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The Power of Cryptography Pervades the World of Bitcoin

November 16, 2014 by Posted in: Bitcoin

One of the truly fascinating things about the Bitcoin cryptocurrency, as well as the legions of imitators it spawned, is how high grade cryptography has been used to secure it. It is more than a little surprising to some that a worldwide network of peer to peer computers could someone underlie a currency that is almost impossible to forge or subvert, but the truth is that this has been accomplished.

Ever since the currency was first unleashed upon the world, a ledger has been building up of all the Bitcoin transactions that have ever happened. Referred to in the lingo of those who use the currency as the “block chain,” this unbroken string of transaction details stretches back from the present to the first Bitcoin that was ever created.

How this ledger is maintained and upheld is interesting, too. As they hash away at difficult mathematical problems in the hopes of earning Bitcoin rewards, Bitcoin miners are not just doing empty, pointless work. In fact, they are generating prospective signatures for each stage of the Bitcoin block chain, looking for a solution that will meet the requirements currently put forth by the network itself.

Each small such victory, then, adds another link to the block chain, as well as a piece of a Bitcoin to the balance of the lucky discoverer. Because it is so difficult even to find a single solution, the prospect of forging an entire block chain all over again is almost impossible to imagine.

That keeps the block chain secure from those who would like to counterfeit their own Bitcoin or otherwise act in underhanded ways. In fact, this basic principle has a wide range of uses, whether in the world of Bitcoin or elsewhere.

The site Satoshi Slot, for example, uses a closely related principle to show to gamblers that its results are on the up and up. It publishes beforehand a list of the signatures for gambling results that it has yet to produce, offering these up as proof of the fact that it operates above board. Just as Bitcoin users can check that the block chain’s integrity is intact, they can use these results to verify that the bets they made with the currency were treated fairly.