Bitcoin

Related articles

• List of applications/Internet#Bitcoin
• Vcash

Bitcoin is a decentralized P2P electronic cash system without a central server or trusted parties. Users hold the cryptographic keys to their own money and make transactions directly with each other, with the help of the network to check for double-spending. Bitcoins, usually denoted by BTC (e.g. 0.1 BTC), can also be exchanged for traditional currencies like US dollars.

Introduction

The Bitcoin network runs on peer-to-peer networking, digital signatures and cryptographic proof to make and verify transactions. Nodes broadcast transactions to the network, which records them in a public record of all transactions, called the blockchain. A block is a record of some or all of the most recent Bitcoin transactions that have not yet been recorded in any prior blocks. In order to preserve the integrity of the blockchain, each block in the chain confirms the integrity of the previous one, all the way back to the first one, using hashing.

New bitcoins are generated by the network through the process of mining. Mining involves inserting a new block into the current blockchain, this is difficult because it requires generating a valid hash (in this case a large integer).

A variation in difficulty is achieved by requiring that this integer is below a certain threshold - the data in the block is perturbed by a nonce value, until the data in the block hashes to produce an integer below the threshold - which takes a lot of processing power. The threshold is set by the number of people currently mining for bitcoins so as to achieve a general speed of about 1 block every 10 minutes.

Consensus

From Bitcoin.it wiki:

The consensus rules are the specific set of rules that all Bitcoin full nodes will unfailingly enforce when considering the validity of a block and its transactions. For example, the Bitcoin consensus rules require that blocks only create a certain number of bitcoins. If a block creates more bitcoins than is allowed, all full nodes will reject this block, even if every other node and miner in the world accepts it. Adding new consensus rules can generally be done as a softfork, while removing any consensus rule requires a hardfork. Rules regarding the behavior of the mere network protocol are not consensus rules, even if a change to the network protocol behavior breaks backward-compatibility. The consensus rules are only concerned with the validity of blocks and transactions.

These rules are called consensus rules because Bitcoin requires that all participants in the Bitcoin economy have consensus (with the meaning of the next definition) as to the consensus rules. If the economy disagrees about the consensus rules, then the currency and economy splits into two or more totally-independent pieces.

Warning: It is integral to understand that you are only capable of transacting with parties with which you are in consensus, should your personal consensus with the network be broken, or consensus of the network at large be broken, you will only be able to transact with those parties with which you are in consensus.

Nature of Consensus Failure

The nature of consensus is a very strict yet completely voluntary uncoordinated interaction of many independent users. It is both a requirement of the networks correct operation, and a facilitator of its correct operation at the same time. You can be considered to be in consensus with any other node that will accept any data structure relevant to consensus as valid that you have accepted as valid (ignoring of course an instance where two different miners both find valid blocks at the same time and each relay theirs to part of the network, the next valid block will decide which preceding block was valid based on which one it extends from). Consensus can be broken violating explicit consensus rules (violating a rule explicitly spelled out as a consensus rule, i.e. the cap of 21 million bitcoin, rate at which they are issued, the maximum size of a block, that a transaction is only valid if citing a valid unspent coin, etc.) or violating unexplicit rules (due to a bug or unintended consequence of design, i.e. a valid structure erroneously being invalidated due to software bug/improper format/etc., or the use of an attack avenue to overstress the node with load due to a bug or bad design). Both types of consensus failures could potentially come to be intentionally or unintentionally.

A discussion of two consensus breaks in Bitcoin Core's history, one explicit, one unexplicit: https://bitcointalk.org/index.php?topic=702755.0

A discussion of design flaw on reddit (with citation links to official developers discussion): https://www.reddit.com/r/Bitcoin/comments/5h70s3/bitcoin_unlimited_bu_the_developers_have_realized/

Installation

See #Bitcoin Software.

How to get Bitcoins?

