Más contenido relacionado


Study on Bitcoin - Technical & Legal Aspects (Presentation at Cyber Cell Gurgaon)

  1. Prepared by - Lovey Jain College - RGNCLC (NLIU,Bhopal) Course - MSCLIS Presented at - Cyber Crime Cell, Gurgaon 1Study on Bitcoin
  2. • How did Bitcoins get started? • What is Bitcoin? • Basic Terminologies • The Basic Mechanism • What is it based on? • What is the Vision of Bitcoins? • The Technology Behind Bitcoins? • Uses of Bitcoin • Who Sells Bitcoins? • Bitcoin Issues - Legality • Who Accepts Bitcoin ? • Comparison to US Dollar • Will Bitcoin Succeed? • Conclusion 2Study on Bitcoin
  3. • In 31 October 2008, a technical paper was posted on the internet by Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. • It described a system of cryptocurrency that was not backed by any government or any form of existing currency. • It is software-based online payment system described by Satoshi Nakamoto in 2008 and released as open-source software in 2009 (Interestingly, this person is pseudonymn - his name is conjectured to be fake by some, and who has not been heard from since April 2011) 3Study on Bitcoin
  4. 4 • Bitcoin is a form of digital currency (physical form is absent), created and held electronically. It can be used to buy things electronically and in that sense we can say that it is no different than conventional dollars. • Bitcoin is commonly referred to as cryptocurrency and it can be divided into smaller unit called Satoshi (one hundred milionth ie. 108 of a BTC). • Protected by strong encryption (that’s why it is also called as cryptoCurrency). People who transmit the transactions are called miners. • The system is peer-to-peer and transactions take place between users directly, without an intermediary. Study on Bitcoin
  5. 55 • The block chain is a public ledger (a book or other collection of financial accounts) that records bitcoin transactions. • The bitcoin transactions are verified by network nodes and recorded in a public distributed ledger known as the block chain, which uses bitcoin as its unit of account. • The block chain is like a distributed database • Approximately six times per hour, a new group of accepted transactions, a block, is created, added to the block chain, and quickly published to all nodes. . Study on Bitcoin
  6. 6 • Bitcoins are created as a reward for payment processing work in which users offer their computing power to verify and record payments into a public ledger. This activity is called mining . • Miners are rewarded with transaction fees and newly created bitcoins. • Mining is a record-keeping service. Miners keep the block chain consistent, complete, and unalterable by repeatedly verifying and collecting newly broadcast transactions into a new group of transactions called a block. • Each block contains a cryptographic hash of the previous block, using the SHA-256 hashing algorithm, which "chains" it to the previous block thus giving the block chain its name Study on Bitcoin
  7. Study on Bitcoin 7 • A wallet stores the information necessary to transact bitcoins. • The best way to describe a wallet is something that "stores the digital credentials for your bitcoin holdings"] and allows you to access (and spend) them. • There is also wallet software for managing accounts and transactions. • Since Bitcoins are valuable, wallets should also be encrypted
  8. 8 • Transactions are published to the Bitcoin P2P network. • Miners compete to solve a proof-of-work problem on average every 10 minutes. • The winning miner publishes a summary of recent transactions in a block. • Miners are rewarded with new coins for having published a valid block. • Blocks are linked to previous blocks, creating a block chain Study on Bitcoin
  9. 9 • System is runned by The Bitcoin protocol • It is based on mathematics unlike conventional currencies that had been based on fixed quantity of metal (gold, silver…) or fiat currencies. • Bitcoin has several features that set it apart from fiat currencies: 1. It is decentralized 2. It is easy to set up and it is fast 3. It is anonymous 4. It is completely transparent 5. Transaction fees are miniscule 6. Transactions are irreversible Study on Bitcoin
  10. 10 • Base for the Bitcoin protocol is a peer-to-peer system which means that there is no need for a third party. • Therefore, in theory, bitcoin network is not controled by central authority (fully decentralized monetary system). • Bitcoins are being created by a community of people that anyone can join. • In theory, there is no authority (financial institution) which can tinker with monetary policy and in that sense devalue or revalue Bitcoin currency. Study on Bitcoin
  11. Study on Bitcoin 11 • Easy to set up: Conventional banks make you jump through hoops simply to open a bank account. Setting up merchant accounts for payment is another tough task, beset by bureaucracy. However, you can set up a bitcoin address in seconds, no questions asked, and with no fees payable. • Anonymous: Users can hold multiple bitcoin addresses, and they aren’t linked to names, addresses, or other personally identifying information. • Transaction fees are miniscule: Your bank may charge you a decent transaction fee for international transfers. Bitcoin doesn’t. • Fast: You can send money anywhere and it will arrive minutes later, as soon as the bitcoin network processes the payment. • Non-repudiable: When your bitcoins are sent, there’s no getting them back, unless the recipient returns them to you. They’re gone forever.
