Alice wants to pay Bob, but the thousands of Bitcoin full nodes who
will verify her transaction don’t know who Alice or Bob are—and we want
to keep it that way to protect their privacy. Alice needs to
communicate that Bob should receive some of her bitcoins without tying
any aspect of that transaction to Bob’s real-world identity or to other
Bitcoin payments that Bob receives. The method Alice uses must ensure
that only Bob can further spend the bitcoins he receives.
The original Bitcoin paper describes a very simple scheme for achieving
those goals, shown in Figure 4-1.
Figure 4-1. Transaction chain from original Bitcoin paper.
A receiver like Bob
accepts bitcoins to a public key in a transaction that is signed by the
spender (like Alice). The bitcoins that Alice is spending had been
previously received to one of her public keys, and she uses the
corresponding private key to generate her signature. Full nodes can
verify that Alice’s signature commits to the output of a hash function
that itself commits to Bob’s public key and other transaction details.
We’ll examine public keys, private keys, signatures, and hash functions
in this chapter, and then use all of them together to describe
the addresses used by modern Bitcoin software.
Public Key Cryptography
Public key cryptography was invented in the 1970s and is a mathematical foundation for modern ...
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