Where did the program come from that makes bitcoins? How can it just be answers to mathematical problems?
In: Technology
I understand Satori wrote a program..::but how does it run without him knowing everything inside of it? I understand the “coins” are a key code for the answer to complex problems…
Is it writing its own code? Could someone just examine the code and find the bitcoins?
I just can’t wrap my head around it and I’ve tried reading abt it several times.
Someone who went by the name Satoshi Nakamoto created Bitcoin. That name is known to be a fake name. We don’t for sure who he really is.
When we say that you answer math problems to create Bitcoin, that’s simplifying something very complicated. It isn’t just any old math problems. Your computer must solve very specific math problems that help to keep the Bitcoin system alive.
When you send dollars to someone using your bank, your bank and the US government verify that you really have that money to send. What they are sending isn’t physical dollar bills of course. It’s just the digital version of dollars. If no one checked, it would be easy to create new digital dollars whenever you like! You could send all your friends millions of dollars because no one is verifying that the US government created them instead of you counterfeiting them.
Bitcoin doesn’t have a government to check on things, so it uses the “miners” instead. Miners are people who run a program on their computer to “solve math problems” and they get Bitcoin. But those math problems are actually tracking everyone’s Bitcoin to verify that they really have the Bitcoin they claim to have and they didn’t counterfeit any of it. It’s kind of like being a part of the Bitcoin government. And just like a real government, you’ll get paid for your work! For helping keep the system safe from counterfeit Bitcoin, you will be awarded some Bitcoin.
Note: Mining is actually far more complicated than this, and some of my explanation is still simplifying things heavily. But I wanted to keep it as ELI5 as possible. I hope this helps you get an idea of what’s going on.
First of all, there’s no such thing as “making” a bitcoin. Bitcoin mining is actually the process that keeps the transaction history secure, and by participating in it, you can be rewarded with Bitcoin added to your balance (out of nowhere). You aren’t actually working to create a Bitcoin, you’re working to keep the history secure, and by doing that, you get Bitcoin.
So how do we keep it secure? First, we have to talk hash functions. A hash function takes some input of any length, and produced a fixed length output. One important trait of hash functions is that you cannot do them in reverse. If you have the hash, you can’t get the original data back. One other important function is that a small change in the input data results in a large change in the hash output, so you can’t “navigate” your way in the hash values.
Now let’s talk about how we keep Bitcoin transactions secure with hashing. Every 10 minutes or so, the Bitcoin transaction history needs to be “sealed”. This transaction history has any number of transactions in it, the hash value of the previous sealed block, as well as something called a *nonce*. The nonce is a field that anyone can write any value in, but its purpose is to manipulate the value of the hash function on that transaction block.
In order to seal the block, you need to find a nonce value that results in a hash with a specific trait. Specifically, we look for a hash that ends in **n** 0’s, where n can be adjusted to make it harder or easier. Since we can’t calculate the hash backwards, we just need to guess a random nonce, run the hash, and if it works, we submit it. If it doesn’t, we throw it away and try again.
Importantly, this takes a significant amount of computer resources to do all these hashing calculations. If you get too much computing power and the hashes calculate too fast, you just increase the number of 0’s you need on the hash.
If someone wants to rewrite the history, they need enough computing power to redo the entire chain. Since every block has the hash of the previous block in it, if you want to go back and edit the block 5 prior, you need to hash that block, which changes the hash of the next block, and the next, and the next, and the next.
The program isn’t some secret: you can literally find the source code on google for the world to see.
So, One step at a time:
> What is bitcoin *really*?
A ledger. It is nothing more than a giant list of transactions: “Joe pays Sally 4btc. Sally pays Bill 1btc. Hally pays Joe 3btc”. By going trough the list and adding up every point where Joe sends away and receives bitcoin you can find out how much Joe has.
> Where is this ledger stored?
Whoever wants it can simply ask for a copy from someone else on the network. If you simply want to know how much Joe has find someone who has the ledger and just ask them to count for you.
> What if there are multiple ledgers because it takes time for them to travel?
The longest ledger (the one who has more work put in to it) is the correct one by default.
> How do you prevent me from saying “Joe sends me a million btc?”
Everyone has a secret key they can use to sign their transactions, like a password. If you don’t have Joe’s secret key you can’t sign transactions from him, and everyone will call you a fraud.
> “How can we prevent People from changing the ledger after the fact?”
That’s where miners come in. Miners are people who take transactions people are making, make sure they are valid and correct, and add them to the ledger. However before adding them to the ledger they group them together and try to find a verification code. This code is really hard to find, but easy to check afterwards. Because it’s really hard to find if you change the ledger you’ll have to find *new* verification numbers, and that’s really hard and generally not worth it when everyone else is just going to ignore your fake ledger for the longer one that everyone else is working on.
> Where do new bitcoins come from?
Miners, when finding the verification numbers, are allowed to add a special transaction to the top of the block they are verifying that says “The miner gets this specific amount of bitcoins from nowhere”.
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