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01_1_Introducing_Bitcoin.md
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@ -4,50 +4,46 @@ Before you can get started programming Bitcoin (and Lightning), you should have
## About Bitcoin ## About Bitcoin
Bitcoin is a programmatic system that allows for the transfer of the bitcoin currency. It is enabled by a decentralized, peer-to-peer system of nodes, which include full nodes, wallets, and miners. Working together, they ensure that bitcoin transactions are fast and non-repudiable. Thanks to the decentralized nature of the system, these transactions are also censor-resistant and can provide other advantages such as pseudonymity and non-correlation if used well. Bitcoin is a programmatic system that allows for the transfer of the bitcoin currency. It is enabled by a decentralized, peer-to-peer system of nodes, which include full nodes, wallets, and miners. Working together, they ensure that bitcoin transactions are fast and non-repudiable. Thanks to the decentralized nature of the system, these transactions are also censorship-resistant and can provide other advantages such as pseudonymity and non-correlation if used well.
Obviously, Bitcoin is the heart of this book, but it's also the originator of many other systems, including blockchains and Lightning, which are both detailed in this tutorial, and many other cryptocurrencies such as Ethereum and Litecoin, which are not. Obviously, Bitcoin is the heart of this book, but it's also the originator of many other systems, including blockchains and Lightning, which are both detailed in this tutorial, and many other cryptocurrencies such as Ethereum and Litecoin, which are not.
**_How Are Coins Transferred?_** Bitcoin currency isn't physical coins. Instead it's an endless series of ownership reassignments. When one person sends coins to another, that transfer is stored as a transaction. It's the transaction that actually records the ownership of the money, not any token local to the owner's wallet or their machine. > 📖 **_How are coins transferred?_** Bitcoin currency isn't physical coins. Instead it's an endless series of ownership reassignments. When one person sends coins to another, that transfer is stored as a transaction. It's the transaction that actually records the ownership of the money, not any token local to the owner's wallet or their machine.
**_Who Can You Send Coins To?_** The vast majority of bitcoin transactions involve coins being sent to individual people (or at least to individual Bitcoin addresses). However, more complex methodologies can be used to send bitcoins to groups of people or to scripts. These various methodologies have names like P2PKH, multisig, and P2SH. > 📖 **_Who can you send coins to?_** The vast majority of bitcoin transactions involve coins being sent to individual people (or at least to individual Bitcoin addresses). However, more complex methodologies can be used to send bitcoins to groups of people or to scripts. These various methodologies have names like P2WPKH, multisig, and P2SH. [§3.5](03_5_Understanding_the_Address.md) will cover many of the methodologies.
**_How Are Transactions Stored?_** Transactions are combined into larger blocks of data, which are then written to the blockchain ledger. A block is built in such a way that it cannot be replaced or rewritten once several blocks have been built atop (following) it. This is what makes bitcoins non-repudiable: the decentralized global ledger where everything is recorded is effectively a permanent and unchangeable database. > 📖 **_How are transactions stored?_** Transactions are combined into larger blocks of data, which are then written to the blockchain ledger. A block is built in such a way that it cannot be replaced or rewritten once several blocks have been built atop (following) it. This is what makes bitcoins non-repudiable: the decentralized global ledger where everything is recorded is effectively a permanent and unchangeable database. However, the process of building these blocks is stochastic: it's somewhat random, so you can never be assured that a transaction will be placed in a specific block. There can also be changes in blocks if they're very recent, but only if they're _very_ recent. That means that things only become non-repudiable (and permanent and unchangeable) after a little bit of time.
However, the process of building these blocks is stochastic: it's somewhat random, so you can never be assured that a transaction will be placed in a specific block. There can also be changes in blocks if they're very recent, but only if they're _very_ recent. So, things become non-repudiable (and permanent and unchangeable) after a little bit of time. > 📖 **_How are transactions protected?_** The funds contained in a Bitcoin transaction are locked with a cryptographic puzzle. These puzzles are designed so that they can be easily solved by the person who the funds were sent to. This is done using the power of public-key cryptography. Technically, a transaction is protected by a signature that proves you're the owner of the public key that a transaction was sent to: this proof of ownership is the puzzle that's being solved. Funds are further protected by the use of hashes. Public keys aren't actually stored in the blockchain until the funds are spent: only public-key hashes are. This means that even if quantum computer were to come along, Bitcoin transactions would remain protected by this second level of cryptography.
