Intro to Bitcoin

Bitcoin is protocol for a peer-to-peer internet-native currency. It is also network that is an instance of the Bitcoin protocol, litecoin is another instance of the bitcoin protocol.

The Bitcoin protocol solves a problem called "The Byzantine Generals problem" , not going into detail, an issue we are all familiar with is, if you send some one a picture of an apple on the internet, both you and the recipient end up with a copy of that picture. Having "ownership" of a picture is difficult because of this issue. Imagine a picture of a £10 note, which you give to an online merchant, clearly not a working model for online cash. How we usually spend money on-line is via a (hopefully) trustworthy third party. They keep a tally of who is owed what when we trade online. Bitcoin solves this issue by keeping a ledger of transfers, with a list of who has an apple - importantly there are many copies of this ledger. Transfers of the digital asset are recorded in a batch and include a finger print (a hash) of a previous batch of transactions. This "batch" of transactions is known as a "Block". The block is hashed, so that it's unique finger print can be used in the next block. Blocks are created every 10 minutes. If someone wants to cheat and change a past transaction, pretend they didn't give the apple to another person, they would need to ammend a transaction in a past block. Because each block includes a hash from the previous, making a change to a previous block requires you to update _every_ block that follows. Computers are fast so, if you wrote the right program it could be done instantly. So a puzzle is included in each block that takes a computer some amount of time to solve. If the puzzle takes one minute, and you want to undo a transaction from yeterday It would take 144 minutes to re-write all the blocks. In the bitcoin network, the puzzle takes about 10 minutes to solve, but that is for the _collective_ computer power on the network. If your computer represents 1000th of the network, it would take you 1000 days to re-write a transaction from yesterday. Once a transaction is in a block that is a few blocks deep, it is unlikely to be changed by bad actors. After 6 it is highly improbable that it can be changed. Changing a transaction that is a day, a week or a month deep is bordering on the impossible.

This ledger, a blockchain, is distributed between tens of thousands of users,

Block creators are chosen at random

Block creators are rewarded with a new set of bitcoin as compensation for the security they provide.

Transactions are small cryptographic smart contracts

Multi-sig wallets are an example of a simple smart contract. Some wallets are made up of private keys of multiple parts known as "Multisig". More sophisticated wallets have M of N private keys, which allows you to access funds with only any of x keys out of the total y keys available.