How to build Bitcoin
Bitcoin is hard to comprehend. But, by separating it into its constituent parts, we can begin to understand and assemble the coin. Using a coin called “Infocoin” as a proxy, we can set the stage for the eventual evolution of Bitcoin.
The steps for creating a cryptocurrency (which ultimately develops into Bitcoin):
- A signed letter of intent.
- To create a cryptocurrency a unique code specific to a single person that demonstrates intent is needed to begin transactions.
- Serial numbers.
- In addition to the letter (or code, depending on how you look at it) of intent, coins need to be uniquely identifiable.
- We need a bank.
- To assign serial numbers and specific letters of intent, as well as a place to have all the info coalesce, there needs to be a bank. But the main theme in crypto is its decentralized system, so everyone is the bank.
- This collective bank is called the blockchain.
- The blockchain is a public ledger and is used to confirm transactions. Transactions only happen when enough people in the blockchain agree for them to happen.
- The blockchain is a chain of blocks, with each block representing one transaction. The chain of blocks signifies the pathway through which the currency travels.
- The blockchain and the way in which it stores sequential events (i.e. capabilities to analyze who had the Bitcoin at one point) makes it less anonymous than most other currencies.
- What happens if one person owns too many of the computers on the blockchain?
- This is discouraged by making it computationally costly to validate transactions while rewarding them for completing it.
- To validate transactions computers are required to solve a puzzle which is designed to take exactly ten minutes.