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wordsmithing ch02.asciidoc #8

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Ed Eykholt 2014-07-28 21:52:13 -07:00
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@ -118,7 +118,7 @@ Finally, another transaction form that is seen often on the bitcoin ledger is a
.Transaction Distributing Funds
image::images/Bitcoin_Transaction_Structure_Distribution.png["Distributing Transaction"]
=== Constructing A Transaction
=== Constructing a Transaction
Alice's wallet application contains all the logic for selecting appropriate inputs and outputs to build a transaction to Alice's specification. Alice only needs to specify a destination and an amount and the rest happens in the wallet application without her seeing the details. Importantly, a wallet application can construct transactions even if it is completely offline. Like writing a cheque at home and later sending it to the bank in an envelope, the transaction does not need to be constructed and signed while connected to the bitcoin network. It only has to be sent to the network eventually for it to be executed.
@ -126,7 +126,7 @@ Alice's wallet application contains all the logic for selecting appropriate inpu
Alice's wallet application will first have to find inputs that can pay for the amount she wants to send to Bob. Most wallet applications keep a small database of "unspent transaction outputs" that are locked (encumbered) with the wallet's own keys. Therefore, Alice's wallet would contain a copy of the transaction output from Joe's transaction which was created in exchange for cash (see <<getting bitcoin>>). A bitcoin wallet application that runs as a full-index client actually contains a copy of *every unspent output* from every transaction in the blockchain. This allows a wallet to construct transaction inputs as well as to quickly verify incoming transactions as having correct inputs.
If the wallet application does not maintain a copy of unspent transaction outputs, it can query the bitcoin network to retrieve this information, using a variety of APIs available by different providers, or by asking a full-index node using the bitcoin JSON RPC API. Below we see an example of a RESTful API request, constructed as a HTTP GET command to a specific URL. This URL will return all the unspent transaction outputs for an address, giving any application the information it needs to construct transaction inputs for spending. We use the simple command-line HTTP client _cURL_ to retrieve the response:
If the wallet application does not maintain a copy of unspent transaction outputs, it can query the bitcoin network to retrieve this information, using a variety of APIs available by different providers, or by asking a full-index node using the bitcoin JSON RPC API. Below we see an example of a RESTful API request, constructed as an HTTP GET command to a specific URL. This URL will return all the unspent transaction outputs for an address, giving any application the information it needs to construct transaction inputs for spending. We use the simple command-line HTTP client _cURL_ to retrieve the response:
.Look up all the unspent outputs for Alice's address 1Cdid9KFAaatwczBwBttQcwXYCpvK8h7FK
----
@ -194,15 +194,15 @@ Since the transaction contains all the information necessary to process, it does
===== How it propagates
Alice's wallet application can send the new transaction to any of the other bitcoin clients it is connected to over any Internet connection: wired, WiFi, or mobile. Her bitcoin wallet does not have to be connected to Bob's bitcoin wallet directly and she does not have to use the Internet connection offered by the cafe, though both those options are possible too. Any bitcoin network node (other client) that receives a valid transaction it has not seen before, will immediately forward it to other nodes it is connected to. Thus, the transaction rapidly propagates out across the peer-to-peer network, reaching a large percentage of the nodes within a few seconds.
Alice's wallet application can send the new transaction to any of the other bitcoin clients it is connected to over any Internet connection: wired, WiFi, or mobile. Her bitcoin wallet does not have to be connected to Bob's bitcoin wallet directly and she does not have to use the Internet connection offered by the cafe, though both those options are possible too. Any bitcoin network node (other client) that receives a valid transaction it has not seen before, will immediately forward it to other nodes to which it is connected. Thus, the transaction rapidly propagates out across the peer-to-peer network, reaching a large percentage of the nodes within a few seconds.
===== Bob's view
If Bob's bitcoin wallet application is directly connected to Alice's wallet application, it may be the first node to receive the transaction. However, even if Alice's wallet sends it through other nodes, the transaction will reach Bob's wallet within a few seconds. Bob's wallet will immediately identify Alice's transaction as an incoming payment because it contains outputs redeemable by Bob's keys. Bob's wallet application can also independently verify that the transaction is well-formed, uses previously-unspent inputs and contains sufficient transaction fees to be included in the next block. At this point Bob can assume, with little risk, that the transaction will shortly be included in a block and confirmed.
If Bob's bitcoin wallet application is directly connected to Alice's wallet application, Bob's wallet application may be the first node to receive the transaction. However, even if Alice's wallet sends the transaction through other nodes, it will reach Bob's wallet within a few seconds. Bob's wallet will immediately identify Alice's transaction as an incoming payment because it contains outputs redeemable by Bob's keys. Bob's wallet application can also independently verify that the transaction is well-formed, uses previously-unspent inputs and contains sufficient transaction fees to be included in the next block. At this point Bob can assume, with little risk, that the transaction will shortly be included in a block and confirmed.
[TIP]
====
A common misconception about bitcoin transactions is that they must be "confirmed" by waiting 10 minutes for a new block, or up to sixty minutes for a full six confirmations. While confirmations ensure the transaction has been accepted by the whole network, such a delay is unnecessary for small value items like a cup of coffee. A merchant may accept a valid small-value transaction with no confirmations, with no more risk than a credit card payment made without ID or a signature, as many do today.
A common misconception about bitcoin transactions is that they must be "confirmed" by waiting 10 minutes for a new block, or up to sixty minutes for a full six confirmations. While confirmations ensure the transaction has been accepted by the whole network, such a delay is unnecessary for small value items like a cup of coffee. A merchant may accept a valid small-value transaction with no confirmations, with no more risk than a credit card payment made without ID or a signature, like merchants routinely accept today.
====
=== Bitcoin Mining