Bitcoin Forum

I decided to write up a guide to help people grasp what roughly Bitcoin is and why roughly it works and why it is valued and used in a layman friendly way.

Feel free to download, copy, edit, share, do what ever with it. The only request I have is that if you spot a typo or a grammar error to please let me know so I can correct it. Thanks!

https://docs.google.com/file/d/0B6bqlVfJOOWsRHphT3E1NmVXUjQ/edit?usp=sharing  (reading time ~10min)


EDIT: Here's a slightly updated black and white version if that is what you prefer: https://docs.google.com/file/d/0B6bqlVfJOOWsZUxtUGU2cUpHd0E/edit?usp=sharing

Very nice work!

Again you proof that a colored ignore button only helps to identify the outsite of average guys (in both directions).

This guide is a very good step to a "Bitcoin for non-Geeks" Guide. (Which is really needed)

If you have any interest to get it translated into other languages, I offer to make a German translation over the weekend. (And keep it updated from time to time)


Well, I will just do so.

Nice writeup :)

I noticed this typo: Bitcoin simply ignores those who don't follow it's its rules

Gah.. I hate it when I miss mistakes like that :P

Bitcoin has value because you can cash out to USD.

I think you have that backwards.
You can cash bitcoin out to USD, because it has value.

Bingo.

This sentence makes no sense:

Nicely written, and pretty concise.

Now if only someone would write up something like this that explains how Bitcoin works (turning technical details into something a third grader could understand)..essentially taking the Wiki version, adding more detail, and removing words longer than 6 characters :P. Or maybe that's been done already and I've just missed it? I'm getting tired of explaining cryptography to people :D

Use this video for getting people to understand cryptography: http://www.youtube.com/watch?v=G2_Q9FoD-oQ

I think you are technically mistaken when you say :


Mathematical certainty is 100%.  Bitcoin is just very near to it.  It happens to be closer to it than our current banking system.

A 51% attack on the network could reverse transactions.
Likewise, a similar attack to the source code could introduce the ability to counterfeit.

You probably don't want to use the term "mathematical certainty".  Perhaps the term "impossible, practically speaking" or something like that.

It bothers me when Roger Ver tosses around the "impossible" and "mathematical certainty" terms, because he is flat out wrong.  You are introducing a binary situation here (yes/no, right/wrong) and in this case these terms are wrong.   "very near right" != "right".

As far as I understand how Bitcoin works this is false.

What could happen is they could get unconfirmed as blocks in which they were confirmed become orphaned but they'd still be valid and pending for confirmation. This of course exposes some of those transaction to a double spend attack but it doesn't reverse them.

I think that is the point jerfelix was making.  If someone had more hashing power than the entire combined honest network (51% of the total that includes their own hash power), then they could spend bitcoins and then re-mine the blocks and include a double spending on the previous transaction that now sends the bitcoins back to an address of their own.  In this way the earlier transaction would be "reversed".

But how many of the hundreds of thousands of transactions now unconfirmed was the attacker a counterparty to? Likely very few, which I'm not trying to downplay as a weakness but saying that he can reverse transactions is just as inaccurate as saying it being impossible with mathematical certainty to cheat Bitcoin.

Btw mathematical certainty in my guide primarily refers to the ability to fake obeying the rules. It's true it doesn't account for an attacker obeying the rules and still defrauding people, but it's a fact that rules in Bitcoin must be obeyed, even by an attacker and this is mathematically certain.

How does it have value? At least the USD is backed by the US Government, I guess bitcoin is backed by drugs since thats all you can buy with it??

With a 51% attack you can reverse all the transaction up to the point where you decide to start forking the blockchain. I can for example start a 51% attack and start it from the block of a year ago: everything before will stay the same, everything after that block will be rewritten by me. So all coins mined in the last year would become mine, every transaction made in the last year would disappear (if i don't want to keep them and if they are not made with coins mined last year).
Yes, there is a checkpoint in the client (so i can just go back some weeks or so) but a 51% attack would still be a serious problem.

There's at least $275 million that says you are just plain wrong (hint it is very little backed by drugs) .... and yet here you are arguing the opposite of the reality staring you in the face,
reality check scoreboard (http://www.bitcoinwatch.com/)  :P

That $275 million is based on the current market price and the total number of bitcoins, thats a pretty poor estimation by any means.

https://en.bitcoin.it/wiki/Trade

plenty more than drugs man.

Correct me if this is wrong, but if I had an extreme amount of computing power, I could create an alternate blockchain dating back to the genesis block, all the way to present, with the only confirmed transactions being me solving the blocks, and then alter the mining software with my new checkpoints.  Also altering the mining software such that I ignore any information coming from the REAL miners with the CORRECT block chain.  Then I become a miner with 51% of the network.

