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International Journal of Trend in Scientific 
Research and Development (IJTSRD) 
International Open Access Journal 





ISSN No: 2456 - 6470 | www.ijtsrd.com | Volume -1 | Issue - 5 


A Glimpse towards Bitcoin and its Reality Analysis on 

Mining and Protocol 


K. Vinitha 

Ph.D. research Scholar, School of Management 
Studies,Vels University, Chennai, India 


ABSTRACT 

Bitcoin has advanced as the most fruitful 
cryptographic currency in history. Since its launch in 
2009.Bitcoingrewtocomprisebillionsofdollarsofecono 
mic value. Since then a lot of literature has been 
identified with concealed-but-vital properties of the 
system, exposed attacks, proposed promising 
alternatives, and singled out difficult future 
challenges. This paper threw light to many related 
cryptocurrencies or ‘altcoins’ and enables a more 
insightful analysis of Bitcoin’s properties. The 
researcher maps the space for providing analyses for 
bitcoin mining, bitcoin protocol, and bitcoin value 
determinations.This paper surveys the anonymity in 
Bitcoins and provides an insight into the framework 
for analysing the mining hardware, the calculation of 
Bitcoin value by reviewing various literatures and 
websites related to Bitcoins. 

Keywords: Bitcoins, Cryptocurrency, mining. 

INTRODUCTION 

Bitcoins was launched as an open source software in 
2009. Its creator is identified by the name Satoshi 
Nakamoto. Nakamoto published a paper entitled 
“Bitcoin: A peer to peer Electronic cash system” in 
2008. The pioneer exchange of Bitcoins the Bitcoins 
Market, open in February 2010 another exchange was 
also opened in July of the same year which is 
MtGox.The pioneer bitcoin exchange which was 
designed and built in India was BTCXIndia. The 
exchange followed KYC and AML guidelines, and it 
allowed instant INR (Indian rupee) deposits and 
withdrawals, BTCXIndia was forced to wind up by 


Dr. S. Vasantha 

Professor& Research Supervisor, School of 
Management Studies, Vels University, Chennai, 
India 


their bank^thus bringing a closure to longer services 
bitcoin businesses. The reason behind is anonymous 
whether the cause was because of perceived risk or it 
was a usual ban by the management 191 . A software 
developer called Satoshi Nakamoto proposed bitcoin. 
It is based on mathematical proof. He developed 
Bitcoin the focus behind it is to introduce a currency 
which works autonomous of any central authority, and 
is transferable electronically, and which gets 
transacted instantly, with an economical transaction 
charges. Bitcoin helps to secure a multibillion-dollar 
global market of anonymous transactions without any 
governmental control. As per Government of India 
incomes from investments are taxable. Hence it is 
obvious that Bitcoin investments are also taxable. The 
tax rate is 30% for short-term investments and around 
20% for long-term (3 years) for the capital gains.So, it 
must deal with many regulatory issues involving 
national governments and financial institutions. Since 
its inception, bitcoin, a virtual currency, has grown in 
both its popularity and its use. Despite this, there still 
exists a relative scarcity of economic analysis in 
academia about this new economic phenomenon. 
Various topics have been researched regarding 
bitcoin, including its economic status as a currency 
[13] , the incentives of bitcoin miners 1 K)| , the economics 
of bitcoin exchange prices'- 111 , among others. 
Macroeconomist Paul Krugman weighed in strongly 
on the normative side of the economicdebate with his 
article “Bitcoin is Evil” published in late 2013. 


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International Journal of Trend m Scientific Research and Development (IJTSRD) ISSN: 2456-6470 


Objectives 

To explore the miningprocess of new bitcoins 
To find the protocol behind mining of bitcoin 
To study the calculation of bitcoin value 

Methodology 

The study is based on secondary sources of data/ 
information. Different books, journals, newspapers 
and relevant websites have been consulted to make 
the study an effective one. The study attempts to 
explore the protocol behind mining of bitcoin, and to 
study the calculation of bitcoin value. The paper also 
analyse the factors involved in mining of new 
bitcoins. 

