Bitcoin has not become a mainstream currency despite early predictions, due to various factors that prevent it from replacing existing payment systems. While it introduced peer-to-peer transactions without third parties, most mining power is concentrated in a few large pools, giving them control over the blockchain. Incentives for miners are also decreasing over time. Additionally, Bitcoin's anonymity enables illegal uses and most governments have not established a legal framework for it, while critics argue the large energy usage for mining is wasteful. Security breaches also threaten the currency's value and stability.
Bitcoin is a digital, decentralized, partially anonymous currency, not backed by any government or other legal entity, and not redeemable for gold or other commodity. It relies on peer-to-peer networking and cryptography to maintain its integrity. A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending.
Confused by some of the terms used on CoinDesk? Here you will find a complete bitcoin 101 that will help you to understand digital currency by explaining commonly used terms and their meanings.
Bitcoin is a digital, decentralized, partially anonymous currency, not backed by any government or other legal entity, and not redeemable for gold or other commodity. It relies on peer-to-peer networking and cryptography to maintain its integrity. A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending.
Confused by some of the terms used on CoinDesk? Here you will find a complete bitcoin 101 that will help you to understand digital currency by explaining commonly used terms and their meanings.
Bitcoin is a complex topic, covering cryptography, software engineering and economics. It is difficult to grasp its essence with only a superficial look at it. But that is all this article has to offer. We’ll try to answer a few basic questions and wet your appetite for more.
Secrets and insights of Bitcoin currency and trading. In this tutorial, you will learn all about BitCoin and other cryptocurrencies. This slide will also explain you about the links between Ransomware and Bitcoin.
What is bitcoin? How does it work? How can you make money out of it? The bitcoin basics for Filipinos who want to understand and invest in the new digital currency.
BLOCKCHAIN ,BITCOIN & CRYPTOCURRENCIES WORLD : MECHANICS AND CYBER CRIMEanupriti
The world of Blockchain and Cryptocurrencies is undeniably amazing and has infinity to explore at hands.Recently I took on a 4 hour session at the prestigious Central Bureau of Investigations,CBI Academy ,Ghaziabad, vide Indian Technical and Economic Cooperation Programme organised by Ministry of External Affairs , to cover right from scratch to overview of mechanics and architecture of how this world works.Sharing here the presentation for info and awareness of anyone who is interested to take a dip in this domain and related cyber crime activities.
Bitcoins may change the way we transfer money overseas or buy goods both locally and overseas. As part of my online UDEMY course Money Laundering in a Digital World I have created a basic overview of Bitcoin.
This article contains information about history of Bitcoin cryptocurrency. What is Bitcoin? Whom was it created by? This article resumes the whole history of Bitcoin since 2008 to 2018.
Short presentation about bitcoin in particular and crypto currencies in general.
Its mainly a description of whats money and what is bitcoin
why bitcoin will dominate
What is Bitcoin & Cryptocurrency?
How do you keep it & spend it?
Where does it come from?
How can you use it in Sarnia/Lambton?
What does the future hold?
Digital Currency Systems: Emerging B2B e-Commerce Alternative During Monetary...cjwells
Digital currency systems form the triumvirate nexus of government policies, money, and technology. Each has a global reach and responds to the needs of business and consumers. E-commerce depends on private and government financial institutions to enable payment transactions, the basis of e-commerce. As the United States financial crisis continues B2B enterprises may need to abandon traditional payment transaction systems and look to alternatives in the form of Web-based digital currency systems accessed via the Internet. The various types of digital currency systems generally fit into five categories: barter exchange software systems, non-bank digital currency payment systems, digital precious metal systems, online value transfer software systems, and online stored value transaction software systems. Digital currency systems are not online banking. Digital currency systems use private electronic monies: electronic tokens, barter-exchange currencies, digital cash, and stored value e-cash vouchers.
We explore the history of money against a backdrop of banking and government policies that cause cyclic monetary crises, how these current digital systems operate, how business can thereby benefit in their use, and why digital currency systems are such an underutilized service in the United States.
