Crypto-currency allows us to transfer our resources securely without any third party organization by the use of mainly blockchain technology. These transactions are verified by the public using common ledger which contains all the required information. In this paper we have presented a systematic investigation of cryptocurrencies which includes the working, comparision with other forms of currencies and the future of cryptocurrency. Finally a present problem in one of the most famous cryptocurrency is addressed and a possible
solution is provided. Index terms-Bitcoin, blockchain, mining, Proof of work.
A crypto-currency is an alternative form of payment which allows us to transfer funds directly to others bypassing third-party organizations like bank while remaining reasonably pseudonymous. Moreover, no collateral or social security is required for this service. This “peer to peer”(P2P) economy is made possible through blockchain technology. The principles underlying the basic concepts of cryptocurrency were first discussed in the “cypherpunks manifesto” which put pressure on the importance of privacy. “Privacy is necessary for an open society in the electronic age. Privacy is not secrecy. A private matter is something one doesn’t want the whole world to know, but a secret matter is something one doesn’t want anybody to know. Privacy is the power to selectively reveal oneself to the world.”
1.1 VARIOUS ATTEMPTS AT CREATING ANONYMOUS TRANSACTING SYSTEMS
1. “Hashcash”, by Dr. Adam Back, would add time and computing cost to sending emails which made spamming uneconomical. This particular principle was used later on by many cryptocurrencies to authenticate transactions.
2. B-money, created by Wei Dai worked on the principle of proof of work. Dai proposed that in order to keep an organized, collective management of records is necessary with certain inbuilt protocols helping to authenticate transactions.B-money was never officially launched but still, Dai’s work closely resembles many modern day blockchain systems.
3. In 2004, Hal Finney created “Reusable Proofs of Work” which borrows from the principles of “Hashcash”.
4. In 2005, Nick Szabo put forth a proposal for ‘Bitgold’ which builds on the works of Hal Finney and various others.
5. In October 2008, a person under the alias of Satoshi Nakamoto addressed a paper to the cypherpunks making direct references to the problems faced by developers of ‘Hashcash’, ‘B-money’ and others.
Fig: 1.1: The percentage division of the cryptocurrency market in various cryptocurrency
Afterward, in January 2009, satoshi mined the first genesis block of Bitcoin.Bitcoin went on to become one of the most predominant cryptocurrencies in the current time . Introduced in 2009, bitcoin is by far the most successful and powerful cryptocurrency we have in today’s world. Bitcoin is getting a lot of attention and its total value has crossed 100 billion USD dollars in Oct 2017. Back in 2008, a paper named “Bitcoin –A Peer to Peer Electronic Cash System” was posted to a mailing list discussion on cryptography. An anonymous person
calling himself Satoshi Nakamoto posted this paper, whose real identity is still a mystery. Just after some time Bitcoin software was made available to the people. Through which everyone came to know about the mining process, how Bitcoins are created and how all transactions are performed and verified on blockchain. When Bitcoin was valued for the first time, someone spent 10000 of them for just 2 pizzas. If the buyer had not made that mistake, he would’ve been the owner of more than $50 million today. After seeing the exponentially increasing popularity of bitcoin, the idea of encrypted currencies catch on and new cryptocurrencies started to emerge. Namecoin, Litecoin were the currencies which came after bitcoin. Their main focus was more onBitcoin. These currencies worked more on bitcoin, tried to offer greater speed, anonymousness and many other facilities. Today, we have more than 1600 cryptocurrencies with the new ones appearing frequently.
In 2013, bitcoin saw huge downfall for the first time. Despite being a currency which was designed with anonymity, bitcoin proved to be a nice target for the immoral people.Today bitcoin has reached a place from where there is no coming back. It is rising exponentially. No doubt
these cryptocurrencies have a tremendous future ahead.
1.2 WHAT DOES CRYPTOCURRENCY MINING MEAN AND HOW IS IT DONE?
Fig 1.2:the cycle of bitcoin transactions
Mining is the method used by cryptocurrency for being decentralised and allowing transparent P2P transactions. When a transaction occurs, data miners are provided with the task of verifying the transaction by solving a task.Upon the completion of this task, new bitcoins are released and the information regarding this entire transaction is updated in the public ledger which allows miners to verify future transactions.This method of verifying a transaction is called “Proof of Work”. Of the 21 million bitcoins available (it isfixed), 80% have already been mined. Asthe figure drops, the difficulty in mining, bitcoins has increased which calls for the formation of mining pools which is a group of people whowork together to provide the heavy computational power required to mine coins, and the profits obtained are
The rate at which new bitcoins are mined is fixed by varying the difficulty of mining which is done by the protocol after the addition of 2016 blocks or roughly every two weeks.