Mining of Bitcoins 

Bitcoin mining serves for the addition of transactions 
to the block chain as well as to release new Bitcoin. 
The process of mining involves collecting recent 
transactions which must be converted into blocks and 
the miner should be able to solve the computational 
problematic puzzle. The one who solves the puzzle 
first can place the next block on the block chain and 
he can claim the rewards. The rewards includes the 
transaction fees paid to the miner which will be in the 
form of Bitcoin as well as the newly released Bitcoin. 
Bitcoins can be obtained through three ways they can 
be bought from an exchange, accepting them for 
goods and services, or else mine new ones. For 
instance, A buys a TV from B with a bitcoin. Inorder 
to confirm his bitcoin is a genuine one miners will 
check the transaction. Numerous transactions the 
miners need to verify it is not just a single transaction. 
All the transactions are gathered into boxes with a 
virtual padlock on them which is called block chain. 
Inorder to search for the key the miners had to run a 
softwarethat will open that padlockOnce their system 
finds it, the box opens and the transactions are 
checked. Inorder to find that key the miners gets a 
reward of 25 newly generated bitcoins. The number of 
attempts taken to search for the apt key is around 
1,789,546,951.05, according to Blockchain.info which 
is the topmost site for the newest bitcoin transactions. 
Even though this many attempts happens, the 25- 
bitcoin rewards is given out about every 10 minutes. 

Private key is a confidential number that ensures the 
spending of bitcoins. Each Bitcoin wallet has one or 


more private keys and it is saved in the wallet file. It 
is mathematically related to all Bitcoin addresses 
generated for the wallet. A Bitcoin sent to anaddress 
can be spent by anyone who knows the private key. 
The private key is needed only to spend the bitcoins. 
If a private key of unspent bitcoin is compromised or 
stolen, the value can only be safeguarded if you are 
immediately spending it to a different output which is 
secure. You can spend bitcoins only once when it is 
spent using a private key. |X| 

There is no single central authority to control the 
bitcoin network. Those machines which enter the 
mining work of the bitcoins forms a part of it and the 
machines need to work together and else the money 
keeps on flowing. Storage of each transaction happens 
in the network in enormous version of a general 
ledger which is kn own as the blockchain. Transfer 
can be done anywhere the time required is only a few 
minutes just to process the transaction.Once the 
bitcoins are sent there is no way of getting it back or 
else the recipient should return them to you. Bitcoins 
are not printed physically as in the case of physical 
money where it is printed with the authority by a 
central bank, and it is unaccountable to the population 
and creates its own rules [8] . Bitcoins are created using 
digital technologies by a group of people and in that 
group any one can join. This is mined using 
computing power in a distributed network. Base of 
Bitcoin is the mathematics formula is used for the 
production of bitcoins. Bitcoins are not under the 
control of any central Ba nk or Government which 
allows the owners to employ bitcoins anonymously. 
These are mined it does not have physical existence 
like coins or notes. These can also be subscribed from 
exchanges by converting US dollars and with other 
currencies.Anyone can become a Bitcoin miner if he 
is able to run a software with a specialized hardware. 
These mining software will listen for the transactions 
which are broadcasted through the peer to peer 
network and it will perform the accurate function in 
order to carry out the transactions. For any new 
transactions inorder to get it confirmed they have to 
be included in a block which has to be followed with 
a mathematical proof of work. The proof of work is 
not an easy task . Inorder to get that proof of work 
billions of calculations per second need to be tried. If 
the blocks are to be accepted by the network the 
miners must perform these calculations.When more 
number of people started to mine, the process to 
finding valid blocks automatically tend to increase by 
the network inorder to make sure that the average 