Bitcoin is a complex topic, covering cryptography, software engineering and economics. It is difficult to grasp its essence with only a superficial look at it. But that is all this article has to offer. We’ll try to answer a few basic questions and wet your appetite for more.
Secrets and insights of Bitcoin currency and trading. In this tutorial, you will learn all about BitCoin and other cryptocurrencies. This slide will also explain you about the links between Ransomware and Bitcoin.
What is bitcoin? How does it work? How can you make money out of it? The bitcoin basics for Filipinos who want to understand and invest in the new digital currency.
BLOCKCHAIN ,BITCOIN & CRYPTOCURRENCIES WORLD : MECHANICS AND CYBER CRIMEanupriti
The world of Blockchain and Cryptocurrencies is undeniably amazing and has infinity to explore at hands.Recently I took on a 4 hour session at the prestigious Central Bureau of Investigations,CBI Academy ,Ghaziabad, vide Indian Technical and Economic Cooperation Programme organised by Ministry of External Affairs , to cover right from scratch to overview of mechanics and architecture of how this world works.Sharing here the presentation for info and awareness of anyone who is interested to take a dip in this domain and related cyber crime activities.
Bitcoins may change the way we transfer money overseas or buy goods both locally and overseas. As part of my online UDEMY course Money Laundering in a Digital World I have created a basic overview of Bitcoin.
This article contains information about history of Bitcoin cryptocurrency. What is Bitcoin? Whom was it created by? This article resumes the whole history of Bitcoin since 2008 to 2018.
Short presentation about bitcoin in particular and crypto currencies in general.
Its mainly a description of whats money and what is bitcoin
why bitcoin will dominate
What is Bitcoin & Cryptocurrency?
How do you keep it & spend it?
Where does it come from?
How can you use it in Sarnia/Lambton?
What does the future hold?
Digital Currency Systems: Emerging B2B e-Commerce Alternative During Monetary...cjwells
Digital currency systems form the triumvirate nexus of government policies, money, and technology. Each has a global reach and responds to the needs of business and consumers. E-commerce depends on private and government financial institutions to enable payment transactions, the basis of e-commerce. As the United States financial crisis continues B2B enterprises may need to abandon traditional payment transaction systems and look to alternatives in the form of Web-based digital currency systems accessed via the Internet. The various types of digital currency systems generally fit into five categories: barter exchange software systems, non-bank digital currency payment systems, digital precious metal systems, online value transfer software systems, and online stored value transaction software systems. Digital currency systems are not online banking. Digital currency systems use private electronic monies: electronic tokens, barter-exchange currencies, digital cash, and stored value e-cash vouchers.
We explore the history of money against a backdrop of banking and government policies that cause cyclic monetary crises, how these current digital systems operate, how business can thereby benefit in their use, and why digital currency systems are such an underutilized service in the United States.
What is Bitcoin and How is it related to Satoshi Nakamoto White Paper.pdfSuraj Sharma
Well the terms like bitcoin & block chain are being coined and referred to everywhere over the internet or over any investment or financial platform the reason being its increasing popularity and the mammoth returns that people have made by investing in these avenues.
Although the concept of bitcoin is known to many but still there are many that are confronted with this question that what is a bitcoin and how does it work? so, in this blog I have made a sincere effort to explain the same in the easiest of manner for you to understand this concept. So as we move ahead we will dive in this concept of What is Bitcoin? How is it related to White paper of Satoshi Nakamoto? to understand the basics of bitcoins and how would its future be like.
The term crypto currency is being coined everywhere due to its increased popularity worldwide, it is being looked at with great aspiration to park one’s money for a lucrative and manifold return. One can well imagine the return percentage on his/her investment in bitcoins by the fact that 1 bitcoin was worth $0 in 2009 and it now values at $55,353 (at the time of writing this article).
This means you could have been a millionaire or a billionaire if a reasonable investment was made in bitcoins in 2009 and was to be redeemed now.
Cryptocurrency- A Digital asset as a medium of exchange:
Crypto currency is a digital asset that is designed in such a manner that it offers the benefits of a medium of exchange like any other currency, so you can buy any item in exchange of these digital assets that you possess from the seller that accepts these forms of payments.
