Minning of Bitcoin Technology

International Journal of Electrical, Electronics and Computers, 5(3)
May-Jun, 2020 | Available: http://eecjournal.com/
ISSN: 2456-2319
https://dx.doi.org/10.22161/eec.532 10
Minning of Bitcoin Technology
Ishita Tiwari, Alisha Goyal, Ankita Joshi
1
B.Tech Scholar, Department of CSE/IT, Global Institute Of Technology, Jaipur, India
2,3
Assistant Professor, Department of CSE/IT, Global Institute Of Technology, Jaipur, India
Abstract—“Bitcoin Technology” Bitcoin is an innovative technology that offers several benefits, such as
fast transaction speeds, low costs, and the elimination of the need for a third-party intermediary to process
transactions. Unfortunately, BitCoin has faced resistance from regulators because the technology has been
used for nefarious purposes, including online drug purchases and Ponzi schemes.
This note provides a basic explanation of how BitCoin works and is currently regulated on federal and state
levels. This note argues that BitCoin should not be forced into old regulatory frameworks that do not
adequately balance security concerns with the benefits of BitCoin. BitCoin should not be regulated at the
federal level. Instead, state regulations should focus on BitCoin providers that can unilaterally transfer or
block transfers of BitCoin on behalf of users. State regulators should require such providers to register with
their given states, maintain adequate books and records, implement advanced cyber security standards,
conduct audits of their operations, and submit reports to state regulators. In crafting these regulations,
regulators should keep in mind that vague or poorly drafted regulations will chill innovation.
A Bitcoin 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. We propose a solution to the double-spending
problem using a peer-to-peer network.
Keywords –Bitcoin Technology, Blockchain, Wallet, Payment Processing, Economy of Bitcoin.
I. INTRODUCTION
Bitcoin emerged out of the 2008 global economic crisis
when big banks were caught misusing borrowers' money,
manipulating the system, and charging exorbitant fees.
To address such issues, Bitcoin creators wanted to put the
owners of bitcoins in-charge of the transactions,
eliminate the middleman, cut high interest rates and
transaction fees, and make transactions transparent. They
created a distributed network system, where people could
control their funds in a transparent way.
Bitcoin has grown rapidly and spread far in a relatively
short period of time. Across the world, companies from a
large jewelry chain in the US, to a private hospital in
Poland, accept bitcoin currency. Multi-billion dollar
corporations such as Dell, PayPal, Microsoft, Expedia,
etc., are dealing in bitcoins. Websites promote bitcoins,
magazines are publishing bitcoin news, and forums are
discussing cryptocurrencies and trading in bitcoins.
Bitcoin has its own Application Programming Interface
(API), price index, trading exchanges and exchange rate.
However, there are issues with bitcoins such as hackers
breaking into accounts, high volatility of bitcoins, and
long transaction delays. Elsewhere, particularly people in
third world countries find Bitcoins as a reliable channel
for transacting money bypassing pesky intermediaries.[1]
II. HISTORY OF BITCOIN
The first Bitcoin protocol and proof of concept was
published in a Whitepaper in 2009 by a shadowy
individual or group under the pseudonym Satoshi
Nakamoto. Eventually Nakamoto, who remained
mysterious, left the project in late 2010. Other developers
took over and the Bitcoin community has since grown
exponentially. While Satoshi Nakamoto's real identity
remains shrouded in mystery, it is on record that he
communicated extensively in Bitcoin's early days. Let us
speculate on questions like when he started working on
Bitcoin, to what extent he was inspired by similar ideas
and what was the motivation for bitcoin.
III. METHODOLOGY
The project was distributed in different modules and
further in various sub tasks. Firstly all the tasks were

