Topic: Wow....Bitcoin is COMPLEX (Read 2738 times)

there's some help articles on the bitcoin wiki https://en.bitcoin.it/wiki/Main_Page

The bitcoin wiki:
-- https://en.bitcoin.it/wiki/Main_Page

Original bitcoin whitepaper:
-- https://bitcoin.org/bitcoin.pdf

Another suggestions might be to download bitcoin core, you'll find it at bitcoin.org, or any other wallet, and start it in testnet node. You might even want to run wallets on a couple of computers of yours in testnet-mode. Then go to a testnet-faucet and get some test-coins. Just google testnet faucet. Once you have some test coins, you can experiment as much as you like without fearing making a fatal mistake. Everything works just like on the main net. In addition, you won't clutter the main net with "test transactions".

Although you intend to be a user of bitcoin, it does not hurt to learn some of the technical stuff.

You might also want to check:
-- https://bitcoinmagazine.com/

And bitcoin subreddit:
-- http://www.reddit.com/r/bitcoin

For updated price info, you could use sites like:
-- http://bitcoinwatch.com/
-- http://cryptowatch.com
-- http://coinmarketcap.com/

If you're like me you'll go through those step, then add steps for how to learn to mine bitcoins, how to purchase your first bitcoin miner, how to setup your bitcoin miner, etc...  It's as much a hobby as anything to me at this point, and I still find it much, much less confusing than fiat currencies.

trezor is really good !

It would help if you could point us in the direction of what country you are living in.  Some of the sites are a bit tricky with the KYC and AML laws. {https://www.coinbase.com/}

I rather use https://www.circle.com/ and https://localbitcoins.com/ to buy BTC.

On keeping it safe... you could consider buying a hardware wallet e.g. Trezor {https://www.bitcointrezor.com/} but most newbies start with a online wallet from blockchain.info with 2FA.

If you want to buy loads of BTC and keep it safe, I would suggest using cold storage / paper wallets. {There are a lot of info on this forum, to do exacly that... just use the search}

Good luck.
 

No.

(See bottom of post for tl;dr

First, each miner (or mining pool) gathers up a group of unconfirmed transactions and places them in order.  The solo miner (or mining pool) gets to choose which transactions (if any) they want to confirm.  It doesn't matter if they put together 1000 transactions or 0 transactions, the result is still a valid block as long as they choose valid transactions and put them in a valid order.  Each set of ordered transactions is called a "block" of transactions.  So there are potentially millions of different unconfirmed blocks being worked on simultaneously.  The miners and mining pools have a financial incentive to include transactions in their block if the transaction pays a transaction fee, because the miner (or pool) gets to keep the transaction fees of all the transactions they include in their block if they successfully "solve" the block (we'll get into "solving" a block in a bit).  To receive these transaction fees, one special transaction is allowed to be included in the block.  This special transaction has no input values, and the sum of the output values is allowed to be less than or equal to the current block subsidy (25 BTC right now) plus the sum of all transaction fees of all transactions in the block.

Next, each miner (or mining pool) creates an 80 byte header for their block of transactions. This is called a "block header". They use a hashing process to generate a unique number (called a merkle root) for their block of transactions, and they include this merkle root in the header.  You can't change any information in the block of transactions at all without it resulting in a different merkle root.  Therefore, it can be easily verified that a list of transactions that is transmitted with a block header is the EXACT correct list of transactions in the EXACT correct order for that block header.  The miner (or pool) must also include a hash of the most recently solved block in their block header.  This "links" the block they are working on to the previous block and provides an indication of the order of the blocks, creating a chain like structure (called "the blockchain"). Some additional useful information is included in the block header (such as a timestamp, a version number, and the current difficulty target). The block header also has a 4 byte field called a "nonce".  We'll get into the purpose of the "nonce" next.

Now the solo miner calculates a SHA256 hash of the block header.  This results in a 256 bit (32 byte) value between 0 and 1.1579X10⁷⁷.  They then calculate a SHA256 hash of that value, which results in a different 256 bit (32 byte) value between 0 and 1.1579X10⁷⁷.  If the block was created by a mining pool, then they will create many different blocks and send the block headers off to all the pool participants.  The pool participants will perform the two SHA256 hashes themselves and check for themselves to see if their resulting hash value is low enough.

If that second value is less than the current target difficulty, then the block is "solved", and the miner can broadcast their block to all their peers.  Every peer that received a copy of the "solved" block verifies that everything is correct (valid transactions, in a valid order, with a valid merkle rook, block header has a valid previous block hash, block header hashes to a value lower than the current target difficulty, special transaction outputs don't exceed sum of block subsidy and transaction fees, etc).  If the solved block passes all validity tests, then the peers broadcast the block to all of their connected peers. Those peers also verify that everything is correct, before broadcasting it to all their connected peers, and so on until the entire network has received the solved block and verified for themselves that the block is valid.

If that second value is NOT less than the current target difficulty, then the "nonce" serves it's purpose.  The solo miner (or pool participant) increments the nonce from 0 to 1 (which is a change to the block header) and then performs the two SHA256 hashes on the new block header.  They check to see if the new resulting value is lower than the difficulty target.  If it is not, then they increment the nonce, and try again.  They continue this until all 4294967296 possible nonce values have been tried.  If after trying all possible nonce values the miner (or pool participant) has not found a SHA256 value that is lower than the target difficulty, then the solo miner (or mining pool) changes information in their list of transactions and computes the resulting new merkle root (which is a change to the block header).  Then they start over with a nonce of 0 and try again.  This process is repeated by all mining equipment until someone is lucky enough to find a SHA256 hash value that is lower than the target difficulty.  Then they broadcast their "solved" block (see previous paragraph).

