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Bitcoin: Programmable Currency For Digital Future

Bitcoin: Programmable Currency For Digital Future. Presented by Amruta Patwardhan. Bitcoin: Programmable currency for digital future. What is Bitcoin? History Working of Bitcoin Attacks faced by Bitcoins Weakness of Bitcoin A Thought for improving Anonymity Conclusion.

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Bitcoin: Programmable Currency For Digital Future

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  1. Bitcoin: Programmable Currency For Digital Future Presented by AmrutaPatwardhan

  2. Bitcoin: Programmable currency for digital future • What is Bitcoin? • History • Working of Bitcoin • Attacks faced by Bitcoins • Weakness of Bitcoin • A Thought for improving Anonymity • Conclusion

  3. What is Bitcoin? • Bitcoin is a new cryptocurrency designed by Satoshi Nakamoto in 2009 • Decentralized currency– no banks or centralized trusted entity is involved • It has a pure P2P architecture of electronic cash. • At present 12 million Bitcoins are in circulation. • Total bitcoins ever generated will be 21 millions and by 2140 all the bitcoins will be generated. • Approx. $13M to $18M transactions take place each day in Bitcoin • $750 per Bitcoin

  4. What is Bitcoin?

  5. History • Satoshi Nakamoto introduced first paper on 31st October 2008 • Project was registered with SourceForge.net on 9thnovember 2008 • 3rd January 2009 – Genesis block was mined by Satoshi Nakamoto. • On 9thjanuary 2009 1st version of Bitcoin was released by Satoshi Nakamoto • First ever transaction was done on 12th of January. http://blockexplorer.com/

  6. Related Work • Chaum’s mix-net design – DigiCash and ecash • PPCoin--alternative cryptocurrency based on Bitcoin. Proof of Stake/Proof of Work system. • Namecoin -- alternative distributed Domain Name System (DNS) on the basis of Bitcoin software. Support transactions for registering, updating, and transferring domains to serve • Litecoin-- has a faster transaction confirmations and will produce four times as many currency units as will be issued by the Bitcoin network

  7. Bitcoin: Programmable currency for digital future • What is Bitcoin? • History • Working of Bitcoin • Attacks faced by Bitcoins • Weakness of Bitcoin • A Thought for improving Anonymity • Conclusion

  8. Working of Bitcoin • Bitcoin wallets : use to store, receive and spend bitcoins • Bitcoin miners – they are users who mine bitcoins and also validate the transactions and add blocks to the blockchain(global transaction ledger) • Blocks – list of user transactions , information about the earlier accepted block. • Bitcoin addresses – user pseudonym’s used for bitcoins transactions. 1dice8EMZmqKvrGE4Qc9bUFf9PX3xaYDp • Double spending: user tried to spend the same coins twice is a problem in virtual currency. • solved without using third party

  9. Working of Bitcoin VKA,X VKB,Y SKA Alice VKA,SKA Bob VKB,SKB Bitcoin miners Other nodes in Bitcoin network SK – signing /private Key VK – verification/public key Broadcasted transactions

  10. Working of Bitcoin • Hash the transactions in pair – gets a corresponding digest then when later all the nodes are completed the two digest are considered and hash them in pair , this continues till you get a single digest = (Challenge , proof numbers) Digest with large prefix of zero • This single digest effectively encodes all the transactions that are where previously not incorporated and received by the individual nodes. • This Digest then will be combined with the hash of the transaction block that was previously accepted by the network • After doing all the combinations , the result is going to be a sequence of numbers. Genesis block … digest Chain of blocks digest Digest Hash

  11. Working of Bitcoin • After doing all these cryptographic hash functions we get a sequence of numbers. • These sequence of numbers are derived by incorporating all these block together • Then convert this sequence numbers into a challenge in a proof of work protocol . • That means, Bitcoin mining node at this point will take the challenge and come up with a separate sequence of numbers term as proof numbers. • This proof of work has a mathematical property which tells that if you take (Challenge, proof numbers) concatenate them together and make them as a input to an cryptographic hash function then the resulting output will have a large prefix of zeros.

  12. Working of Bitcoin • The Bitcoin miner has to find this proof numbers such that the output has the required number of prefixed zeros. • The more leading zeros required in a proof makes it harder to come up with the proof numbers that satisfy this condition. • The system makes sure that this proof of work is found in every 10mins. • Miners who solve the puzzle will get a chance to add the block to the block chain and bitcoins are assigned for working hard along with the transaction fee. • This is how new BTC are created .Currently this reward is 25 BTC.. • BTC – unit of bitcoins. • Smallest possible unit in Bitcoin is called Satoshi • 1 Satoshi = 0.00000001 BTC

  13. Bitcoin Wallets • Bitcoin Wallets – allows users to transact with other users.

  14. Attacks • Malicious pool of miners - -more then 50% miners are compromised. • Can update the protocol to have a limit to the number of miners in a pool. • Spamming transactions: sending bitcoins to yourself repeatedly. • Transaction fees • Transactions are further prioritized by time. • DDoS attacks

  15. Weakness of Bitcoin • Wallet vulnerable to Theft – unencrypted by default • losses all bitcoins • Anonymity– Bitcoin systems main claim. • Pseudonymous system • Uses Pseudonyms which can be linked. • Transactions are publicly avaliable • According to the paper Evaluating User Privacy in Bitcoin by E.Androulaki et.al[1] showed that 40% of users profiles to a large extent were recovered. • Network analysis – helps to trace lost bitcoins. • There are Bitcoin mixers or e-wallets available in market like • Bitcoin Fog • Bitcoin Laundry Third Party solutions • OnionBC [1]E.Androulaki1, G. O. Karame2, M.Roeschlin1,T. Scherer1, and S. Capkun1 Evaluating User Privacy in Bitcoin

  16. A Thought for improving Anonymity • Use of Encryption Technique for mixing of addresses and Tor for transactions. • Use a Commutative Encryption Technique for mixing the addresses. • Find two peers in a Bitcoin network who are interested in transacting. Initially they exchange there address Say A1,B1 and C1 with each other. They openely don’t share there other address A2,B2 and C2. • Once the addresses are known to all the peers participating, the bitcoins can be transferred to their respective addresses without each other’s knowledge and then sent to the targeted address using Tor. A2,B2,C2 E_BC(C2) PkB PKB,SKB E_B(B2) (Pkc,SKc) Alice Bob PKc E_C(C2) Carol E_BC(B2)

  17. Conclusion • Advantages: • Decentralised P2P Architecture • Secure • Provides some level of Anonymity(Pseudonymity)\ • Low or no transactions fees • Disadvantages • Payments are irreversible • Not widely accepted • Loses Bitcoin if wallet access is lost • Price is Volatile

  18. THANK YOU!!!

  19. QUESTIONS!!!!

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