ISSN: 2456-2319
collected to be there in the project for achieving the
projected plan. Then the tasks were divided according to
the different modules. Different modules identified were:
Creation of first Bitcoin: It is believed that Satoshi
started coding Bitcoin around May 2007. He is said to
have registered the domain bitcoin.org in August 2008.
Around that time, he started sending emails to a few
individuals he thought might be interested in the idea of
bitcoins.[1]
In October 2008, he publicly published a white paper that
dwelt on the Bitcoin protocol, and released the Bitcoin
code as well. Then he stayed in contact for about two
years, during which he interacted actively in forums,
communicated with several developers and later he also
submitted patches to the initial code. He maintained the
source code along with other developers, tackling issues
as they happened. By December 2010, as others had
slowly taken over, he quietly left the scene.
Entities: The entities involved in the implementation
and maintenance of Bitcoins are:
 The Blockchain platform
 Cryptographic algorithms
 Bitcoin miners which are computers or specialized
machines that mint the currency and make possible
transactions
 People who participate in the transactions and thus
help to move the payment system
 Bitcoin Transaction: We shall now see how a new
block of bitcoin transaction is created.
A bitcoin miner creates a block by using the
following steps –
 Gathering pending transactions, preferentially
those with transaction fees first, and then the
free ones
 Verifying the transactions for their validity
 Solving a hashing problem
 According to the statistics, in October, 2015,
blockchain.info site stated that, the average
number of transactions per block was 411, and
as of May 2018, the current number of pending
unconfirmed transactions is around 2495.
 Reward And Cost Per Bitcoin Transaction:
Assuming that one bitcoin is worth $400, the reward
of 25 bitcoins per block is worth around $10,000,
ignoring negligible amount of transaction fees.
Taking average number of transactions per second
as 2, and the number of transactions per block as
1200, the reward per transaction works out to $8.33.
It is found that the cost of electricity consumed in
mining is close to the reward which makes mining
bitcoins not so profitable. The basic problem of
mining as of now, is the 1 MB limit on block size
which makes it possible to have at most only 10
transactions per second.
 Bitcoin Handle Double Spending Problem: For
digital cash system, a payment network necessarily
should have valid accounts, balances and transaction
records. The biggest bottleneck common to every
payment network is the double spending problem
which is the case when same money is used multiple
times to do transactions.[1]
To prevent double spending, all transactions have to be
recorded and validated every time in a central server
where all the balance records are kept. However, in a
decentralized network, every node on the network has to
do the job of a server; it has to maintain list of
transactions and balance records. Thus, it is compulsory
for all nodes/entities in the network to keep a consensus
about all these records. This was achieved by using the
blockchain technology in bitcoins.
So we can say that bitcoins like other cryptocurrencies
are mere token entries stored in the decentralized
databases that keep consensus of all balance and account
records. It is to be noted that cryptography is used
extensively to secure the consensus records. Bitcoins and
other cryptocurrencies are secured by math and logic
more than anything else.
Bitcoins and cyptocurrencies have gained recognition and
adoption based on their perceived value by their creators
and users.
IV. BLOCKCHAIN TECHNOLOGY
A blockchain is basically a perpetually growing list of
records, called blocks. These blocks are linked and
secured by using cryptography. Each block generally
contains a cryptographic hash of the previous block along
with timestamp and transaction data. By its design, a
blockchain does not allow modification of the data.
It is an open, distributed ledger that records transactions
between different parties efficiently and in a verifiable
and permanent way. A blockchain, as shown in figure
below is typically managed by a p2p or peer-to-peer
network collectively following a protocol for
communication between nodes and for validating new
blocks. Once recorded, the data in any given block
cannot be altered without consensus of the network
majority.
In case of bitcoins, the blockchain is a public ledger that
records bitcoin transactions. It is implemented as
a chain of blocks. Each block contains a hash of the

