Midterm - Process: ELI20ish (Bitcoin Transaction Flow)

Fall 24

What happens when a user initiates a Bitcoin transaction?

User enters the transaction details, including account, amount, and urgency.

What does the wallet do with the transaction data?

The wallet hashes the transaction data using SHA-256 and encrypts the hash with the user's private key to create a digital signature

What does a miner use the public key for in a Bitcoin transaction?

miner uses the public key to unlock and verify the digital signature, confirming the transaction's legitimacy.

What is the goal of the miner when creating a block hash?

To solve the Proof of Work (PoW) problem by finding a block hash that is less than the target value through varying the nonce.

What happens if the miner successfully solves the PoW problem?

The block is broadcast to the network, and it is added to the blockchain.

What happens if the miner does not solve the PoW problem on the first attempt?

The miner adjusts the nonce and attempts to solve the problem again.

The process of a Bitcoin transaction (User’s perspective)

user enter transactions - wallet hashes transaction data - wallet encrypts the hash - wallet sends data, digital signature, public key to a few miners

The process of a Bitcoin transaction (Miner’s perspective)

unlock digital signature via public key - broadcast valid transaction to nearest miners - create a block hash - attempt to solve proof of work (PoW) - Is the problem solve, yes/no? - broadcast block and add to chain