These digital assets are stored in computerized databases as they do not exist in physical form, using strong cryptography to secure the transaction records.
Decentralized Cryptocurrency Explained in Easy:
Whenever these digital currencies are minted, mined or created by the originator , the process is said to have exercised a centralized control, however when these are further disseminated to larger groups a decentralized control is said to have exercised. Each cryptocurrency functions through a distributed ledger technology that is typically known as block chain technology that serves as a public financial transaction database.
Although there are several other Cryptocurrencies that exist in the digital world and they too have offered good returns over a period of time, but the major issue involved in these digital currencies is that they are not backed by any of the apex bank of any country nor do they are traded in any banking channel.
Usually these digital currencies or cryptocurrencies that are not backed by any government or banking channel have no intrinsic value and nor do they will have in future.
Their values are derived purely on the basis of market forces of demand and supply and are a private fiat money. The market of these digital assets is highly volatile and have no capping on their price increase or decrease.
Bitcoin price today BTC to USD market cap.pdfFranck La Rocca
As of 4:11 p.m., the price of Bitcoin is $16,171.30, changing -2.19% from the previous day. The market capitalization of the tokens was $310,785,787,847.95 after the recent fluctuations in the price of bitcoin. Bitcoin has had a shift of -65.00% so far this year. According to the CoinDesks Digital Asset Classification Standard, Bitcoin is categorized as a currency (DACS).
The complete guide to bitcoin and how it is redefining the future of money an...SameerShaik43
The future of money and payments is digital, and Bitcoin has the potential to redefine it. The advent of cryptocurrency has given rise to a new era in the world of finance, one that is characterized by decentralization, anonymity, and security.
https://www.tycoonstory.com/money/the-complete-guide-to-bitcoin-and-how-it-is-redefining-the-future-of-money-and-payments/
Here is the Bitcoin Report. The report involves every aspect of Bitcoin that one need to understand Bitcoin from scratch. Following are the contents that are being covered by the report:-
· Abstract
· Introduction
· History and its Creation
· Working of Bitcoin
· Advantages
· Disadvantages
· Challenges to Bitcoin
· Scope of Bitcoin
· Conclusion
Hope this will help
All you want to know about #cryptocurrency and blockchain as well as hashing bitcoin.
- there are something is so difficult to understand in the power point but don't hesitate and write down your comment and surly i will make it easier for you.
Bitcoin is one of the famous and widely used decentralized currency in the world since it's creation. Here is the presentation on Bitcoin will help you understand more about it.
Hope this will help
What is cryptocurrency?, Blockchain, Bitcoin, Bitcoin Mining, Facts about Bitcoin Different types of cryptocurrencies, Cryptocurrency in India, Supreme court on cryptocurrency. Advantages and disadvantages of cryptocurrencies, Do we Invest?, Conclusion.
Bitcoin is a cryptocurrency. It is a decentralized payment system and kept alive due to the technology called Blockchain. These are peer-to-peer transactions. These transactions are verified by using a cryptography technology bank. Chain technology keeps the record of the distributed ledger. Bitcoins can be earned as a reward through mining. This currency can be convertible into other currencies, products, and services. Bitcoin has been emerging as a famous digital currency and popularity all over for quick transition. Moreover, bitcoin will be an economic asset because it has profitable results. The purpose of this research study is to explain the complete working of bitcoins technology, applications, and research challenges to be addressed, and the current future international market scope of Bitcoin technology.
Bitcoin was proposed by Satoshi Nakamoto on 31st Oct 2008. It is the pseudonym used by an individual or a collective group of people. In January 2009, the First open-source Bitcoin client was released and the bitcoin network came into existence. Satoshi Nakamoto is an inventor of bitcoin, and blockchain technology. All through it’s a false name. This is how he introduced himself to the internet. Unfortunately, many people think that because Satoshi Nakamoto has invented Bitcoin and the Blockchain technology, he is the owner of those too. The reality is that Satoshi Nakamoto has neither control over the Blockchain nor bitcoin. Therefore, it really doesn’t matter who Satoshi Nakamoto is.
