Learning Bitcoin

Richard Caetano

• Publisher: Packt Publishing
• Year: 2015
• eBook ISBN: 9781785287305
• Edition: 1
• Topic: Business
• Subtopic: Business Intelligence
• Index: Business

Embrace the new world of fiance by leveraging the power of crypto-currencies using Bitcoin and the Blockchain

About This Book

• Set up your own wallet, buy and sell Bitcoin, and execute custom transactions on the Blockchain
• Leverage the power of Bitcoin to reduce transaction costs and eliminate fraud
• A practical step-by-step guide to break down the Bitcoin technology to ensure safe transactions

Who This Book Is For

If you are familiar with online banking and want to expand your finances into a resilient and transparent currency, this book is ideal for you. A basic understanding of online wallets and financial systems will be highly beneficial to unravel the mysteries of Bitcoin.

What You Will Learn

• Set up your wallet and buy a Bitcoin in a flash while understanding the basics of addresses and transactions
• Acquire the knack of buying, selling, and trading Bitcoins with online marketplaces
• Secure and protect your Bitcoins from online theft using Brainwallets and cold storage
• Understand how Bitcoin's underlying technology, the Blockchain, works with simple illustrations and explanations
• Configure your own Bitcoin node and execute common operations on the network
• Discover various aspects of mining Bitcoin and how to set up your own mining rig
• Dive deeper into Bitcoin and write scripts and multi-signature transactions on the network
• Explore the various alt-coins and get to know how to compare them and their value

In Detail

The financial crisis of 2008 raised attention to the need for transparency and accountability in the financial world. As banks and governments were scrambling to stay solvent while seeking a sustainable plan, a powerfully new and resilient technology emerged.

Bitcoin, built on a fundamentally new technology called "The Blockchain, " offered the promise of a new financial system where transactions are sent directly between two parties without the need for central control.

Bitcoin exists as an open and transparent financial system without banks, governments, or corporate support. Simply put, Bitcoin is "programmable money" that has the potential to change the world on the same scale as the Internet itself.

This book arms you with immense knowledge of Bitcoin and helps you implement the technology in your money matters, enabling secure transactions.

We first walk through the fundamentals of Bitcoin, illustrate how the technology works, and exemplify how to interact with this powerful and new financial technology. You will learn how to set up your online Bitcoin wallet, indulge in buying and selling of bitcoins, and manage their storage. We then get to grips with the most powerful algorithm of all times: the Blockchain, and learn how crypto-currencies can reduce the risk of fraud for e-commerce merchants and consumers.

With a solid base of Blockchain, you will write and execute your own custom transactions. Most importantly, you will be able to protect and secure your Bitcoin with the help of effective solutions provided in the book. Packed with plenty of screenshots, Learning Bitcoin is a simple and painless guide to working with Bitcoin.

Style and approach

This is an easy-to-follow guide to working with Bitcoin and the Blockchain technology. This book is ideal for anyone who wants to learn the basics of Bitcoin and explore how to set up their own transactions.

Learning Bitcoin

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Table of Contents

Learning Bitcoin

Credits

About the Author

Acknowledgments

About the Reviewers

www.PacktPub.com

Support files, eBooks, discount offers, and more

Why subscribe?

