Block Chain Foundation (II.)

Lecture 2.1 Author: bao_zijian@163.com centralization vs decentralization such as e-mail:decentralized protocol,but nated BU Centralized Webmail services
Aspects of decentralization in bitcoin:1.who maintains ledger. 2.who has authority over which Transactiona are valid? 3.who creaters new Bitcoins? 4.who determines how the rules of the system change? (Wait next lecture) 5.how do bitcoins acquires exchange values. (Finance to solve)
Beyond the Protocol:exchangers,wallet software,service providers
Aspects of decentralization in bitcoin:1.p2p network open to Anyone,low barrier to entry           2.mining open to anyone, but inevitable concentration the power often seen as undesirable 3.updates to Softwate:core developers trusted by the Community,have great power.




Lecture 2.2 Author: bao_zijian@163.com distributed consensus Why consensus? Traditional motivation:reliability in Distributed systems distributed Key-value Store enables various applications:dns,p Ublic Key Directory,stock Trades
Distributed consensus protocol. There are n nodes that all have an input value. Some of these nodes are faulty or malicious. A distributed consensus protocol has following properties:
It must terminate with all honest nodes in agreement on the value of must have been generated by a honest node

How consensus could work in Bitcoin on any given time:all nodes have a sequence of blocks of transactions they hav E reached consensus on each node has a set of outstanding transactions (not written to the block) it is heard about
Why consensus is hard nodes could crash nodes may be malicious network are imprefect not all pairs of nodes C onnected Faults in Network latency
Many Impossibility Results Byzantine generals problem Fischer-lynch_paterson (deterministic nodes): con Sensus impossible with a single faulty node




Lecture2.3 Author: bao_zijian@163.com Consense without identitiy:the block chain why identity. Pragmatic:some protocols need node IDs some distributed protocols need the least ID identitiy to do things security:assume less than 50% malicious because of these Bitcoin Consistency is a bit difficult, but why is there no identity. 1. Point-to-Point to the system no one can assign value to id--will have Sybil attack 2. Using a pseudonym is a goal of Bitcoin
Most Common heuristic:6 confirmations double-spend probability decreases exponentially with# of confirmations


Lecture 2.4 Author: bao_zijian@163.com Incentives and proof of work Bitcoin to the central part is the technical mechanism part is the engineering incentive mechanism assumption of honesty for Behaving honestly. Can we give nodes incentives for behaving honestly.
Incentive 1:block reward Creator of block gets to include special coin-creation transaction in the block (put a record into Block) Choose Recipient Adddress of this transaction the Value is fixed:currently btc,halves every 4 years block CRE Ator gets to "collect" the reward only if the block ends up on long-term consensus.
Incentive 2:transaction Fees (TIP) Creator of transaction can choose to make output value less than input value. Remainder is a transaction fee and goes to block creator.
remianing problems how to pick a random node? How to avoid a free-for-all due to rewards? (There are incentives to solve the problem of melee.) How to prevent Sybil attack.      (witch attacks, creating a number of legitimate nodes, trying to disrupt the consensus process) to solve these 3 problems? Proof of work workload certificate to approximate selecting a random node:select nodes in proportion to a resource that n o One can monopolize (we hope) in proportion to computing power:proof-of-work into proportion to Ownership:proo F-of-stake
Hash puzzles to create blocks, find Nonce s.t. H (nonce | | prev_hash | | | |-TX) is very small
If hash function is secure:only way to succeed be to try enough nonces until for your get lucky.
POW property 1:difficult to compute about 10 of the 20-time side hashes/block only some nodes to bother. The POW property 2:parameterizable costs (cost can be parameterized) Nodes automatically re-calculate the target every two. Goal:avarage time between blocks = 10minutes Prob (Alice wins next blocks) = fraction of global hash power she contro Ls
Key security assumption attacks infeasible if majority of miners weigted by hash power follow the protocol. The POW property 3:trivial to verify (simple) has proved that he is correct.



Lecture 2.5 Author: bao_zijian@163.com Putting it all together mining economics if mining reward (block reward + tx fees) (Bit COIN) > Hardware electricity Cost (dollars)-"profit complications:fixed vs variable costs reward depends on Globle Hash Rate
Recap identities block Chain&consensus transactions Peer-to-peer network Hash puzzles&mining
Bitcoin has three types of consensus value state rules (hard soft fork)
What can a 51% attacker do? No, steal coins from existing?      Suppress some transactions?         From the blocks chain yes from the Peer-to-peer network no change to the block reward?     No (the reward for Bitcoin is written on the mining software) destory confidence in bitcoin? Yes lose faith
Remaining questions How does we get from consensus to currency? What else can we do with consensus?