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.
- Cryptocurrency 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.
Overview-
1. What is cryptocurrency?
2. The Difference
The tabular comparison between Fiat or conventional currency and Cryptocurrency on parameters like durability, portability, type, security etc.
3. 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
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.
4. Evolution of cryptocurrency
Evolution of cryptocurrency from 2009 to 2015. Major Cryptocurrencies include are Bitcoin, Namecoin, Litecoin, Peercoin, Monero and Capricoin.
5. Categories of cryptocurrency
Cryptocurrencies are divide into various categories based on what type of algorithm used, type of community, investor involved, according to usage and on speed of transaction.
6. Major Cryptocurrencies
List of major Cryptocurrencies Bitcoin, Litecoin, Ripple, Peercoin, Mastercoin, NXT, Namecoin, Quarkcoin, Worldcoin and Megacoin
7. Bitcoin
First popular Cryptocurrency Bitcoin founded by Satoshi comprehensive details.
8. Technology
Bitcoin utilizes the following technologies which are Distributed ledger technology, Mining, Mining hardware, Mining Software, Blockchain and Bitcoin wallets.
9. Transaction Process
A typical transaction process of a Cryptocurrency namely Bitcoin involving concepts like wallet, block, transaction block-chain and proof-of-work algorithm. It gives step by step procedure on how the transaction is carried out in the case of Bitcoin.
10. 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
11. Risks
- Problems in implementation- Hardware restrictions (Computational inefficiency), Instability, Deflation, Lack of Replicability and Growing centrality.
- 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 and Still Developing.
This is an academic presentation by Sameer Satyam.
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
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.
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
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.
