IEEE BYTE VOLUME-3 ISSUE-1 | Page 11

Bitcoins

Sayli​ ​Uttarwar, ​ ​TE​ ​IT
If​ ​you​ ​are​ ​an​ ​ardent​ ​fan​ ​of​ ​Game​ ​of​ ​Thrones, ​ ​as​ ​I​ ​am, ​ ​you​ ​would​ ​know​ ​that​ ​in​ ​July, ​ ​a hacker​ ​group​ ​allegedly​ ​known​ ​as​ ​Mr. ​ ​Smith​ ​created​ ​quite​ ​a​ ​havoc​ ​for​ ​HBO​ ​by​ ​releasing​ ​private HBO​ ​data​ ​online, ​ ​including​ ​the​ ​scripts​ ​of​ ​the​ ​upcoming​ ​GOT​ ​episodes. ​ ​The​ ​hackers​ ​sent​ ​HBO on​ ​a​ ​hunt​ ​for​ ​a​ ​hefty​ ​load​ ​of​ ​bitcoin​ ​by​ ​demanding​ ​ $ 250,000​ ​worth​ ​of​ ​bitcoins​ ​as​ ​a​ ​ransom​ ​in order​ ​to​ ​stop​ ​releasing​ ​private​ ​HBO​ ​data. ​ ​We​ ​all​ ​have​ ​heard​ ​about​ ​bitcoins, ​ ​but​ ​what​ ​are​ ​they​ ​in real​ ​sense? ​ ​And​ ​why​ ​is​ ​everyone​ ​so​ ​crazy​ ​about​ ​them? ​ ​Let’ s​ ​see.
1. Cryptocurrency Bitcoin​ ​is​ ​a​ ​system​ ​based​ ​on​ ​ownership​ ​and​ ​no​ ​one can​ ​censor​ ​it​ ​, ​ ​no​ ​one​ ​can​ ​seize​ ​it​ ​, ​ ​no​ ​one​ ​can freeze​ ​it. ​ ​It’ s​ ​a​ ​digital​ ​currency​ ​which​ ​means​ ​it​ ​only exists​ ​electronically. ​ ​It​ ​isn’ t​ ​attached​ ​to​ ​a​ ​state​ ​or government​ ​, ​ ​so​ ​it​ ​doesn’ t​ ​have​ ​a​ ​central​ ​issuing authority. ​ ​There’ s​ ​ ​no​ ​one​ ​making​ ​decisions​ ​on​ ​how to​ ​regulate​ ​the​ ​flow​ ​of​ ​bitcoins​ ​or​ ​investigate​ ​any fraud. Bitcoin​ ​exists​ ​because​ ​of​ ​a​ ​network​ ​of​ ​people​ ​called​ ​the​ ​cryptographers. ​ ​In​ ​fact​ ​bitcoin​ ​is termed​ ​as​ ​world’ s​ ​first​ ​cryptocurrency​.
​ ​ ​ ​ ​ ​ ​2. ​ ​ ​ ​Blockchain ​ ​Bitcoin​ ​is​ ​a​ ​fully​ ​digital​ ​currency​ ​and​ ​you​ ​can​ ​exchange​ ​bitcoins​ ​between​ ​computers​ ​in​ ​a worldwide​ ​network​ ​from​ ​one​ ​computer​ ​to​ ​another​ ​directly. ​ ​It’ s​ ​the​ ​same​ ​as​ ​you​ ​use​ ​peer-to-peer network​ ​to​ ​download​ ​your​ ​favorite​ ​movies, ​ ​music, ​ ​etc. But​ ​then​ ​what’ s​ ​stopping​ ​anyone​ ​from making​ ​a​ ​bunch​ ​of​ ​counterfeit​ ​copies​ ​of​ ​bitcoins​ ​and​ ​becoming​ ​fabulously​ ​wealthy​ ​? ​ ​But​ ​unlike an​ ​mp3​ ​or​ ​a​ ​video​ ​file​ ​, ​ ​bitcoin​ ​isn’ t​ ​a​ ​string​ ​of​ ​data​ ​that​ ​can​ ​be​ ​duplicated​ ​. ​ ​A​ ​bitcoin​ ​is​ ​actually an​ ​entry​ ​on​ ​a​ ​huge​ ​, ​ ​global​ ​ledger​ ​called​ ​the​ ​blockchain​ ​. ​ ​A​ ​blockchain​ ​records​ ​every​ ​bitcoin transaction​ ​that​ ​has​ ​ever​ ​happened. ​ ​So​ ​sending​ ​bitcoins​ ​ ​means​ ​that​ ​a​ ​new​ ​transaction​ ​is recorded​ ​onto​ ​the​ ​blockchain. This​ ​blockchain​ ​is​ ​not​ ​centralized​ ​, ​ ​i. e. ​ ​its​ ​not​ ​kept​ ​and​ ​maintained​ ​by​ ​a​ ​single​ ​person​ ​ / organization. ​ ​In​ ​fact​ ​anybody​ ​can​ ​volunteer​ ​to​ ​keep​ ​the​ ​blockchain​ ​up​ ​to​ ​date​ ​with​ ​all​ ​the​ ​new transactions​ ​irrespective​ ​of​ ​their​ ​physical​ ​location. ​ ​And​ ​a​ ​ton​ ​of​ ​people​ ​do. ​ ​It​ ​all​ ​works​ ​out because​ ​there​ ​are​ ​a​ ​lot​ ​of​ ​people​ ​keeping​ ​track​ ​of​ ​the​ ​same​ ​thing​ ​, ​ ​to​ ​make​ ​sure​ ​all​ ​transactions are​ ​accurate.
​ ​ ​ ​ ​ ​ ​3. How​ ​it​ ​works Whenever​ ​you​ ​need​ ​to​ ​make​ ​a​ ​transfer​ ​over​ ​the​ ​bitcoin​ ​network​ ​, ​ ​you​ ​announce​ ​a​ ​few​ ​things​ ​to the​ ​whole​ ​network, ​ ​them​ ​being​ ​: a. ​ ​Your​ ​account​ ​number b. ​ ​The​ ​account​ ​number​ ​of​ ​the​ ​person​ ​you​ ​are​ ​sending​ ​bitcoins​ ​to