Introduction of Bitcoin With Comparison
Introduction of Bitcoin With Comparison
1Student, Dept. of Master of Computer Application, Vivekanand Education Society's Institute of Technology,
Maharashtra, India
2 Professor, Dept. of Master of Computer Application, Vivekanand Education Society's Institute of Technology,
Maharashtra, India
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Abstract - “Bitcoin is the most important invention in the going to be one of the major forces for reducing the role of
history of the world since the Internet” once said by Roger Ver government. The one thing that’s missing but will soon be
a former politician and an early investor in Bitcoin related developed is a reliable e-cash” nine years later, Bitcoin was
startups. A whole new economy is said be built on top of born. Bitcoin is definitely the most well-known
cryptocurrencies, and a whole new asset class is being born cryptocurrency but there are over 700 other
with these Bitcoins. One which no state government or bank cryptocurrencies termed as Altcoin, of these some are
can stop. These Bitcoin isn’t attached to any state or considered to be potential challengers to Bitcoins.
government, so doesn’t have a central issuing authority,
which makes it more popular, fair and transparent thus easily
2. OBJECTIVE
available for everyone to use. All the transactions are tacked
[1] Introduction to the Bitcoin and how they actually work.
in a global database or ledger called blockchain. Apart from
these Bitcoins there are various other alternative currencies [2] Advantages of these Bitcoin available
called Altcoin that describes every single cryptocurrencies
except for the Bitcoins. These coins attempt to improve on the [3] Introducing to the Altcoin available with few examples
ideas of what Bitcoin represents. Developer who wants to
[4]Comparing Bitcoin to the Altcoin
explore the boundaries of underlying blockchain technology
goes for the development of Altcoin.
3. HOW BITCOIN WORK
Key Words: Cryptocurrency, Blockchain, Bitcoin, Altcoin,
Mining, Miners, Proof-of-work, Hash algorithm 3.1 Bitcoin Blockchain
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add next block of transaction to the blockchain, which then rate of block generation goes up, the difficulty rises that will
generates a new math hash function that needs to be lead to pushing the rate of block creation back down.
solved.
3.3 Proof-Of-Work
Bitcoin uses SHA (Secure Hash Algorithm) 256 bit hash
function. It is said to be one of the strongest hash function It is usually very easy to produce a hash from a collection of
available, originally developed by United States national data. Computers are really good at this. In order to make it
security agency. If multiple people make block at roughly the difficult to avoid hashing of transaction blocks each second
same time, the network picks one to keep building upon and bitcoins mined in minutes, bitcoin protocol deliberately
which, becomes longest and most trusted chain. A complete makes it more difficult by introducing something called
copy of a currency's Blockchain contains every transaction ‘proof-of-work’. Proof of work demands that a block’s hash
that is ever executed in the currency. With this detail, one has to look a certain way, won’t just accept any old hash. As
can find out how much value belonged to each address at soon as a new piece of data is included, the hash generated
any point in history thus maintain record. will be totally different. It must have a certain number of
zeroes at the start.
3.2 Processing: Bitcoin mining
Thus, proof of work can be defined as the method to ensure
It is a decentralized computational process that serves that the information (new block) was difficult (costly, time
basically two purposes. Firstly, to confirms the transaction is consuming) to be made. More specifically as defined in
processed in a trustful manner when enough computational Wikipedia A proof-of-work (POW) system (or protocol, or
power is devoted to blockchain, secondly, to create or issue function) is an economic measure to deter denial of service
new bitcoins into the blockchain. When a block of attacks and other service such as spam on network by
transaction is created, miners put it through a process. The requiring some work from the service requester, usually
process goes like this, they first validate the transactions are meaning the processing time by a computer.
valid, and then bundles the transaction in a block. They then
select the header of the most recent block and insert it into Thus, the overall process and the step that the bitcoin goes
the new block as hash. The miners then solve the proof of though as explained in [3] by the author is as follows:
work problem, after successful solution of proof of work is
found, the new block is added to local blockchain and 1) Firstly new transactions are broadcasted to all the
propagated to the network. This, is how the block is been nodes.
added to the blockchain, adding transaction records to 2) Each node collects the new transactions into a
Bitcoin’s public ledger of past transactions. block of blockchain
3) Each node works on finding a difficult proof-of-
Primary purpose of mining is to allow Bitcoin nodes to reach work for its block by solving the hash algorithm
a secure transaction of bitcoin, also a mechanism used to 4) After finding a proof-of-work, it broadcasts the
introduce Bitcoins into System. These miners are block to all the available nodes
transactional fees as well as “subsidy” of newly created 5) Only if all the transactions are valid and not already
coins. When a new block is discovered, the discoverer or the spend the nodes then accepts the block
miner is awarded with certain number of bitcoin, agreed 6) A next block is the created into the blockchain, as
upon everyone in the network. the result of previous step this means the nodes has
accepts the block, using the hash of the accepted
There are some difficulties to these mining such as block as the previous hash.