Blockchain is a technology, and its first function was on the platform named bitcoin. Bitcoin is Blockchain. However, Bitcoin itself is only a cryptocurrency that is capable of replacing fiduciary currency. Nevertheless, not that many people will like the idea at first.
Bitcoin – for some people, this may be something making them excited and sleepless while for some others, it may be the first time they have come across such a term.
1. Bitcoin – Currency of the Future?
Rutgers University New Brunswick, NJ 08901, USA
Niraj Dholakia
MS in Computer Science
Abstract:
The Bitcoin cryptocurrency has been around since 2010 and while many of its early adopters believed it
to be the next big thing and predicted it to soon become a main stream digital currency others mainly
perceived it as a behind-the-scenes technology that would never be a currency that the average person will
use to pay for goods online or in a physical store. All these years later, bitcoin is certainly not a
mainstream digital currency. Despite big promises from early adopters, bitcoin is still plagued by tax and
regulatory issues. And the bitcoin community is still fighting over its core technology—a fracas that
could significantly hamper bitcoin’s ability to expand in the near future [22]. In this paper, I present
various factors that prevent Bitcoin and other Crypto-currencies (Altcoins) from replacing existing
payment schemes and becoming the currency of the future.
Introduction:
Bitcoin is a popular digital currency with over 168,210,443 transactions and 15,967,188 Bitcoins in
circulation as of 3rd
November 2016[10]. Today, one Bitcoin has a market value of around $700 with total
market capitalization of astonishing 100 billion US dollars as of September 2016[1]. The Bitcoin protocol
proposed by Satoshi Nakamoto is described as a peer-to-peer electronic cash system [2]. It is a
decentralized payment system with no trusted third party, such as a bank or a broker, as used in traditional
payment systems to guard against double spending. In this online payment system, anyone can make a
payment to any other individual on network directly in peer-to-peer manner just like physical cash. Each
purchase and transfer is verified by one of thousands of computers on a volunteer network and bundled
into a digital “block”. Each block of transactions is then recorded on a central ledger called the
blockchain. Hence, very peer knows about every other peer’s transactions; this is unlike a centralized
system (like Bank) where only the central authority knows about all transactions [3].
Background-
Each individual in the Bitcoin network can be a payer (customer) or payee (vendor) or both. To start
using the Bitcoin protocol, the user needs a Bitcoin account and a wallet. A prerequisite for a user is to
have a private and a public key pair, first of all because the account is identified by the public key
(Bitcoin wallet address). Also, a payer needs to know the public key of the payee to make a payment.
If a user wants to make a payment, that user has to create a transaction with all relevant information, i.e.,
the address of the payee, the amount of Bitcoins and a challenge. This transaction is then broadcasted to
all nodes in the network. Each node places this transaction into a block and tries to solve the proof-of-
work (cryptographic puzzle) for this block. Once a node finds a solution to the challenge, it broadcasts it
to all other nodes. This process is called mining and is performed by mining software. Mining yields
Bitcoins for the miner as a reward.
If all transactions are valid and not spent before, then the other nodes accept the block and start working
on the next block in the chain. At certain times, the chain may have forks because two blocks were mined
and broadcasted at the same time. Nodes always consider the longest block-chain to be the correct one.
2. Bitcoin Value and Mining:
The Bitcoin protocol came into existence in 2008 and first block or the genesis block was mined in
January 2009 by Satoshi Nakamoto yielding 50 Bitcoins as a reward. The currency that started with a
value of zero dollars is today valued at $700 and reached its peak price of $1242 on 29th
November 2013.
The figure [10] below shows how the price of Bitcoins varied between the years 2014 to 2016.
Like any other commodity in the world, Bitcoin gained value because people were willing to trade in it.
Bitcoin is often compared to Gold because like Gold it is rare and it has no intrinsic value. We say Bitcoin
is rare because the algorithm limits the total number of Bitcoins that can be ever produced to 21 million. It
is predicted that all Bitcoins will be produced by the year 2140[16].
Generation of Bitcoins require solving of cryptographic puzzles (obtaining hash less than a target value)
that require lots of computational power thus involving lots of cost in terms of machine and electricity.
