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The Bitcoin Network part1

Peer-to-Peer Network Architecture
Bitcoin is structured as a peer-to-peer network architecture on top of the Internet. The term peer-to-peer, or P2P, means that the computers that participate in the network are peers to each other, that they are all equal, that there are no “special” nodes, and that all nodes share the burden of providing network services. The network nodes interconnect in a mesh network with a “flat” topology. There is no server, no centralized service, and no hierarchy within the network. Nodes in a peer-to-peer network both provide and consume services at the same time with reciprocity acting as the incentive for participation. Peer-to-peer networks are inherently resilient, decentralized, and open. The preeminent example of a P2P network architecture was the early Internet itself, where nodes on the IP network were equal. Today’s Internet architecture is more hierarchical, but the Internet Protocol still retains its flat-topology essence. Beyond bitcoin, the largest and most successful application of P2P technologies is file sharing with Napster as the pioneer and BitTorrent as the most recent evolution of the architecture.

Bitcoin’s P2P network architecture is much more than a topology choice. Bitcoin is a peer-to-peer digital cash system by design, and the network architecture is both a reflection and a foundation of that core characteristic. Decentralization of control is a core design principle and that can only be achieved and maintained by a flat, decentralized P2P consensus network.

The term “bitcoin network” refers to the collection of nodes running the bitcoin P2P protocol. In addition to the bitcoin P2P protocol, there are other protocols such as Stratum, which are used for mining and lightweight or mobile wallets. These additional protocols are provided by gateway routing servers that access the bitcoin network using the bitcoin P2P protocol, and then extend that network to nodes running other protocols. For example, Stratum servers connect Stratum mining nodes via the Stratum protocol to the main bitcoin network and bridge the Stratum protocol to the bitcoin P2P protocol. We use the term “extended bitcoin network” to refer to the overall network that includes the bitcoin P2P protocol, pool-mining protocols, the Stratum protocol, and any other related protocols connecting the components of the bitcoin system.

Nodes Types and Roles
Although nodes in the bitcoin P2P network are equal, they may take on different roles depending on the functionality they are supporting. A bitcoin node is a collection of functions: routing, the blockchain database, mining, and wallet services.

All nodes include the routing function to participate in the network and might include other functionality. All nodes validate and propagate transactions and blocks, and discover and maintain connections to peers. In the full-node example in Figure 6-1, the routing function is indicated by an orange circle named “Network Routing Node.”

Some nodes, called full nodes, also maintain a complete and up-to-date copy of the blockchain. Full nodes can autonomously and authoritatively verify any transaction without external reference. Some nodes maintain only a subset of the blockchain and verify transactions using a method called simplified payment verification, or SPV. These nodes are known as SPV or lightweight nodes. In the full-node example in the figure, the full-node blockchain database function is indicated by a blue circle named “Full Blockchain.” In Figure 6-3, SPV nodes are drawn without the blue circle, showing that they do not have a full copy of the blockchain.

Mining nodes compete to create new blocks by running specialized hardware to solve the proof-of-work algorithm. Some mining nodes are also full nodes, maintaining a full copy of the blockchain, while others are lightweight nodes participating in pool mining and depending on a pool server to maintain a full node. The mining function is shown in the full node as a black circle named “Miner.”

User wallets might be part of a full node, as is usually the case with desktop bitcoin clients. Increasingly, many user wallets, especially those running on resource-constrained devices such as smartphones, are SPV nodes. The wallet function is shown in Figure 6-1 as a green circle named “Wallet”.

In addition to the main node types on the bitcoin P2P protocol, there are servers and nodes running other protocols, such as specialized mining pool protocols and lightweight client-access protocols.

The Extended Bitcoin Network
The main bitcoin network, running the bitcoin P2P protocol, consists of between 7,000 and 10,000 listening nodes running various versions of the bitcoin reference client (Bitcoin Core) and a few hundred nodes running various other implementations of the bitcoin P2P protocol, such as BitcoinJ, Libbitcoin, and btcd. A small percentage of the nodes on the bitcoin P2P network are also mining nodes, competing in the mining process, validating transactions, and creating new blocks. Various large companies interface with the bitcoin network by running full-node clients based on the Bitcoin Core client, with full copies of the blockchain and a network node, but without mining or wallet functions. These nodes act as network edge routers, allowing various other services (exchanges, wallets, block explorers, merchant payment processing) to be built on top.

The extended bitcoin network includes the network running the bitcoin P2P protocol, described earlier, as well as nodes running specialized protocols. Attached to the main bitcoin P2P network are a number of pool servers and protocol gateways that connect nodes running other protocols. These other protocol nodes are mostly pool mining nodes (see Chapter 8) and lightweight wallet clients, which do not carry a full copy of the blockchain.

