On Wed, Dec 18, 2013 at 10:31 PM, LizR <lizj...@gmail.com> wrote:
> On 19 December 2013 10:09, Quentin Anciaux <allco...@gmail.com> wrote:
>> 2013/12/18 LizR <lizj...@gmail.com>
>>> On 19 December 2013 08:01, Quentin Anciaux <allco...@gmail.com> wrote:
>>>> 2013/12/18 Bruno Marchal <marc...@ulb.ac.be>
>>>>> On 18 Dec 2013, at 09:47, Quentin Anciaux wrote:
>>>>>> Depends on the problem you're considering, I think it can lead to a
>>>>>> society with more individual freedoms, for example.
>>>>> I don't think it can... can you give argument how bitcoin would achieve
>>>>> that ?
>>>>> Bitcoin was not deflationist at the start,
>>>> Yes it was and is... the number of bitcoins are finite and fixed over
>>>> time... There will be at most 21 millions bitcoins in circulation for
>>>> ever... a lost bitcoin is lost *forever*...
>>> I don't know much about bitcoins. Why are they limited to 21 million,
>> By design.
>>> and if one is lost, why can't it be recreated?
>> Because a bitcoin cannot be recreated as the number is fixed. So if you
>> lose your wallet (erase it), then the bitcoins in it are lost forever...
> Sorry, but that doesn't tell me why the number is fixed, and why one can't
> be recreated. Preferably explain in simple terms, so an idiot like me can
> grasp it.
All the transactions that occurred so far are registered in a file
that is shared between the nodes in the network. New transactions are
broadcast to many nodes.
One of these nodes is going to be lucky enough to find a way to
incorporate the outstanding transactions into the file according to
very strict requirements. These outstanding set of transactions will
form a "block". A block contains the following things:
- the hash of the previous block
- the set of transactions
- an arbitrary number (nounce)
An hash is the output of a one-way functions. One-way functions are
hard to invert, so getting the original block from the hash is
computationally hard. The bitcoin protocol wants to make the hash hard
to create, in part because every time a hash is discovered, the
discoverer is rewarded with a predetermined number of bitcoins. The
way to make the hash hard to create is that the network agrees that it
must start with a certain number of zeros. The only way to meet this
requirement is through brute force, by trying random values for the
nounce until one works.
Once the hash is found, a new block is created and work will begin on
finding the nest one, ad infinitum. This is why the ledger file is
called a blockchain. Each block hashes the hash of the previous block.
This difficulty also serves as a proof-of-work (a receipt that shows
that a certain amount of computational effort was spent, on average).
This protects the network against attacks. If a node received two
conflicting blockchains, it will chose the longest one. This way,
unless the attacker controls the majority of the computing power of
the network, it cannot create a fake blockchain longer than the rest
of the network.
So mining for bitcoins is the same process that allows for
transactions. There is also the possibility of transaction fees. When
you make a transaction, you can volunteer to pay a fee to the miners.
The discoverer of the next block will receive this fee. Nodes that
receive your transactions are not forced to accept them, so the fee is
an incentive for them to accept it. As mining becomes less profitable,
it becomes more likely that miners will expect fees. Once all coins
are discovered, the network will work solely on fees, and I imagine
fee prices will emerge naturally (miners will compete on price, users
will pay more according to urgency). In a market with many
transactions, mining can become profitable even with no new coins to
discover and low fees.
What "contains" your coins are wallets. Wallets are two random
numbers. One is public, for incoming transactions and one private, for
outgoing transactions. Only you know your private address but if you
sign a transaction with it, the validity if the transaction can be
confirmed through a one-way function against the blockchain. So
ultimately, you keep possession of your coins by knowing the private
So the blockchain is a gigantic number and the wallets are numbers.
The actual coins are not numbers, they are a complete abstraction.
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