ChrisThe Goth:
I think what is confusing you is the crypto-currency label.
the crypto does not mean encryption. Encryption is to hide something in an unbreakable way.
The crypto refers to the other part of RSA is signing. Signing allows you to prove that a message was originated by a particular user/computer etc.
The message is not hidden. It simply list's the address (public key) that can be used to verify the message, the message exactly as it was signed (by the private key), and the hash sum
afterwards is the signature. That is why it is called key-pair. Private key you keep hidden and public key you make available.
The normal message in what mining is doing are transactions and parts of the block chain.
You can not change any part of the message as the hash will no longer verify. Even adding a single space or changing a lowercase letter to capital letter
will cause the hash verify to fail.
That is what the crypto is used for. To prove that the block chain is exactly the way it was when a particular block was created.
This way no trust is needed. Every transaction can be proven and verified.
When you buy something at sears and pay for it with cash. The only proof you have is the receipt and you have to trust sears to verify that the receipt is real.
They can always claim that you faked it and there is nothing you can do to prove them wrong.
If you use bitcoin and as long as the transaction is confirmed you can prove to anyone in the world that you paid them as long as you still control the sending address.
you can sign a message to prove the address is yours etc. No trust needed. It is mathematically provable.
So you're saying it's a tracking system for data packets that are themselves unencrypted. The reliability comes from purely the number of 'people' tracking ( confirmations ).
Which makes it a voucher system. A voucher system where said vouchers can be exchanged for cash.
Which means the 'reserve' is peer-to-peer, rather than centralised.
Yeah, that bit did confuse me. I don't get how new coins are created, unless it's built into the equation.
I get that the blockchain is important, but that's why you have 2 styles of wallet ( qt that downloads a copy, & others that read the blockchain off of a remote host ).
In any currency system there must be control of what exists, or you get hyper-inflation & mass counterfeiting.
The 'new coin' bit is where I am falling down.
I like to think of it as a world wide network of archivists or scribes that record transactions in the network and
also verify that what others have recorded is correct and provable. On the block chain, the "confirmations" is a
count of how many scribes "confirm" that the recorded transaction is correct. As the Doc said, the coins are a reward
for doing this scribe work and are built into the software/rules. At some point, only the transaction fee's will be the reward.
This reward help ensure that there is competition for confirming work "blocks" thus creating the growing network and making
it decentralized. The end result is word wide financial archive that anyone can examine without trust or permission needed.
Think of older market registers that had a "journal" tape where you could scroll back through the journal to see the transactions.
You didn't need a password, just pull out the roll and look back.
Can you imagine calling American Express or one of the big banks and demanding to see their ledgers of transactions.
There is no need to call anyone for bit coin, just start exploring.
Look at the fight going on between credit card companies and Russia. Where the US has asked them (CC comps) to hold Russia
finance hostage to their demands by withdrawing services. In bitcoin this is near impossible to do unless you cut the internet
links to that country. And even then, they can always create their own.