The miners mine the transaction blocks and continue the building the block chain because of the incentive
received after successful mining of a block. This reward was of 50 Bitcoins initially but it gets halved
every 4 years. The current reward is 25 Bitcoins but will soon become 12.5 and so on till it would become
zero and all the 21 million Bitcoins will be mined. All the estimations made above are made by assuming
that one block will be mined by the miners in approximately 10 minutes. As more and more miners try to
solve the cryptographic puzzle with powerful machines, GPUs and using mining pools, the difficulty of
the cryptographic puzzle is also dynamically varied after generation of every 2016 blocks, to make sure
that block generation takes approximately 10 minutes. The difficulty that started at level 1 for mining a
block is today at 254,620,187,304, with Hash rate of 1,847,956,772 GH/sec [10].
Advantages of Bitcoin-
Peer-to-peer transfer –
The Bitcoin protocol introduced the concept of peer-to-peer transfer of Bitcoins between individuals
without requirement of any third party or financial institution like banks. Thus eliminating the transaction
cost involved in transfer of money that traditional institutions charge for acting as middle man. This made
sure that any individual/ organization in any part of the world can transfer any amount of money to any
individual/organization practically free of charge. Bitcoin users do pay some transaction fees to the
miners who mine their blocks just out of good will but that transaction fees is really very small/ almost
negligible.
3. The use of wallet address (string of alphanumeric character) instead of Names and identities in Bitcoins
gave a sense of privacy and security to the users involved in the trade. This privacy was seen as an
attractive feature of Bitcoin by many individuals who did not want Government / banks to know about
every purchase/transfer that they made. Unfortunately this pseudo anonymity of Bitcoin transactions also
made it very popular in black market activities, deep web and illegal money transfers.
The initial boost to Bitcoin was received mainly due the Euro zone financial crisis of 2009 and infamous
Cyprus bailout of year 2012-13. The financial losses and difficulties faced by the citizens during this
period caused people to lose faith in traditional financial systems like Banks [17]. The concept of
currency without any central authority thus attracted attention of everyone. The Bitcoin was thus no
longer a concept, it was seen as an alternative to the traditional currency and people started investing in
Bitcoins. This was also the time when Bitcoin peaked in its value.
Global Currency-
Bitcoin is not bound by any political boundary or controlled by a single Government body. The Bitcoin
can be accepted and used in the same form all over the world. There is no foreign exchange or conversion
required. Plus it has the added advantage of low transaction fees. The individuals and organizations that
were restricted to trade within their own countries now have an opportunity to freely trade all over the
world. In this sense, Bitcoin is the only truly global currency available in the world.
Security –
The Bitcoin protocol is designed in such a way that the blockchain prevents individuals from double
spending (using the same coin for different transactions).Everything is visible to everyone and each
Bitcoin ever generated in the Bitcoin economy can be traced and can be accounted for. Any attacker
cannot just simply generate Bitcoins out of thin air. If an attacker wants to add his malicious/fake Bitcoin
transaction block to the blockchain he need to get it verified by all the other miners of the community. If
the attacker manages to fork the blockchain with his malicious block than he needs to make sure that the
fork that he created keeps building longer than the current blockchain for it to be accepted by the other
miners. As described before, in Bitcoin community, the miners only follow the longest chain. Thus for a
attacker to make his fake chain longer than the existing honest chain, he has to generate a mining power
greater than mining power of all the nodes of the Bitcoin community added together [21]. Or the attacker
has to gain a trust of at least 51% of miners in the Bitcoin community (to have 51% mining power) so as
to make sure that his fake forked block chain gets accepted [21]. In order to successfully 51% attack
Bitcoin network, all that's needed is a combined hashrate higher than the genuine hashrate. Suppose
overall hash-rate is around 2,000,000 TH/s (current hashrate is 835,299,534 Giga Hash per sec[10]). The
most powerful miner, Antminer S9, has 14 TH/s. Each S9 costs $3,000. So money required to own the
same amount of hashrate is: 2,000,000 / 14 * 3,000 = $428,571,429. That's less than half a billion dollars.
