1. by
Topalidis Georgios
under the supervision of
Professor Stefanidis Georgios
12 February 2016
University of Macedonia
Department of Applied Informatics
Bachelor’s Thesis: Analyzing and Programming the
Basic Transactions of Bitcoin System

2. Purpose of Thesis
 Analyzing the Basic Transactions and executing the
Scripts, in stack which are responsible for their behavior in
Bitcoin system.
 Programming the Basic Transactions with the aid of
BitcoinJ(library of Java).

3. Contents
 What is Bitcoin?
 Features of Bitcoin
 Node Types and Roles
 The Technology Behind Bitcoin
 The Basic Mechanism
 Structure of an Elliptic Key
 Public Key to Bitcoin Address
 Anatomy of a Transaction
 Inputs and Outputs of a Transaction
 Thinking in Transaction Scripts
 Basic Transactions and Scripting Language
 A Pay-to-Pub-Key-Hash Transaction
 Execution in Stack
 Applications of Bitcoin Scripts
 Facts

4. What is Bitcoin?
 Is a global currency
 Around since January of 2009
 Peer-to-peer/decentralized
 Trading over the Internet
 Protocol is open source
 Somewhat anonymous
 Protected by strong encryption(cryptocurrency)

5. Features of Bitcoin
 All-electronic
 Provable value
 Fast transactions
 Low-cost transactions
 No third-party trust required
 Uncontrollable(Decentralized)
 Deflationary (Maximum 21M issued)
 International
 Widely accepted as a currency

6. Node Types and Roles
Bitcoin System
Wallet
Network
Routing
Node
B
Full
Blockchain
Miner

7. The Technology Behind Bitcoin
 Cryptographic Hash Functions(SHA256,RIPEMD160)
 Proof-of-Work(hash cash proof) miners must solve the
problem:
H (nonce || prev_hash||tx||tx) <target
 Elliptic curve Digital Signature Algorithm (ECDSA)
 (sk,pk) := generateKeys(keysize)
 sig := sign(sk,message)
 isValid :=verify(pk,message,sig)
 Merkle Tree
S
c
h
e
m
e

8. The Basic Mechanism
1
TX1 Published
to the P2P
network
2
3TX1 added to my
block
My Block
Coinbase
TX
TX1
.
TXn
N-2
CB TX
Tx1
.
.
Txn
4
N-1
CB TX
Tx1
.
.
Txn
N=My Block
CB TX
Tx1
.
.
Txn
The Blockchain 25
BT
C

9. Structure of an Elliptic Key
Private Key: k Public Key : K
K=k*G
G: generator point of elliptic
curve

10. Public Key to Bitcoin Address
Public Key: K
SHA256(K)
RIPEMD(SHA256(K))
Base58Check
Encoding
Bitcoin Address

11. Anatomy of a Transaction
‘‘hash’’ : 5a425…
 metadata ‘‘vin_sz’’ :1
‘‘vout_sz’’ :1
In : [ ‘‘prev_out’’:{
‘‘hash’’: 3be4a…
 inputs ‘‘n’’ : 0 }
‘‘Unlocking Script’’ : ‘’30440… ‘’
]
Out : [
{
 outputs ‘‘value’’: 10.12286732
‘‘Locking Script’’ : ‘’OP_DUP OP_HASH160 69e….42e
OP_EQUALVERIFY OP_CHECKSIG ‘’ }
]

12. Inputs and Outputs of a Transaction
 Inputs:
 Value in BTs which is going to be spend if the receiver holds a valid signature in
Unlocking Script.
 This value came from a previous TX which still has unspent outputs (UTXO).
 Outputs from previous TX becoming Inputs of present TX.
 Outputs:
 Set the conditions, in the Locking Script, which have to be fulfilled in order the
receiver to be able to redeem the BTs.

13. Thinking in Transaction Scripts
 A new transaction is valid if the transaction scripts of its
input field and the transaction script of its preceding
validates to true.
Input TX Unlocking
Script
Output TX Locking
Script
Validation Script
[Unlocking Script, Locking Script

14. Basic Transactions and Scripting Language
Basic Transactions
1) Pay-to-Public-Key-Hash Transaction (P2PKH)
2) Pay-to-Public-Key Transaction (Coinbase
Transactions)
3) Multi-Signature Transaction
4) Pay-to-Script-Hash Transaction (P2SH)
5) Data Output Transaction (OP_RETURN)
Scripting Language
 Stack-based
 Every instruction is executed exactly once, in a linear
Example
follows

15. A Pay-to-Pub-Key-Hash Transaction
Therefore the Validation script looks like:
<sig> <pubKey> OP_DUP OP_HASH160 <pubKeyHash>
OP_EQUALVERIFY
OP_CHECKSIG
Unlocking Script
<sig>
<pubKey>
Locking
Script(from the
previous UTXO)
OP_DUP
OP_HASH160
<pubKeyHash>
OP_EQUALVERIFY
OP_CHECKSIG

16. Execution in Stack
STACK
<sig> <pubKey> OP_DUP OP_HASH160 <pubKeyHash> OP_EQUALVERIFY
OP_CHECKSIG
<sig>
<pubKey>
<pubKey><pubKeyHash>
<pubKeyHash>
True

17. Applications of Bitcoin Scripts
 Escrow Transactions
Introduce a third party and implement a MULTISIG(2-of-3)
Transaction.
 Green Addresses
Being able to send BTs without the recipient being able to
access the Blockchain. Example: Mt.Gox(Bitcoin Exchange
company)bankruptcy
 Efficient Micro-Payments
Being able to pay small amounts of money for some
provided service

18. Facts
 Current Bitcoin Price: 1BT=376.95 euros (11/2/2016)
 Reward for finding blocks: 25BT
every 4 years this price is divided by 2 (200950BT,
201225BT)
 Hash Rate=1,031,625,717 GH/s, 1GH/s=109 H/s
(7/2/2016)
every 10 minutes a new block is going to be mined
 Number of blocks so far: 397933 (11/2/2016)
every block can include maximum 4000 transactions

19. Thank you
description of Java projects is following…