Introduction to Bitcoin UNIT-III

1. Explain Briefly about Bitcoin Blockchain.

The Bitcoin blockchain is a decentralized, peer-to-peer digital ledger that underlies

the Bitcoin cryptocurrency. It was created by an individual or group of individuals
using the pseudonym "Satoshi Nakamoto" and was released as open-source
software in January 2009. The Bitcoin blockchain revolutionized the way digital
transactions are recorded and secured, introducing the concept of a trustless,
censorship-resistant, and transparent financial system.

Here are the key features and components of the Bitcoin blockchain:

Decentralization: The Bitcoin blockchain operates on a decentralized network of

computers (nodes) spread across the globe. There is no central authority, like a
bank or government, controlling it. Anyone can participate by running a node and
validating transactions.

Cryptocurrency (Bitcoin): The primary purpose of the Bitcoin blockchain is to

facilitate the transfer of the Bitcoin cryptocurrency (BTC) between users. Bitcoin is
a digital currency that allows for peer-to-peer transactions without the need for
intermediaries.

The blockchain is made up of blocks, which are essentially records of transactions.

Each block contains several transactions, a timestamp, and a hash of the previous
block. The hash is a unique identifier for each block, and it is used to link the blocks
together in a chain.

Consensus Mechanism (Proof of Work): Bitcoin uses a consensus mechanism

called "Proof of Work" (PoW) to validate and add new blocks to the blockchain.
Miners compete to solve complex mathematical puzzles, and the first one to solve
it gets the right to add a new block and is rewarded with Bitcoin. This process is
called mining. This process secures the network and ensures that only valid
transactions are added to the blockchain.

Secure: - The Bitcoin blockchain is secure because it is very difficult to reverse a

transaction once it has been added to the blockchain. To do so, an attacker would
need to re-calculate the hash of every block after the affected block, which would
be computationally infeasible.

Transparent: - The Bitcoin blockchain is also transparent. Anyone can view the
blockchain and see all of the transactions that have taken place. This makes it a
very reliable way to track and verify Bitcoin ownership.

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Limited Supply: Bitcoin has a capped supply of 21 million coins. This scarcity is
programmed into the protocol and serves to control inflation and create a digital
asset with potential long-term value.

Permissionless: Anyone can participate in the Bitcoin network by downloading

the software, creating a wallet, and making transactions. There are no barriers to
entry.

Global and 24/7: The Bitcoin network operates 24/7, allowing for borderless and
continuous transactions without dependence on traditional banking hours or
holidays.

The Bitcoin blockchain has gained significant attention as a store of value and digital
gold, as well as for its potential to transform the financial industry. It has inspired the
development of thousands of other cryptocurrencies and blockchain projects,
contributing to the broader blockchain and cryptocurrency ecosystem.

2. Describe how a transaction in Bitcoin is processed and recorded on

Blockchain.

A Bitcoin transaction is a transfer of value between Bitcoin wallets that gets included
in the blockchain. The transaction is initiated by the sender and broadcast to the
Bitcoin network. Once the transaction is verified by a miner, it is included in a block
of transactions that is recorded on the blockchain. Once recorded on the blockchain
and confirmed by sufficient subsequent blocks, the transaction becomes a permanent
part of the Bitcoin open-distributed ledger and is accepted as valid by all participants.

A transaction in Bitcoin is processed and recorded on the blockchain in the following

steps:

1. Initiation: The sender creates a new transaction and broadcasts it to the

network. The transaction includes the following information:
o The sender's and receiver's public addresses
o The amount of Bitcoin being sent.
o A transaction fees.
2. Validation: Miners validate the transaction by checking to make sure that the
sender has enough Bitcoin to send, and that the transaction is not fraudulent.
3. Mining: Miners add the validated transaction to a block and compete to solve
a complex mathematical puzzle. The first miner to solve the puzzle adds the
block to the blockchain and receives a block reward.

