looks like 12yxzhUNfQSPWeDrmwKrWKCxQW2Cz36v3B.
Suppose I want to use the 1 Bitcoin to buy something from my brother George. The real-world message then is “WalletCrypto was legitimately awarded 1 Bitcoin at 4:59 pm on Sunday the 12th of April 2015. WalletCrypto gave 1 Bitcoin to WalletGeorge at 5 pm on Sunday the 12th of April 2015.” But we already know that the first part of the message is represented by the hash 12yxzhUNfQSPWeDrmwKrWKCxQW2Cz36v3B. So I apply my brother George’s public key to a string that looks something like “12yxzhUNfQSPWeDrmwKrWKCxQW2Cz36v3B WalletCrypto gave 1 Bitcoin to WalletGeorge at 5 pm on Sunday the 12th of April 2015” and the money is now irrevocably his.
This transaction information gets scrambled into a 64 character hash. Something like 975bT0e06f6395403fd37c2bb8003ef1T94b8a9Ucc9e150c2d99klKEB6EHEf.
The 26 to 34 character hash that was my 1 Bitcoin gets re-hashed together with my brother’s public key into a new 26 to 34 character hash. Something like GGe3523tn65ybn9a9441hmaR90AFGWR
So we started with 1 Bitcoin (which is a hash), we did a transaction (which is a longer hash) and we ended up with another 1 Bitcoin (which is a hash) Because the new 1 Bitcoin has my brother George’s public key somewhere in the hash, he alone knows what the private key is that can prove he is the rightful owner of the 1 Bitcoin.
Whenever he feels like transferring the money to somebody else (say a bookstore), he must first unlock the 1 Bitcoin with his private key and then apply the bookstore’s public key to the 1 Bitcoin.
This, in turn, generates 2 new hashes:
1. a 1 Bitcoin hash that has in it somewhere the bookstore’s public key
2. a transaction hash that has in it both George’s unlocking of his public key and the bookstore’s public key (and this solves the mystery of why the transaction hash is longer)
And so on.
The big idea behind the hash is that IT TRAVELS LIGHT. Regardless of the input, the Bitcoin hash is always <= 34 characters. So the hash is evidence of the entire history of a particular Bitcoin without getting longer and longer.
Every dollar turns 7 times per annum in America and some surely turn a lot more often than that. A hundred years down the line the full history of what happened to every Bitcoin would be impossibly long, the Bitcoin would be pages long, but the hash keeps it all at a max of 34 characters at all times. You most obviously cannot travel from 34 characters back in time to every transaction, but the transactions themselves (64 characters apiece) are so compact that every “full node” (see below) can verify every transaction ever done via Bitcoin.
The little miracle that is the hash means Bitcoin is money good that travels light.
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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Thanks for reading