computationally-difficult problem because SHA-256 hash
states that a block must start with zeroes, probability of 4. Security
calculating a hash that starts with many zeros is very low
thus many attempts must be made to generate a new hash Bitcoin would not exist without a little thing called
each round. Next is difficulty metric that is the measure of cryptography, is also sometimes referred to as world’s first
how difficult it is to find a new block. As, more miners join cryptocurrency. Bitcoin are kept safe thanks to
to mine the block, the rate of block creation will go up, as the cryptography, consisting of keys, which are basically chunk
of information that can be used to make mathematical
guarantee about message indicating that it is actually from
© 2017, IRJET | Impact Factor value: 5.181 | ISO 9001:2008 Certified Journal | Page 2491
International Research Journal of Engineering and Technology (IRJET) e-ISSN: 2395 -0056
Volume: 04 Issue: 06 | June -2017 www.irjet.net p-ISSN: 2395-0072
the intended person. Bitcoin transaction is the transfer of mathematically as the summation of this geometric series as
value between Bitcoin wallets that gets included in given below:
blockchain, when we create an account on wallet, that
account is linked to two unique keys – private key and public
key.
Private Key takes some data and marks it by signing, Bitcoin has the property of volatility mainly due to the fact
providing a mathematical proof that they have come from that there is a limited amount of coins and the demand for
owner of the wallet. The signature also prevents the them increases by each passing day.
transaction from being altered by some intruder once been
issued. The signed private key is then send out to the bitcoin 6. Bitcoin advantages
network and everyone can use of the public key to make sure
sign checks out. This way all those keeping track of Bitcoins Following are listed some of the advantages that is observed
trading knows to add transaction to their copy of blockchain. in a bitcoin. These advantages are a good reason for the
In other words, if public key works that’s a proof that data investors or anyone who would like to buy or sell Bitcoins.
was signed by owner’s private key. This proof of identity
It is decentralized. Most important feature of Bitcoin is
isn’t something that can be faked. Thus, cryptography helps
decentralization meaning no one can take your Bitcoins
to achieve fundamental security concepts:
away from you or freeze your account, due to the absence of
[1] Confidentiality: the information can be read or accessed body called a central regulating authority system. You own
by only intended receiver, avoiding the information to be your money completely and have control on your
understood by someone for whom it was unintended. transactions.
[2] Integrity: Information cannot be altered between the Your purchases are not taxed. Owing to absence of single
owner and the intended receipt of the data. central authority that would regulate Bitcoin transactions,
there is absence of any tax on any Bitcoin transaction.
[3] Authentication: The owner and the receiver can
confirm each other’s identity thus, achieving authenticity on It is secure. Your payment information cannot be stolen
the identity. away from you in any case. A Bitcoin transaction does not
require any personal data to be submitted, thus protecting
5. Who controls the Bitcoin network? you from any kind identity theft. Sender cannot reverse his
transaction which means fewer risks for merchants as well.
Bitcoin is not controlled by any central authority or General ledger called blockchain keeps all record of
government, instead is controlled by all Bitcoin users all transaction securely also helping keeping track of all
around the world. This makes it very powerful and more transaction performed.
willing to use. Thus once quoted “Bitcoin will do to banks
what email did to the postal industry” by Rick Falkvinge. It gives you privacy. Since no personal information is
Bitcoin has the appearance of being decentralized; these are attached to your Bitcoin wallet, people do not know who
controlled by the miners. As of June 1st, 2017 there are purchased what achieving privacy. Also it is transparent,
16,366,257 BTC out of a total 21,000,000 BTC in theoretical meaning that anyone can find information on addresses and
supply, which has yet to be mined. their balances in a public ledger.
The limit of 21 million bitcoins is inherent in to the protocol, It is time-saving. It does not matter where you are and
and there will never be more bitcoins than this. A block where you want to transfer your coins, with Bitcoin such
introduces 50 new coins into the bitcoin ecosystem. This transfer becomes close to instantaneous thus time
quantity mined halves every 210,000 blocks. As of recent consuming.
new the reward for mining a block was recently cut in half
on July 9th, 2016 from 25 bitcoins to 12.5 bitcoins as reward Zero or low transaction fees. Since there are no
for solving the problem. This halving event occurs every four intermediate in Bitcoin network, no one will charge you for
years with the next one for 2020 with a block reward anything. There might be some fees for faster processing of
amount of 6.25 Bitcoins. We can observe the limit of coins transactions or conversion of bitcoins into fiat currency. Still,
the costs are kept very low.