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4. Confirmation: Once a block is added to the blockchain, the transaction is

considered confirmed. The number of confirmations required for a transaction
to be considered secure varies depending on the wallet and the user's
preferences.
Bitcoin transactions are processed and recorded on the blockchain in a secure and
transparent way. This is made possible using cryptography and distributed ledger
technology.

3. Demonstrate opcodes used to perform transactions in bitcoin Blockchain.

Bitcoin transactions are not typically constructed directly using opcodes at the user
level. Instead, users interact with Bitcoin through wallets and use wallet software to
create transactions. However, at the lower level, Bitcoin transactions do involve
scripting using Bitcoin Script, a simple, stack-based programming language.

Here, is the basic overview of some commonly used Bitcoin Script opcodes and how
they can be used to perform transactions. These are simplified ones, and Bitcoin
Script can be quite complex.

• OP_DUP: Duplicates the top item on the stack.

• OP_HASH160: Computes the RIPEMD160 hash of the top item on the stack
and pushes the hash onto the stack.
• OP_EQUAL: Compares the top two items on the stack and pushes TRUE if
they are equal, or FALSE if they are not equal.
• OP_CHECKSIG: Verifies the signature of the top two items on the stack,
using the public key that is also on the stack. If the signature is valid, pushes
TRUE onto the stack; otherwise, pushes FALSE.
• OP_RETURN: Marks the end of the script and pushes an empty string onto
the stack.

Here is an example of a transaction script that uses these opcodes:

OP_DUP
OP_HASH160
<public key>
OP_EQUALVERIFY
OP_CHECKSIG

This script first duplicates the public key, then computes the RIPEMD160 hash of the
public key, and pushes the hash onto the stack. The next opcode,
OP_EQUALVERIFY, verifies the signature of the hash using the public key. If the
signature is valid, the script pushes TRUE onto the stack and the transaction is
considered valid. Otherwise, the script pushes FALSE and the transaction is rejected.

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The final opcode, OP_CHECKSIG, is used to ensure that the signature is valid. This
is the most important opcode in the script, as it is what prevents anyone from
spending someone else's Bitcoin.

There are many other opcodes that can be used in Bitcoin scripts, but these are some
of the most common ones. The specific opcodes that are used in a script will depend
on the type of transaction that is being performed.

4. Demonstrate how Bitcoin Scripting Language is used for Locking and

Unlocking of a transaction.

Bitcoin Script is a programming language that is used to create spending conditions

for Bitcoin transactions. It is a stack-based language, which means that it operates
on a stack of data.
Bitcoin Script can be used to lock and unlock transactions in a variety of ways. For
example, it can be used to create multi-signature transactions, time-locked
transactions, and conditional transactions.
To lock a transaction, the sender creates a locking script that specifies the conditions
that must be met in order to spend the transaction. The locking script is then
attached to the transaction output.
To unlock a transaction, the spender creates an unlocking script that satisfies the
conditions specified in the locking script. The unlocking script is then attached to the
transaction input.
Example:
A simple example of a locking script is a pay-to-public-key-hash (P2PKH) script. A
P2PKH script specifies that the transaction output can be spent by anyone who has
the private key that corresponds to the public key in the script.
To lock a transaction using a P2PKH script, the sender would simply include their
public key in the script. To unlock the transaction, the spender would need to provide
a signature that is generated using the corresponding private key.
The language is designed to be simple and efficient, with a limited set of opcodes
that can be combined in various ways to create complex scripts.
Here’s an example of how locking and unlocking scripts can be used in a
transaction:

1. Alice wants to send 1 BTC to Bob.

2. Alice creates a transaction with an output of 1 BTC that is locked with a
script that requires Bob’s public key to unlock.
3. Alice signs the transaction with her private key and broadcasts it to the
network.

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4. Bob receives the transaction and creates an input with an unlocking script
that provides his public key as proof that he is authorized to spend the
output.
5. The input and output scripts are combined and executed, verifying that
Bob’s public key matches the one specified in the locking script.
6. The transaction is added to the blockchain as a valid transaction.

