BITCOINS-how much secure is the future of e-transaction?

- PUSHAN MONDAL

UG1

Bitcoins-the new electronic currency. So, whenever we hear about BITCOINS, we get an unusual spark in our eyes, dollars start showering around us and we imagine ourselves to be the “Ambani’s”. Well, coming back to reality, here I will be explaining about BITCOINS and how does it work. I feel this is a very interesting topic that we all should have some in-depth knowledge in this era of electronics. We have e-classes, e-shopping, e-meetings and what not in electronic platform. So why not give some emphasis on this e-transaction, though in its budding stage, has immense potential to revolutionize the whole transaction system in future. We all have some knowledge about this system but very few of us actually know how does it work. Astonishingly, we can create our own bitcoin but practically it will require us years of computation of complex mathematical algorithms to earn a single bitcoin! Maybe the cost of energy consumptions of computers computing algorithms can exceed the cost of a bitcoin! So, keeping our dream of quickly becoming the second Elon Musk to a halt, we will try to find the answer to “WHAT IS A BITCOIN?”

A question will obviously come to our mind, “Why do we need bitcoins?”, while third party apps like Paytm, Google Pay, etc. works fine for us. Well, if we look into our surrounding, there are still many people who prefer physical transactions over any other method because for us it is the safest transaction system possible (barring incidents like, our money being stolen while on our way to the merchant!). Now the “so-called” trusted apps I mentioned above claim to be fail safe for transaction and transacting through these platforms gives us a sense of “pseudo satisfaction”. Well, that isn’t the case always! There are some really skilled hackers or attackers who can just tamper with the process while it is being carried out. Even the merchant carrying out the transaction can tamper the data of transaction (P.S. not indicating towards renowned companies being fraudulent)! Moreover, in these types systems, there are lot of mediations thereby increasing the cost. Practically, this whole system works on the basis of TRUST; better the trust more popular is the platform. So, here comes the need of security as in BITCOINS system. E.g., they store data of the transactors in forms of blocks which indeed store the information through cryptographic messages called hashes and using digital signatures. The whole purpose of the introduction of such system is to remove the influence of mediators in the process, thus decreasing the cost to a significant extent.

Basically, bitcoins are based on Peer-to-Peer (P2P) Network. P2P network is created when two or more PCs are connected and share resources without going through a separate server computer. A P2P network can be an ad hoc connection—a couple of computers connected via a Universal Serial Bus to transfer files. We define an electronic coin as a chain of digital signatures. There is a central authority known as mint that checks for double transactions. This is achieved by issuing a timestamp over every has transferred through the block. The timestamp proves that the data must have existed at some point of time, to get into a hash. The timestamp also contains timestamp of the previous transactions thus forming a chain. Timestamp of a specific hash is broadcasted to the whole network so that everyone is aware that a transaction has not taken place earlier before the one being carried out. This is done by Proof-of-Work. It involves scanning for a value that when hashed, the hash begins with a number of zero bits. The average work required is exponential in the number of zero bits and can be verified by executing a single hash. These hashes are transferred through blocks.

Every owner possesses two keys- public key and private key. Public key of an owner consists of information of the owner that are to be shared with the other user while transaction is carried out. Private key, as the name suggests, consists of exclusive information about the user. During transaction the recipient signs a hash of its public key. This hash is verified with the signature of the payee’s private key and the transaction is carried out. A timestamp is issued over all of the hashes. Eventually, the signature of the recipient’s private key is recorded at the end of the coin after the transaction is over, to prevent double spending. A coin returns to mint only to issue a new coin. Hence, the motto of such complex mechanism is to ensure security and the transaction is carried out between the payee and the recipient only.

Interestingly, bitcoins are not legal in all regions around the world. It depends on the region and the server activities. Since bitcoins are not issued by any central bank and are created through a computer-generated process called mining. In addition to being a cryptocurrency, bitcoin is a peer-to-peer payment system that does not exist in a physical form. As such it offers a convenient way to conduct cross-border transactions without any exchange fees from the government. I hope, this slightly detailed overview will just do enough to make the readers understand how a BITCOIN actually works, its benefits and clear any myth about it.

“Stay at home, stay healthy!”

A hash of the above message (according to SHA-256 algorithm which creates hashes of fixed lengths of 256 bits for any data entered):

“4d6bc8f5503e42fe69426476cca0d055038a5c90a4dfc9e0c431787ed7be29b8”