2.0 COMPARING DIFFERENT CURRENCIES WITH CRYPTOCURRENCIES.
Definition of currencies:- A system of money in general use in a particular country, the fact or quality of being generally accepted or in use. (Oxford Dictionary)
Real currency: It has intrinsic value like Gold, Silver,etc.that have their own value base on specific weight and measurement.
Fiat Currency: It is the actual money which we use the most.Which includes coins and paper notes issued by our central government.
Unlike usual currencies which are issued by the government, cryptocurrencies are created by computers. Cryptocurrency has limited supply but usual currencies can be produced according to the necessity by the government.usual currencies are centralized and controlled by the law and banks whereas cryptocurrencies are totally decentralized and not controlled by any single entity or government.usual currencies are valued by the market and with the specific regulations but cryptocurrencies has no value determined by the supply and demand. Cryptocurrencies are not different from e-money that is PayPal or WebMoney. That means they have also, have some problems with them. Although both e-money and cryptocurrency have a lot in common, some specific features of cryptocurrency make problems more like to occur, that makes cryptocurrency riskier.
Fig 2.1::the comparison of different types of currencies
1. Price Manipulation: This is the biggest issue with cryptocurrency. The value of the cryptocurrency may rise and fall dramatically in a very short time.
2. Random alphanumeric or hexadecimal addresses: For a non-technical person addresses like
0xb794f5ea8bc39494ce987128fffba74279579287doesn’t make any sense. Basically, these addresses are a cryptographic hash created by cryptographers or some genius computer programmers.It is very hard for new crypto users to learn this address exchange ritual and accept it. This created a problem for new users to move to crypto-currency.
3. Lack of crypto-friendly solutions for merchants: It is easier to pay with debit, credit card or mobile payment than purchasing something with the help of Bitcoin or other crypto-currency? .The user would have to go through the address ritual all over again. very high transaction fees and relatively slow speeds are also issues users have to deal with. Now think from the other side for merchants cannot easily manage crypto-currency payments or easily integrate them with their existing payment systems.
4. No contextual information around transactions. Crypto-currency are meant to be anonymous, hence the merchant would not get the information about who made the payment. This might seem initially to be an advantage but if we consider cryptocurrency for regular purpose the merchant need to get the information of the client. For now, there is no way the merchant can check who made the payment. For instance, if merchant receives 5 crypto payments from five different customers there would be no way for them merchant to know which payment was made by the specific customer, this would create a big problem. Hence, crypto-currencies are practically not usable in the current form.
5. The activities of Cyber criminals There are plenty of activities of hackers and cyber criminals in market of cryptocurrencies. In past, cryptocurrencies have been hacked and heisted that have resulted in loss of billions of dollars. Due to these dark activities, prices of particular cryptocurrencies dropped dramatically. And to counter this type of activities, operators had to take precautionary measures. Some of which turned out to be helpful. Transactions offered by blockchain are inflexible, that is, there is a very little chance of recovering stolen funds. Cryptocurrency trading platforms which trade cryptocurrency have to improve their security framework to stay ahead of the thieves and hackers. Because of all of this, the authentication steps of transaction of cryptocurrency becomes more complex and inconvenient to its users.
6. Lack of price It is very important for investment analysis and strategies to have some price charting. Basically, the problem with cryptocurrencies is that their price vary considerably even in a very short span of time. Moreover, its price has different values on different platforms. So it becomes very hard for one to make price charting of prices of cryptocurrencies
1. The solution Tip proposes for this problem is, user-friendly usernames, instead of cryptographic addresses. As the problem is mentioned above, the simple solution to this can be using of simple addresses. This will not create any security issues as it might seem, since the blockchain technology can further encrypt the address as the user types it. The solution is proposed just for the end user.0x2138794f5ea01238a39494c23839613fffba74279579268 => akash21W99
2. Solutions for merchants.It must be very hard for merchants to take payment using cryptocurrencies. The solution don’t intend to make cryptocurrencies non-anonymous. We intend to give every user of cryptocurrency a unique username that deal with the identity of user. Now the users can be given a option to user cryptocurrency the way they were using earlier or the using the username method. In this way the user can switch between anonymity, and this would solve the major drawback of cryptocurrency.