The "difficulty" is a number somewhere between 0 and 1.1579X10⁷⁷.  The protocol automatically adjusts the difficulty every 2016 blocks.  If the current block height is a multiple of 2016 and the difference in timestamps between the current block and the block 2106 blocks ago is less than 20160 minutes, then blocks have been being solved too fast, and the difficulty target is reduced to a lower value to make less likely to find a SHA256 hash that is less than the target difficulty.  If the difference in timestamps is greater than 20160 minutes, then the blocks are being solved too slow, and the difficulty target is increased to a higher value to make it more likely to find a SHA256 hash that is less than the target difficulty.

Since EVERY node on the entire network validates EVERYTHING about the blocks it receives before it accepts or re-broadcasts the block, it is impossible for anyone to send a block that has invalid transactions, or that pays themselves a block reward that is too high, or broadcast a block that doesn't result in a double-SHA256 hash that is lower than the current target difficulty.

tl;dr:
That's it.  That's basically the mining process.  There are a few technical details that I've left out or simplified a bit (for example, I didn't explain how to calculate a SHA256 hash, you can look that up on wikipedia if you're interested), the point is that the description of  "complex mathematical equations" is a very misleading way of explaining what is happening.  It's actually a very simple and very fast SHA256 calculation.  It just that the target value is low enough that the SHA256 has to be calculated on MANY different block headers until someone stumbles upon a resulting value that is lower than the target.  As of the current difficulty cycle, it requires on average about 213,294,220,000,000,000,000 double-SHA256 hash attempts before someone is lucky enough to stumble upon a hash value that is low enough.

Exactly, earning one bitcoin might not be easy, but to do that you'll need to interact with the online community and make business with the faceless people online, learn how this free market works, what opportunities are there, and you'll learn a lot in the way.

For people looking for technicalities I highly recommend the Bitcoin Course of Princeton University.

Lecture 1 — Intro to Crypto and Cryptocurrencies
https://www.youtube.com/watch?v=fOMVZXLjKYo

Lecture 2 — How Bitcoin Achieves Decentralization
https://www.youtube.com/watch?v=q5GWwTgRIT4

Lecture 3 — Mechanics of Bitcoin
https://www.youtube.com/watch?v=t3hJsFpPmXs

You should look on alternative wallets to bitcoin-qt. Learn how to make simple paper wallets in bitcoinaddress.org. Once you get it it's really useful.

That's a very good article. And I think I get it a little more now....

So, am I correct in thinking that these "complex mathematical equations" that miners solve with their machines are actually the resolution of all the transactions going through the (closed) system? Which would make sense actually....the more people using it, the more Bitcoin being moved, the more complex the ledger gets so the harder it becomes to resolve, or tally up....

Hmm...*lightbulb*....?

I really like this article and have pointed friends in family to it as a Primer
https://medium.com/@nik5ter/explain-bitcoin-like-im-five-73b4257ac833

Hahaha! Spending sure is easy than earning. But come back to the forums often, and achieve at least a full member rank. Join in the discussions and signature campaign. and you will surely earn BTC side by side with the knowledge that you'll gain.

This is my plan for the next few weeks. Will report back in detail about how it goes! Thank you L, cool suggestions

I hope you don't mind me re-organising them though, as earning a bitcoin is probably going to be slowest for me, whereas spending one will be fastest

It's not that too complex if you focused on the basics. The wallet is also easy to use though, and I find it newbie-friendly. It's just that people aren't accustomed to it yet.

Hello there! If you need to know the basics, this might be a useful site. This was the first site I've visited regarding bitcoins that really sparked my interest even more.

https://bitcoin.org/en/

The basics are in there, and there are useful tips and advice within that site that may be of help to you.

Glad you've discovered bitcoin!
you should google new to bitcoin , there's alot of helpful videos.
atleast that's how i got started : )
you should also check around on this forum and please feel like it's your home!

I was trying to use Microsoft store to buy something for bitcoin but I seem to miss bitcoin payment option. Do you know where I can find it? After completing my order my available methods of payment are only: Visa, MasterCard and Paypal. Maybe it is due to I am browsing from EU? And Bitcoin payment are available only in US?

my advice would be firstly to understand the distinction between Bitcoin (capital B - the technology/protocol) and bitcoin (the currency / application )

Yes, bitcoin is complex for average people.
If we want more people adopt it, the wallet should be more easier to use.

DannyHamilton's answer is very nice, but I will try a different approach. Here's my quick start guide:

• Download electrum https://electrum.org/. If you are using Windows download "Windows installer".
• Install it
• Run electrum and it will display a wizard for creating a new wallet. Two things to be mindful of are:
   
  • Write down the 13 word seed on a piece of paper and put in a safe place. This is your backup and it is all that is needed to get access to your bitcoins should you forget your password from the next step. The seed is a secret so don't reveal it to anyone.
    
  • Set a password which you will be asked for when spending your bitcoins.

• Once the wallet is setup you can use the "receive" tab to get a bitcoin address. Share it with anyone or any entity that wants to send your bitcoins. You can use any of the addresses on the receive and addresses tabs to receive bitcoins. You can use the same address over and over again or a different address per transaction. The latter is recommended but not required.
• When you want to spend bitcoins use the send tab and enter the recipient's address and the amount you want to send