Blocks and chains : introduction to Bitcoin cryptocurrencies and their consensus mechanisms 7. Conclusion and open challenges 7.1 Conclusion A. Glossary Bibliography Authors biographies 6. Nakamoto consensus 6.1 The problem Bitcoin strives to solve 6.1.1 Trusted third parties 6.1.2 Placing trust in a distributed system 6.1.3 Decentralizing trust 6.2 Consensus and fault tolerance in distributed systems 6.2.1 Consensus 6.2.2 System models and their impact 6.2.3 Byzantine fault tolerance 6.2.4 Randomized consensus protocols 6.3 A closer look at Nakamoto consensus 6.3.1 Defining Nakamoto consensus 2. Background 2.1 Cryptographic primitives 2.1.1 Cryptographic hash functions 2.1.2 Asymmetric cryptography 2.2 Notation symbols and definitions 5. Coin management tools 5.1 History and categorization of CMTs 5.2 Metaphors 5.3 Usability 5.3.1 Bitcoin management strategies and tools 5.3.2 Anonymity 5.3.3 Perceptions of usability 5.4 User experiences with security 5.5 Cryptocurrency usage scenarios The new field of cryptographic currencies and consensus ledgers commonly referred to as blockchains is receiving increasing interest from various different communities. These communities are very diverse and amongst others include: technical enthusiasts activist groups researchers from various disciplines start ups large enterprises public authorities banks financial regulators business men investors and also criminals. The scientific community adapted relatively slowly to this emerging and fast moving field of cryptographic currencies and consensus ledgers. This was one reason that for quite a while the only resources available have been the Bitcoin source code blog and forum posts mailing lists and other online publications. Also the original Bitcoin paper which initiated the hype was published online without any prior peer review. Following the original publication spirit of the Bitcoin paper a lot of innovation in this field has repeatedly come from the community itself in the form of online publications and online conversations instead of established peer reviewed scientific publishing. On the one side this spirit of fast free software development combined with the business aspects of cryptographic currencies as well as the interests of todays time to market focused industry produced a flood of publications whitepapers and prototypes. On the other side this has led to deficits in systematization and a gap between practice and the theoretical understanding of this new field. This book aims to further close this gap and presents a well structured overview of this broad field from a technical viewpoint. The archetype for modern cryptographic currencies and consensus ledgers is Bitcoin and its underlying Nakamoto consensus. Therefore we describe the inner workings of this protocol in great detail and discuss its relations to other derived systems 3. History of cryptographic currencies 3.1 Before Bitcoin 3.1.1 The early beginnings of digital cash 3.1.2 The cypherpunk movement 3.1.3 The rise of cryptocurrencies 3.2 Bitcoin 4. Bitcoin 4.1 Bitcoin at a glance 4.1.1 Components of cryptocurrency technologies 4.2 Core data structures and concepts 4.2.1 Block 4.2.2 Blockchain 4.2.3 Address 4.2.4 Transaction 4.3 Consensus management 4.3.1 The idea of proof of work (PoW ) 4.3.2 Proof of work in general 4.3.3 Proof of work in Bitcoin 4.3.4 Mining 4.3.5 Blockchain forks 4.3.6 Double spending 4.3.7 Double spending success probability 4.4 Network and communication management 4.4.1 Seeding and connecting 4.4.2 Network structure and overlay networks 4.5 Digital asset management 4.6 Altcoins 4.6.1 Namecoin and merged mining 4.6.2 Other examples 1. Introduction 1.1 Aspects of cryptocurrencies 1.2 Cryptocurrency community 1.3 From cryptocurrency to blockchain 1.4 The analog stone block chain 1.4.1 Security model of the stone block chain 1.5 Structure of this book