The locking and unlocking scripts in a Bitcoin transaction are written in the Bitcoin
Scripting Language. When a node receives the transaction data, it runs the locking
and unlocking scripts together to see if the digital signature matches the address that
the output has been locked to. If the scripts are valid, the node accepts the transaction
and adds it to the blockchain.

5. Apply block chain technology in micro payments and escrow.

Blockchain technology can be applied to micropayments and escrow in a number of

ways.

Micropayments

Micropayments are small payments that are typically made for digital content or
services. They can be difficult to implement using traditional payment systems, as the
transaction fees can be high. Blockchain technology can be used to create
micropayment systems that are low-cost and efficient.
One way to do this is to use a micropayment channel. A micropayment channel is a
two-party payment channel that allows users to make multiple small payments to each
other without having to pay transaction fees on each payment. Micropayment
channels can be used to pay for digital content, such as articles, videos, and music,
as well as for services, such as cloud storage and streaming video.
Another way to use blockchain technology for micropayments is to use a
cryptocurrency with low transaction fees. There are a number of cryptocurrencies that
have been designed specifically for micropayments, such as Nano and Bitcoin Cash.
These cryptocurrencies can be used to make small payments quickly and cheaply.
Escrow
Escrow is a process where a third party holds funds until certain conditions are met.
This is often used in online transactions to protect both the buyer and the seller.
Blockchain technology can be used to create decentralized escrow systems that are
more secure and efficient than traditional escrow systems.
One way to do this is to use a smart contract. A smart contract is a self-executing
contract that is stored on the blockchain. Smart contracts can be used to create
escrow agreements that automatically release funds to the seller once the buyer has
confirmed that they have received the goods or services.

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• Escrow.co: Escrow.co is a decentralized escrow service that allows users to

hold funds in escrow without having to trust a third party. Escrow.co is used by a
variety of businesses, including freelancers, online marketplaces, and e-
commerce stores.
Blockchain technology has the potential to revolutionize micropayments and escrow.
By creating low-cost and efficient micropayment systems and decentralized escrow
services, blockchain technology can make it easier and safer for people to buy and
sell digital goods and services.
6. Explain the disadvantages of Bitcoin Blockchain.

Bitcoin blockchain is a decentralized ledger technology that records all Bitcoin

transactions. It is a secure and transparent way to store and share data, but it also
has some disadvantages.
Here are some of the disadvantages of Bitcoin blockchain:
• Scalability: Bitcoin blockchain is not very scalable. This means that it can
only process a limited number of transactions per second. This can lead to
slow transaction times and high transaction fees.
• Energy consumption: Bitcoin mining is a very energy-intensive process.
This is because miners need to use powerful computers to solve complex
mathematical problems to earn Bitcoin rewards.
• Security vulnerabilities: Bitcoin blockchain has been the target of a number
of security attacks in the past. These attacks have resulted in the theft of
millions of dollars’ worth of Bitcoin.
• Environmental impact: Bitcoin mining produces a significant amount of
carbon emissions. This is because miners rely on electricity from power
plants, which often burn fossil fuels.
In addition to these disadvantages, Bitcoin blockchain is also relatively new
technology. This means that it is still under development and there are a number of
risks associated with using it.
Here are some of the risks associated with using Bitcoin blockchain:
• Price volatility: The price of Bitcoin is very volatile. This means that the
value of Bitcoin can fluctuate wildly in a short period of time. This makes
Bitcoin a risky investment.
• Regulatory uncertainty: Bitcoin is not regulated by any government or
financial institution. This means that there is no legal protection for Bitcoin
users.
• Complexity: Bitcoin blockchain is a complex technology. This can make it
difficult for users to understand and use Bitcoin safely.

