What we want you to know is that the whole structure of bitcoin is the only account book that is exclusive and recognized, and this book “records” and “proves” the wealth of all. In other words, the essence of bitcoin is not coins or banknotes. The essence of bitcoin is “public account”. Text: what is the Jemmy virtual currency? Virtual currency is a kind of currency which has no entity and exists in virtual form. The early well-known examples, such as heaven coin in paradise game, or batch coin in kicking and kicking industrial workshop, are all kinds of virtual currency. Nowadays, virtual currency has been widely used to refer to cryptocurrency. For the convenience of understanding, this paper will mix the two words as the same meaning. Cryptocurrency: cryptography, which has been strengthened by cryptography, is a knowledge about encryption and decoding. In the past, the common day coins or batch coins may be broken line backtracking, hacker intrusion, and even the currency issuers change the number by themselves. Cryptocurrency solves the security problems of these virtual currencies through cryptography related technologies. Bitcoin is the originator of cryptocurrency. Bitcoin is the originator of cryptocurrency. It was born in 2009 due to the well-known subprime mortgage crisis. It was invented by one (or more) mysterious people under the pseudonym “Nakamoto”. Bitcoin is the most widely used and recognized virtual currency. At the time of writing, the total market value of bitcoin is more than 170 billion US dollars, far more than the sum of thousands of other virtual currencies. The following uses bitcoin as the main example to illustrate the principle and application of virtual currency. Decentralisation: filling the biggest loophole in the money system, bitcoin not only greatly enhances security issues with cryptography, but also solves middlemen in the monetary system. Photo source: if the amount of money transferred by chain news is large, or foreign exchange is involved, it will face many restrictions and fees, including excluding credit card companies, banks, and even the government, eliminating the security concerns and efficiency losses associated with money intermediaries. This is called decentralization, which also means removing all intermediaries. Some people may think that banks are very convenient. Why should we “decentralize” when we have nothing to do? Due to the development of the financial system, most of the daily transactions do have satisfactory security and convenience, but in fact, there are still many loopholes in cheating and hacking. In serious cases, there are even potential crises that may cause the whole system to collapse. Cheating loopholes of payers: the “one currency, two flowers” virtual currency solves the “one currency, two flowers” problem of all virtual currencies, even cash use. Double spending means double spending after spending the same amount of money. “My money was deducted immediately after I paid it. How could I spend it again? Virtual currency, such as batch currency, is completely controlled by the issuer. As long as you are willing, you can change the number unilaterally. In the real world, as long as the real gold and silver issued by the government or the bank is digital, there are also cases of digital change and double coin. Moreover, the author has more personal experience in this regard, that is, when a credit card is stolen by an unworthy person: the bank refunds the disputed money to the cardholder, which is an example of spending the same amount of money (stolen brush) and spending it again (bank refund). Although the stolen money can be recovered, which is both safe and convenient, it is dangerous and inconvenient for the seller whose money has been withdrawn to use credit card to collect money. Cheating loopholes of money collectors: renege on debts. Under normal circumstances, the banks in charge of collecting and managing money will not do it casually, but as long as they are bad enough and dare to do so, the possibility of cheating by banks or credit card companies themselves and taking money from anyone’s account by hand or foot cannot be ruled out. The cheating loophole of money printer: printing money indiscriminately will cause currency devaluation and inflation. Bread priced at 10 yuan in the morning becomes 50 yuan in the afternoon. Things are more and more expensive, but the money in hand is less and less valuable. The government had to print bigger bills, and the vicious circle continued until the currency collapsed. The largest denomination currency in the world is Zimbabwe’s 100 trillion paper money, but its value is reduced to the same as waste paper. However, how can bitcoin solve the above problem of money cheating? The solution is as follows: public ledger blockchain technology proof of work public / private keys virtual currency use a unified “public account book” which is like a passbook to record each account in order: where the money comes from, to whom, how much, etc. As long as there is any dispute, both sides can check it together. In case of disputes, because others do not have the same account book, it is impossible to confirm who is right. In more extreme cases, as long as the “collection” and “money management” collude with each other, how to tamper with the