MasteringBitcoin

Join the technological revolution that’s taking the financial world by storm. Mastering Bitcoin is your guide through the seemingly complex world of bitcoin, providing the knowledge you need to participate in the internet of money. Whether you’re building the next killer app, investing in a startup,Praise for Mastering bitcoinWhen i talk about bitcoin to general audiences i am sometimes asked but how does it reallwork? Now I have a great answer for that question, because anybody who reads masteringBitcoin will have a deep understanding of how it works and will be well-equipped to writethe next generation of amazing cryptocurrency applicationsGavin andresenChief Scientist Bitcoin FoundationBitcoin and blockchain technologies are becoming fundamental building blocks for thenext generation internet. Silicon valley 's best and brightest are working on it Andreas bookwill help you join the software revolution in the world of financeNaval ravikantCofounder angellistMastering bitcoin is the best technical reference available on bitcoin today and bitcoin islikely to be seen in retrospect as the most important technology of this decade. As such, thisbook is an absolute must-have for any developer, especially those interested in buildingapplications with the bitcoin protocol. Highly recommendedBalaji s. Srinivasan(@balaji,General partnerMastering bitcoinAndreas M. AntonopoulosBeijing· Cambridge· Farnham·.Kon· Sebastopol· Tokyo OREILLY°Mastering Bitcoinby Andreas M. AntonopoulosCopyright o 2015 Andreas M. Antonopoulos LLC. All rights reservedPrinted in the United States of americaPublished by O reilly Media, Inc, 1005 Gravenstein Highway North, Sebastopol, CA 95472O'Reilly books may be purchased for educational, business, or sales promotional use. Online editions arealsoavailableformosttitles(http://safaribooksonline.com).Formoreinformationcontactourcorporateinstitutionalsalesdepartment800-998-9938orcorporate@oreilly.comEditors: Mike Loukides and allyson macDonaldIndexer: Word Co Indexing ServicesProduction Editor: Melanie YarbroughhCover Designer: Karen Montgomery〔 .opyeditor:: Kim CoferInterior Designer: David FutatoProofreader carla thorntonstrator: Rebecca demarestDecember 2014: First editionRevision History for the First Edition:2014-12-01: First releaseSeehttp://oreilly.com/catalog/errata.csp?isbn=9781449374044forreleasedetailsThe O Reilly logo is a registered trademark of O Reilly Media, Inc. Mastering Bitcoin, the cover image, andrelated trade dress are trademarks of o reilly media, IncMany of the designations used by manufacturers and sellers to distinguish their products are claimed asrademarks. Where those designations appear in this book, and O Reilly Media, Inc was aware of a trademarkclaim, the designations have been printed in caps or initial capsWhile the publisher and the author have used good faith efforts to ensure that the information and instruc-tions contained in this work are accurate, the publisher and the author disclaim all responsibility for errorsor omissions, including without limitation responsibility for damages resulting from the use of or relianceon this work. Use of the information and instructions contained in this work is at your own risk. If any codesamples or other technology this work contains or describes is subject to open source licenses or the intellectual property rights of others, it is your responsibility to ensure that your use thereof complies with suchlicenses and/or rightsISBN:978-1-449-374044Table of contentsPrefaceQuick Glossary.1. IntroductionWhat Is bitcoin?History of bitcoinBitcoin uses Users, and Their StoriesGetting startedQuick startGetting Your First BitcoinsSending and receiving bitcoins102. How Bitcoin Works15Transactions, Blocks, Mining, and the blockchain15Bitcoin overviewBuying a cup of coffe16Bitcoin transactions18Common Transaction forms20Constructing