Bitcoin for the Doubters

In any case, we have to use our private keys to authorise the ‘important personal documents’ (transactions) and therefore give our currency notes, to the unauthorised persons. The public key serves for verifying the originality of other people’s transactions.

Hash function

Hash operation is very simple to explain. Take an arbitrary number. Let’s assume, 3+5+4+6+7+8+9+11+13+16+30+19+26. Make an arithmetic addition of all digits several times:
3+5+4+6+7+8+9+11+13+16+30+19+26=157 => 1+5+7=13 => 1+3=4.

Thus, you can compare some unique number to any string of numbers. Addition procedure was called hashing, and the method of execution — hash function. The unique number 4 resulted from addition was called hash sum. A hash function can be described as a mincer, where one puts a big piece of meat and gets mince at the output. The reverse operation is impossible.

Properties of hashing:

• Having hash (the result of adding numbers), it is impossible to establish an original string of numbers;
• You can’t choose the string of numbers to fit the pre-agreed result;
• The slightest reshuffle in the number chain causes a substantial modification of the hash.

Public key hash

Bitcoin uses the hash sum of a public key as the address for cryptocurrency transaction. There is nothing easier than to publish the bitcoin address in a direct text. However, even the great astrologers can’t define a source key using the hash. The life cycle of the keys will end as soon as the transfer of property happens. They don’t appear further.

PRIVAT 1 — private key.
HASH 1 or HASH (PUBL 1) — hash sum of a public key (bitcoin address).
HASH 2 or HASH (PUBL 2) — hash of a public key of the next buyer.

Property transaction

Let us assume that there is an owner of the yacht, and his property is beyond doubt. At the fair, the owner shows the buyers the hash of his public key and the yacht number from a shipbuilding company, and everyone admits it. Before the start of the final sale, the seller’s public and private keys are secret for all. The buyers know only the hash sum of a public key and the corresponding numbers of the yacht.

When the owner of the yacht wants to sell it to an interested client, he makes an announcement, where he writes a number of the yacht and the hash sum of a public key of the future owner. The seller authorises the contract with his personal key and attaches a public key.

After the sale of the yacht, the personal key ceases to perform its function. There will be no second such deal. We know nothing about the second buyer, apart from the public key hash, until he sells the ownership of the yacht to the third customer. This line can be unlimited. Authorising a contract for the yacht sale using a digital signature, the owner confirms his identity and assumes the charge of transfer.

It is supposed that the personal key performs its privacy function only once and sends the change from the sale to his secret address. Therefore, it is difficult to determine how much cryptocurrency is located at the wallet address. The overall picture of the transactions is established due to the long chain.