ISSN: 2456-2319
previous block up to the genesis block which is the first
block of the bitcoin blockchain. This is however achieved
without any trusted central authority: the working of the
blockchain is performed by a network of communicating
nodes running bitcoin software. Transactions of the type
payer A sends B bitcoins to payee C are broadcast to this
network using existing software applications. Bitcoins
are created as a reward for payment processing work in
which users who offer their computing power verify and
record payments into a public ledger. Called mining,
individuals engage in this activity in exchange for
transaction fees and newly minted bitcoins. Besides
mining, bitcoins can be obtained in exchange for other
currencies, products, and services. Users can buy, send,
and receive bitcoins electronically for a nominal fee
using wallet software on a personal computer, mobile
device, or a web application. Bitcoin is the first
implementation of a concept called "crypto-currency",
which was first described in 1998 by Wei Dai on the
cypherpunks mailing list, suggesting the idea of a new
form of money that uses cryptography to control its
creation and transactions, rather than a central authority.
The first Bitcoin specification and proof of concept was
published in 2009 in a cryptography mailing list by
Satoshi Nakamoto.
Blockchain Architecture: For starters, let's first learn
what is blockchain technology. Logically, a blockchain is
a chain of blocks which contain specific information
(database), but in a secure and genuine way that is
grouped together in a network (peer-to-peer). In other
words, blockchain is a combination of computers linked
to each other instead of a central server, meaning that the
whole network is decentralized. To make it even simpler,
the blockchain concept can be compared to work done
with Google Docs. You may recall the days of tossing
over doc. documents and waiting for other participants to
make necessary edits. These days, with the help of Google
Docs, it is possible to work on the same document
simultaneously. The blockchain technique allows digital
information to be distributed, rather than copied. This
distributed ledger provides transparency, trust, and data
security. Blockchain architecture is being used very
broadly in the financial industry. However, these days,
this technology is employed not only for cryptocurrencies,
but also for record keeping, digital notary, and smart
contracts.[2]
 Work Flow Of Blockchain:
Fig 1: Workflow Of Blockchain
Any new record or transaction within the blockchain
implies the building of a new block. Each record is then
proven and digitally signed to ensure its genuineness.
Before this block is added to the network, it should be
verified by the majority of nodes in the system.
 Transaction: Generally we use coins for
transaction but here we had pretends coinbase
transactions do not exist. Coinbase transactions can only
be created by Bitcoin miners and they’re an exception to
many of the rules listed below. The figure above shows
the main parts of a Bitcoin transaction. Each transaction
has at least one input and one output. Each input spends
the satoshis paid to a previous output. Each output then
waits as an Unspent Transaction Output (UTXO) until a
later input spends it. When your Bitcoin wallet tells you
that you have a 10,000 satoshi balance, it really means
that you have 10,000 satoshis waiting in one or
more UTXOs. Each transaction is prefixed by a four-
byte transaction version number which tells
Bitcoin peers and miners which set of rules to use to
validate it. This lets developers create new rules for future
transactions without invalidating previous
transactions[4]
.These Bitcoin due to transaction broadly
came up and by cryptocurrency technology spread over
the market. Using the public and private keys help us to
ensure the security since the data would be in cipher text
format that would easy for anyone is decrypt without any
proper key.
Public key is broadcasted so it would be easily available
while private key is present only to the sender who is
sending the data in encrypted format.

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Fig 2(a): Transactions
An output has an implied index number based on its
location in the transaction—the index of the first output is
zero.
V. CONCLUSION
Bitcoins can be helpful to a lot of people. Since they are
an international currency, you can use them in any
country without having to convert between currencies.
The Blockchain is really secure and it lets you make sure
your money goes to/comes from the right person. People
receiving Bitcoins won't have to pay anything for the
transactions, and Bitcoins have a lot of support. All of
these will definitely help Bitcoin get more users, and if
everyone uses Bitcoin it could replace official currencies.
Sure, it has some disadvantages, but some of those are
because Bitcoin is a new thing, so as time goes on they
will be less of a problem. The others can easily be
avoided.
VI. FUTURE SCOPE
A private initiative that has created a virtual currency and
a payment system based on cryptography and
decentralized management, Bitcoin is considered not only
an interesting, but also a disruptive technical innovation
by many observers.
 It's true that bitcoin has been far more stable
in 2019 than in previous years. In
2017, bitcoin's price rose from about $1,000 to
almost $20,000 before ending the year at about
$14,500. In 2018, bitcoin plunged from that
level at the beginning of the year to less than
$4,000 by year's end.
 After a rejuvenating 2019, it appears bitcoin is
on the rise once more. While its underlying
market is virtually inscrutable—billions of
dollars shuttle between traders in the black
market—there is one fundamental change on the
horizon.
 Given Bitcoin's volatility, it is easy to guess that
by 2025 it could be worth as much as $150,000
per coin if some of the conservative predictions
manage to come to fruition. However, some true
believers out there feel that Bitcoin's
price could hit $500,000 by 2025!
REFERENCES
[1] https://www.researchgate.net/publication/281773799_Rese
arch_and_Challenges_on_Bitcoin_Anonymity
[2] https://blockgeeks.com/guides/what-is-blockchain-
technology/
[3] https://cointelegraph.com/bitcoin-for-beginners/what-is-
bitcoin-wallets
[4] https://bitcoinmagazine.com/articles/research-paper-
bitcoin-disrupts-international-monetary-policy
https://www.academia.edu/Documents/in/Bitcoin

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