How do Bitcoin Transactions Work?
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We hope you understand, and consider subscribing for unlimited online access. Bitcoin is taking the world by storm. The decentralized digital currency is a secure payment platform that anybody can use. It is free from government interference and operated by an open, peer-to-peer network. This independence is one reason Bitcoin has become so popular, causing its value to rise steeply. A crucial feature of Bitcoin private key vs public key bitcoin news its security. Bitcoins have two important security features that prevent them from being stolen or copied.
Both are based on cryptographic protocols that are hard to crack. In other words, they exploit mathematical functions, like factorization, that are easy in one direction but hard in the other—at least for an ordinary classical computer. But there is a problem on the horizon. Quantum computers can solve these problems easily. And the first quantum computers are currently under development. That raises an urgent question: Today, we get an answer thanks to the work of Divesh Aggarwal at the National University of Singapore and a few pals.
These guys have studied the threat to Bitcoin posed by quantum computers and say that the danger is real and imminent.
Bitcoin transactions are stored in a distributed ledger that collates private key vs public key bitcoin news the deals carried out in a specific time period, usually about 10 minutes. This collection, private key vs public key bitcoin news a block, also contains a cryptographic hash of the previous block, which contains a cryptographic hash of the one before that, and so on in a chain.
Hence the term blockchain. A hash is a mathematical function that turns a set of data of any length into a set of specific length. The new block must also contain a number called a nonce that has a special property. When this nonce is hashed, or combined mathematically, with the content of the block, the result must be less than some specific target value. Given the nonce and the block content, this is easy to show, which allows anybody to verify the block. But generating the nonce is time consuming, since the only way to do it is by brute force—to try numbers one after the other until a nonce is found.
This process of finding a nonce, called mining, is rewarded with Bitcoins. Mining is so computationally intensive that the task is usually divided among many computers that share the reward. The block is then placed on the distributed ledger and, once validated, incorporated into the blockchain.
The miners then start work on the next block. Occasionally, two mining groups find different nonces and declare two different blocks.
The Bitcoin protocol states that in private key vs public key bitcoin news case, the block that has been worked on more will be incorporated into the chain and the other discarded.
In that case, it effectively controls the ledger. If it is malicious, it can spend bitcoins twice, by deleting transactions so they are never incorporated into the blockchain. The other 49 percent of miners are none the wiser because they have no oversight of the mining process. That creates an opportunity for a private key vs public key bitcoin news owner of a quantum computer put to work as a Bitcoin miner.
If this computational power breaks the 50 percent threshold, it can do what it likes. Their conclusion will be a relief to Bitcoin miners the world over. Aggarwal and co say that most mining is done by application-specific integrated circuits ASICs made by companies such as Nvidia. But there is a different threat that is much more worrying. Bitcoin has another cryptographic security feature to ensure that only the private key vs public key bitcoin news of a Bitcoin can spend it. This is based on the same mathematics used for public-key encryption schemes.
The idea is that the owner generates two numbers—a private key that is secret and a public key that is published. The public key can be easily generated from the private key, but not vice versa. A signature can be used to verify that the owner holds the private key, without revealing the private key, using a technique known as an elliptic curve signature scheme. In this way, the receiver can verify that the owner possesses the private key and therefore has the right to spend the Bitcoin.
The only way to cheat this system is to calculate the private key using the public key, which is extremely hard with conventional computers. But with a quantum computer, it is easy. Indeed, quantum computers pose a similar risk to all encryption schemes that use a similar technology, which includes many common forms of encryption.
There are public-key schemes that are resistant to attack by quantum computers. So it is conceivable that the Bitcoin protocols could be revised to make the system safer.
But there are no plans to do that now. Bitcoin is no stranger to controversy. It has weathered various storms over its security. But that is no guarantee that it will cope well in the future. One thing is sure: Operating a botnet is expensive and risky. Everything included in Insider Basic, plus the digital magazine, extensive archive, ad-free web experience, and discounts to partner offerings and MIT Technology Review events.
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