Bitcoin: An Overview



Faculty Mentor:
Ms. Geeta Sharma

Student Name:
Rhytham Negi (MCA-1 st Year)
Paramjeet Singh (MCA-1 st Year)


1. INTRODUCTION


The world is digitally transformed and Indian government is running many projects to make Digital India. Documents are digital documents and signatures are digital signatures. The RBI, however, has not encouraged the use of bitcoins, and the sale of bitcoins currently is taxed in India. There are an estimated three million bitcoins in circulation in the country. Here, Bitcoin is a digital currency, also known as virtual currency or electronic money. It is used to transact the digital money from one person to another. Bitcoin is symbolically known as BTC. Bitcoin is a peer to peer payment system developed by "Satoshi Nakamoto" in the year 2009. It is a decentralized currency, which means there is no middle organization or company that keep the log of the transactions. According to the google.com, the current rate of 1 BTC is 7,77,671.14 (INR). (As on September, 3rd, 2019 08:27 PM).
According to the journals.elsevier.com, the financial capabilities of bitcoin are compatible with that of gold and the dollar, as they share similar traits.

2. WHERE THE BITCOINS CAME FROM?


Bitcoin was developed by the group of developers called Satoshi_Nakamoto. This group of developer also released the first Bitcoin software in which the first units of currency called bitcoins were mostly utilized. It is not commented that Satoshi_Nakamoto was a group of people or one single genius.

3. WHAT IS BITCOIN AND BITCOIN BLOCKCHAIN?


Bitcoin is a virtual monetary unit and therefore has no physical representation. The Bitcoin Blockchain consists of a sequence of blocks where each block builds on its predecessors and contains information about new Bitcoin transactions. The Bitcoin Blockchain has a public ledger, where it maintains all the ownership information for any point of time. To use the Bitcoin system, we need to download the Bitcoin wallet. The bitcoin wallet is software that Store, receive and sending the bitcoin unit. The next step is to exchange of different currency into the Bitcoin unit. The common way to exchange the Bitcoin unit with our physical currency, just make an account on one of the many Bitcoin exchange and transfer fiat currency to Bitcoin unit. Due to the widespread adoption of Bitcoin, the pricing on large exchanges is very competitive with relatively small bid-ask spreads. Most exchanges provide order books and many other financial tools that make the trading process transparent.

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4. HOW DO A BITCOIN TRANSACTION WORKS?


The transaction system in the bitcoin is similarly as the transaction through any payment app like Paytm. Paytm is the most popular and convenient payment system in India. The seller shows his/her payment link (QR Code) to the buyer, scan or accept the payment request, and send the desired amount of BTC (Bitcoin). A transaction in bitcoin is a transfer of value between Bitcoin wallets that gets included in the blockchain. Each Bitcoin wallets has an obscure piece of data called a private key, which is used to sign transactions, providing a mathematical proof of work (confirmation of transaction) that they have come from the real-owner of the wallet. The signature also averts the transaction from being changed by a hacker once it has been. All transactions are broadcast to the network and usually begin to be affirmed within 11-15 minutes, through a process called mining.
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5. BITCOIN MINING



