Showing Revision 1 created 06/29/2012 by Amara Bot.

1. Title:
   06-55 Longest Block Chain
2. Description:

   Other units in this course below:
   Unit 1:http://www.youtube.com/playlist?list=PLAA92F9967A520440
   Unit 2:http://www.youtube.com/playlist?list=PL82ECFBA355C2D7AC
   Unit 3:http://www.youtube.com/playlist?list=PLEA779BF14BC54A1F
   Unit 4:http://www.youtube.com/playlist?list=PL70C88B4299F00842
   Unit 5:http://www.youtube.com/playlist?list=PL29E48E3B5FD7A2FA
   Unit 6:http://www.youtube.com/playlist?list=PL146831BEFADFE152
   QA: http://www.youtube.com/playlist?list=PL54A10DB39F3EF17B

   To gain access to interactive quizzes, homework, programming assignments and a helpful community, join the class at http://www.udacity.com

3. 0 0:00 - 0:03
   Now what happens in the network is
4. 3000 0:03 - 0:05
   at each time step a new block is created
5. 5000 0:05 - 0:07
   that validates all the transactions in that block.
6. 7000 0:07 - 0:09
   At the point where this block is created,
7. 9000 0:09 - 0:12
   this has to be the longest block chain.
8. 12000 0:12 - 0:14
   That's the way that Bob can validate
9. 14000 0:14 - 0:16
   that this was a valid spend.
10. 16000 0:16 - 0:18
    Someone could try to create an alternate block chain.
11. 18000 0:18 - 0:21
    So if Bob wants to spend the coin twice,
12. 21000 0:21 - 0:23
    what Bob would need to do is create a chain
13. 23000 0:23 - 0:26
    that's longer than the longest chain.
14. 26000 0:26 - 0:29
    When a transaction's validated by the network,
15. 29000 0:29 - 0:31
    all the signatures in the coin are checked.
16. 31000 0:31 - 0:33
    This is using the transfer chain,
17. 33000 0:33 - 0:35
    but to prevent double spending
18. 35000 0:35 - 0:37
    there's also a check of this chain of blocks.
19. 37000 0:37 - 0:41
    And the check is: the longest chain is the one that's viewed as correct.
20. 41000 0:41 - 0:45
    So each peer in the network might see a different view of this chain of blocks.
21. 45000 0:45 - 0:49
    If they see different views, the one that has the longest chain
22. 49000 0:49 - 0:54
    is the one that will be viewed as the most correct view of all the transactions.
23. 54000 0:54 - 0:56
    So every participant in the network
24. 56000 0:56 - 0:59
    is effectively keeping track of all transactions.
25. 59000 0:59 - 1:03
    And the version of all transactions that people trust the most
26. 63000 1:03 - 1:05
    is the one with the longest chain,
27. 65000 1:05 - 1:08
    and if an adversary wants to create a longer chain
28. 68000 1:08 - 1:10
    with a different view of transactions--
29. 70000 1:10 - 1:15
    so if Bob wants to double spend this coin and, say,
30. 75000 1:15 - 1:18
    give the same coin to both Cathy and Doug,
31. 78000 1:18 - 1:20
    what Bob would need to do is create a longer chain
32. 80000 1:20 - 1:24
    that convinces Doug that this is the correct view of the network
33. 84000 1:24 - 1:27
    and this view is incorrect.
34. 87000 1:27 - 1:29
    So that requires finding these hash values.
35. 89000 1:29 - 1:33
    If the power of the network exceeds the power of the adversary,
36. 93000 1:33 - 1:35
    well then it's likely the network will have
37. 95000 1:35 - 1:38
    a longer chain than the adversary can produce.
38. 98000 1:38 - 1:41
    Keep in mind, the motivation for producing this attack
39. 101000 1:41 - 1:43
    is just to be able to double spend one coin.
40. 103000 1:43 - 1:47
    There's still the chain of public key signatures
41. 107000 1:47 - 1:50
    that validates the transfers of each coin.
42. 110000 1:50 - 1:53
    So the resources that you would need to spend to produce a longer chain
43. 113000 1:53 - 1:56
    to convince someone that you didn't spend that coin
44. 116000 1:56 - 2:02
    in the other chain, which is now the one that would've included the previous spend
45. 122000 2:02 - 2:05
    is to find these hash values quicker than the network can.
46. 125000 2:05 - 2:07
    Then centers are set up in such a way
47. 127000 2:07 - 2:10
    to make it unlikely that someone will want to do that
48. 130000 2:10 - 2:13
    since if you do find that next hash value in the chain,
49. 133000 2:13 - 2:16
    you can create a new block, which is worth 50 bit coins
50. 136000 2:16 - 2:18
    If you create a longer chain
51. 138000 2:18 - 2:21
    trying to catch up to the chain that the network has,
52. 141000 2:21 - 2:24
    that's going to require a lot more computing resources,
53. 144000 2:24 - 2:26
    and would only allow you to respend
54. 146000 2:26 - 2:28
    the bit coins that you already owned.
55. 148000 2:28 - 2:32
    So this doesn't provide anonymity in the traditional sense.
56. 152000 2:32 - 2:35
    It avoids the need for a central authority,
57. 155000 2:35 - 2:38
    but each transaction is known to everyone in the network.
58. 158000 2:38 - 2:40
    The way to provide some anonymity is,
59. 160000 2:40 - 2:43
    instead of using your actual names in the transactions,
60. 163000 2:43 - 2:46
    you can have different identities for each transaction.
61. 166000 2:46 - 2:49
    So this is gonna be some new identity.
62. 169000 2:49 - 2:52
    It will still need to have a certificate
63. 172000 2:52 - 2:54
    that validates the public key for that,
64. 174000 2:54 - 2:57
    but it doesn't need to be tied to Alice's identity
65. 177000 2:57 - 2:59
    in any way that's visible to anyone else.
66. 179000 2:59 - 3:02
    So that's the way to provide some anonymity,
67. 182000 3:02 - 3:05
    even though all the transactions in the network are public
68. 185000 3:05 - 3:07
    to everyone who participates.
69. 187000 3:07 - 3:09
    So this actually works.
70. 189000 3:09 - 3:11
    There's at least a reasonable number of people
71. 191000 3:11 - 3:13
    that trust this currency
72. 193000 3:13 - 3:16
    and are providing computation
73. 196000 3:16 - 3:18
    to create these blocks,
74. 198000 3:18 - 3:22
    which is incentivized by creating the value of new bit coins.
75. 202000 3:22 - 3:26
    There's about 9 million bit coins currently available.
76. 206000 3:26 - 3:31
    And the marketplace fluctuates, and it depends on cost of computation
77. 211000 3:31 - 3:34
    as well as the trust in the bit coin network.
78. 214000 3:34 - 3:40
    There have been some incidents where the price fluctuated wildly
79. 220000 3:40 - 3:46
    because there was some concern about the security of the bit coin transaction site
80. 226000 3:46 -
    but the current market is fairly stable around $5 for a bit coin.