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International Journal of Trend m Scientific Research and Development (IJTSRD) ISSN: 2456-6470 


time to find a block remained equal to 10 minutes. 
Inshort, we can say that mining is a very competitive 
business where no one can regulate what is included 
in the block chain. The proof of work is so designed 
as it should be subject to the preceding block inorder 
to maintain a chronological order in the block chain. 
This is actually a difficult task to reverse the 
preceding transactions because it requires to 
recalculate the proof of work of all the succeeding 
blocks. When simultaneously two blocks are created 
the miners will function on the first one and will in 
turn move to the longest chain of blocks as soon as 
the succeeding block is found. Thus, mining is 
protected and thereby maintains a global harmony. 
Cheating by the individuals included in the network 
by the way there as to increase their reward alone or if 
they are performing any fraudulent transactions 
thereby to corrupt the Bitcoin network is not at all 
possible as the Bitcoin nodes will reject the block 
which consists of invalid data according to the rules 
framed in the Bitcoin protocol. [9] Users can spend 
bitcoins anonymously. It is not tied to a bank or 
Government. Exchange of bitcoins are also possible 
with US dollars and other currencies. Bitcoins when 
they are transmitted from one user to the next user 
they are digitally signed each time they are just lines 
of compute code [1] . 

When the bitcoins are converted into currency the 
owner of the bitcoins can be traced. Until then the 
transactions and accounts can be traced. Now the 
ransomware attack accounts remains untouched as it 
is a hard task for the perpetrators to cash in. [2] The 
bitcoins work on the basis of lines of computer code 
that need to be signed digitally every time they need 
to be transmitted from one user to the other. As the 
transactions can be done anonymously libertarians as 
well as tech enthusiasts, speculators, perpetrators and 
criminals made the currency popular.Tom Bossert, 
President Donald Trump's adviser for homeland 
security and counterterrorism, said that less than $ 
70,000 has been pooled in ransomware attacks, there 
are still more unidentified accounts other than the 
three known accounts. 

Miners pour the transactions into a blockchain which 
runs the tally of each bitcoin transaction. Prevention 
of multiple spending of bitcoins are restricted by 
blockchains. Miners gets the reward of bitcoins for 
their effort. Bitcoin came into existence in 2009 by an 
individual or group of individuals operating under the 
name Satoshi Nakamoto. An internal logic existed 


behind the functioning of bitcoins. New blocks are 
added to the blockchain through mining thus it makes 
the history of transactions difficult to amend. There 
are two forms of mining. 

Solo mining Here the miner makes an attempt to 
create new blocks of his own, for his job he will be 
rewarded with proceeds from the block reward and 
also the transaction fees also goes fully to him. This 
allows him to get large payments. 

Pooled mining when the miner pools resources with 
others inorder to find blocks more often with the 
proceeds shared among the pool miners in rough 
correlation to the amount of hashing power they each 
contributed, here the miner receive only small 
payments. 

Creation of newbitcoins 

The process of mining paves the way for new bitcoins 
by the network. In this process the mining nodes on 
the network are awarded with bitcoins each time when 
they find the solution to a mathematical problem and 
as a result they can create a new block. Creating a 
block is thus a proof of work. The proceeds inorder to 
solve a block is automatically adjusted, so that every 
four years of operation of the network, half the 
amount of bitcoins created in the prior four years are 
created. An extreme of 10,499,889.80231183 bitcoins 
were formed in the first 4 (approx.) years from 
January 2009 to November 2012. Every four years 
thereafter this amount halves, so it should be 
5,250,000 over years 4-8, 2,625,000 over years 8-12, 
and so on. So that the overall number of bitcoins in 
existence can never exceed 20,999,839.77085749 . 

