Turning BitCOINS into best-coins

Siddharth Rao

University of Tartu, Estonia

Under the guidance of

Dr. Vitaly Skachek


  • S. Barber, X. Boyen, E. Shi, and E. Uzun. Bitter to better – how to make bitcoin a better currency. In Financial Cryptography and Data Security, pages 399–414. Springer, 2012.    

  • 2013 Bitcoin market reports.

  • Current Bitcoin trends.


  1. History.
  2. Working Mechanism.
  3. Comparison with other crypto currencies.
  4. Other competitors.
  5. Success factors of Bitcoin.
  6. Market fluctuations.
  7. Issues/Problems.
  8. Solution.
  9. Conclusion.

History of Bitcoins

  • Transferable digital money
     – Based on cryptographic signatures and hash functions
  • P2P system, no central bank or trusted issuer
  • Self published paper by a person/group with pseudonym "Satashi Nakamoto" in October 2008.
Nakamoto, S.: Bitcoin: A peer-to-peer electronic cash system
  • 3rd of January, 2009 : Announced in the Cryptography mailing list
  • 11th of January, 2009 : launched as open-source project on Sourceforge. 

    Working Mechanism

    • Works like previous e-cash attempts such as Bit-gold, Hashcash.
    •  Verifying ownership - "Double spending".
    • Trusted central authority  but Blockchain.
    • A public ledger - which creates a time stamped history of all previous transactions.

    Market Comparison


    •  Litecoin
      • Favourite among late comers.
      • Cheap, easy and fast.
      • First mined : 7th December, 2011
    •  Peercoin
      • No limit on amount of coins.
      • inflation rate of 1% to adjust scalability.
      • First mined on : 16th August, 2012.
    •  Namecoin 
      • Serves as an alternative Domain Name System (DNS)
      • customers buy the .bit domains ; the domain is added to the blockchains
      • First mined on : 17th April, 2011.


    •  Primecoin        
      • Based on prime numbers.
      • Network discovers new prime numbers.
    •  Quarkcoin
      • Fastest to mine : 0.5574 minutes to confirm.
      • More secure : 9 rounds of encryptions using 6 different encryption algorithms.
      • First mined on : 21st July,  2013.
    •  Ripple 
    •  Zerocoin

    Success Factors(1)

    • No central point of trust.    

    • Incentives for participation.

    • Predictable money supply.

    • Open source and easy-to-implement modules.

    Success Factors(2)

    • Support for scripting.    

    • Irreversibility of transactions.

    • Low fees of transaction.

    Market Fluctuations


    • Black hat communities hacking the systems.
    • Government restrictions.
    • New laws.
    • Digital market shutting down.
    • Malware attacks.
    • Accidental loss.
    • Lack of measures to back up.

    Malware Attacks

    • Mass thefts : hack of marketplace / Bitcoin exchange.
    • Individual thefts : 
      • Cryptocurrency Stealing Malware (CCSM) :
        • Wallet Stealer.
        • Credential stealer.
        • Man-in-the-middle malware.
        • RPC Automation malware.
      • Remote Access Trojans (RAT)
    • Solutions:
      • Threshold Cryptography.
      • Super-wallets.

    Privacy Issues(1)

    • Bitcoin ecosystem = Decentralized -  Distributed.
    • Everyone will have  the history of transactions.
    • Bitcoin System  = Directed Acyclic Graphs.       
      • Each vertex represents a single transaction.
    • Some interesting facts revealed:
      • Who is the rich Bitcoin user (Transacation code in 2010).
      • 98% of the addresses have fewer than 10 Bitcoins.
      • 47% of the general transactions make less than 0.01 Bitcoins.
      • 84% of the transactions are less than 10 Bitcoins.

    Privacy issues(2)

    • Analysis of a user network revealed many things.
    • Multi-input payment = Involvement of same user.
    • Shadow addresses.
    • Mapping features of TCP/IP layers reveal approximate geographical location of the user.
    • Companies accepting Bitcoins may require email address or personal information == Complete breach of privacy.
    • Solutions :
      • Use of Mixtures.
      • Fair Exchange Protocol.

    Scalability issues

    • Challenges:
      1. Data retentions and communication failures.
      2. Delay associated with transaction confirmation.
      3. Growing size of private key storage.
    • Solutions: 
      • Filtering of Bitcoin nodes as Clients and Verifiers.
        • May be with the help of trusted third party cloud service.
      • Semi-trusted bank as in intermediate
      • Pseudo Random Generator for generating private keys and associating expiration dates for public-keys.

    Anonymity vs trust

    • The Bitcoin enforces anonymity and unlinkability.
      • By allowing users to have different addresses and public keys in every transaction
      • However not completely anonymous.

    •  Solutions:    
      • Usage of Mixtures.
      • Fair Exchange Protocol.
      • Switch to Zerocoin - But not compatiable with Bitcoin.

    Fair Exchange Protocol

    • Avoids the compromising nature of mixers.
    • works on a backward compatible manner :
      • Two users can exchange Bitcoins without third party intervention.
    • Probability of cheating is smaller.


    • Bitcoins has revolutionized the whole technology and financial world. 

    • Not perfect but scope for improvement.

    • More companies have started accepting Bitcoins.

    • Improves global business trends.




    [1] S. Barber, X. Boyen, E. Shi, and E. Uzun. Bitter to better – how to    .   make bitcoin a better currency. In Financial Cryptography and Data  .   .   Security, pages 399–414.Springer, 2012.
    [2] Bitcoin Competitors: What You Should Know About 6 Alternative crypto    .   currencies : http://goo.gl/KG2NvC
    [3] Coin Span of digital currencies: http://bitinfocharts.com/charts.html
    [4] Cryptocurrency Market Capitalizations based on available supply
    http://coinmarketcap.com/#USD [5] CoinDesk State of Bitcoin-2014 Report: http://www.coindesk.com/bitcoin-2014-report/ [6]Bitcoin media mentions in the year 2013 using using media database Lexis . Nexis

    Turning Bitcoins into Best-Coins

    By sidnext2none

    Turning Bitcoins into Best-Coins

    Research Seminar at University of Tartu

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