This would effectively REVERSE every transaction that ever occurred.  Every existing transaction would appear to be an attempt to spend money that didn't belong to the owner, and so they would be reversed.

So although practically impossible, it is mathematically possible.

(I should also note that it would take just minutes to solve every block since the genesis block in an offline fashion, if I am creating this alternate blockchain, since I am not in competition with anyone, and the difficulty would be minimal.)

Yeah you are wrong and I already explained it to you how.

You are mistaken.

You need to convince EVERY user on the network to use your altered software instead of the correct software with the original checkpoints.  If you don't then they will all ignore your blockchain no matter how "long" it is.

When people say the "longest" block chain wins, they are speaking metaphorically.  The mining AND client software actually choose the blockchain with the highest total difficulty.  Under normal circumstances this happens to be the longest one, but under the special circumstances you are describing having the most blocks wouldn't qualify your blockchain.

But if I own 51% or 85% or 99% of the network, and have modified the Bitcoin software such that every new download doesn't care about these rules of which you speak, it doesn't matter that there's this tiny faction of miners that still believe that they have the "right" blockchain.

Good luck modifying the bitcoin software that I am running such that it doesn't care about these rules of which I speak, or the bitcoin software that Gavin is running, or the bitcoin software that hazek is running, or a whole lot of other people.  Are you going to sneak into all of our houses and replace all of our software one by one while we are sleeping?  As soon as you strat trying to convince people to user "your" version of the software, don't you think people will spread the word that yours has been modified to increase the likelihood of an attack?

So you, Gavin, Hazek and a whole lot of other people will end up with your own little private network with your private bitcoin economy, claiming adamantly to anyone who will listen that "we have the real Bitcoins". 

Meanwhile the US Government, in conjunction with the blessing of the UN and the G20 have sanctioned Bitcoin with the "new blockchain to be fair to all", reversing all past transactions, legislating that Sourceforge host their newly revised, CIA-approved version, and declaring the "new blockchain" as the one backed by the "full faith and credit of all the major countries of the world".

Yeah, you're right within the scope of your little world, that no one will "reverse" your transactions in your little world.  But it is absolutely, positively incorrect to claim that it is mathematical certainty that transactions cannot be reversed.  Because they can be.

Mathematical certainty has a specific meaning, and this is not within the realm of impossibility, despite how improbable it is.

I never argued that this is not within the realm of impossibility, only that some of your specific examples of how it could be accomplished aren't possible.  Keeping in mind that you are the one who decided this should be a discussion on semantics, I would certainly agree with you that saying a bitcoin transaction is irreversible doesn't meet a generally accepted definition of "mathematical certainty" today. However, I would also maintain that your example of a modified client also doesn't meet a generally accepted definition of "bitcoin" today.

Good write up.

Horrible colours used though. Can you please do a plain black/grey on white background please so I can hand a few of these out? Grey background sucks!

Apart from that great job!  ;)

"National currencies are used because they are used."

Correct me if I am wrong but isn't this a tautology?  It doesn't have much meaning.

The quote above is poorly written.  I wouldn't want a newcomer to bitcoin to see that.  (especially if they are well educated).

Well, I was just trying to give feedback to the document that many people (myself included) feel that the words "mathematical certainty" are not appropriate.  It's feedback - take it or leave it.

Here's what Hazek's text says:

all confirmed Bitcoin transactions are with mathematical certainty irreversible, all
bitcoins are with mathematical certainty non-counterfeitable

Hazek's response was:

Btw mathematical certainty in my guide primarily refers to the ability to fake obeying the rules. It's true it doesn't account for an attacker obeying the rules and still defrauding people, but it's a fact that rules in Bitcoin must be obeyed, even by an attacker and this is mathematically certain.


And I walked through a complete example (and was accused at various steps in the process that I was wrong) where if someone doesn't "obey the rules" of Bitcoin, his statement falls apart.  

Defending the statement by saying "oh, I meant if you follow the rules" is like saying there are absolutely zero law breakers in New York City, and then saying "Oh, I meant I was only counting the ones who follow the rules."

--

Overall, I think it's a great intro.  I was just giving honest feedback about how I, and others, react to the "mathematical certainty" lines that come from Roger Ver and others, including this text. 

You are either not paying attention, or are intentionally trolling.  Either way, I give up.

Ah, the old New World Order attack argument. Yeah, if the entire world falls under a single dictator and the people refuse to revolt, then we have more problems than what we use to buy our groceries. I just don't see this this happening without a lot of objections.

