Bitcoin
Erika Strano & Natalie Parke
Bitcoin
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Bitcoin → An Electronic Payment System
Peer-to-Peer System → transaction directly between users
Decentralized
Cryptocurrency:
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Dogecoin (Internet Tipping System)
Blackcoin (Proof-of-Stake → confirmation time 64 seconds)
Litecoin (nearly identical)
Bitcoin Network: Peer-to-Peer
Blockchain
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Transaction database shared by all nodes
Contains transaction ever executed in the currency
Double-spending very difficult:
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Honest generators only build onto a block
Dishonest generators would have to compute previous block hashes
Bitcoin Transaction
Transactions: Wallets and Addresses
Bob and Alice
both have
Bitcoin “wallets”
on their
computers.
Wallets
And
Addresses
Bob creates a
new Bitcoin
address for
Alice to send
her payment to.
Creating
A New
Address
Wallets are files
that provide
access to
multiple Bitcoin
addresses.
Each
address has
its own
balance of
bitcoins.
An address
is a string of
letters and
numbers,
such as
1HULMwZE
PkjEPeCh4
3BeKJL1yb
LCWrfDpN.
Transactions: Payment
Submitting
A Payment
Bitcoin Addresses: Hashes of Public Key
Alice tells her
Bitcoin client
that she’d like to
transfer the
purchase
amount to Bob’s
address.
Private
key
Alice’s wallet holds the private key
for each of her addresses. The
private key of the address she’s
transferring bitcoins from.
Public key
Anyone on the network can now use
the public key to verify that the
transaction request is actually coming
from the legitimate account owner.
Transactions: Verification
Gary, Garth,
and Glenn are
Bitcoin miners.
Verifying
The
Transaction
Their computers
bundle the
transactions of
the past 10
minutes into a
new “transaction
block.”
The miners’
computers are
set up to
calculate
cryptographic
hash functions.
Transactions: New Hash Values
Transactions: Verified
Each block includes a “coinbase”
transaction that pays out 50
bitcoins to the winning miner - in
this case, Gary. A new address is
created in Gary's wallet with a
balance of newly minted bitcoins.
Transaction
Verified
As time goes on, Alice’s transfer to Bob gets buried
beneath other, more recent transactions. For anyone to
modify the details, he would have to redo the work that
Gary did - because any changes require a completely
different winning nonce - and then redo the work of all the
subsequent miners. Such a feat is nearly impossible.
Transaction: Overview
Challenges
Anonymity of Bitcoin
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Every bitcoin transaction is publicly
logged
If bitcoin addresses can be linked to
identity, it is possible to guess who
may own other addresses
Bitcoin transactions do not have an
origin but the identity of the owner
can be determined by inferring
Bitcoin Security Vulnerabilities/Breaches
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Unconfirmed transactions lack security
Ubitex Scam
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Bitfinex Hack
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First company to be listed on Global Bitcoin Stock Exchange
Provided service which allowed anyone to buy and sell BTCs
for cash with minimal transaction fee
Service raised around 1100 BTCs before founder disappeared
with the Bitcoins
Lost 119,756 bitcoins after its platform was hacked
Bitcoin market rate dropped 20 percent following the hack
Difficult to secure bitcoin transactions
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Security lies in the private key
If private key is stolen, attacker can obtain bitcoin
Performance Evaluation and Challenges
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Bitcoin can support seven transactions per second
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Miniscule in comparison to Visa’s 56,000 transactions per
second on average
Debate exists on how much the size of the blocks can
be increased to support more transactions
At the hypothetical max limit, Bitcoin could support 27
transactions per minute
Without a solution to handle the increasing number of
transactions, networks close to capacity will become
congested and unreliable
Fees on transactions may be necessary
Mining: The Winning Block
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Example: The Chinese miners
Two control more than 50% of the hash power
During 2015 conference: 95% hashing power controlled by a handful
Future Work
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Investigate plausible methods for securing bitcoin transactions
Research original programmers
Compile survey of integrity and overall security of bitcoin and suggested
improvements
References
http://thumbnails.visually.netdna-cdn.com/bitcoin-infographic_5029189c9cbaf.jpg
http://www.ybrikman.com/assets/img/blog/bitcoin/bitcoin-send-message.png
https://en.wikipedia.org/wiki/Dogecoin
https://en.wikipedia.org/wiki/BlackCoin
https://en.wikipedia.org/wiki/Litecoin
http://esotera.eu/btc-addresses/
https://en.bitcoin.it/wiki/Block_chain
http://www.nature.com/news/the-future-of-cryptocurrencies-bitcoin-and-beyond-1.18447
https://blog.plan99.net/the-resolution-of-the-bitcoin-experiment-dabb30201f7
http://www.sciencemag.org/news/2016/03/why-criminals-cant-hide-behind-bitcoin