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7. How proof-of-work (PoW), and proof-of-stake (PoS) consensus

mechanisms works? Write the applications of proof of work and proof of
stake in mining?
Proof-of-Work (PoW): In PoW, miners compete to solve complex mathematical
puzzles to validate transactions and create new blocks. The first miner to solve the
puzzle is rewarded with cryptocurrency. The more computational power a miner has,
the higher their chances of solving the puzzle and earning the reward . PoW requires
a lot of computational power and energy, which can be expensive and environmentally
unsustainable

Proof-of-Stake (PoS): In PoS, validators are required to stake a certain amount of

cryptocurrency to participate in the consensus process. Validators are chosen
randomly to validate transactions and create new blocks based on the amount of
cryptocurrency they have staked. Validators are rewarded with transaction fees instead
of new cryptocurrency. PoS is faster, more energy-efficient, and requires no special
computing equipment.

Applications of PoW and PoS in mining

• PoW is used by many of the most popular cryptocurrencies, including Bitcoin,

Litecoin, and Ethereum 1.0.
• PoS is used by newer cryptocurrencies, such as Cardano, Solana, and
Ethereum 2.0.
• Transaction validation: PoW and PoS are both used to validate new
transactions on a blockchain. This helps to ensure that all transactions are valid
and that the blockchain is secure.
• Block creation: PoW and PoS are also used to create new blocks on a
blockchain. This is how new transactions are added to the blockchain and how
the blockchain grows.
• Security: PoW and PoS both help to secure the blockchain by making it difficult
for attackers to gain control of the network.

Advantages and disadvantages of PoW and PoS

PoW:
Advantages: Secure, decentralized, and tamper-proof.
Disadvantages: Energy-intensive and expensive to mine.
PoS:
Advantages: Energy-efficient and relatively inexpensive to mine.
Disadvantages: Can be less secure than PoW and more vulnerable to
centralization.

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8. Illustrate how Grid coin incentivizes participants to contribute their

computational power to scientific research projects through
blockchain technology?

Gridcoin is a cryptocurrency that incentivizes participants to contribute their

computational power to scientific research projects through blockchain technology.

Here's how Gridcoin works:

o Gridcoin is linked with the Berkeley Open Infrastructure for Network

Computing (BOINC) and Folding@Home, which are distributed computing
projects that allow users to donate their unused computing power to
scientific research.
o Gridcoin uses a proof-of-stake consensus mechanism to secure its
blockchain network. This means that users can earn Gridcoin by holding
and staking their coins, which helps to secure the network.
o Gridcoin rewards users for their contributions to scientific research by
minting and distributing cryptocurrency based on the relative processing
power a network participant directs toward data-driven analysis and
scientific discovery.
o Gridcoin uses a decentralized oracle system to verify the accuracy of
scientific computations and distribute rewards to users.
o Gridcoin incentivizes participants to contribute their computational power to
scientific research projects through blockchain technology by rewarding
them with GRC tokens. GRC tokens are a cryptocurrency that can be
exchanged for other cryptocurrencies or fiat currencies.

Here are some of the benefits of using Gridcoin to contribute to scientific research
projects:

• Financial incentives: Participants can earn GRC tokens for their

contributions, which can be exchanged for other cryptocurrencies or fiat
currencies.
• Decentralization: Gridcoin is a decentralized network, which means that it
is not controlled by any single entity. This makes it more resistant to
censorship and corruption.
• Transparency: All transactions on the Gridcoin blockchain are public and
transparent. This makes it easy to track how GRC tokens are being
distributed and to ensure that participants are being rewarded fairly.

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Gridcoin is a valuable tool for supporting scientific research. By providing a

financial incentive for participants to contribute their computational power, Gridcoin
can help to accelerate the pace of scientific discovery.

