Study on Bitcoin
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Transcript of Study on Bitcoin
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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
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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
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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
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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
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BITCOIN WALLET
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Bitcoin addresses
are collected in
“wallet”.
Essence of wallet
Security and
protecting private key
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VERSATALITY OF WALLET
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Wallets come in variety of
forms
Purchase with mobile device
QR codes are used.
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BITCOIN PROTOCOL
WORKING OF BITCOIN
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Block chain
Transaction
Processing mining
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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
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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
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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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