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Cryptocurrency - Digital Currency
- 1. Cryptocurrency Academic Presentation - AKTU by Sameer Satyam C.S.E
- 2. Outline 1. What is cryptocurrency? 2. The Difference 3. Why use cryptocurrency 4. Evolution of cryptocurrency 5. Categories of cryptocurrency 6. Major cryptocurrencies 7. Bitcoin 8. Technology 9. Transaction Process 10. Benefits 11. Risks
- 3. What is cryptocurrency? • Cryptocurrency is a digital currency in which cryptography techniques are used to regulate the generation of units of currency and verify the transfer of funds. • Decentralized i.e. operates independent of any central authority or individual. • The supply of money is regulated by software and the agreement of users of the system. • Trust based on peer to peer consensus. • Transactions are irreversible.
- 4. The Difference Fiat or conventional currency Cryptocurrency Type Real Virtual Intermediates Yes No (Peer-to-Peer) Portability Yes (except heavy cash) Highly portable Durable Moderate Highly durable Acceptance National Global (throughout the internet)
- 5. Fiat or conventional currency Cryptocurrency Secure (cannot be counterfeited) Moderate High Scarce (Predictable Supply) Low High Sovereign (Government Issued) Yes No Decentralized No (Central bank control) Yes (controlled by complex math) Smart (Programmable) No Yes
- 6. Why use cryptocurrency? • Fast and cheap. • Easy to use. • Free to transfer and hold. • Decentralized control- users are the only owner of cryptocurrency. • Central government can’t take it away and there are no chargebacks. • Privacy and Security – Anonymous payments
- 7. • Due to no intermediary (such as Bank or Credit Card company) users have freedom to transact. • Transparency is maintained through public ledger system. • Reduced Fraud – eliminates cases of credit card frauds.
- 8. Evolution of cryptocurrency YEAR NAME DESCRIPTION 2009 Bitcoin First cryptocurrency and used SHA-256d as hashing function. April 2011 Namecoin Decentralized DNS Oct 2011 Litecoin First successful Scrypt cryptocurrency 2012 Peercoin First use of POW and POS functions Early 2014 Monero Uses CryptoNote protocol. 2G of cryptocurrency 2015 Capricoin Improved and more user friendly
- 10. Major cryptocurrencies • Bitcoin • Litecoin • Ripple • Peercoin • Mastercoin • NXT • Namecoin • Quarkcoin • Worldcoin • Megacoin
- 11. Bitcoin • First decentralized peer to peer payment network powered by its users (no central authority involved). • Payments recorded in public ledger using unit of currency ‘BTC’. • 1 BTC = 100,00,000 Satoshi • 21 Million Bitcoin’s will be created or mined until year 2140 hence it is protected from inflation. • Completely Open source.
- 12. Technology • Distributed ledger technology • Mining • Mining hardware • Mining Software • Blockchain • Bitcoin wallets
- 14. Transaction Process • Every transactions ever happened recorded on one global ledger in cryptocurrency. • Sender initiate a bitcoin payment using "wallet" software. This and other pending transactions are broadcast on the global bitcoin network. • Once every ten minutes or so, miners specialized computers (or groups of computers) on this network, collect a few hundred transactions and combine them in a "block". • In order to mine a block and validate the transaction, miners compete to solve a difficult mathematical equation (a "hash function"). The miner that solves the equation first further processes the block and broadcasts this "proof-of-work" to the bitcoin network.
- 15. • The other miners check the proof-of- work and the validity of the transactions. If they approve, the winning miner gets a reward (25 bitcoins), which is the incentive for miners to provide computing power. Adjusting the difficulty of the problem ensures that the supply of new bitcoins remains steady. • The mined block is added to the "blockchain", the unbreakable ledger and serves as a record of all transactions. • Receiver can use his wallet software to see whether the bitcoin have arrived.
- 16. Since each transaction includes its previous transaction and blocks become buried in the blockchain making it is nearly impossible to remove or modify any of these transactions. And hence prevents double spending. Transaction Block (chain)
- 17. Benefits • Fast, Safe and cheap • Ease of use and highly portable • Untraceable (pseudo-anonymous transactions) • Transparent and neutral • Decentralized nature • Active involvement of users • Fewer risks for merchants • Freedom to transact • Low inflation and collapse risk
- 18. Risk and Failures • Problems in implementation Hardware restrictions (Computational inefficiency) Instability Deflation Lack of Replicability Growing centrality
- 19. • Risk and failure in policy • Money Laundering • Purchase of illegal goods • Supporting criminal activity- BTC Theft, Malware, Scams • Risk for consumers • Fewer Protections • Cost • Lack of awareness and understanding • Still Developing
- 20. References [1.] https://bitcoin.org/bitcoin.pdf [2.] http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2544331 [3.] http://en.wikipedia.org/wiki/Proof-of-work_system [4.] https://en.bitcoin.it/wiki/Proof_of_work [5.] https://bitcoin.org/en/developer-guide#payment-processing [6.] http://alphapixel.com/sites/default/files/download/BitCoinPresentation.pdf [7.] https://www.stlouisfed.org/~/media/Files/PDFs/DWTF/Bitcoin-3-31-14.pdf [8.] http://www.imponderablethings.com/2013/07/how-bitcoin-works-under-hood.html [9.] https://www.tbs-certificates.co.uk/FAQ/en/sha256.html [10.] www.khanacademy.org/economics-finance-domain/core-finance/money-and- banking/bitcoin [11.] http://www.coindesk.com/price/
- 21. Thank You
Editor's Notes
- Bitcoin is divided into smaller units called Satoshi. Open source so anyone can develop his own currency.
- Mining- Bitcoin mining is the processing of transactions in the digital currency system. In which the records of current Bitcoin transactions, known as a blocks, are added to the record of past transactions, known as the block chain. Various mining hardware’s are needed to carry out this complex process in the attempt to find more hashes with less electrical power usage. Multi-graphics card systems Field-programmable gate arrays (FPGAs) Application-specific integrated circuits (ASICs) To operate these special type of hardware’s mining software programs are also needed like EasyMiner, BFGMiner, CGMiner etc. Block chain (Public Ledger) is used to store ordered and timestamped record of transactions. One block of chain contains many transactions happened at the same time. Transaction not yet in a block are called “unconfirmed” or “unordered”. Miners use fast hardware’s to solve complex equations or puzzles and the miner to first solve this problem is rewarded. Wallets allow a user to make and accept payments using Bitcoin. Bitcoin uses public-key cryptography to build and maintain the security of wallets and transactions as well as to encrypt data. Each Bitcoin address has its own pair of private and public key. In order to send bitcoin the user must digitally sign the transaction using the corresponding private key.