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Hash Each new hash value contains value*information about all previous How a Bitcoin transaction works The mining computers calculate new hash values based on a combination of the previous hash value, the new transaction block, and a nonce Bitcoin transactions. Nonce Bob, an online merchant, decides to begin accepting bitcoins as payment. Alice, a buyer, has bitcoins and wants to purchase merchandise from Bob value Nonce Bob and Alice both have Bitcoin "wallets" Wallets are files that provide access to multiple Bit WALLETS AND ADDRESSES hash value Nonce Cryptographic Hashes Cryptographic hash functions transform a collection of data into an alphanumeric string with a fixed length called a hash value. Even tiny changes in the original data drastically change the resulting hash value. And it's essentially impossible to predict which initial data set will create a specific hash value. An address String of all evil ??7 letters and numbers, Bob creates a new Bitcoin address for Alice to send her payment to. Each address: has its own balance of bitcoins. 1HULMwZEP kjEPeCh 43BeKJLlyb LCWrfDpN. Creating hashes is computationally trivial, but the Bitcoin system requires that the new hash value have a particular form-specifically, it must start with a certain number of zeros. ADDRESS The root 6d0a 1899 086a... (56 more characters) The miners have no way to predict which nonce will produce a hash of all euil 486c 6be4 6dde... It's tempting to think of addresses as bank accounts, but they work a bit differently. Bitcoin users can create as many addresses as they wish and in fact are encouraged to create a new one for every new transaction to increase privacy So long as no one knows which addresses are Alice's, her anonymity is protected. b8db 7ee9 8392. Private key Public SUBMITTING A PAYMENT Nonces To create different hash values from the same data, Bitcoin uses "nonces." A nonce is just a random number that Public Key Cryptography 101 or to hashing. Changing the nonce resu tographic key pair," composed o equi ing Gary, Garth to ey, and the spondin e to ey y that a message signed wit ress ated in Gary's wallet wit VERIFYING computers are se urchase TRANSACTION of th TRANSACTION ke As time goes on, Alic more recent tra would have to redo the work that Gary did-because any changes ce's wallet holds the private key for each Anyone on the network can now use a comp differ transaction request with the pri request is actually coming from the legitimate account owner ey ubsequent miners. Such a feat is nearly impos s from.

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Lee Sharpe, 8% @ a @LeeSharpeNFL A friend just sent me this ten-year- old prize structure for a Starcraft tournament, and I can't stop laughing. Prizes: 1st Place: $500 2nd Place: $250 3rd Place: $150 4th Place: $100 5th-8th Place: 25 BitCoins
A BUBBLE!
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Uploaded Aug 07, 2013 at 08:16PM EDT

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