Free access for Packt account holders

Preface

What this book covers

What you need for this book

Who this book is for

Conventions

Reader feedback

Customer support

Downloading the example code

Errata

Piracy

Questions

1. Setting up a Wallet

A brief history of money

Buying your first bitcoin in 15 minutes

Signing up for a wallet – five minutes

Adding a funding source – ten minutes

Buying bitcoin – less than a minute

Looking at your Bitcoin balance

Explaining Bitcoin addresses

Sending and receiving bitcoins

Sending bitcoins

Receiving bitcoins

Private keys and wallets

Transactions and confirmations

Transactions

Confirmations

Comparing Bitcoin wallets

Online wallets

Desktop wallets

Mobile wallets

Hardware wallets

Summary

2. Buying and Selling Bitcoins

Understanding Bitcoin's price volatility

Exchange rates

Bitcoin's price history

Price bubbles

Theft

Seizure

Following exchange rates and news

Price tickers

Detailed price tracking

Candlestick charts

Market orders

Trading techniques

News sources

Comparing Bitcoin exchanges

Volume and liquidity

Fees and commissions

Transfer limits

Jurisdiction and regulations

Service uptime

Trading Bitcoins on an exchange

Setting up an account

Depositing funds

Using Coinbase Exchange

Funding and orders

Order book and history

Price charts

Physical Bitcoins

Summary

3. Protecting Your Bitcoins

Storing your bitcoins

Bitcoin savings

Paper wallets

One time use paper wallets

Creating a paper wallet

Verifying your wallet's balance

Importing versus sweeping

Importing your paper wallet

Paper wallet guidelines

Paper wallet services

Brainwallets

Creating a brainwallet

Increasing brainwallet security

Deterministic wallets

Creating a deterministic wallet

Spending from a deterministic wallet

Type 2 Hierarchical Deterministic wallets

Installing a HD wallet

Bitcoins in cold storage

Cold storage with Electrum

Verifying access to a private key

Good housekeeping with Bitcoin

Summary

4. Understanding the Blockchain

The Genesis block

Satoshi Nakamoto

The whitepaper

The blockchain

Keys, transactions, and blocks

Creating a transaction

Digital signatures

Public key encryption

Signing a document

Elliptic Curve Cryptography

Bitcoin addresses

Cryptographic hashes

Generating a Bitcoin address

Signing a transaction

Decentralized network

Broadcasting the transaction

The blockchain

Blocks

Forks

The Bitcoin supply

Proof of work

Confirmation

Difficulty level

Mining

Solving a difficult problem

Transaction fees

Network attacks

51 percent attacks

Race attacks

Finney attacks

Alternative coins

Summary

5. Installing a Bitcoin Node

Understanding a Bitcoin node

Bitcoin Core

Internals of a node

Node discovery

Messaging

Maintaining a Blockchain

Transaction relaying

Bitcoin wallets

Installing the client

Requirements

Starting the client

Connecting to the network

Downloading the blockchain

Using the client

Encrypting your wallet

Backing up your wallet

Balance and history

Receiving transactions

Sending transactions

Executing Bitcoin operations

Opening the console

Working with an encrypted wallet

Working with Bitcoin addresses

Creating and sending a transaction

Generating a destination address

Selecting a funding source

Specifying a change address

Including a transaction fee

Defining the transaction in JSON

Encoding and signing the transaction

Reviewing the transaction

Broadcasting the transaction

Summary

6. Understanding the Mining Process

Digital gold

Bitcoin mining

Exploring the mining ecosystem

Validating transactions

Proof-of-Work

SHA-256

Scrypt

Mining rewards

Difficulty metrics

Mining hardware

Mining conditions

Mining pools

Mining shares

Fees and Payout

Cloud mining

Estimating profitability

Hardware efficiency

Factoring in the difficulty level

Selecting a currency

Exchange rates

Setting up a mining client

Requirements

Capital

Hardware

Facilities

Choosing the equipment

Choosing the software

Connecting to a mining pool

The payout method

The pool fees

The pool speed

Additional features

Avoiding large pools

Running the client

Summary

7. Programming Bitcoin

Programmable money

Decentralized applications

Blockchains

Public Blockchains

Permissioned Blockchains

Smart contracts

Installing BitcoinJS

Requirements

Beginning the installation

Editing the source code

Programming common Bitcoin operations

Checking your balance

Generating addresses for a website

Sending transactions

Simple transactions

Building an Escrow contract

Generating the keys

Generating the Escrow address

Creating a withdraw script

Signing the transaction

Broadcasting the transaction

Refunding

Summary

8. Exploring Alternative Coins

Open source money

The rise of the alt-coin

Namecoin

Decentralized domain name service

Merged mining

Litecoin

Block rate

Scrypt mining

Peercoin

Proof-of-stake

Primecoin

Prime numbers

Mining prime numbers

Evaluating an alt-coin

Developer activity

Launching of the alt-coin

The legitimate feature set

Protocols built on the Bitcoin Blockchain

Digital assets

Building a voting system with Counterparty

The XCP alt-coin

Creating a voting system

Creating a wallet

Funding the wallet

Creating the tokens

Sending tokens

Casting votes

Verifying the results

Finishing up

The future of finance

Index

Learning Bitcoin

Copyright © 2015 Packt Publishing

All rights reserved. No part of this book may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, without the prior written permission of the publisher, except in the case of brief q...

Table of contents

• Learning Bitcoin