Want to have free bitcoin? Is it really possible to earn free bitcoin using online mining or any other tools? There are so many questions that need answeres. We will discuss all ambiguities in your mind. First, we will discuss what is the back end working technology behind the cryptocurrency. Then we will discuss how to mine bitcoins and get free bitcoin. The crypto-currency Bitcoin is currently on everyone’s lips. However, this is less due to the revolutionary technology than to the hype surrounding the price jumps. It remains to be hoped that this hype will not bring Bitcoin into disrepute, because the approaches underlying Bitcoin and above all the technical design are fascinating and revolutionary. In the following article, I will try to explain the technical basics of Bitcoin as simple and understandable as possible.
Basic technical terms before you think to get free bitcoin
There are two technical terms that need to be explained without which an understanding of the technical basics of Bitcoin is not possible: hash values and digital signatures. There are numerous method if you want to earn free bitcoin. For getting free bitcoin you can have online miners and there are also many methods through which you can get free bitcoin.
Hash value
A hash value is a value calculated from digital content using certain complex mathematical methods. The hash value is always identical if the initial value has not been changed.
The special feature of hash values is that although the hash function used is known, the actual digital content cannot be recalculated from a hash value (so-called “hiding”). An illustrative example of a – simple – hash function is the digits sum. However, it is not possible to calculate the output value back from the hash value 6, since, for example, 222 or 500001 also gives the value 6 as the checksum.
Bitcoin uses SHA-256 as a hash function. SHA-256 is a much more complex mathematical method than the hash sum and accordingly, the hash values are much more complex. This complexity of hash values makes it possible to check whether a digital content has been modified. If even one bit of the digital content has been changed, this results in a different hash value.
A hash value is therefore also referred to as the digital fingerprint of a specific digital content. This is because it is statistically virtually impossible for two different digital contents to have the same hash value. This property is called collision resistance. Statistically, a computer that can calculate 10,000 hash values per second would have to calculate 10 27 years to find two congruent hash values or two digital contents that have the same hash value. Hash values are therefore excellent for masking content and determining whether it is unadulterated at the same time.
Digital Signature
Using digital signatures free bitcoin, it is possible to mark any digital content so that it can be traced who signed the content.
Digital signatures are generated in an asynchronous encryption process. The asynchronous encryption is based on the following principle: Two so-called keys are required to generate a digital signature. The private key is only known to the owner of the signature. It is required to calculate the digital signature from the digital content to be signed (e.g. e-mail, Word document, etc.).
In addition, there is a public key for each private key, which corresponds to the private key and is accessible to everyone. With the public key, it is possible to check whether the digital signature was calculated by the private key corresponding to the public key; that is, to verify the authenticity of the signature. In any case, the signatory must have known the private key.
Both private keys and public keys are long character combinations that appear random. It is statistically virtually impossible for the same keys to be generated.
The encryption method used in Bitcoin is the “Elliptic Curve Digital Signature Algorithm (ECDSA)” under the standard elliptic curve “secp256k1”, which provides 128-bit encryption.
Transactions in Free Bitcoin
In any currency system, it is necessary to transfer currency units between participants. Bitcoin is, however, based on the basic principle that transactions without the involvement of an intermediary – a bank – should be possible directly between the parties electronically. The transaction should also be as anonymous as possible. To ensure this, the authorizer and recipient use a pseudonym.
Nevertheless, it goes without saying that any kind of identification of the parties involved – authorizer and recipient – is indispensable in a transaction. In order to implement the basic principle shown, the public keys shown are used to identify the participants, from which bitcoin addresses can then be calculated. Bitcoin addresses are random-looking character strings that are excellent pseudonyms.
Each transaction in Bitcoin is an instruction to transfer a certain value of Bitcoins from the authorizer’s public key to the recipient’s public key. To verify the authorizations of the authorizer, this transaction instruction is then signed by the authorizer using the private key corresponding to his or her public key. Since the authorizer’s public key is/becomes known during the transaction, you can check at any time whether the authorizer knows the correct private key.
In this context, it is important to understand that Bitcoins do not actually exist in the sense of a single currency unit. Each new free Bitcoin transaction does not transfer a certain amount of Bitcoins but passes a previous transaction executed to the authorizer’s public key to the new recipient’s public key. This new transaction has exactly the value of Bitcoins that the previous transaction had. In Bitcoin, there is no account on which a certain sum of bitcoins is available and from which an amount X is passed on, but the incoming transaction itself is passed on directly. Since there is usually no predecessor transaction available to the instructor that has exactly the value that is to be transferred, each bitcoin transaction usually has at least two receivers. Firstly, the actual transaction recipient, to whom the counter value is assigned within the transaction, which is actually to be transferred, and additionally a further public key to which the statement transfers back the remaining amount so to speak.
