Cryptocurrency

With transactions, we go from a “general purpose” blockchain to a cryptocurrency.

Reference projects:

• naivecoin (by typescript)
• naivecoin (by javascript)

A transaction contains the following info:

• where the coins come (wallet of the sender)
• where the coins go (wallet of the receiver)
• amount of the coins

Workflow

A transaction (object) is stored in a transaction pool which will broadcast to the network.

Any node on the network can take it from the pool, verify the transaction, mine a block, get rewords, and then add it to the blockchain. The “data” region of the block contains that transaction.

The node broadcasts this new block to the network and other nodes verify this block and update their local blockchain.

In this way, the blockchain contains all verified transactions.

Transaction

The seller may collect coins from several places for the deal. And the buyer may cut the overall coins into several pieces. Each of the “piece” or “place” is a unit of an asset. It consists of:

• the address (public-key)
• the amount

The address tells who owns this piece of asset. A TxOut (transaction output) is the structure for this info. When you own some coins in the blockchain, what you actually have is a list of unspent transaction outputs (uTxOuts) whose public key matches the private key you own.

The bellow picture shows the workflow of a transaction:

Three uTxOuts of the owner are spent and two TxOut are generated. The unspent transaction outputs list will be updated.

Wallet

From the user’s point of view, he does not care how the transaction works. He only needs to know how to:

• check the balance in his wallet
• send some coins to others
• check transactions detail

The balance info can be obtained from the blockchain. It is the sum of a list of unspent transaction outputs (uTxOuts) that belongs to him.

Verification

TxId guarantees Integrity and signature guarantees Authentication. This helps to verify a transaction.

How to verify that a uTxOut belongs to someone? How to verify that the transaction indeed triggered by the owner of the specific uTxOut?

The address of a uTxOut is in fact a public-key. It corresponds to a private-key owned by the owner of this uTxOut.

A TxIn object contains:

• a reference to an uTxOut
• signature of the transaction id (TxId)

TxId is a hash from the content of the transaction. It makes sure that the content of the transaction is not tampered. The owner just signs the transaction Id with his private-key and generates a signature. Anyone else can verify this signature with the public-key. Successful verification means that the transaction is valid.

In a word, only the owner of this uTxOut can trigger the transaction. Anyone else’s signature will not be verified and thus the transaction will fail.