9. Demonstrate the concept of Folding Coin and how it is utilized for the
research of protein folding.
FoldingCoin (FLDC) is a cryptocurrency that rewards participants for their
contributions to the Folding@home project. Folding@home is a distributed computing
project that uses the idle processing power of millions of computers to simulate the
folding of proteins. Protein folding is a complex process that is essential for many
biological functions, and understanding it better could lead to new treatments and
cures for diseases such as cancer and Alzheimer's.
FLDC is earned by running the Folding@home software on your computer. The more
processing power you contribute, the more FLDC you will earn. FLDC can be
exchanged for other cryptocurrencies or fiat currencies, or it can be used to support
the Folding@home project.
FoldingCoin utilizes the traditional Proof-of-Work (PoW) mechanism of the Bitcoin
blockchain. Miners use their computing power to secure the network, similar to how
Bitcoin miners validate transactions and add them to the blockchain.
FoldingCoin is utilized for protein folding research by providing a financial incentive
for people to contribute their computing power to the Folding@home project. The
more people who participate in Folding@home, the more computing power is
available to simulate protein folding, which can help researchers to better understand
this process and develop new treatments and cures for diseases.
Here is an example of how FoldingCoin is utilized for protein folding research:
A researcher wants to simulate the folding of a particular protein.
• They create a work unit (WU) that contains the necessary data to simulate the
protein folding process.
• The WU is sent to the Folding@home network, where it is distributed to
volunteers who are running the Folding@home software on their computers.
• The volunteers' computers simulate the protein folding process and return the
results to the researcher.
• The researcher analyzes the results and uses them to learn more about protein
folding.
• The volunteers are rewarded with FLDC for contributing their computing power.

FoldingCoin is a valuable tool for protein folding research because it provides a way
to harness the computing power of millions of computers to simulate protein folding.
This can help researchers to better understand this process and develop new
treatments and cures for diseases.

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10. Illustrate the fundamental concepts of genomics and how they are
incorporated into blockchain based solutions.

Genomics is the study of genes and genomes. A gene is a basic unit of heredity
that is passed down from parents to offspring. A genome is the complete set of
genes in an organism.
Genomics has revolutionized our understanding of biology and medicine. By
sequencing and analyzing genomes, scientists have identified genes that are
associated with diseases, developed new diagnostic tools, and created
personalized treatments.
Blockchain is a distributed ledger technology that can be used to store and share
data in a secure and transparent way. Blockchain is best known for its role in
cryptocurrencies, but it has the potential to be used in a wide variety of
applications, including genomics.
Blockchain-based genomic solutions are still in their early stages of development,
but they have the potential to improve the way we store, share, and analyze
genomic data.
Here are some examples of how blockchain is being incorporated into
genomics:
Data Security and Privacy: Genomic data is highly sensitive and personal.
Blockchain's cryptographic features can provide robust data security and privacy.
Patients can have control over who accesses their genomic data, and they can
grant or revoke permissions as needed.
Data Ownership and Control: Blockchain allows individuals to maintain
ownership and control over their genomic data. They can decide whether to share
it with researchers, healthcare providers, or pharmaceutical companies and under
what terms.
Data Sharing and Collaboration: Blockchain facilitates secure and transparent
data sharing among different stakeholders in the genomics field. Researchers,
institutions, and pharmaceutical companies can collaborate more effectively while
ensuring data integrity and privacy.
Monetization of Data: Patients and research participants can choose to monetize
their genomic data by granting access to it for research purposes. Smart contracts
on the blockchain can automate the payment process, ensuring fair compensation
for data contributors.

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Clinical Trials and Drug Development: Blockchain can streamline the

management of clinical trial data and drug development processes. This can
reduce administrative overhead, speed up drug discovery, and lower costs.
Research Reproducibility: Researchers can record their findings and
methodologies on the blockchain, making their work more transparent and
reproducible. This can help address issues of scientific misconduct and fraud.
One example of a blockchain-based genomic solution is Genomics England's
Patient Data Guardian. The Patient Data Guardian is a secure platform that allows
patients to share their genomic data with researchers and clinicians. The platform
uses blockchain technology to ensure that the data is shared in a controlled and
secure way.
Another example is ** Nebula Genomics**. Nebula Genomics is a company that
provides personal genomic sequencing services. Nebula Genomics uses
blockchain technology to give users control over their own genomic data. Users
can choose who to share their data with and how it is used.
Blockchain technology has the potential to revolutionize the way we store, share,
and analyze genomic data. By making genomic data more secure, accessible, and
actionable, blockchain can help us to improve human health and well-being.

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