Hence the idea of an individual investing around half a billion dollars just to attack and fork the Bitcoin
blockchain seems unreal. Although a State sponsored adversary or large mining pools are capable of
performing such an attack.
Bitcoin is a speculative currency. Its value is good only as long as people trust in the system. If the
peoples trust is more than value of Bitcoin is more. And if Bitcoin gets hacked/ if Bitcoin blockchain is
forked by an attacker than people lose faith in the economy and thus the value of Bitcoin can become zero
overnight. Thus if a attacker forks the blockchain by influencing and gaining 51% mining power than the
currency would lose its credibility and thus its value will become zero. The attacker thus will have any
number of Bitcoins that he wants but all of them would be of $0 market value. The Bitcoin protocol thus
encourages its participants to remain honest. This provides an intrinsic security to the Bitcoin economy.
4. Arguments against Bitcoins:
In spite of all its advantages and arguments provided by Nakamoto and the Bitcoin community, there are
lots of factors that prevent Bitcoins from being accepted as an alternative to the existing payment systems.
A Pure decentralized system?
The Bitcoin protocol was proposed as a truly decentralized economy because Nakamoto assumed that no
single individual/ organization would ever be able to control the Bitcoin economy. The thought of
someone controlling 51% of total mining power seems impossible but in June, 2014, Ghash.io, one of the
mining pools of the Bitcoin network, came close to obtaining 51% of the Bitcoin network’s hash-rate
[14]. This could have led to double-spending if the pool would have behaved maliciously. Many of the
miners in Ghash.io decided to join other mining pools to prevent this majority from occurring. Ghash.io
closed in October, 2016. But the top five mining pools operating today still control well over 51% of total
mining power of the Bitcoin economy. These mining pools have monopoly and have the entire blockchain
to their mercy. The data for top mining pools and their contribution in generation of blocks can be seen in
the figure [13] below.
The entire decisions of which block to be added to the blockchain is controlled by these mining pools and
it has led to great fear among the developers of the Bitcoin community. The people who consider to invest
all their life savings in Bitcoin economy instead of traditional banks are thus at a risk of losing it all if few
of these mining pools collude to destroy the blockchain. These mining pools belong mostly to few
countries like China and US. A scenario in which people of European Union decide to leave the
traditional economy and start operating on Bitcoin and due to international tensions if all mining pools of
China/ US decide to destroy the blockchain than entire Euro Zone can be brought to their knees with a
financial disaster. The risk of control of Blockchain in hands of few is dangerous.
This has been speculated by researchers who have proposed use of “Proof of Stake” and “Proof of Space”
instead of “Proof of Work” in Digital Currencies, but Proof of Stake currencies have their own short
comings and the Digital Currencies like PeerCoin, Nxt Coin, that made use of Proof of Stake are a seen as
replacement for Bitcoins Proof of Work but they still have a long way to go in terms of public acceptance
and market capitalization if they want to compete with Bitcoin [20][19].
5. Moreover, any Digital currencies that start competing with Bitcoin are forked and destroyed by use of
massive computational power by Bitcoin miners and mining pools. As of 5th
November, 2016, the value
of Bitcoin is $704.27 where as value of next best Digital Currency by market capitalization Ethereum is
just $11.23 [19]. Thus the difference is huge.
Decreasing Incentives-
As more and more mining power is being invested in generation of blocks, the chances of individual
miners to mine the block and earn incentives is getting low. The incentives earned are halved every 4
years in Bitcoin and thus not very far in future, the cost of generating a block will exceed the value of
incentive. At that stage there would be no incentive left for individual miners to invest their resources for
block generation and only the rich and powerful mining pools will get all the benefits of mining. This
would again tilt entire control of the Bitcoins in favor of handful of powerful miners.
Government Intervention-
The traditional payment schemes offer security to an individual’s transactions and protect them from
malicious traders. The transactions and money can be returned back to an individual if the trader is found
to have cheated in providing the service to the user. There are laws to protect the individual and banks and
financial institutions to act as mediators. As there is no central authority backing Bitcoins and Digital
currencies any cheating in trade cannot be mediated. The transactions once included in blockchain are
irreversible and require the trader to resend the money back to user if the services are not provided. This
leaves the consumer completely at the mercy of the seller.
