The Economics Of Cryptocurrency Pump And Dump Schemes

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The Bitcoin protocol forces input addresses to spend the precise quantity of a previously received transaction (notice that, in Figure 1, there are two input addresses that are precisely the similar, which indicates that bitcoins have arrived to this Bitcoin account in two separate transactions). An output that has not been spent is identified as unspent transaction output, or UTXO. Consequently, every input should unambiguously indicate the preceding transaction identifier (a transaction is identified in the Bitcoin method by its hash value) and the index of the output exactly where the bitcoins had been received. The initial validation can be performed with the details included in the transaction itself (field ScriptSig) with each other with the information of the transaction identified in the Preceding output (Index) (field scriptPubKey). Before accepting a payment from a standard transaction, the receiver should really(i)validate that the digital signatures are appropriate(ii)validate that the bitcoins of the input addresses are not previously spent. As a consequence, at any provided moment, an output could be in two states: either already spent or not yet spent.