account books and cheat is completely possible. Nakamoto, the ancestor of cryptocurrency, came up with a solution to these problems: just put all the transaction records in the same passbook, and then let all connected computers check the “that” passbook. This is the “public ledger”. The open account book contains all transactions since its inception. With the convenience of digitization, this large account book can also be distributed to all connected computers to check together. If anyone wants to cheat, it’s not enough to deal with the bank. They need to collude or fight against “connected computers”. This makes it extremely difficult for any minority group to collude in cheating. It also changes the basis of wealth from “trust intermediary” to “proof of work”. The scarcity of bitcoin limits that bitcoin does not have any central issuing agency. Under the restriction of algorithm, it can only produce 21 million pieces at most, and this rule can not be rewritten. Therefore, bitcoin will not have the problem of value collapse due to “printing banknotes” and issuing money indiscriminately. On the other hand, under the current financial system, the issuing government still has full power to dilute the value of money by printing money. The side effect of printing money indiscriminately is that the real salary will shrink. If it is destroyed, it will become a terrible hyperinflation. The key technology of virtual currency proof transaction: “blockchain” needs to record everyone’s money transaction, and this account will be filled up soon. In the field of virtual currency, there is a similar concept called “block” when the passbook is full of “supplementary passbook”, and the public account book is full of old transactions. Block is to record a lot of transaction related information, such as “passbook”. When there are more and more passbooks, they should be put together in order, otherwise everyone’s transaction will be in disorder. In cryptocurrency, the “blocks” of historical transaction records are strung together in sequence and firmly connected as a “chain” through cryptography technology. This technology is called “blockchain”. The knowledge complexity of blockchain is enough to open a whole school of learning. However, the “application” of blockchain is similar to the concept of swiping cards. Consumers do not need to disassemble and understand the working principle behind credit cards, as long as they can swipe them. Top experts in many fields believe that if the technology of blockchain can be widely used, it is very likely to completely subvert the world’s understanding of money. Just as human beings have changed from barter or shell trading to using lighter and safer banknotes in history, blockchain has made the entity of banknotes invisible, and has added the powerful security of cryptography. The essence of bitcoin: the recognized trading book, bitcoin gives up relying on the “trust” of the government, banks and other units to prove wealth, and uses powerful computing power to “prove” the existence of wealth. The whole structure of bitcoin is the exclusive and recognized only account book, which “records” and “proves” the wealth of all. In other words, the essence of bitcoin is not coins or banknotes. The essence of bitcoin is “public account”. Because all connected computers look at the same account and check them together, in the cryptocurrency world, “holding money” is equivalent to “actually recording one’s own transactions on a recognized book.”. The anonymity of bitcoin: as long as you don’t say it, no one will ever know that as long as the transactions recorded in the recognized books can prove the possession of money, it also means that no one, including the bank or the government, can really master how many bitcoin you have, where you put it, how to spend it and where to spend it. However, “the book is open” also means that everyone can see the flow of transactions in each account and each fund. Therefore, once the identity of the bitcoin holder is confirmed, such as putting his / her account on the Internet and being searched by “flesh search”, all the capital movements of the transaction in the past, present and future will be recorded in collusion, and the anonymity can no longer be maintained. By the same token, if the funds are linked to the targeted account, or there are multiple transfers in the same account, it is easy to infer that these transactions may have come from the same person, or at least related persons, and are difficult to be truly hidden. So, strictly speaking, bitcoin is actually a “semi anonymous” virtual currency. Security of virtual currency: bitcoin is the most expensive vault in the world at present, and its vault lock is also universally acknowledged to be unable to be cracked. The password alone is as long as 256 words. People who hold the bitcoin password can freely transfer funds in the bitcoin network. The bitcoin password is composed of the numbers 0 and 1, so the whole string of passwords actually looks like this (because it’s too long, it can only be split into eight lines) The bitcoin password consists of a string of 256 zeros and ones, which can also be written in another shortened format of 64 words: 7235e6428d051ad7e4806ead9eaec3d8c5e7c1a5fc31a73b1331994c7e12c10f. Look up the table and divide