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International Research Journal of Engineering and Technology (IRJET) e-ISSN: 2395 -0056
Volume: 04 Issue: 06 | June -2017 www.irjet.net p-ISSN: 2395-0072
It is not subject to inflation. Bitcoin volume growth is incorporates the SHA-256 algorithm but with much more
predictable and number of Bitcoins to be ever issued is fixed serialised calculations. Scrypt favours large amount of high-
limited to 21 million, so they cannot be churned out like fiat speed RAM thus known as ‘memory hard problem’. When
currencies and poured into economy. considered transaction, Litecoin handles a higher volume of
transaction speed (or faster block time) and confirmation
7. Altcoin introduction speed compared to Bitcoin because of its faster block
generation. For instance in case of Litecoin a merchant who
Altcoin as the name says are alternative currencies. It can be
waited for a minimum of two confirmations would only need
said that these are Bitcoin clones or alternative to Bitcoins.
to wait five minutes as compared to ten minutes for just one
As of 11 July 2016 there were more than 710
confirmation in case of Bitcoin .
cryptocurrencies available for trade in online markets and
more than 740 in total but only a few dozen of them are 7.2 Ripple
successful to reach a market capitalization of above $10
million above as of early 2017. Altcoin seeks to improve on Ripple is currently the third-largest cryptocurrency by
the idea Bitcoin represents, giving an option to trade or market capitalization after Bitcoin and Ethereum. In many
speculate if not on Bitcoin against fiat currency markets. The ways, Ripple as a currency is extremely similar to Bitcoin: a
basic ideas behind development of Altcoin as researched decentralised, maths-based currency with a finite number of
through mainly are firstly, some developer want to explore units. One main difference in Ripple to Bitcoin is that they
the boundaries of underlying Blockchain technology, so are not mined in the same way as Bitcoins. Instead, are
rather than submitting their ideas to the bitcoin developers, created using a method called consensus, which requires
they use the bitcoin code, change the name make some “comparatively negligible computing power”. 100 billion
minor tweaks and then launch it as a brand new digital XRP or Ripple coins are expected to be created, but they are
currency with their new add-on features thus introducing a far cheaper than Bitcoins.
brand new Altcoin into the market. Secondly, Bitcoin has a
huge market capitalization in billions, and many businesses 7.3 Namecoin
now rely on it, making too many changes could create
Namecoin is another Bitcoin that is created from modified
problem for people making use of it thus in order to avoid
Bitcoin software, and hence is quite similar to it. Like Bitcoin,
this Altcoin are introduced.
it uses the SHA-256 algorithm; also it can be mined, up to a
There are many Altcoin introduced so far that have been able limit of 21 million like Bitcoin. However, it differs in one
to make a better version of coin by incorporating feature major aspect that they were not intended to be used as
such as anonymous transactions, turning completeness, currency instead was developed as a decentralized DNS,
better mining algorithms and many more. A special concern right now, working as both a cryptocurrency and an
is concentrated on qualities such as stability, robustness and alternative, decentralized DNS. Launched in 18th April 2011,
security which Bitcoin is able to achieve successfully. Further Namecoin unlike Bitcoin can store data within its own
through this paper we introduce to some famous and blockchain transaction database. Namecoin is said to merge-
successful Altcoin developed. mined with Bitcoin that is a node can mine for both
Namecoin and Bitcoin simultaneously at the same rate that
7.1 Litecoin they would mine just one.
Most of these Altcoin do not survive for long duration with 8. Comparison of the both
few exceptions. One of the exceptions is Litecoin, which was
one of the first Altcoin developed. Apart from using a There are number of Altcoin all around each have their own
different hashing algorithm than Bitcoin, Litcoin is said to individual characteristics and algorithms. These Altcoin are
have a higher number of currency units. Litcoin announced said to play a vital role in the cryptocurrency world,
in 2011 created by former Google engineer Charles Lee with encouraging further decentralisation, innovation and
a goal of being ‘silver’ to Bitcoin’s ‘gold’. The key difference competition apart from the available Bitcoins. Bitcoins are
for end-users being 2.5 minutes to generate a block as considered to be most well-known cryptocurrency with its
compared to Bitcoin’s 10 minutes. Other important developed infrastructure and growing fan base, where as
difference being Bitcoin using SHA-256 hashing algorithm different Altcoin trying to grow its popularity by
over Litcoin using Scrypt algorithm, this algorithm incorporating new characteristics. Bitcoin and Litecoin is
© 2017, IRJET | Impact Factor value: 5.181 | ISO 9001:2008 Certified Journal | Page 2493
International Research Journal of Engineering and Technology (IRJET) e-ISSN: 2395 -0056
Volume: 04 Issue: 06 | June -2017 www.irjet.net p-ISSN: 2395-0072
9. CONCLUSIONS
REFERENCES
[1] http://www.coindesk.com/information/comparing-
litecoin-bitcoin/
[2] https://www.linkedin.com/pulse/why-altcoins-just-
important-bitcoin-derrick-alling
[3] https://bitcoin.org/bitcoin.pdf
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