Study on Bitcoin

BITCOIN

Guided by Submitted By

Ms. Caroline Mary Krishna Veni.A

Asst. Professor S7 CSE

CSE Dept.

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CONTENTS

Description of earlier systems Barter

Money-Its advantages and disadvantages

Introduction to Bitcoin

Characteristics

Bitcoin as email

Bitcoin Wallet

Bitcoin Protocol Block chain

Transaction

Mining

How to accept bitcoins in store

Advantages

Brief History of Bitcoin

Conclusion

References2

BRIEF DESCRIPTION OF EARLIER SYSTEMS

Barter

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(CONTD…)

Goods *BECOME* Money

Money is

A medium of exchange

A unit of account

A store of value

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CONTD…

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Advantages

Acceptable

Durable

Portable

Scarce

Divisible

Recognizable

Disadvantages

• It is centralized

• Misuse of Capital

SO REALLY HOW INNOVATIVE IS BITCOIN??

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WHAT IS BITCOIN?

•Bitcoin lets you send money over the internet.

•Digital, distributed currency developed by open source

community.

•Produced using software that solves mathematical problems.

•Example for crypto currency.

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ABOUT BITCOIN(CONTD……..)

• Used to buy things electronically.

• It is decentralized, no need of large bank to

control money.

• Proposed by an unknown author, Satoshi

Nakamoto.

• Mined using computing power in distributed

network

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CHARACTERISTICS OF BITCOIN

It’s decentralized.

It’s easy to set up

It’s anonymous

It’s completely transparent

Transaction fees are miniscule

It’s fast

It’s non-repudiable

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1010

Internet

Bitcoin is like email

Internet

BITCOIN ACCOUNT

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Functions using public key

cryptography

Generates pair of cryptographic

keys

Public key as bitcoin address

Private key kept secret and

create digital signatures

BITCOIN WALLET

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Bitcoin addresses

are collected in

“wallet”.

Essence of wallet

Security and

protecting private key

VERSATALITY OF WALLET

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Wallets come in variety of

forms

Purchase with mobile device

QR codes are used.

BITCOIN PROTOCOL

WORKING OF BITCOIN

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Block chain

Transaction

Processing mining

PROTOCOL(CONTD..)

Block Chain

Maintains consistent record of all transactions

Blocks :- data structures encapsulating

transactions.

Prevents double spending.

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CONTD…

Transaction

“We define a digital coin as a chain of digital

signatures”

Components of transaction

Input

Amount

Output

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EXAMPLE OF PARTIAL TRANSACTION GRAPH

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Alice ,5

Alice ,2

Bob1,3

Bob2,2

Charlie.4tA tC

tB

Bob3,1

PROTOCOL(CONTD..)

Mining

Primary importance

All participants have a consistent view of

bitcoin data and to create no bitcoins.

Mining raises new problems

Proof of Work

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MIINING (CONTD..)

How to make hash of it??

Miners take the information in the block, and apply a mathematical formula to turn hash.

Hash : random sequence of letters and numbers.

Every time someone successfully creates a hash, they get a reward of 25 bitcoins.

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HOW MINING WORKS

mining uses cryptography, with a hash function

called double SHA-256

hash takes data and shrinks into smaller hash

value(256 bits)

cryptographic hashing becomes a good way to

implement the Bitcoin "proof-of-work“

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CONTD..

To mine a block, collect new transactions in a block.

hash starts with enough zeros , block has been

successfully mined.

About every 10 minute someone will successfully

mine a block.

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STRUCTURE OF BITCOIN BLOCK

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CONTD…

Block header contains field such as

1st field :-protocol version

2nd field :-hash of previous block

3rd field :-Merkle root ,special hash of all

transactions

4th field :- time stamp server

5th field :-nonce,arbitrary value added on each

hash value.

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HOW TO ACCEPT BITCOIN PAYMENTS FOR YOUR

STORE

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Person to person

payments

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MERCHANT BITCOIN POINT-OF-SALE (POS) SOLUTIONS

Block chain

merchant

ADVANTAGES

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REFERENCES

S. Nakamoto, Bitcoin: A Peer-to-Peer Electronic

Cash System, 2008.

To appear in the proceedings of the 2013 eCrime

researches summit(eCrime) published by IEEE.

http://www.righto.com/2014/02/bitcoin-mining-hard-

way-algorithms.html

http:/coindesk.com/information

http://en.wikipedia.org/wiki/Bitcoin

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