the four numbers into groups. Don’t underestimate the 64 words. It can be proved mathematically that the most sophisticated computers in the world, together with ceaseless calculation, can’t guess any one at the end of the universe. That is to say, we will never repeat and never guess the password correctly. Hard knowledge of virtual currency: account number and password of bitcoin. In daily life, before bank transfer and remittance, you need to have someone else’s bank account number to know where the money is going. Bitcoin also has an account like function called public key. As long as the public key is displayed, others can “remit” bitcoin to your account. The account number of bitcoin is “calculated” by substituting “256 zeros and ones” into the complex encryption formula, and the 256 bit password is called private key. This sophisticated “public-private password lock” design can automatically “only let the private key holders” receive money. Just as people who know the password of the vault can unlock the lock, only those who know the password can truly become the master of bitcoin. The encryption technology of digital password lock is basically guaranteed to be unable to be cracked. In addition to using encryption technology to ensure that the virtual money market also dare to bet with everyone. For example, there are $10000.03 bitcoin in the big account found in the list. It is said that its private key has been lost permanently, that is, no one can get back the money. If there is a way to calculate the private key from these accounts, or guess its private key out of thin air, Congratulations, you can take this bitcoin from the blockchain to the market. At the time of writing, this account is worth more than 90 million US dollars. Cryptocurrency and wallet? Only with it can we really hold currency, and only those with private key can really hold bitcoin, and everyone can “generate” the private key. The core concept of virtual currency is decentralization. Any application of “collocation centralization” will greatly weaken the core concept of virtual currency. This includes that all online platforms and exchanges are the same: no matter how much balance is displayed on the screen, as long as you don’t have the private key of the account, you can’t really hold cryptocurrency. Without a private key, you can’t really control the money in the account. What’s more, there is no regulatory authority for cryptocurrency, and no one can freeze the money. Therefore, the person holding the private key can permanently transfer bitcoin from the account at any time as long as he / she wishes. (extended reading: founder of quadrigacx died with his private key on his honeymoon) he can open his own account with his wallet account password and bitcoin. Since the private key of bitcoin is any string of 256 character zero and one numbers, and the public key can be “calculated” by the private key, so as long as the rules are followed, the “infinite group” public and private keys can be created. This pair of public-private key combinations are called wallets, which can be used to collect and pay, so they are similar to the functions of wallets. Some websites, such as bitcoin paperwallet, have launched an online version of the wallet function, which can generate “unlimited” wallets at random, and then display complex public and private key codes into an interface suitable for printing into entities. This is also known as “paper wallet”. Bitcoin can be used to store huge wealth. Therefore, if we pay more attention to security, we assume that the information connected to the Internet is likely to be recorded and retrieved. The wallet that keeps disconnected, completely isolated from the private key and does not contact the Internet is called cold storage. Because it is very troublesome to go offline specially, cold wallets are usually used to store virtual currencies that need high security, such as the huge monetary capital deposits of exchanges. You can generate your own private key by tossing 256 coins. A bitcoin private key is a string of 256 0 and 1 numbers, so you can also make your own private key at home by “throwing a coin”. The actual steps are as follows: randomly toss a coin 256 times and record the result. The front side is 0 and the back side is 1. Because it is too long, every 4 digits are divided into a group and shortened to 64 characters: 7235e6428d051ad7e4806ead9eaec3d8c5e7c1a5fc31a73b1331994c7e12c10f automatically calculates the bitcoin private key, and the whole process of coin tossing and calculating private key is not included It’s too difficult, someone actually threw 256 times, but it can also be quickly deduced by Excel’s random formula. As for the public key of bitcoin’s “account number”, because the encryption technology involved is too complex, other programs have to be used. Many websites provide more convenient wallet services, such as bitcoin paperwallet, which can click on the account number of bitcoin and confirm whether the password format is correct. If you press the wrong key or provide an illegal account number, the screen will also display an error. If you want to pursue the password completely offline, you can also choose its stand-alone non connected wallet version to get the account password offline and generate a cold wallet.