Okay, so I
just want
to reiterate, if
there's anyone watching this that's into computer science or cryptography, just turn the other
way right now because it will probably make you cringe.
I am absolutely oversimplifying this to a ridiculous degree, but it just still gets
across the basic function of how this works in a much more digestible fashion.
So when you first create a bitcoin wallet you're going to be given a private key, and
this is just a sequence of numbers and letters thats generated when you create that wallet.
So lets say we've got person A over here, and this is the private zone.
So this is private key A. and over here they want to interact with some person B. and over
here they've got their private, and this is the key B. Now, when a transaction actually
occurs these two people are going to have a brief interaction where...its all done in
the background but basically an algorithm is going to pick some number C. And this is
in the public.
This is private, thats private, this C that they both select is public.
So now, what they're going to do is; person A is going to take their private key, they're
going to put it against this public value C. and lets do black for our transfers.
So thats going to go over, that key is going to sign that C. And this B is going to come
over and its going to sign that C. So now the result is two new keys where you're going
to have a public AC, and on this side you are going to have a public BC.
So now you've got something general that is signed with that side and signed with this
side.
So now, whats going to happen, and remember all of this is done automatically via an algorithm
in the background, you’re not actually applying these signatures or doing any of that, it
all just happens instantly.
So now whats going to happen is this public section AC is going to get brought over into
this private zone and BC is going to get brought over into this private zone.
So now what you're going to do is you have your…..you have your AC which is now moved
into the private, you have your BC which has now moved into the private.
And your kind of second to last step here is, now you're going to go and you're going
to take that A, private and your once again going to this BC section.
And the same over here, the B is going to sign the AC.
So now the result of this, its going to come out here so you've got ABC, and now you have
ABC.
Over on this side the B is signing the AC.
So once again you have ABC.
And now these are back in the public domain and you can confirm that ABC is indeed ABC.
They’re the same value, and the beauty of all of this is that, person A can absolutely
confirm that they are sending their money to person B, person B can confirm who the
money is coming from as well, and they do all of this and confirm all of this information
without ever having to share that private bit of information.
So essentially those private keys will now be used as the backend of the signatures for
all of these transactions and all of this shuffling around is basically just to put
together enough information that they can come forward and they can say yes, the person
that says they're sending this is indeed the person thats sending it, whatever is in the
transaction is indeed there, but you never actually have to share any of that private,
secure information that would allow something to be decoded if you only had one bit.
So, as I said, its extremely over simplified but I think a lot of people get so confused
by crypto and they think that its this crazy thing but its really not that nutty of a process
you know.
This signs this, this signs this.
They sign each other., they come back over, they're signed.
And you compare them.
Thats really the gist of a bitcoin transaction.
Its not that crazy, and you know its incredibly secure.
And its just a very unique way of doing things, because, you know it doesn’t matter what
information you're sharing and it doesn’t matter if you are in contact with that person
or they're halfway across the world.
You can share that information and know that its secure without ever revealing anything
private.
And thats really the beauty of asymmetric key exchanges.
So, if you have any questions about this I’d be glad to explain a little bit more, I might
even do a follow up video, maybe talk about the actual math of it.
But hopefully this kind of just breaks down the mystery of what happens with a bitcoin
transaction.
Its really not that scary.
So anyways I hope you enjoyed this and hope you learned something.
We’ll see you next time.