  12. • Bitcoins are intended to be most successful digital currency. • Buyers and sellers will use them and it is intended to eliminate all the middlemen such as credit cards, ATM machines, etc. • Bitcoins will be safer than carrying a plastic card. • Bitcoins will be an international currency with no exchange transaction fees. 12Study on Bitcoin
  13. 13 • Hashing (double-SHA256) • Dual key encryption (Elliptical Curve Digital Signature Algorithm) • Peer-To-Peer Networking (Similar to IRC , Internet Relay chat) Study on Bitcoin
  14. Study on Bitcoin 14 To interact on the Bitcoin network users first need to download the free and open-source software. Once connected to the network, there are three ways to obtain Bitcoins: • A user can exchange conventional money (e.g., dollars, yen, and euros) for a fee on an online exchange (e.g., Okcoin). The exchange fee falls with the size of the transaction, ranging from 0.5% for small transactions down to 0.2% for large transactions. • A user can obtain Bitcoins in exchange for the sale of goods or services, as when a merchant accepts Bitcoin from a buyer for the sale of his product. • A user can acquire new Bitcoins by serving as miner and applying his or her computer’s processing power to successfully verify the validity of new network transactions.
  15. 15 • Convenient online purchases • Tips and donations • Transactions that must be irreversible • When information is transferred • When an irreversible action is performed • Black-market transactions • A store of value • Investment • Gambling • International transactions and financing Study on Bitcoin
  16. • Bitcoins are like diamonds or gold – no intrinsic value. • As more people want to buy Bitcoins, sellers will charge more. • No rules, regulations or oversight. • Speculators who think Bitcoins will be successful, buy as many as they can and hold them price appreciation. 16Study on Bitcoin
  17. • Larger Buyers go to Exchanges, An Exchange is a website with significant software and funding. • Exchanges act as a clearing house to match buyers and sellers similar to Stock Exchanges. They keep a very small transaction fee for each trade. • There are at least 21 Bitcoin Exchanges in the U.S. alone. Mt Gox (Magic The Gathering Online eXchange) was one of the largest exchanges and was located in Japan • Zebpay, an app-enabled bitcoin mobile wallet, earlier provided for just trading of the currency. This June it entered the payment sphere; its users can now buy vouchers of Amazon, Flipkart, Freecharge, Bookmyshow and Makemytrip. 17Study on Bitcoin
  18. • Many small Dealers want to make money selling Bitcoin to individuals who use them for e-commerce. • The Dealer will withdraw Bitcoins from their account at an Exchange and sell them to you. • You can buy any fraction of a coin you wish. There is no “round amount.” • Search for local Bitcoin sellers and you will get the current prices from each. 18Study on Bitcoin
  19. • ATM’s that sell Bitcoin are in a very few locations. • First one was in Texas in a gun store. • Bitcoin ATM’s only take cash. • They only sell Bitcoin, you can’t convert Bitcoin to cash. 19Study on Bitcoin
  20. • Currently there are 60,000 to 70,000 Bitcoin transactions each day • The level hasn’t changed significantly in the last year. • You can Log in to to see the transaction activity. • 1 Bitcoin equals 751.00 US Dollar (50595.70 Indian Rupee). It keeps on fluctuating according to the markets condition. 20Study on Bitcoin
  22. Study on Bitcoin 22 • In June 2013, the RBI issued a notice acknowledging that virtual currencies posed legal, regulatory and operational challenges. • On 24 December 2013, the Reserve Bank of India issued an advisory to the Indian public to be cautious in buying or selling of virtual currencies, including bitcoin. Following the announcement bitcoin operators in the country began suspending operations. • The first raid in India was undertaken a couple of days later in Ahmedabad by the Enforcement Directorate (ED) on the office of the website,, that provided a platform to trade in this virtual currency. The preliminary investigations found it to be in violation of the Foreign Exchange Management Act (FEMA). • On 28 December 2013, the Deputy Governor of the RBI, K. C. Chakrabarty, made a statement that RBI had no plans to regulate bitcoin.