**_How Are Transactions Protected?_** The funds contained in a Bitcoin transaction are locked with a cryptographic puzzle. These puzzles are designed so that they can be easily solved by the person who the funds were sent to. This is done using the power of public-key cryptography. Technically, a transaction is protected by a signature that proves you're the owner of the public key that a transaction was sent to: this proof of ownership is the puzzle that's being solved. > 📖 **_How are transactions created?_** The heart of each Bitcoin transaction is a FORTH-like scripting language that is used to lock the transaction. To respend the money, the recipient provides specific information to the script that proves he's the intended recipient. However, these Bitcoin scripts are the lowest level of Bitcoin functionality. Much Bitcoin work is done through the `bitcoind` Bitcoin daemon, which is controlled through RPC commands. Many people send those RPC commands through the `bitcoin-cli` program, which provides an even simpler interface. Non-programmers don't even worry about these minutia, but instead use programmed wallets with simpler interfaces.
Funds are further protected by the use of hashes. Public keys aren't actually stored in the blockchain until the funds are spent: only public-key hashes are. This means that even if quantum computer were to come along, Bitcoin transactions would remain protected by this second level of cryptography.
**_How Are Transactions Created?_** The heart of each Bitcoin transaction is a FORTH-like scripting language that is used to lock the transaction. To respend the money, the recipient provides specific information to the script that proves he's the intended recipient.
However, these Bitcoin scripts are the lowest level of Bitcoin functionality. Much Bitcoin work is done through the `bitcoind` Bitcoin daemon, which is controlled through RPC commands. Many people send those RPC commands through the `bitcoin-cli` program, which provides an even simpler interface. Non-programmers don't even worry about these minutia, but instead use programmed wallets with simpler interfaces.
### Bitcoin — In Short ### Bitcoin — In Short
One way to think of Bitcoin is as _a sequence of atomic transactions_. Each transaction is authenticated by a sender with the solution to a previous cryptographic puzzle that was stored as a script. The new transaction is locked for the recipient with a new cryptographic puzzle that is also stored as a script. Every transaction is recorded in an immutable global ledger. One way to think of Bitcoin is as _a sequence of atomic transactions_. Each transaction is authenticated by a sender with the solution to a previous cryptographic puzzle that was stored as a script. The new transaction is locked for the recipient with a new cryptographic puzzle that is also stored as a script. Every transaction is recorded in an immutable global ledger.
> 🔥 ***What is the power of Bitcoin?*** Bitcoin allows for the creation of pseudonymous identifiers (addresses based on the hashes of public keys) that can be used to transfer digital currency. It supports the right to transact through a reduction in potential censorship and coercion. That makes it particularly important in places where centralized authorities are not trusted to take on these responsibilities, whether that's due to a corrupt government or the censorship of a traditional payment processor.
## About Public-Key Cryptography ## About Public-Key Cryptography
Public-key cryptography is a mathematical system for protecting data and proving ownership through an asymmetric pair of linked keys: the public key and the private key. Public-key cryptography is a mathematical system for protecting data and proving ownership through an asymmetric pair of linked keys: the public key and the private key. It's important to Bitcoin (and to most blockchain systems) because it's the basis of a lot of the cryptography that protects the cryptocurrency funds. A Bitcoin transaction is typically sent to an address that is a hashed public key. The recipient is then able to retrieve the money by revealing both the public key and the private key.
