The main functions of money are distinguished as:
Any item or verifiable record that fulfills these functions can be considered as money.
- a medium of exchange;
- a unit of account;
- a store of value;
- and, sometimes, a standard of deferred payment.
First decentralized digital currency.
A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.
The Times 03/Jan/2009 Chancellor on brink of second bailout for banks
We can win a major battle in the arms race and gain a new territory of freedom for several years.
Governments are good at cutting off the heads of a centrally controlled networks like Napster, but pure P2P networks like Gnutella and Tor seem to be holding their own.
The first time in history we have a digital asset that can be transferred but cannot be duplicated.
Cryptography is the practice of techniques for secure communication in the presence of third parties called adversaries. More generally, cryptography is about constructing and analyzing protocols that prevent third parties or the public from reading private messages.
The encryption key is shared between Alice and Bob, and they need to keep it secret.
How can they safely exchange the secret shared key?
Alice and Bob will generate two complementary keys.
What can be encrypted with one key can be decrypted with the other key.
Generated by bitaddress.org.
See: Mnemonic code converter.
Merkle Tree, or Hash Trees, allow efficient verification of large data structures.
Miners will work on the longest chain; the shorter chain are quickly invalidated. The network will reach the consensus in few blocks. Every new block added is basically a confirmation over the previous ones.
Mining is the process to add new blocks of transactions in the block chain.
Miners are paid for their work with transaction fees and a reward: new bitcoins emission.
This decreasing-supply algorithm approximates the rate at which commodities like gold are mined.
Having a higher hash power advantages one miner over the others; mining industry developed more energy and cost efficient strategies over the years:
DApp = frontend (or client) + contracts.
It is an entity that lives on the internet and exists autonomously, but also heavily relies on hiring individuals to perform certain tasks that the automaton itself cannot do.