Bitcoin for Nonmathematicians:. Slava Gomzin
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Название: Bitcoin for Nonmathematicians:
Автор: Slava Gomzin
Издательство: Ingram
Жанр: Маркетинг, PR, реклама
isbn: 9781627340724
isbn:
If we analyze existing payment systems—predecessors of bitcoin—there are two main problems in their design: security and centralization. Security flaws in the design of payment cards resulted in the creation of PCI data security standards, which forced merchants, service providers, banks, and payment brands to invest billions of dollars into security controls, which eventually failed to protect them from data breaches. On the other hand, as you will see in part I of this book, centralized management of the first virtual currencies was the main reason for fiasco.
Bitcoin design provides solutions to both the security and centralization problems: digital signature and proof of work. A digital signature is based on public-key cryptography, while a cryptographic hash function is the essential part of both a digital signature and a proof-of-work implementation.
Before the invention of digital signatures, it was impossible to broadcast the message throughout a public channel such as the Internet and verify through multiple recipients that this message was unchanged since its creation by the original sender. Along with public-key encryption, the cryptographic hash function made creation of a digital signature possible, which protects the integrity of crypto transactions—a solution for security problems.
At the same time, a cryptographic one-way hash function, besides its participation in digital signature design, made proof-of-work implementation possible, which is a solution for centralization problems.
So it’s safe to say that if you understand the cryptography behind bitcoin, then you know how bitcoin and other cryptocurrencies work, so you can trust them.
Part I
From Coins to Crypto
In This Part
Chapter 3: Centralized Digital Payments
Chapter 1
Traditional Money
Money is like muck, not good except it be spread
—Francis Bacon
Many books start telling their stories ab ovo,1 and this book is no exception. One can say that bitcoins are created from thin air. While perhaps it’s true, the idea wasn’t born in a vacuum. There was life before bitcoin, and its daring ancestors helped to build a foundation for what we recognize today as cryptocurrency. Learning more about the history of traditional and digital money and payment methods might help us to understand the common rules of the game and predict the challenges facing cryptocurrencies.
This book does not pretend to be a full reference on bitcoin design and implementation, but rather focuses on cryptography. However, it would be reckless to discuss other aspects of cryptocurrencies without reviewing its implementation, and especially without comparing this design with other cashless payment implementations, such as plastic cards.
Commodities versus Gold
Money. Everyone knows what it is, at least its practical application. It all began with barter, when people were exchanging their products with each other for goods and services. For a very long time barter was the only way to sell or buy. But at some point, people realized that barter was limited and inconvenient. For example, I have oranges that I want to sell, and I need to buy some apples. But the apple seller doesn’t need oranges, so I can’t buy his apples. In this situation, I need to exchange my oranges for something that would satisfy the apple seller as a medium of exchange for his apples. This something can be a commodity—goods that are useful to many people and that can be easily and willingly swapped for other goods and services. So commodities became the first money. For some time, many different societies were happy using commodities, such as cocoa beans in Abyssinia or iron nails in Scotland, as money.2
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