3.0 ADVANTAGES AND DISADVANTAGES OF CRYPTOCURRENCIES OVER USUAL CURRENCIES
The use of cryptocurrency reduces the need of middle-man in a transaction. It hence in some cases reduced lot of legal procedure,paperwork, fees and commissions One of the major advantages is the secrecy of user, no information is sent to government or banks. Cryptocurrency use NSA created cryptography which makes almost impossible for any other person than the owner to use his wallet. International Transactions on cryptocurrencies are easier than usual currencies Cryptocurrencies unlike bank don’t charge any extra money for transaction. Cybersecurity issues As a digital technology, cryptocurrencies will be subject to cybersecurity breaches, and may fall into the hands of hackers. We have already seen evidence of this, with multiple ICOs getting breached and costing investors hundreds of millions of dollars this summer alone (one of these attacks by itself resulted in the loss of $473 million). Mitigating this will require continuous upkeep of security infrastructure, but we are already seeing man players dealing with this directly, and using enhanced cybersecurity measures that go beyond those used in the traditional banking industries.
4.0 FUTURE OF CRYPTOCURRENCY
Future of crypto currency will be great for all over the world. The future of Crypto currencies which are fundamentally strong like Bitcoin, Ethereu, Dash, Ripple etc. have bright future across the globe. Bitcoin has made its debut in India nearly 5 years back and is now here to stay. In the years to come, the Government of India can legalize crypto currency and can be traded as other stock and assets. The first decentralized cryptocurrency, bitcoin, was created in 2009 by pseudonymous developer SatoshiNakamoto.Since its birth it has grown rapidly as shown in graph. On April 1, 2017 Japan legalized Bitcoin, the first decentralized cryptocurrency. The prices hiked and got doubled. Similarly, when Australia did it also boosted growth of Bitcoins. Future of cryptocurrency can be seen as a revolution in the whole market internationally If we come to India, as of now the future of the Cryptocurrencies looks really good. India is starting to learn and grow with the technology. The future of Cryptocurrency in India will be great.
With regards to the cryptocurrency, it can’t be overlooked. It is an incredible nation with more than a billion people who recently experienced demonetization. That is the time that numerous Indians started capitalizing their cash in Bitcoin and proceed to owe them now It has been no harm in buying cryptocurrency but it can be disastrous in the future as one of the unfortunate factors clouding many peoples view of Cryptocurrencies is the fact that hacking of crypto exchanges and wallets had risen proportionately as Cryptocurrency popularity also rose within the world media. Its future depends on the cyber security if it becomes secure than it can become very popular. Encryption of these things will help the people so that they don’t fall into fishing and other hackers attacks. Even if blockchain is inherently secure, crypto offerings may not be secured very much. Many cryptocurrency ventures themselves contain security vulnerabilities. CYBCSEC is a program to secure the future security in the cryptocurrency transaction so that everyone can freely transact and use cryptocurrency without having fear of any security vulnerabilities.
Hence the future of the cryptocurrency likes bitcoin, etherium, zcash, dash, Ripple, etc. are very bright if the
continuous growth of the cryptocurrency continues without any flaws, it will be a revolutionary act throughout
the world and the whole system of currency will change through it. One can see the bright future of the
cryptonym world with no security vulnerabilities threats.
4.1 FUTURE PROBLEM WITH BITCOIN
Bitcoinhas a very slow performance. It can perform only seven transactions per minute and it takes ten minutes to create a block to be added to the public ledger.As the no. of unmined bitcoin reduces the power and energy required to mine the remaining bitcoins unreasonably high. There is a chance that cryptocurrency may come in the influence of cyber threats.
4.2 SOLUTION OF THIS PROBLEM
Bitcoin uses “Proof of Work” to validate transactions, this process requires tremendous amount of computational power and time.To fix this problem it should use “Proof ofstake” method which is much quicker and consumes less power. Each miner puts forth a part of their wealth which is their stake in this transaction i.e if any malicious activity is performed by them, they would lose their stake.Then based on a selecting algorithm, miners are selected usually the ones with highest stake but to prevent this method from being abused by the rich, the selection process is based on chance to a high degree.The selected miners would then verify the transaction and they are paid a transaction fee but no reward is given as in proof of work.This method increases the security as to gain majority control , a user would have to put a lot of their wealth at stake.If a user on proof of stake doubles his investments, he will have twice as much control but in proof of work the same investment would grant him exponentially higher control.
- Akash Manhas
- Kumar Utkarsh
- Tushar Jain
- Manan Parekh