Bitcoin is a new pipeline to the financial sector
The payment system is a let people around the world between money transfer pipes and valves. For most people, their brains are in a state of insulation. Even if they escape in sight, understanding, due to the lack of knowledge of errors caused by the lack of progress and responsibility, will build slowly accepted innovation and new channels.
Bitcoin represents a new way through a decentralized structure to reshape the financial system. However, as the existing financial system, there are few people who understand the importance of thinking and design of its channel layout.
Than the usual financial system, pipeline analog really suitable to describe bitcoin. Bitcoin is not money (coins), in fact it is not even a monetary unit concept obviously. It should be considered to have a similar unit of account: bitcoin currency flow. The flow of money, bitcoin, flowing through the pipeline system (transaction trading output, outputs) and plumbing accessories (transaction transactions).
The pipeline construction of bitcoin
The construction of each transaction are on the history before the transaction information, each “output” (outputs) has its “input” historical information (inputs) corresponding to the. Each “output” can be seen as a pipeline bitcoin holding capacity. While every transaction information is a pipeline connecting device, one or more of the existing pipeline. The pipeline connected by a pipeline device or a plurality of pipes, can put all connected to the pipeline in the trading off.
Bitcoin is not a bank account or payment system marking system based on. The protocol uses all past transaction history, to generate a cost of bitcoin (unspent bitcoins) state. When we say that there are 13 million coins in circulation, we actually means that the system has admitted that 13 million bitcoin is “no cost” output can be assigned to the payment system according to the rules. This redistribution is irreversible, so the new deal is adding more content to the growing complexity of the pipeline system, the pipeline system will be more and more long more complex.
Analysis of pipeline bitcoin
The pipeline or transaction can not be changed to a great extent, thus making it suitable for analysis. The pipeline will be destroyed in the network only by consensus reorganization. The pipeline system (append only), append only the transaction graph complexity and size increase with time. Bitcoin history can be assessed according to January 1, 2014 or the height of any block pipeline state.
There is a long time problem is the lack of mapping from input to output. When the warm water from the tap water, hot and cold water are not separated. Bitcoin transactions, if the two output is input in the same transaction information, the bitcoin protocol does not attempt from input to output tracking. Bitcoin stop this kind of information that is revealed, the device connected to the individual capacity of the pipeline (or individual with different pipeline information to the tracking ability of terminal). In this case, bitcoin is not a marked system (token system), more complex and liquidity.
In the above chart, each node is a transaction or a cost of output. The green node refers to the transaction, the white node does not spend output. Contains the digital circle represents the sum of the transaction output, or output transaction. Each edge is output to the following trading links. We cannot know what percentage of the transaction in the input provides funds for output.
想象一下这样一个交易，一个新的iPhone 6要花费1.5 BTC来购买。 Now suppose the money in part is stolen. The theft is marked as orange trading. Now the problem is how to know how much stolen bitcoin is still in the thief’s assets? The bitcoin protocol is not the answer to this question. 相反，我们必须依赖于我们的法律规则的建立，说明小偷身上剩下的0.5 BTC实际上也是偷来的。
Block chain is an open transaction account, so the analysis can be performed in any large scale.
For example, we can ask you now have is I have bitcoin bitcoin? Simulation of pouring water into a pipeline, and then calculate how many same water in export collection.
For this analysis: two algorithms were used?? the minimum flow (min flow) and the maximum flow rate (max flow).
The minimum flow problem: “from the entrance to the minimum number of bitcoin exports is how much?”
The question asked: “maximum flow from the entrance to the maximum number of bitcoin exports is how much”.
The minimum flow is given a positive answer, X, then export at least number of X from the entrance of bitcoin. The inflow and outflow of water is the same.
However, the minimum flow usually will rapidly become zero, because we need to deal with our debt. So if I spent 1.5 BTC for 6 iPhone payment. Each cost minimum flow state of the input is 0.5 BTC (assuming the maximum value of minimum flow algorithm for 0.5 BTC, the maximum flow rate, because the output of more than 1 BTC, the figure is 1 BTC). Only a few transactions, the minimum flow may drop to zero.
Greater than zero in the minimum flow, we can prove from the entrance to the exit of bitcoin, full traceability. But in the minimum flow because all potential output becomes zero, this case is usually not traceable. Although we can show all the different trading and bitcoin historical pipeline connection, but we cannot explain more about the monetary flow situation. We get the transparency but almost no traceability. Caused the confusion of the parties, but also can be identified according to their bitcoin address, and can be related to bad debts.
In view of this, maybe a red herring would even think of bitcoin is a unit of money, we should reflect on what we say “I bitcoin” this sentence. May I describe the flow of money should be considered at the same time: creation and destruction of the interests are not necessarily linked (as some of US Securities). These problems must be understood, that bitcoin to private legal framework and appropriate AML tools and guidelines. One thing is for sure, no coins in bitcoin (there are no coins in in Bitcoin).
In the subsequent post, I will discuss the tube sequence more complex (mixed service), and many around the negotiability and more specific legal issues of alternative, all belong to this category.