a transaction21Getting the Right Inputs22Creating the Outputs23Adding the transaction to the Ledger24Bitcoin Mining25Mining transactions in blocks27Spending the Transaction283. The bitcoin client,31Bitcoin Core: The Reference Implementation31Running Bitcoin Core for the First Time31Compiling bitcoin Core from the Source code33USing Bitcoin Core's JSON-RPC API from the Command Line38Getting Information on the Bitcoin Core Client StatusWallet Setup and encryption41Wallet Backup, Plain-text Dump, and RestoreWallet Addresses and Receiving transactions42Exploring and Decoding Transactions44Exploring Blocks48Creating, Signing, and Submitting Transactions Based on Unspent Outputs 49Alternative Clients. Libraries, and Toolkits56Libbitcoin and sx tools56pycoinbcd584. Keys, Addresses, Wallets.61Introduction61Public Key Cryptography and Cryptocurrency62Private and Public KeysPrivate KeysPublic keys65Elliptic Curve Cryptography ExplainedgPublic Ke68Bitcoin addresses70Base5 8 and Base58 Check EncodKey formatsImplementing Keys and Addresses in Python81Wallets84Nondeterministic(Random) Wallets85Deterministic(Seeded) WalletsMnemonic Code words86Hierarchical Deterministic Wallets (BlPo032/BIPo044)87Advanced Keys and addressesEncrypted Private Keys(BIPo038)999Pay-to-Script Hash(P2SH) and Multi-Sig Addresses778Vanity addressesPaper wallets1045.Transactions.109Introduction109Transaction Lifecycle109Creating Transactions110Broadcasting Transactions to the Bitcoin Network10ⅵi| Table of contentsPropagating Transactions on the Bitcoin NetworkTransaction StructureTransaction Outputs and Inputs112Transaction Outputs113Transaction Inputs115Transaction Fees118Adding Fees to Transactions119Transaction Chaining and Orphan Transactions120Transaction Scripts and Script Language121Script Construction(Lock Unlock)122Scripting language123Turing incompleteness126Stateless verificationStandard Transactions126Pay-to-Public-Key-Hash(P2PKH)127Pay-to-Public-Key128Multi-Signature129Data Output (OP_RETURN130Pay-to-Script-Hash(P2SH)1326. the bitcoin network137Peer-to-Peer Network Architecture137Nodes Types and roles138The Extended Bitcoin Network139Network discovery142Full nodes145Exchanging Inventory146Simplified Payment Verification(SPV) Nodes147Bloom filters150Bloom Filters and Inventory updateTransaction pools156Alert Messages1577. The blockchain159Introduction159Structure of a block160Block headerBlock Identifiers: Block Header Hash and block height161The Genesis block162Linking blocks in the blockchain163Merkle trees164Merkle Trees and Simplified Payment Verification(SPv)170Table of Contents8. Mining and Consensus.Introduction173Bitcoin Economics and Currency Creation174Decentralized consensus176Independent verification of Transactions177Mining Nodes179Aggregating Transactions into Blocks179Transaction Age, Fees, and Priority180The Generation Transaction182Coinbase reward and fees183Structure of the generation transaction184Coinbase Data185Constructing the block header187Mining the block188Proof-Of-Work algorithm188Difficulty representation194Difficulty Target and Retargeting195Successfully Mining the Block197Validating a New block197Assembling and Selecting Chains of Blocks198Blockchain forks199Mining and the hashing race204The Extra nonce solution206Mining pools207Consensus attacks2109. Alternative Chains, Currencies, and Applications................ 215A Taxonomy of Alternative Currencies and Chains216Meta Coin platforms216Colored Coins217Mastercoin218Counterparty218Alt coins218Evaluating an alt coin219Monetary Parameter Alternatives: Litecoin, Dogecoin, Freicoin220Consensus Innovation: Peercoin, Myriad, Blackcoin, Vericoin, NXT221Dual-Purpose Mining Innovation: Primecoin, Curecoin, gridcoin223Anonymity- Focused Alt Coins: CryptoNote, Bytecoin, Monero, Zerocash/Zerocoin Darkcoin225Noncurrency alt Chains226Namecoin226Bitmessage228I Table of Contents