Government takes the decision to print and distribute 
the currencies in the case of physical cash where as 
Bitcoins doesn’t have a central authority. A special 
type of software is used to solve the math problems 
and in return the miners get bitcoins. This really acts 
as an incentive for the miners and also an 
encouragement for more people to participate in 
mining . These Bitcoins are just ledger entries which 
are not backed by anything like any other currency. 
Even though they are not backed they are having 
value which is based on their utility and supply. 
Where as the inclusion of bitcoins into the money 
supply is regulated by the software for bitcoin and it is 
regulated to a predetermined amount and rate of 
distribution. The cause for the creation of new 


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International Journal of Trend m Scientific Research and Development (IJTSRD) ISSN: 2456-6470 


bitcoins to be created is two-fold. It acts as a 
mechanism inorder to introduce bitcoins into the 
money supply whichis controllable and it happens 
random. And in other way it acts as an 
encouragement for people to run the software for 
mining which will be helpful to secure the entire 
system. [6] 

Anyone can participate in mining for this one should 
have access to the internet and he should have the 
appropriate hardware for mining. At the beginning 
stage of Bitcoins, mining was carried out with CPUs 
from normal desktop computers. Graphics cards, or 
graphics processing units (GPUs), proved more 
efficient in mining when compared with CPUs and 
asBitcoin became popular, GPUs became dominant. 
Eventually, hardware known as an ASIC (which 
stands for Application-Specific Integrated Circuit) 
was designed specifically for mining Bitcoin. The 
initial one was released in 2013 . In today’s scenario 
mining became so competitive, it can only be done 
profitably with the modem ASICs. When using CPUs, 
GPUs, or even the older ASICs, the cost of energy 
consumption is greater than the revenue generated. 
Due to speculation activities, the price may go up 
further. There are lot of companies which produce 
mining hardware. Some of the more prominent ones 
are Bitfury, Hashfast, KncMiner and Butterfly Labs. 
Companies such as MegaBigPower, CloudHashing, 
and CEX.io also give customers to lease minig 
hardware. 

Bitcoin protocol 

The fact is that you won’t be able to mine unlimited 
bitcoins. There exists a bitcoin protocol which makes 
the bitcoin to work. In this rale it states that only 21 
million bitcoins can be mined. Bitcoin works under a 
protocol which are the rules which makes the bitcoins 
to work. In the protocol, it is framed that only 21 
million bitcoins can be framed by the miners. 
Likewise in rupee there are smaller divisions for 
bitcoins also and it is the one hundredth millionth of a 
bitcoin. when the algorithm was created under the 
pseudonym Satoshi Nakamoto - the individual 
created a finite limit on the number of bitcoins that 
will ever exist: 21 million. Currently more than 12 
million are in circulation. This means that a little less 
than 9 million bitcoins are yet to be discovered. As 
per the current rate of creation, the final bitcoin will 
be mined in the year 2140. 



Source: http://www.bitcoinnotbombs.com/bitcoin- 

mining 

Blockreward is the amount of novel bitcoin released 
with every mined block. The Block reward is halved 
approximately each four year. The block reward was 
initiated at 50 bitcoins in 2009, and it is now 25 
bitcoins in 2014. Thus, the reduction of block rewards 
will result in an aggregate release of bitcoin which 
approaches 21million. As per the existing Bitcoin 
protocol, 21 million is the cap and nor more will be 
mined after that number has been attained. According 
to the current scenario block rewards provides the 
majority of the incentives for the miners. 

Calculation of Value of Bitcoin 

Satoshi is currently the smallest unit of the bitcoin 
currency recorded on the blockchain. It is one 
hundred millionth of a single bitcoin (0.00000001 
BTC). The name of the unit gives homage to the 
original creator of Bitcoin Satoshi Nakamoto. The 
amounts in blockchain are denominated in Satoshi 
before it is converted for display. Each bitcoin is 
divisible to the eighth decimal place so that each 
bitcoin can be split into 100,000,000 units. So, each 
unit of bitcoin is called satoshi. Hence a satoshi is the 
smallest unit of bitcoin [2] . 

The value of the Bitcoin is calculated using a formula 
PB=(SW + TX)/BC 

SW=Storage of wealth 

TX=Total amount of the Bitcoin used for concurrently 
transacting in it. 