It's important to Bitcoin (and to most blockchain systems) because it's the basis of a lot of the cryptography that protects the cryptocurrency funds. A Bitcoin transaction is typically sent to an address that is a hashed public key. The recipient is then able to retrieve the money by revealing both the public key and the private key. > 📖 **_What is a public key?_** A public key is the key given out to other people. In a typical public-key system, a user generates a public key and a private key, then he gives the public key to all and sundry.
**_What Is a Public Key?_** A public key is the key given out to other people. In a typical public-key system, a user generates a public key and a private key, then he gives the public key to all and sundry. Those recipients can encrypt information with the public key, but it can't be decrypted with the same public key because of the asymmetry of the key pair. > 📖 **_What is a private key?_** A private key is linked to a public key in a key pair. In a typical public-key system, a user keeps his private key secure and uses it to engage in asymmetric signing and encryption activities.
**_What Is a Private Key?_** A private key is linked to a public key in a key pair. In a typical public-key system, a user keeps his private key secure and uses it to decrypt messages that were encrypted with his public key before being sent to him. **_What is encryption?** Encryption is a methodology for making data unreadable. In symmetric encryption, the encoding is done with a singular "symmetric" key that allows either encryption or decryption. In asymmetric encryption, the encryption is typically done with a public key, which then requires the private key for decryption.
**_What Is a Signature?_** A message (or more commonly, a hash of a message) can be signed with a private key, creating a signature. Anyone with the corresponding public key can then validate the signature, which verifies that the signer owns the private key associated with the public key in question. _SegWit_ is a specific format for storing a signature on the Bitcoin network that we'll meet down the line. **_What is a signature?_** A message (or more commonly, a hash of a message) can be signed with a private key, creating a signature. Anyone with the corresponding public key can then validate the signature, which verifies that the signer owns the private key associated with the public key in question. _SegWit_ is a specific format for storing a signature on the Bitcoin network that we'll meet down the line.
**_What Is a Hash Function?_** A hash function is an algorithm frequently used with cryptography. It's a way to map a large, arbitrary amount of data to a small, fixed amount of data. Hash functions used in cryptography are one-way and collision-resistant, meaning that a hash can reliably be linked to the original data, but the original data can not be regenerated from the hash. Hashes thus allow the transmission of small amounts of data to represent large amounts of data, which can be important for efficiency and storage requirements. **_What is a hash function?_** A hash function is an algorithm frequently used with cryptography. It's a way to map a large, arbitrary amount of data to a small, fixed amount of data. Hash functions used in cryptography are one-way and collision-resistant, meaning that a hash can reliably be linked to the original data, but the original data can not be regenerated from the hash. Hashes therefore allow the transmission of small amounts of data to represent large amounts of data, which can be important for efficiency and storage requirements. Bitcoin uses hashing to disguise the original data, which allows concealment of a user's actual public key, making transactions resistant to quantum computing.
Bitcoin takes advantage of a hash's ability to disguise the original data, which allows concealment of a user's actual public key, making transactions resistant to quantum computing.
### Public-Key Cryptography — In Short ### Public-Key Cryptography — In Short
One way to think of public-key cryptography is: _a way for anyone to protect data such that only an authorized person can access it, and such that the authorized person can prove that he will have that access._ One way to think of public-key cryptography is: _a way for anyone to protect data such that only an authorized person can access it, and such that the authorized person can prove that he will have that access._
> 🔥 ***What is the power of public-key cryptography?*** Public-key cryptography allows asymmetric activities: one user can encrypt data that can only be decrypted by another; or one person can create signatures that can be verified (but not duplicated) by others. Asymmetric signatures are what make Bitcoin go round.
## About ECC ## About ECC
ECC stands for elliptic-curve cryptography. It's a specific branch of public-key cryptography that depends on mathematical calculations conducted using elliptic curves defined over finite fields. It's more complex and harder to explain than classic public-key cryptography (which used prime numbers), but it has some nice advantages. ECC stands for elliptic-curve cryptography. It's a specific branch of public-key cryptography that depends on mathematical calculations conducted using elliptic curves defined over finite fields. It's more complex and harder to explain than classic public-key cryptography (which used prime numbers), but it has some nice advantages.