The Bitcoin was introduced in this world by Satoshi Nakamoto through a research-style white paper entitled Bitcoin: A Peer-to-Peer Electronic Cash System in the year 2008.
The Bitcoin not only solved the double-spending problem, but also offered many more advantages, One such advantage worth mentioning here is the anonymity in the transactions. Satoshi who created the system and did transact few coins on this system is totally anonymous to the entire world.
Just imagine, in this world of social media, when the privacy of each individual is at stake, the world is not able to trace out so far who is Satoshi? In fact, we do not know whether Satoshi is an individual or a group of people. Googling it out also revealed the fact that the bitcoins Satoshi Nakamoto holds is worth about $19.4 billion – that money now remains unclaimed in the Bitcoin system. So what is Bitcoin – let us have a look!
What is Bitcoin?
As you saw earlier, the bank maintains a ledger recording each transaction. This ledger is privately held and maintained by the bank. Satoshi proposed that let this ledger be public and maintained by the community.
The moment you make such a ledger public, several considerations would come to your mind. This ledger has to be tamper-proof so that nobody can modify its entries. As each entry in the ledger is publicly visible, we will have to figure out how to maintain the anonymity – obviously you would not like everybody in the world to know that I paid you one million dollars.
Also, as there is only one single ledger keeping track of each and every transaction in the world, the size of ledger would be another great concern. Providing a solution to these intricacies was not trivial and that’s what I am attempting it here to make you understand underlying architecture of Bitcoin in simple words.
This underlying architecture is the Blockchain and that’s what this tutorial is about. To understand the Blockchain architecture, you need to understand a few key features on which it is based on. So, let us get started with PKI – Public Key Cryptography.