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Development (IJTSRD) ISSN: 2456-6470 


International Journal of Trend in Scientific Research and 
BC=Amount of Bitcoins in circulation 

PB=Price of Bitcoin 

Thus, we can say that we can calculate the value of 
Bitcoin which is derived from the total value of the 
Bitcoin used for storage of wealth(SW) added with 
the aggregate amount of the Bitcoin required for 
concurrently transacting in it (TX).The sum of these 
two numbers divided by the amount of Bitcoins in 
circulation (BC) (currently 12.2 million, ultimately 21 
million), will give you the price of Bitcoin (PB). [7] 

Conclusion 

Cyber attackers’ currency of choice are the bitcoins. 
Inorder to regain access to the system data the cyber 
attackers demand payments in bitcoins from the 
victims. Purchase of goods and services are possible 
without including the banks, credit card issuers or 
other third parties. It is not completely anonymous it 
can be traced when bitcoins are converted into regular 
currency. Due to bitcoin bandwagon and the outbreak 
of media coverage some businesses have plunged. For 
example Overstock.com payment is accepted only in 
bitcoins. Over 300,000 routine transactions occur 
through bitcoins thus making it prevalent according to 
bitcoin wallet site blockchain.info. But when 
comparison arises with physical money and cards 
many individuals business won’t accept bitcoins for 
transactions. Anonymity of the users makes the 
bitcoin popular. Even though all the transactions are 
recorded in a ledger only the public address is related 
to the transaction one makes. As it does not contain 
any identifying information of itself. The users who 
are sake of this anonymity made the bitcoins popular. 
This anonymity was utilised by the “darknet” 
websites for trading illegal commodities such as drugs 
and weapons. One among the website was “Silk 
Road” in which the US Government shutdown it in 
October 2013. [9] 

Future research 

Other than bitcoins there are a lot of cryptocurrencies 
available in the market some of them are 

> Ethereum 

> Litecoin 

> Ripple 

> Peercoin 


> Namecoin 

> Quarkcoin 

> Zetacoin 

Thereby giving space for future research work which 

in turn can create opportunities to get the public 

acquainted with the new cryptocurrencies available in 

the global market. 

References 

1) http://economictimes.indiatimes.com/articleshow/ 
58694578.cms?utm_source=contentofinterest&ut 
m_medium=text&utm_campaign=cppst 

2) http://satoshitobitcoin.co/ 

3) http://www.bitcoinnotbombs.com/bitcoin-mining- 
101/10 

4) http://www.coindesk.com/information/what-is- 
bitcoin 

5) https://bitcoin.Org/en/faq#what-is-bitcoin-mining 

6) https://bitcoin.stackexchange.eom/questions/l 82/ 
where-do-bitcoins-come-from-and-what-gives- 
them-their-value 

7) https://bitcoin.stackexchange.eom/questions/l 82/ 
where-do-bitcoins-come-ffom-and-what-gives- 
them-their-value 

8) https://bitcoin.stackexchange.com/questions/2994 
8/why-doc-says-importing-private-keys-is-so- 
dangerous4 

9) https://www.cryptocoinsnews.com/top-10- 
countries-bitcoin-banned/ 

10) Kroll, J. A., Davey, I. C., & Felten, E. W. “The 
economics of Bitcoin mining, or Bitcoin in the 
presence of adversaries.” In Proceedings of WEIS 
(2013). 

11) Miroslava, Rajcaniova, Kanes d'Artis, and Ciaian 
Pavel. "The Economics of BitCoin Price 
Formation." EERI Research Paper Series (2014). 

12) Power, Mike. "Life after Silk Road: How the 
Darknet Drugs Market Is Booming." The 
Guardian, May 30, 2014. Web(2015) 

13) Yermack, David. “Is Bitcoin a real currency? An 
economic appraisal.” No. wl9747. National 
Bureau of Economic Research (2013). 


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