Introduction

Overview

Bitcoin was proposed by Nakamoto (2008)Satoshi Nakamoto. Bitcoin: A peer-to-peer electronic cash system. https://bitcoin. org/bitcoin.pdf, Dec 2008. Accessed: 2015-07-01. as the first electronic payment system, which fully relies on cryptographic primitives in order to work over a purely peer-to-peer system, where everyone can participate in sending funds to other users without the need for a trusted third party.

This chapter first introduces the basic ideas of Satoshi Nakamoto, who defined an electronic coin as a chain of digital signatures. We’ll then explain how the addresses in Bitcoin are derived, and how the ECC key pair is used in order to transact funds from one user to another. For this, we’ll show how the transactions are constructed in Bitcoin based on the most common transaction, which is the Pay-to-Public-Key-Hash transaction. Finally, we’ll show how the transactions are permanently stored in the public ledger, the blockchain, and how the miners solve the Proof-of-Work in order to safeguard the records.