If I could give one suggestion, I would avoid referring to the reader as a "layman" or indicate that "big letters" are needed to convey important points.

This document looks like an EXCELLENT outline for some sort of video, illustration, or document that helps convey Bitcoin to everyday people, but my take is that this itself isn't that document.

The title, "Wrapping your head around Bitcoin", doesn't particularly suggest that it's meant to help the average person understand Bitcoin - it actually suggests that it's meant to help super smart people understand it, causing the intended audience to perhaps self-select out of thinking it's meant for them.  I'd suggest "The Basics of Bitcoin: The What and The Why" or something like that.

I hope you understand that my comment was a point to prove that it was possible, not likely.  It is addressing the words "mathematical impossibility".

But yes, I agree with you... I don't see this happening without a lot of objections either.  But stranger things have happened.

Sure, here you go: https://docs.google.com/file/d/0B6bqlVfJOOWsY2NGSGRiYkNaUkk/edit?usp=sharing


Thanks!

Let me see if I can explain the above to you so you'll understand why it is correct.

First off all, you are wrong with your follow rules analogy:
The only way to attack Bitcoin is to follow it's rules. The problem is not that Bitcoin rules can be broken. They can't be because you'd need to convince everyone to change to a different Bitcoin client with different rules for that. What can happen though is that the Bitcoin rules can be abused. So yes, when talking about attackers I of course mean only those who follow the rules. Those who don't simply get ignored by the network.

The problem is someone can follow the rules in such a way that can cause damage. But the damage they can cause is limited. For instance they can't steal your bitcoins, that is mathematically certain, they'd need your private keys for that. They can't reverse your transaction that contains a signature with your private key when you sent it, that is mathematically certain.

What they can do however is they can double spend any coins they themselves sent to you and this is mathematically certain, and they can unconfirm transactions up to the hardcoded checkpoint and that is also mathematically certain.



As you can see, what I say about Bitcoin security is not false. Not even by a little. Everything in Bitcoin is mathematically certain except I didn't mention the unlikely event where someone decides to abuse mathematically certainty to double spend or unconfirm transaction up to a point.

I appreciate the input and you're more than welcome to take what I wrote and modify it. And yes I was toying around with the idea of making this into a video but I'm a noob when it comes to that so I'd need someone who knows animation and can do voice acting to help me.

Our whole point of disagreement seems to be centered around this one statement.  You seem to believe that it is absolutely 100% impossible "to convince everyone to change to a different Bitcoin client with different rules", and I don't.  Difficult?  Absolutely.  Darn near impossible?  Yup.  Do I think it will ever happen?  Nope?  Am I a firm believer in the mathematics of Bitcoin, yup.  

But, impossible?  Nope.  In fact, I don't even believe it needs to be "everyone".  But for the sake of argument, say everyone.  I believe that it would be possible through legislation, port blocking, and other evil tricks (both technological and political / legal) for the governments of the world to render the current Bitcoin client useless.  I think you are kidding yourself if you think otherwise.

Or without even convincing ANYONE to "use a different client", if a major entity / government created a new block chain with a higher difficulty level, diverting all the mined bitcoins since the last check point to them, and then performed a worldwide Black Out, to knock out the internet and Bitcoin, and when worldwide power got restored one city at a time, and one-by-one, as people were connecting to the internet, and discovering a new block chain with a higher difficulty, they'd reject their existing block chain dating back to the last check point, and boom, the deed would be done - tons of transactions reversed.  Do I think this will happen?  Nope.  Do I think it is possible?  absolutely.  

In fact, I think that it is still very much within the realm of the budget of the US Government to undo a day's worth of transactions, and probably many more.

Don't get me wrong, I have a ton invested in the success of Bitcoin.  I just believe that you lose credibility when you toss around words like impossible and mathematical certainty, when they fall just short of that 100% number.  99.9% with 300 9's after the decimal ISN'T 100%.  Sorry.

We should probably agree to disagree on this one.  I like your document, but I am just trying to explain my reaction.  It's your document - you asked for feedback, I didn't mean any offense.  Just providing feedback, and trying to explain what I meant.

I don't either.

I specifically say this in the guide. So we're not talking about changing rules, we're talking about following rules where whether or not they are or aren't followed can be determined with mathematical certainty.

I'm asking the forum experts about "is there an easy explanation of how Bitcoin works? A video maybe?"
The problem is solved I guess. There is a lot of good work done in this topic:
https://bitcointalk.org/index.php?topic=144642

I've used some ideas of @hazek and @Korbman there - and I received nice answers.

Thanks Hazek for that.