[JOURNAL] (Shivam) GB : 01-04

[Shevxer]

Name: Shivam Verma
Book: Grokking Bitcoin: 01-04
Q&A:

Q1) Who created the first bitcoin?
Sol. The genesis block was mined by Satoshi Nakamoto, with a reward of 50 BTC. With a message in coinbase of block 'The Times Jan/03/2009 Chancellor on brink of second bailout for banks.’

Q2) Is your private key stored on the blockchain?
Sol. No, the private key is not part of the Bitcoin network, it’s just a random number between 1 to 2^256 used as one’s identity. The blockchain stores transactions which only use BTC addresses or public keys.

Q3) How private key is generated?

Q4) What are the other type of BTC address instead of base58check encoding of PKH?
Sol. base58check encoding is also called legacy address (P2PKH), starts with 1. This is quite expensive compared to others like the SegWit one. Other types of addresses:

• Pay to Script Hash (P2SH) – starts with 3
• Native SegWit (P2WPKH) – Starts with ‘bc1q’
• Taproot (P2TR) – Starts with ‘bc1p’

Example - CoinDCX, Kucoin, Unstoppable use P2SH, Exodus gives choice between P2WPKH and legacy address.

Q5) How does checksum minimize possibilities of typos?
Sol. The wallet does the hectic base58check decoding for us. If the BTC address has typos the checksum will not match, most probably and the wallet will notify us that the address is invalid. The checksum is 4 bytes, which corresponds to 2^32≈ 4.3 billion values. The chance is about 1 in 4.3 billion that base58check fails to detect the typing error.

Q6) Where does money goes when we buy BTC?
Sol. It's like a product, for example - when we buy coffee we are not putting money inside coffee rather giving it to a cashier. The money goes to the person, brokerage house, or exchange through which you are buying bitcoin. Buying a bitcoin is simply like a general exchange of currency (like USD-INR) except the fact that money resides in your bank account and bitcoin in your bitcoin wallet.

Q7) Can there be an infinite number of blocks?
Sol. There can be only 21 million bitcoins that can ever exist but there's no limit to the number of blocks. Miners will stop getting block rewards after the mining of the last BTC but hopefully, as the network would expand the number of transactions on each block will increase hence the transaction fees, so mining might still be profitable. Bitcoin although has no plans can switch to proof of stake if Etherium 2.0 is successful.