Bitcoin for the befuddled

About the Authors PREFACE Acknowledgments WHAT IS BITCOIN?Why Bitcoin Now?The Benefits of Using Bitcoin The Complexity and Confusion of Bitcoin What's in This Book?BITCOIN BASICS How Bitcoin Works in Simple Terms Bitcoin Units The Bitcoin Address The Private Key The Bitcoin Wallet Acquiring Bitcoins in Your Wallet Spending Bitcoins with Your Wallet Bitcoin Addresses Generated by Your Bitcoin Wallet Program The Blockchain The Blockchain Lottery Blockchain Forking Transaction Confirmations, Double Spending, and Irreversibility Mining Bitcoins The Complexity of the Bitcoin System STORING YOUR BITCOINS SAFELY, SECURELY, AND CONVENIENTLY Storing Your Private Key(s)Hot Storage vs. Cold Storage Personal vs. Hosted Wallets Safety, Security, and Convenience Storing Small Amounts of Bitcoins Online Hosted Wallet Services Online Personal Wallet Services Personal Hot Wallet Storing Large Amounts of Bitcoins Paper Wallets Encrypted Paper Wallets Offline Transaction Signing Fragmented Private Keys and Multi-Signature Addresses Special Mention: The Bitcoin Hardware Wallet Special Mention: The Bitcoin Brain Wallet Choosing the Storage Method That's Right for You BUYING BITCOINS Why Not Just Mine Bitcoins?Ways to Buy Bitcoins Buying Bitcoins the Easy Way Authentication Factors The Hassle of Converting Dollars (or Other Currencies) into Bitcoins Reversible Transactions Irreversible Transactions Combining Reversible and Irreversible Assets Why Irreversible Transactions Are Arguably Superior Buying Bitcoins with Coinbase Step 1: Registering at Coinbase Step 2: Setting Up Two-Factor Identification Step 3: Linking Your Bank Account to Coinbase Step 4: Buying Bitcoins on Coinbase Step 5: Protecting Your Shiny New Bitcoins Buying Bitcoins the Efficient Way Buying Bitcoins from a Currency Exchange Step 1: Setting Up an Account and Linking to Your Bank Account Step 2: Transferring US Dollars to Your Exchange Account Step 3: Placing an Order to Buy Bitcoins Market Orders Limit Orders Buying Bitcoins the Fun and Futuristic Way Step 1: Finding Someone to Buy From Step 2: Deciding on a Meeting Place Step 3: Handing Over the Money and Getting Your Bitcoins A Face-to-Face Bitcoin Purchase Without Escrow Problems During Person-to-Person Transactions A Face-to-Face Bitcoin Purchase with Escrow Satoshi Square Still Don't See a Buying Option That Works for You?LOST AT SEA. CRYPTOGRAPHIC ADVENTURE WHY BITCOIN IS A BIG DEAL A Brief History of Digital Currencies The Dawn of Bitcoin Bitcoin's First Four Years Bitcoin's Early Impact The Future Potential of Bitcoin What Are the Existential Risks to Bitcoin?Does Bitcoin Have Advantages over Existing Currencies?Can Bitcoin Be Destroyed via Bugs or Hacks?Can Bitcoin Be Destroyed by Governments or Corporations?Can Bitcoin Be Supplanted by Another Cryptocurrency?What Role Might Bitcoin Play in the Future?Using Bitcoin for Savings Using Bitcoin as a Medium of Exchange The Dangers of Decentralized Digital Money Bitcoin and Illegal Activity The Energy Costs of Bitcoin Bitcoin and the Dangers of Deflation Bitcoin and Government Stability THE CRYPTOGRAPHY BEHIND BITCOIN A Brief Cryptography Overview One-Way Functions Cryptographic Hash Functions Verify Information Public Key Cryptography Digital Signatures This Is It Called a Digital Signature?Using Digital Signatures Why Bitcoin Needs Cryptography Authorizing Transactions with Digital Signatures Verifying the Validity of the Transaction History Proof-of-Work in Bitcoin Mining Extra Protection for Bitcoin Private Keys Cryptographic Methods Used in Bitcoin Cryptographic Hash Functions: SHA256 and RIPEMD160 Crowley and the Unfortunate Jelly-Filled Donut Incident Moving Around on a Line Elliptic Curve Digital Signature Algorithm (ECDSA)Signing a Bitcoin Transaction Using ECDSA The Security of Bitcoin's Cryptography Pseudocode for Elliptic Point Summation and Point Multiplication BITCOIN MINING Why Is Bitcoin Mining Needed?A Parable of Two Generals Applying the Parable to Bitcoin Preventing Attacks with Mining Distributing New Currency with Mining How Does Bitcoin Mining Work?How Miners Solve a Block Anatomy of a Block Block header structure Pooled Mining Bitcoin Mining for Profit Theoretical Hash Rate Limits Decentralization in Bitcoin Mining UNDERSTANDING THE DIFFERENT TYPES OF BITCOIN WALLETS Wallet Software Design Fundamentals Offline vs. Online Transaction Signing Random Key Generation vs. Deterministic Key Generation (vs. Single Key Generation)Full vs. Simplified Payment Verification Speediness of initial installation and network synchronization Speed of new payments Security for new payments Security of confirmed payments Overall security Efficiency of storage use Ability to inspect arbitrary Bitcoin addresses Ability to import private keys Effect on overall health of Bitcoin network Other Common (and Not So Common) Bitcoin Wallet Features Future Wallets Which Wallet Is Right for You?Additional Wallet Considerations BITCOIN 2030 What Will a Bitcoin Be Worth in 2030?Bitcoin Mining in 2030 A Day in the Life of a Bitcoiner in 2030 The Bitcoin End Game HELLO MONEY! A SIMPLE JAVASCRIPT PROGRAM The Meaning of "Easy"Three Ways to Write Bitcoin Software General Security Notes on Bitcoin Programming Some Upbeat Notes on Bitcoin Security Writing Your First Bitcoin Program in JavaScript Why Use JavaScript?Bitcoin Core vs. Bitcoind Preparing Your Machine for JavaScript Bitcoin Programming Installing Node.js Installing node-bitcoin Starting Bitcoin Core For Mac Hackers For Linux Folks Hello Money!Initializing the Connection with Bitcoin Core The Main Loop The Bitcoin Core JSON-RPC API Running the Hello Money! App Limitations of Writing Bitcoin Programs That Use JSON-RPC BITCOIN PROGRAMMING WITH BITCOINJ The Best Programming Language for Connecting to the Bitcoin Network Installing Java, Maven, and the BitcoinJ Library Step 1: Installing Java Step 2: Installing Maven Step 3: Installing Git Step 4: Installing BitcoinJ Creating a Starter Project for hello-money Writing the Code for hello-money Declarations at the Top of the Program Initializing Our Java Objects Connecting to the Bitcoin Network Listening for New Money Running and Testing the hello-money Java Program Hello Money! Balance: 20000 satoshis Bye-Bye Money Importing a Private Key Sending the Money Ensuring the Money Transmission Running bye-bye-money Gotchas When Using Wallets in BitcoinJ Conclusion