  23. • Russia was first to outlaw Bitcoin transactions • They have enough corruption without Bitcoin • China is restricting it use • Too much speculation • Korea outlaws it’s use – claims it’s not a legitimate currency • Thailand shutdown the Bitcoin exchange in their country. 23Study on Bitcoin
  24. • Largest Exchange, Mt Gox (Magic The Gathering Online eXchange) in Japan just went bankrupt • Hackers were siphoning off their Bitcoins • They lost $450 million dollars • Account holders are the real losers • Electronic Wallets • Many websites have created “secure” electronic wallets for you. • There are Wallets for Windows, Mac, iPhone, and Android • Some “Wallets” deduct a small fee for every transaction 24Study on Bitcoin
  25. • Thousands of online merchants such as: • Pirate Bay – Online sharing site for questionable materials. • OKCupid – Online dating site • – Sells clearance merchandise • – Major electronics retailer • 50,000 Retail stores (and counting) accept Bitcoin • Hotels in Las Vegas • Gift Cards for GAP, Lowes, Burger King, etc. • Mostly small merchants who want to increase traffic 25Study on Bitcoin
  26. 26 1. Since value of a bitcoin fluctuates, one can generate net income selling them at the higher price than the original purchase price. 2. If they are received by merchants as payment for goods and services. 3. Bitcoins obtained through mining activities are a subject of standard income taxation. Study on Bitcoin
  27. 27 US Dollar (Cash) *Backed by United States? *Controlled by US *Primarily US-only *Created by government *Hard to steal by hackers *Hard to transmit *Hard to trace *Non-refundable *Used for crime Bitcoin *Backed only by other users *Controlled by users *International *Created based on work done *Easier to steal by hackers *Easy to transmit *Hard to trace *Non-refundable *Used for crime Study on Bitcoin
  28. • Digital currency makes a lot of sense. • It could eliminate a lot of middle man costs (credit cards, wire fees, etc.) • It could be extremely easy to use • It could eliminate billions of dollars in credit card fraud and identity theft. 28Study on Bitcoin
  29. 29 ADVANTAGES *It is easy to set up and it is fast *Low and irreversible transaction fees *Without central authority *Decentralized *It is anonymous *It is completely transparent DISADVANTAGES *New and uninvestigated financial product *Absence of relevant theoretical background *Highly volatile value and an unknown issuer *Unclear legal status *Unregulated commodity and absence of consumer protection *Illegal or undefined in most countries of the world Study on Bitcoin
  30. Study on Bitcoin 30 • Bitcoin has received more adoption and popularity than any other digital currency proposed date. • Currently, Bitcoin holds the largest market share amongst all existing digital currencies (eg. BlackCoin, DigitalNote, Mastercoin, Primecoin etc), with a market cap exceeding 3 billion USD. • Bitcoin has emerged as the most successful cryptographic currency in history.
  31. 3131 • – The Bitcoin Foundation • Bitcoin Wiki • Bitcoin Forums • Reddit Bitcoin • – Pretty real-time charts • Study on Bitcoin
  32. 32 Thank you for your attention! Questions, comments or remarks? Study on Bitcoin