This somewhat complicated system is necessary because Bitcoin also has to deal with a problem facing all electronic currencies. The problem of double-spending.
Double Spending” problem
As shown, a Bitcoins transaction assigns a previous transaction to a new public key of the recipient. The problem is: How can it be verified that the predecessor transaction had ever been assigned to the authorizer’s public key or whether this transaction has not already been transferred elsewhere in the meantime (so-called “double spending”)?
To solve this problem, a record of the transaction processes is required. To validate a transaction, it must be possible for the recipient to see whether the transaction in question has ever been assigned to the authorizer’s public key and whether there has been another transaction in the meantime that has already assigned the preceding transaction to be transferred to another public key. This is recorded in the now famous (bitcoin) blockchain. The blockchain is a register in which all transactions ever executed in Bitcoin are recorded chronologically. Since everyone is free to participate in the Bitcoin currency system at any time, it is necessary that the blockchain is publicly accessible at all times and to everyone. This is also the case: The blockchain can be viewed here, for example.
Forgery protection of the blockchain
Since the blockchain is so essential for Bitcoin, it must, of course, be ensured that the blockchain cannot be manipulated. Otherwise, the shown validation would not be possible. And indeed: The blockchain is almost impossible to manipulate. This is guaranteed by the revolutionary design.
As the name suggests, the blockchain consists of a chain of data blocks. Each of these data blocks contains a certain number of bitcoin transactions. The individual data blocks are logically linked. The sequence of the blocks cannot be changed by this link either.
The forgery protection and traceability of the sequence are guaranteed as follows: Starting from block zero, a hash value is calculated for each block. This hash value is stored in the following block and thus included in the calculation of the hash value for this subsequent block. Since each block refers to the hash value of its predecessor block, the order can be determined.
The use of hash values also guarantees protection against forgery. As shown at the beginning, changing just one binary zero or one already leads to a different hash value. Any minimal change to just one transaction in one of the thousands and thousands of blocks would, therefore, cause the hash value of this block to change and thus also the hash value of the subsequent block since it stores the hash value of its predecessor. The manipulation would, therefore, propagate through all subsequent blocks and ultimately lead to the hash value of the last, most current block also changing. It is therefore only necessary to know the hash value of the last block to validate that there is no manipulation in the entire blockchain.
Structure of the blockchain
Blockchain as the P2P network
One of the basic principles of Bitcoin is to enable transactions directly between instructor and receiver. An intermediary should be deliberately avoided. This basic principle also has considerable effects on the “location” of the blockchain. If the blockchain were stored centrally on a server, the operator of the server would ultimately be an intermediary who mediates the transactions. For this reason, the blockchain is kept decentralized in a peer-to-peer (“P2P”) network. Participation in the Bitcoin P2P network is open to virtually anyone at any time. The only requirement is the installation of the free software. Registration or similar is not required for participation.
Mining of bitcoins
All pending transactions are continuously reported to the Bitcoin P2P network and a special group of participants (so-called “miners”) constantly calculate new blocks for the blockchain from the reported transactions. A valid new block is calculated in a competition between all miners. The Miner, who is the first to calculate a hash value for the new block from the outstanding transactions that lies within a certain earnings corridor, has produced the so-called “proof of work”. The block calculated by the winner will be added to the blockchain by all participants of the respective local version and the competition will start again. On average, the calculation of a new block takes about 10 minutes.
The calculation of a valid block (“mining”) is now very computationally intensive and involves high costs for suitable hardware and electricity. As a reward for participation, the winner always receives a fixed sum of Bitcoins (currently 12.5 Bitcoins/Stand Nov. 2017) in the form of a transaction to a public key specified by him. By the way, this is how bitcoins are “created”. The amount of the reward is reduced at regular intervals. While at the start of Bitcoin 50 Bitcoins were still granted, the reward is halved approx. every 4 years and will eventually completely disappear. This means that the total of all bitcoins ever circulating is already almost 21 million. In order to further motivate Miner to participate even if the reward ceases to apply, they already receive additional transaction fees, the amount of which, however, is currently determined by the users themselves.
Bitcoin and Privacy Policy
The inclined reader of our blog might ask himself at this point: “All well and good, but what does all this have to do with data protection? Well: More than you might think at first! The problem is the publicity of the blockchain. More on this in my article: Bitcoin: Risk of a data protection GAU by the Blockchain?