The anonymous nature of transactions of Bitcoin has made them popular in Deep-web, black markets and
for illegal money laundering schemes. Strict actions have been taken by US government to stop online
gambling using Bitcoins that is used mostly to make dirty Bitcoins clean. The dirty Bitcoins are inserted
in slot machines and then after playing for small amounts withdrawn as clean Bitcoins[8]( "dirty" bitcoins
are bitcoins from stolen wallets or bitcoins that have passed through a wallet of a known criminal, etc).
This has made countries and Government of the world a little skeptical about legalizing use of Bitcoins
and other Digital currencies. The framework needed to implement Digital currencies as alternative to
actual currency is difficult and not been proposed by any country of the world till date [7]. The US
Commodity Futures Trading Commission, CFTC, has classified Bitcoin as a commodity in September
2015 and US treasury has accepted Bitcoin as Virtual currency in 2013 but a recent ruling of a Miami
judge in July, 2016 deemed Bitcoin as not real money [12]. The illegal case of money laundering was thus
tossed. 95% of the countries of the world have either made use of Digital Currencies illegal or have
deemed it unregulated. Thus people investing in Bitcoins have no Government protection for their
investment.
Energy consumption by Mining pools –
The current hash-rate of the Bitcoin network is 1,835,299,534 Giga Hash per sec[10]. Out of all the
hashing done only one hash gives correct result and thus results in mining of a block. Hence billions and
billions of computations made by using high power GPU’s and ASIC (Application Specific Integrated
Chips) are for nothing. And for doing this computations and cooling the machines, tremendous amount of
power is consumed. This is a pure waste of energy and adds to wastage of precious resources. Generating
a single block in the Bitcoin blockchain requires a number of hashing operations exceeding 260
, which
means that significant energy needs to be expended in order for the protocol to run. Calculations made by
[18] suggest that miners currently consume 350 megawatts of electricity which is roughly equivalent to
electricity demand of 280,000 American households. Early calculations placed the energy requirements of
the protocol in the order of magnitude of a country, see e.g.,[14]. This puts a serious question on use of
Digital currencies.
6. Security breaches-
Bitcoin protocol makes use of best cryptographic techniques and are more protected than the traditional
payment systems like credit cards and ATMs but this does not mean that they are unshakable. Bitcoin has
its own vulnerabilities and has faced disasters when it comes to getting hacked [9]. During its initial days,
on August, 6th
2010 an unknown hacker exploited an vulnerability and produced 1 billion Bitcoins out of
thin air. This was later fixed by renewing of Blockchain. But if similar attack happens today, it would
result in complete destruction of 100 billion dollars worth of Bitcoin economy. Mt. Gox used to be one of
the leading Bitcoin exchanges until 2014, but the attack on Mt. Gox in 2011 and 2014 has caused the
value of Bitcoin to go from $1000 to $700 that it is today. In a speculative economy like Bitcoin, any
information about a smallest vulnerability can cause entire economy to collapse. The lack of backing by
financial organizations and Government makes this a big risk to the people dependent on this economy.
If a credit card or a bank account is hacked than at least it can be insured and investigated to return the
money back to the individual but this is not the case for Digital Currencies. Even Barry Silbert, founder
and CEO of Digital Currency Group and supporter of Bitcoin technology has famously said, “it’s very
easy to come up with a calculation to show that the price of Bitcoin is going to go to $10,000, and with
some tweaks, I could get that back down to $100.”
Comparison of Digital currencies to existing payment systems-
The anonymous nature Bitcoins, no central control and possibility of a parallel Digital economy have
always been strong arguments in favor of Bitcoin, but as rightly pointed out by ConvergEx chief market
strategist Nicholas Colas in an interview to CNBC [6], "The dollar is likely to remain a global reserve
currency as long as it's the way global markets price gold and oil and guns. The $100 bill is the world's
Bitcoin, It's anonymous. It's easy to use. It's actually easier than Bitcoin, because you don't need a
computer or even power." Most of the money today is already in electronic form. The Bank is not
holding a lot of money in form of cash. The money is in our account data. It is set of zeros and ones.
