UndocumentedInternalsBitcoinEthereumBlockchains.pdf

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Undocumented Internals of the Bitcoin, ethereum and blockchains

The

Undocumented Internals of the

bitcoin,

ethereum

and

blockchains

Vijay Mukhi

Undocumented Internals of the Bitcoin, ethereum and blockchains

FIRST EDITION 2018

ISBN : 978-93-8655-130-6

in a database or retrieval system, without the prior written permission of publisher with the exception that the program

listings may be entered, stored and executed in a computer system, but they may not be reproduced by publication.

LIMITS OF LIABILITY AND DISCLAIMER OF WARRANTY

The information contained in this book is true and correct and the best of author’s & publisher’s knowledge. The author

has made every effort to ensure accuracy of this publications, but cannot be held responsible for any loss or damage

arising from any information in this book.

All trademarks referred to in the book are acknowledged as properties of their respective owners.

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Published by Manish Jain for BPB Publications, 20 Ansari Road, Darya Ganj, New Delhi-110002

Undocumented Internals of the Bitcoin, ethereum and blockchains

Dedication

This book is dedicated to my friend, the late

Shri Anil Ganguly.

His journey of life and his success stories have inspired us in a big way.

The legendary director had only one advice for all:

Never Give Up On Your Dreams, no matter what.

iii

Undocumented Internals of the Bitcoin, ethereum and blockchains

Foreword

The Future of VALUE EXCHANGE

The “Fintech” sector has been a passionate advocate for Bitcoins. It is touted by early adopters to be the silver bullet

that will take out intermediaries like banks and governments from the financial ecosystem and make exchange of value

much more efficient. On the other hand, some financial veterans dismiss the entire concept as a fad.

The buzz around Bitcoins just keeps getting louder and louder.

Bitcoins provide a barrier against governments that control central banks who in turn control fiat money. The recent

demonetization initiatives in countries like India and Venezuela have woken up citizens to the need for a currency that

is not controlled by governments. Cryptocurrencies seem to be an ideal answer to this need.

On the dark side, Bitcoins have had a notorious history so far. They have been used for illegal purposes like purchase

of drugs off the dark web. However, Bitcoins have managed to survive that phase and are now on the cusp of becoming

a mainstream medium of value exchange. Large financial organizations like BNP Paribas, Citi Bank, Barclays etc. have

Bitcoin initiatives. (http://www.coindesk.com/8-banking-giants-bitcoin-blockchain/)

The anonymity of the owner of Bitcoins is a boon for some and certainly a bane for those who want to track it down.

Bitcoin has reached an impressive milestone in the first week of December, 2017, where the popular cryptocurrency

became more valuable than gold for the first time ever.

The blockchain-powered currency topped off gold, hitting the price of $16000 for a single unit of Bitcoin compared to

$1,233 for a troy ounce of gold. (Ref: BBC)

Recovering from a sharp fall to $200 per unit in mid-2015, Bitcoin has experienced a rather significant surge throughout

the latter part of 2017 and early 2018 so far. Gold on the other hand has circled around the $1,200 price point for a while

now, with some sporadic hikes and drops here and there. This could be too good to be true for some people while the

virtual world believes this is just a beginning.

The Bitcoin is currently heavy managed / controlled by the miners from China. This certainly poses the challenge in the

way it will be adopted by the World. We will certainly see a huge amount of churn happening in times to come. The lack

of regulations and fundamentals of valuation raises another concerns about longevity and stability. However it is certain

that an ecosystem will evolve which will depolarize the Bitcoin and we will see regulations evolving around the rise of

crypto currency

However, Bitcoin is just one of the applications of a much bigger technology viz. blockchain. Bitcoin is to Blockchain as

jewelry is to gold. A blockchain is a distributed database that maintains a continuously growing list of ordered records

called blocks. Each block contains a timestamp and a link to a previous block. By design, blockchains are inherently

resistant to modification of the data — once recorded, the data in a block cannot be altered retroactively. Blockchains

are “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and

permanent way. The ledger itself can also be programmed to trigger transactions automatically.” (Reference: https://

en.wikipedia.org/wiki/Blockchain_(database))

The Blockchain is actually the building block of any application involving value exchange without involving an intermedi-

ary. This not only about the Fin Tech or changing the Financial Ecosystem but this is about changing the way Value is

UndocumentedInternalsBitcoinEthereumBlockchains.pdf

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