Warning: Your private keys are what allows you to spend your Bitcoin under valid consensus rules. They also allow anyone else possessing them to spend your Bitcoin. Keeping your private keys safe is the equivalent of keeping your Bitcoin safe, the two are inseparable. Here is a link to the Bitcoin Wiki article on wallet security: Wallet Security.

There are a variety of ways to acquire bitcoins:

• Accept bitcoins as payment for goods or services.
• There are several services where you can trade them for traditional currency.
• Find someone to trade cash for bitcoins in-person through a local directory. To find traders near you, you can use LocalBitcoins or a bitcoin map.
• Participate in a mining pool.
• If you have very good hardware, you can solo mine and attempt to create a new block (currently yields 12.5 BTC plus fees).

Mining

Note: Mining is only really commercially viable with decent hardware, for a comparison of hardware and their performance see the bitcoin.it wiki. To see if your setup is viable use a Profit Calculator.

The concept of Bitcoin mining is based on searching for an input that is hard to find but easy to prove the existence of. Bitcoin miners construct blocks that consist of a set of transactions users are trying to make and link them to the previously solved block. Miners add a random piece of data to this, and hash a summary of the block. If the hash of this summary is below the desired target of the network, the block is considered valid. Since it is easy to reproduce any individual hash, they are impossible to predict, so the miner does not know which piece of data will create a desirable hash.

Mining requires the use of a miner, which is a program used to compute the required hashes and thus create Bitcoins. To learn more about mining please read this article.

There are several Bitcoin miners in the official repositories as well as in the AUR.

Bitcoin Software

Full Nodes

A full node is a bitcoin client which starts with the initial genesis block of the blockchain, and sequentially validates the signature chain of each historical block to construct upon arriving at the tip of the chain the current Unspent Transaction Output Set. This is the current set of unspent coins, and which bitcoin addresses they are encumbered to. It is called a full node because it obviously verifies the cryptographic integrity of the UTXO set itself. A full node client may or may not also participate in relaying unconfirmed transactions around the network and operate a mempool of all unconfirmed transactions, and may or may not participate in serving the full historical blockchain to new full node clients bootstrapping themselves. It is possible to run a full node that deletes almost all historical blocks, only keeping the recent history to a certain threshold (pruning), but only after having downloaded and verified them in sequence to arrive at the present period it retains. This is to ensure the same guarantee of the cryptographic integrity of the UTXO set.

Some good practices to consider:

1. Encrypt your wallet with a strong password.
2. Backup your wallet.dat file using bitcoin-qt.
3. See the official Bitcoin wiki for additional guidance.

Bitcoin nodes can made to use less storage by enabling pruning, by adding prune=550 to the configuration file at ~/.bitcoin/bitcoin.conf. This will bring the disk space usage down to about 2GB. Synchronizing the blockchain can be made faster by increasing the database cache as much as your RAM allows, add dbcache=M to ~/.bitcoin/bitcoin.conf where M is the number of megabytes of RAM to allocate. To reduce bandwidth usage you can use the options from this page: https://bitcoin.org/en/full-node#reduce-traffic

Bitcoin Classic

Bitcoin Classic stands for the original Bitcoin as Satoshi described it, "A Peer-to-Peer Electronic Cash System".

From the Official Website:

We are writing the software that miners and users say they want. We will make sure it solves their needs, help them deploy it, and gracefully upgrade the bitcoin network's capacity together.

Bitcoin Classic can be found in bitcoin-classic^AUR, which always follows the latest stable, making sure it uses the signed source release from the official project release. Bitcoin Classic ships with a systemd unit bitcoind.service.

Bitcoin Classic has a statement on blocksize here.

In Bitcoin Classic the block size is no longer limited by rules set by software developers. It is set by you, the person running the software.

Bitcoin Core

Install bitcoin-qt, bitcoin-daemon, bitcoin-cli and bitcoin-tx.

Note: Bitcoin Core requires syncing the blockchain (current size is about 97GB as of Nov. 2016); each transaction in a block gets verified by verifying the ECDSA signatures that spend each transaction, which is a time-consuming mathematical operation, so having a good CPU, sufficient storage and bandwidth is highly recommended.