There is digitalization of money in work around us and it has nothing to do with digital currencies.
The clearing of transactions by verification of block in Bitcoin currently takes around 40 minutes,
compare it with processing time required to approve the transaction when you swipe your visa card at a
Grocery store. The difference in ease of use is huge!
Conclusion:
Bitcoin and Digital currencies may never replace the existing payment systems but the technology behind
it is genius. The concept of Blockchain by Satoshi Nakamoto is unique and has opened new avenues of
research in the field of distributed systems. The technology behind Bitcoins is now finding its application
in various fields like internet of things, etc[15]. Thinking of shifting to Digital Currency and abandoning
traditional payment schemes is not the answer. The high transfer fee that the users used to pay to Western
Union has been reduced considerably by use of Paypal. The concept of payment through facebook that
allows transfer of funds at much lower rates than banks, plus many other newer applications are forcing
the banks to reduce their transaction costs and this will continue with more innovations that would come
in future.
The future of money will really be on finding ways to transact in a lower-cost way, and that's a societal
trend, not just Bitcoin. The status quo of existing currencies is way stronger than that of Digital
Currencies.
7. References:
[1] http://www.newsbtc.com/2016/11/05/total-Bitcoin-transaction-volume-surpassed-us100bn-september.
[2]Satoshi Nakamoto. Bitcoin: A Peer-to-Peer Electronic Cash System
[3] Kaylash Chaudhary.Modeling and Verification of the Bitcoin Protocol
s[4] Roman Oliynykov. A Provably Secure Proof-of-Stake Blockchain Protocol
[5]Should You Invest In Bitcoin? 10 Arguments In Favor As Of December 2015
(http://www.forbes.com/sites/laurashin/2015/12/11/should-you-invest-in-bitcoin-10-arguments-in-favor-
as-of-december-2015/#258b6cda540e)
[6]The US dollar to reign supreme for decades to come (http://www.cnbc.com/2014/04/24/future-of-
money-what-currencies-will-look-like-in-25-years.html)
[7]Legality of bitcoin by country (en.wikipedia.org)
[8]Using Bitcoin Casinos To Launder Bitcoin (https://www.deepdotweb.com/2016/04/13/using-bitcoin-
casinos-launder-bitcoin/)
[9]The Biggest Bitcoin Hacks and Thefts of time(https://hacked.com/biggest-bitcoin-hacks-thefts-time/)
[10]https://blockchain.info/stats
[11]Crypto-Currency Market Capitalizations (https://coinmarketcap.com/)
[12]Bitcoin 'not real money' says Miami judge in closely watched ruling
(https://www.theguardian.com/technology/2016/jul/26/bitcoin-not-real-money-miami-judge)
[13] https://bitcoinchain.com/pools
[14] Karl J. O’Dwyer and David Malone. Bitcoin mining and its energy footprint.
[15] Arvind Narayanan. SoK: Research Perspectives and Challenges for Bitcoin and Cryptocurrencies.
[16] Controlled Supply. https://en.bitcoin.it/wiki/Controlled_supply
[17] European debt crisis. https://en.wikipedia.org/wiki/European_debt_crisis
[18] Bitcoin could consume as much electricity as Denmark by 2020. (http://motherboard.vice.com/read/
bitcoin-could-consume-as-much-electricity-as-denmark-by-2020)
[19] Crypto-Currency Market Capitalizations. (http://coinmarketcap.com/currencies/views/all/)
[20] The Inevitable Failure of Proof-of-Stake Blockchains and Why a New Algorithm is Needed.
(https://cointelegraph.com/news/the-inevitable-failure-of-proof-of-stake-blockchains-and-why-a-new-
algorithm-is-needed)
[21] Majority Attack. (https://en.bitcoin.it/wiki/Majority_attack)
[22] The Schism Over Bitcoin Is How Bitcoin Is Supposed to Work. (https://www.wired.com/2016/02/
the-schism-over-bitcoin-is-how-bitcoin-is-supposed-to-work/)