The presentation consists of various methodologies of cryptography and types of cryptocurrencies. The slides include information about how data mining is done for creating new Bitcoins. Also, how do transactions occur; Advantages and disadvantages of Bitcoins; Future Growth of Bitcoins.

1. BITCOIN
(CRYPTO-CURRENCY)
BY :- AVANTIKA SENGAR
B.TECH. (CSE) III YR.
1

2. CONTENTS
 INTRODUCTION
 CRYPTO-CURRENCY (Basics)
 WHAT IS A BITCOIN ?
 CRYTPOGRAPHY PRINCIPLE
 CRYPTOGRAPHY IN BITCOIN
 MINING PROCESS
 HOW DO TRANSACTIONS
OCCUR?
 WHY DO BITCOINS HAVE
VALUE ?
 WHAT DETERMINES IT’S
PRICE ?
 ADVANTAGES
 FUTURE IN QUESTION
 DISADVANTAGES
 CONCLUSION
 REFERENCES
2

3. INTRODUCTION
Few technologies have the ability to stir
passionate debate and baffle the vast majority of
the population as, bitcoin.
The virtual currency has been a constant source
of interest and confusion since it thrust itself
into the mainstream more than five years ago.
3

4. CRYPTO-CURRENCY (Basics)
 Crypto-currency is a digital currency that uses
encryption techniques to generate money and verify
transactions.
 Transactions are added to a public ledger – BLOCKCHAIN.
 New coins are created by the process of mining.
 Crypto-currencies use hash functions to solve various
math problems. Solving which the miners are rewarded in
terms of the crypto-currencies itself. 4

5. WHAT IS A BITCOIN?
 It’s a digital currency.
 Discovered by Satoshi Nakamoto in 2009.
 It’s decentralized.
 It runs on a blockchain, a decentralised ledger kept
running by miners.
 No banks or any other regulatory authorities required
for keeping a track on its value and number of
transactions, on a daily basis.
 It relies on the principle of cryptography. 5

6. CRYPTOGRAPHY PRINCIPLE
 Cryptography is a method of storing and transmitting data in
an encrypted form so that only those for whom it is
intended can read and process it.
 Its objective is to ensure data confidentiality by means of
authentication and data encryption.
 Two different types:
1. Symmetric cryptography
2. Asymmetric cryptography
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7. SYMMETRIC CRYPTOGRAPHY
 KEY : Sender and receiver share a secret key –
used to encrypt and decrypt data.
 KEY EXCHANGE : The process by which two peers
agree upon a key over an insecure medium can be
problematic as, until the same key is agreed, the
peers have no way to communicate in secret.
 SPEED : faster as algorithm is less complex.
 SECURITY : only confidentiality is ensured.
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8. 8

9. ASYMMETRIC CRYPTOGRAPHY
 Its a public key cryptography.
 Two keys are used – Private and Public.
 KEY EXCHANGE :
1. Message is encrypted using a sender’s Public key -
the Private key is not disclosed.
2. The encrypted data can only be decrypted by the
receiver’s private key. 9

10. SPEED : slower than symmetric cryptography as
here the algorithm is more complex.
SECURITY : ensures confidentiality and
authenticity.
10

11. 11

12. CRYPTOGRAPHY algorithm
USED IN BITCOIN
RSA – combination of two algorithms.
1. For asymmetric encryption
2. Generating digital signature
Its an asymmetric cryptography algorithm, which is
used to send information to a specific party without
even yourself being able to decrypt it again. But
the other person can decrypt it. 12

13. SHA-256 – it’s a cryptographic hash function
used for integrity and data authenticity.
It generates a unique signature for a block. By
comparing the computed hash to a known
hash value, a person can determine the data
integrity.
Mining uses this as a proof-of-work algorithm.
13

14. Fig : Hashing passwords 14

15.  Making the slightest change in the input data,
changes the hash unpredictably and vice-versa.
 This way integrity is ensured.
 Hashing is a one way operation.
HASH
FUNCTION
input COMPACT STRING
(IMPOSSIBLE TO REVERSE)
15

16. Fig : Hashing - one way operation 16

17. Process of mining
Bundle the
transactions in a block
Verification of
valid transactions
Header of most recent
block is selected
Insert it into a new
block as a hash
Solve the
proof-of-work
problem
When solution is found, local
block is added to the
block-chain 17

18. HOWDO Transactions OCCUR?
What does a transaction look like?
Three components:
1. Input (source of previous transaction(s))
2. Amount
3. Output
Install bitcoin
wallet on your
phone/laptop
Bitcoin
address is
generated
Disclose address to
your friends so
that they can pay
you and vice-versa
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19. How is it sent?
To send bitcoins two things are required: bitcoin address
and private key.
Sender signs the
message with the input
and amount using
private key
Sends them via bitcoin
wallet disclosing the
public key
Mining takes place
Receiver decrypts
the message using
his private key
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20. BITCOINS HAVE VALUE? WHY?
 Bitcoins have value because they are useful as a form of
money.
 Can be used to buy any form of goods (gadgets, medical
equipment etc.)
 Can be used to buy any commodity.
 Has the characteristics of money (durability, portability,
scarcity, divisibility, recognisability).
 Bitcoin is backed by mathematics and computer science.
20

21. What determines it’s price?
 The price of a bitcoin is determined by supply and
demand.
 Increase in demand => increase in price.
21

22. advantages
 No third party interference
 No taxes applicable
 Zero transaction cost
 Highly secured
 Bitcoins cannot be stolen
 User’s anonymity is respected
 Can be backed up and ensure integrity and authenticity.
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23. disadvantages
 Bitcoin wallets can be lost (if hard-drive is
infected).
 No valuation is guaranteed (since no authority is
involved).
 Doesn’t have any physical form like INR, USD, SGD
etc.
 Volatile (bitcoins are limited)
 Bitcoins are expensive to buy.
23

24. Future in question
24

25. conclusion
With this, we now have both sides of the coin.
Bitcoin, as you can see, is not perfect. It does have
many advantages that physical currencies do not
provide its users. However, it also has its
disadvantages. This is mostly due to the fact that
Bitcoin is still a relatively young and a new currency.
In order for Bitcoin to succeed, more people need to
understand what it is and not let their preconceived
notions distort the concept of digital currencies.
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26. REFERENCES
Websites referred :
• https://community.jisc.ac.uk/library/advisory-
services/introduction-cryptographic-techniques
• https://bitcoin.org/en/faq
• www.youtube.com
• https://en.bitcoin.it/How_bitcoin_works
• https://www.cryptocoinsnews.com/determines-value-
bitcoin
• https://www.coindesk.com 26

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