Currently the dominant standard being used by most Bitcoin nodes. Has the vast majority of bitcoin developers, resources and bitcoin economy behind it.

Version 0.13.1 introduced signalling for Segregated Witness (segwit).

You can use this systemd service file for bitcoin-daemon

(You will probably need to change User= or create a bitcoin user.)

/etc/systemd/system/bitcoind.service

[Unit]
Description=Bitcoin daemon service
After=network.target
 
[Service]
Type=simple
User=bitcoin
ExecStart=/usr/bin/bitcoind
 
[Install]
WantedBy=multi-user.target

bitcoind and bitcoin-qt should run fine with minimal or no configuration file. For a list of configuration parameters that can be added to your ~/.bitcoin/bitcoin.conf, see: bitcoind --help.

Official Website

Bitcoin Unlimited

Bitcoin Unlimited can be found in bitcoind-unlimited-git^AUR

Consensus-incompatible implementation that Removes the block size limit completely.

Note: In Bitcoin Unlimited the block size is no longer limited by rules set by software developers. It is set by you, the person running the software. This runs the very real risk of adding support to raising the blocksize to a point your hardware cannot provide the necessary resources to fully validate the blockchain.

Official Website

Bitcoin XT

Bitcoin XT can be found in bitcoinxt-gui-git^AUR

Implementation similar to Bitcoin Classic which also implements multiple patches aimed at improving the network's throughput. This client is potentially consensus-incompatible with the rest of the network, and upon conditions being met will fork away from the previous chain and consensus rules.

Official Website

Thin Clients

Thin clients do not fully validate the blockchain or compute a full UTXO set. They derive their security in proxy by connecting to a fullnode and downloading the blockheaders. They are still able to guarantee the Proof of Work behind a block is valid, and each blockheader contains a merkle root of all the transactions in the block. This allows them to query full node clients for the blockheaders and the data to prove their transaction is in the merkle root in the blockheader. They however must trust that miners are mining valid blocks, and have no way to make sure rules like the issuance rate or cap of Bitcoins are being followed.

Warning: In the event of a consensus failure at large on the network, or one affecting the node(s) an SPV client is connected to, the SPV client is incapable of detecting which partition of the network it is on, or communicating to, or being sent information by. It is extremely insecure to send or receive money with an SPV client in the event of such a consensus failure occurring.

Electrum

Lightweight Bitcoin wallet.

Install the electrum package.

Official website

Multibit HD

Lightweight Bitcoin desktop client powered by the BitCoinJ library.

Install the multibit package.

Official website

See also

Informational Sites

• Bitcoin Whitepaper - The original whitepaper published by Satoshi Nakamoto before the launch of the live Bitcoin network.
• bitcoin.org - Today the site is an independent open source project with contributors from around the world. Final publication authority is held by the co-owners, but all regular activity is organized through the public pull request process and managed by the site co-maintainers.
• bitcoin.it Wiki - Bitcoin Wikipedia.
• Satoshi Nakamoto Institute - Thoughts and quotes from the designer.
• Coin Dance - Broad purpose network statistics.

Discussion Groups

• bitcointalk.org - Forum.
• IRC Channels on Freenode:
  • #bitcoin - General Bitcoin-related.
  • ##bitcoin - Price talk discussion, etc.
  • #bitcoin-core-dev - Development and technical.
  • #bitcoin-otc - Over The Counter exchange.
  • #bitcoin-market - Live quotes from markets.
  • #bitcoin-mining - Mining discussion.

Blockchain Explorers

• Blockchain.info - Blockchain explorer/Webwallet.
• Blockr.io - Blockchain explorer.
• blockparser - Fast, quick and dirty bitcoin blockchain parser.
• Tradeblock - Blockchain explorer with graphical real-time tools.
• Blockcypher - Blockchain explorer.