Bitcoin mining is one of the ways to earn bitcoins using our computational system power. Every bitcoin transaction consists of some mathematical calculations which need to solve using high computational system power. Those who mine the bitcoins are known as the Bitcoin Miners. Every bitcoin transaction is validated or verified by miners. A miner collects all the pending Bitcoin transactions, verifies their legitimacy, and assembles them into what is known as a block candidate.
Anyone can become a Bitcoin miner, means bitcoin mining is a permission less job. It requires a respected software which downloads the most recent copy of Bitcoin Blockchain. Generally, there are small groups of miners who accepted the new blocks and use high-end hardware and access to cheap electricity can still make a profit from mining. The fingerprint of block candidate is obtained by the computing the hash value of a block candidate, using the hashing function dSHA256.
From above example, we can see that the hash value for the text, The national language of India. The hash value of this text, which has been calculated by the hash function (dSHA256), is
B271A8EB7D400EB471D827
4AAB6D2B491FD4E0C935C5
3A1FD35DA3368B2A7AB4
Now we have made a small change in the original text to the national language of India. It will cause an erratic change in the hash value, which can be seen from the corresponding hash value.
New hash value:
4637EB70E352EA1F726CDEB7F44
242606569C0E6D9F490E6
3E86E612831C7050 According to the above example, the data file's hash value cannot be prognosticated. It means we can't be able to determine the next hash value after the change fractions of things in data.
Every miner continuously tried out to find the hash value that satisfied the condition in block candidate, that the hashed value must be a particular threshold value means it must display several zeroes at the beginning of the hash value.
An example of a hash value of a block that was added to the Bitcoin-Blockchain in 2011 is shown in the above example:
Block #69786 (July 23rd, 2010, 12:09:36 CET)
0000000000 14243293b78a2833b45d78e97625 f 6484ddd1accbe0067c2b8 f 98b57995
Need to be zero
In the bitcoin blockchain, a data field contains an arbitrary value called nonce. The miner modifies this arbitrary value/data order to gain a new hash value. These customizations did not affect the set of transactions. Just as with our example, every customization result in a new hash value.

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6. ADVANTAGES OF BITCOIN


  • Decreases the Risks of Fraud for Consumer: Buyers can complete their transaction without giving their sensitive and confidential information (like debit or credit card details) to the seller. Thus, they provide an essential amount of invisibility that most of the credit card fails to deliver. Bitcoin act as a digital currency that hackers cannot decrypt in any possible way because bitcoin makes use of cryptographic hash function known as SHA256 provides security by encrypting the data. At the same time, your identity was also obscured for safety. It helps a lot in preventing data breaches.

  • International payment becomes easy for small business ventures: Small online sellers and retailers dont often sell their product or services internationally because of the high cross border transaction fees., Bitcoins, being global, relives this pressure once and for all, thereby making payments cheaper, safer, faster, and more comfortable. Foreign currency exchange rates and cost will be minimized.

  • Decentralized emission: The entire process of a bitcoin transaction is peer to peer. No one can freeze, tax, or claim your coins. They cannot be stolen and cannot be seized by the government in no possible circumstances.

  • No paperwork: Anyone, from any part of the globe, of any age, can buy and receive bitcoins within minutes. There is no ID card, pan card or passport or proof of bank is required to open an account. All you need to do is to make an account or sign up for a Bitcoin Wallet and start purchasing and selling Bitcoins.

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    7. DISADVANTAGES OF BITCOIN


  • Bitcoins are not widely accepted: Like in India the The Reserve Bank of India (RBI) announces a ban on purchasing and sale of cryptocurrency like Bitcoins. Therefore, bitcoins are still only be accepted by a small group of online merchants and vendors. To entirely rely on Bitcoins as a currency is quite tricky.

  • No Valuation Guarantee: Since there is no authority governing Bitcoins and suppose If a large group of merchants decides to flood Bitcoins and leave the system, its valuation will decrease significantly, no one can guarantee its minimum cost. So, the users who have spent a large amount of wealth invested in Bitcoins would be in trouble. The decentralized nature of bitcoin has both merits and demerits.

  • Fluctuation in bitcoin value: Based on demand the value of the bitcoin fluctuates continuously. This constant fluctuation will cause Bitcoin-accepting sites to continually updating prices. Suppose when a user wants a refund for his product, causing a lot of confusion like should the new amount be sent? There are still some essential scenarios that the Bitcoin community still has no consensus over.

  • Terrorist funding for weapons and Criminal Activity: Due to the security feature of the Bitcoin, it attracts the criminals and terrorist. Bitcoins can be used by terrorist to purchase weapons on deep web there are many illegal deals of firearms and contract killing by criminals takes place on deep web takes place

    • 8. REFERENCES

  • [1] http://www.bitcoin.org/
  • [2] https://en.wikipedia.org/wiki/Digital_India
  • [3] https://www.coindesk.com/
  • [4] https://en.wikipedia.org/wiki/Payment_system
  • [5] https://files.stlouisfed.org/files
    /htdocs/publications/review/2018/01/10/a-short-introduction-to-the-world-of-cryptocurrencies.pdf

    • Copyright © 2019, JIMS