Figure 6-3 shows the extended bitcoin network with the various types of nodes, gateway servers, edge routers, and wallet clients and the various protocols they use to connect to each other.

Network Discovery

When a new node boots up, it must discover other bitcoin nodes on the network in order to participate. To start this process, a new node must discover at least one existing node on the network and connect to it. The geographic location of other nodes is irrelevant; the bitcoin network topology is not geographically defined. Therefore, any existing bitcoin nodes can be selected at random.

To connect to a known peer, nodes establish a TCP connection, usually to port 8333 (the port generally known as the one used by bitcoin), or an alternative port if one is provided. Upon establishing a connection, the node will start a “handshake”

A constant that defines the bitcoin P2P protocol version the client “speaks” (e.g., 70002)
A list of local services supported by the node, currently just NODE_NETWORK
The current time
The IP address of the remote node as seen from this node
The IP address of the local node, as discovered by the local node
A sub-version showing the type of software running on this node (e.g., “/Satoshi:”)+
The block height of this node’s blockchain

The peer node responds with verack to acknowledge and establish a connection, and optionally sends its own version message if it wishes to reciprocate the connection and connect back as a peer.

How does a new node find peers? Although there are no special nodes in bitcoin, there are some long-running stable nodes that are listed in the client seed nodes. Although a new node does not have to connect with the seed nodes, it can use them to quickly discover other nodes in the network. In the Bitcoin Core client, the option to use the seed nodes is controlled by the option switch -dnsseed, which is set to 1, to use the seed nodes, by default. Alternatively, a bootstrapping node that knows nothing of the network must be given the IP address of at least one bitcoin node, after which it can establish connections through further introductions. The command-line argument -seednode can be used to connect to one node just for introductions, using it as a DNS seed. After the initial seed node is used to form introductions, the client will disconnect from it and use the newly discovered peers.

Once one or more connections are established, the new node will send an addr message containing its own IP address to its neighbors. The neighbors will, in turn, forward the addr message to their neighbors, ensuring that the newly connected node becomes well known and better connected. Additionally, the newly connected node can send getaddr to the neighbors, asking them to return a list of IP addresses of other peers. That way, a node can find peers to connect to and advertise its existence on the network for other nodes to find it. 




Salvadorans take to the streets to protest against the implementation of Bitcoin as legal tender

El Salvador will begin to accept the cryptocurrency as legal tender alongside the US dollar on September 7. However, there is still some skepticism.
Cryptocurrency mining is booming: ‘Decred’ is becoming the most profitable currency to mine.
Bitcoin will become legal tender in El Salvador on September 7.Bitcoin will become legal tender in El Salvador on September 7.
El Salvador became in June this year the first country in the world to pass a law to make Bitcoin legal tender. The new regulation aims to come into force next September 7, but not everyone accepts this decision.

Over the last few days, a large crowd of Salvadorans have taken to the streets to protest against the speed with which this measure has been accepted. According to the new law, the popular cryptocurrency will have the same validity as the US dollar, however, some show skepticism towards this initiative.

Binance is the world’s largest cryptocurrency exchange.
To date, the official U.S. currency. This currency has proven for decades that it is stable. However, Bitcoin is known for its ups and downs in the market, therefore, the citizens of El Salvador do not fully trust this regulation.

Salvadorans’ concerns
Bitcoin is characterized by its enormous volatility and the possibility of money laundering. These two peculiarities of the digital currency mean that Salvadorans do not fully trust the government’s decision to make it official.

According to the president of El Salvador, Nayib Bukele, this measure will facilitate remittance payments by Salvadorans living abroad and sending money to their relatives. However, some international players such as the International Monetary Fund consider that this new law will be counterproductive.

The cryptocurrency is constantly changing in value. This situation causes the unknown of how much a Salvadoran’s Bitcoin savings will be worth in a few years. Digital money can multiply or shrink just as easily.

Bukele showed images of the government’s cryptocurrency application.
El Salvador will offer $30 in bitcoins to every citizen who downloads the government’s cryptocurrency app
For the time being, the government of El Salvador has created a $150 million fund as a security measure and to guarantee convertibility. In addition, Bukele affirms that the US dollar will remain the national currency alongside Bitcoin.

On the other hand, as far as money laundering is concerned, it is worth noting that cryptocurrency is easier to launder without raising suspicions. This is because when the money is digitized it is practically anonymous and it is complicated to trace who is behind it.