A PROJECT REPORT ON

CRYPTOCURRENCY

A Project submitted to University of Mumbai for partial completion of the

degree of Bachelor in Commerce (Banking and Insurance)

Under the Faculty of Commerce By

By: MS. VAISHNAVI SAIGAL

Under the Guidance of

Mrs. LATA LOKHANDE

SIES (NERUL) COLLEGE OF ARTS, SCIENCE &

COMMERCE
Sri Chandrasekar Saraswati Vidyapuram, Plot 1 - E, Sector - 5Nerul,
Navi Mumbai - 400706

YEAR: 2020-2021

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This is to certify that VAISHNAVI SAIGAL Roll No I.18.87 has worked and duly completed
his project work for the degree of Bachelor of Commerce (Banking and Insurance) under the
faculty of Bachelor of Commerce (Banking and Insurance) and his/her project is entitled
Cryptocurrency under my supervision.

I further certify that the entire work has been done by the learner under my guidance and that no
part of it has been submitted previously for any Degree or Diploma of any University.

It is his/her work and facts reported by his/her personal findings and investigations.

Internal Guide Coordinator Principal

Mrs. Lata Lokhande Mrs.Lata Lokhande Dr. Koel
Roychoudhry

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 DECLARATION BY LEARNER

I the undersigned Miss. VAISHNAVI SAIGAL hereby, declare that the work embodied in
this project work titled "CRYPTOCURRENCY" forms my own contribution to the
research work carried out under the guidance of Mrs. LATA LOKHANDE is a result of my
own research work and has not been previously submitted to any Degree to this or any other
University.

Wherever reference has been made to previous works of others, it has been clearly indicated
as such and included in the bibliography.

I hereby further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.

Name and signature of the learner

MS. VAISHNAVI KAMAL SAIGAL

Signature of the Guiding Teacher

Mrs. LATA LOKHANDE

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 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous and the

depth is so enormous.

I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to do
this project.

I would like to thank my Principal, Dr. Milind Vaidya for providing the
necessary facilities required for completion of this project.

I take this opportunity to thank our Coordinator Mrs. Lata, Lokhande for her moral support
and guidance.

I would also like to express my sincere gratitude towards my project guide Mrs. Lata
Lokhande whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various reference
books and magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped
me in the completion of this project especially my Parents and Peers who supported
me throughout my project.

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 INDEX

Chapter Topic Page No.

1 1.1 Introduction
1.2 History of cryptocurrency
1.3 Types of cryptocurrency
1.4 Risk
1.5 How does cryptocurrency work?
1.6 The cryptocurrency basics
1.7 The structure of cryptocurrency
1.8 Advantages and Disadvantages of
cryptocurrency
1.9 Cryptocurrency regulation in India
1.10 Countries with surprising cryptocurrency
1.11 Top 10 cryptocurrencies currently

2 Research Methodology
3 Review of Literature
4 4.1 Data analysis and representation
4.2 Hypotheses Testing
5 Conclusion and suggestions

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 Chapter 1: Introduction

A cryptocurrency is a digital or virtual currency that uses cryptography for security.

A cryptocurrency is difficult to counterfeit because of this security feature. Many
cryptocurrencies are decentralized systems based on block chain technology, a distributed
ledger enforced by a disparate network of computers. A defining feature of a
cryptocurrency, and arguably its biggest attraction, is its organic nature; it is not issued by
any central authority, rendering it theoretically immune to government interference or
manipulation. The first block chain-based cryptocurrency was Bitcoin, which still remains
the most popular and most valuable. Today, there are thousands of alternate
cryptocurrencies with various functions or specifications. Some of these are clones of
Bitcoin while others are forks, or new cryptocurrencies that split off from an already
existing one.
Cryptocurrencies are systems that allow for the secure payments of online
transactions that are denominated in terms of a virtual "token," representing ledger entries
internal to the system itself. "Crypto" refers to the fact that various encryption algorithms
and cryptographic techniques, such as elliptical curve encryption, public- private key pairs,
and hashing functions, are employed. The first cryptocurrency to capture the public
imagination was Bitcoin, which was launched in 2009 by an individual or group known
under the pseudonym, Satoshi Nakamoto. As of February 2019, there were over
17.53 million Bitcoins in circulation with a total market value of around $63 billion
(although the market price of bitcoin can fluctuate quite a bit). Bitcoin's success has
spawned a number of competing cryptocurrencies, known as "altcoins" such as
Litecoin, Name coin and Peer coin, as well as Ethereum, EOS, and Cardano. Today, there
are literally thousands of cryptocurrencies in existence, with an aggregate market value of
over $120 billion, Bitcoin currently represents more than 50% of the total value.

Bitcoin, the world’s most common and well-known cryptocurrency, has been
increasing in popularity. It has the same basic structure as it did when created in 2008, but
repeat instances of the world market changing has created a new demand for
cryptocurrencies much greater than its initial showing. By using a cryptocurrency, users

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Are able to exchange value digitally without third party oversight. Cryptocurrency works
on the theory of solving encryption algorithms to create unique hashes that are finite in
number. Combined with a network of computers verifying transactions, users are able to
exchange hashes as if exchanging physical currency. There is a finite number of bitcoins
that will ever be generated, preventing an overabundance and ensuring its rarity. Water,
despite its requirement as a life-giving material, is generally accepted as being free or of
little cost because it is so abundant. If water was rare, it would be more valuable than
diamonds. Value exists for bitcoin because its users have trust that if they accept it as
payment, they would could use it elsewhere to purchase something they want or need. As
long as the users maintain this faith, the valued object can be anything. Bitcoin’s value
exists in its ecosystem much in the same way that wampum, a seashell, was the currency
of the land for Native Americans. Bitcoin does not have intrinsic value like gold in that it
cannot be used to make physical objects like jewelry that have value. Nevertheless, value
continues to exist due to trust and acceptance. Current legal and financial structures are not
designed with a technology like this in mind. Financial institutions are built off of much
older forms of currency. In some ways, it is comparative to the computing industry. The
baseline of computing still relies on transmitting and processing 1‟s and 0‟s, providing only
two dimensions of input. Yet all of our current technology uses this technologically archaic
system due to adoption, cultivation, and lack of need for newer systems. If cryptocurrencies
became the global norm for transactions, long standing systems for trade would need to be
completely reformed to deal with this type of competition. For this reason, cryptocurrencies
could possibly be the single most disruptive technology to global financial and economic
systems. Bit Pay, the largest bitcoin processor in the world, has recently seen transaction
rate grow 110% in the past 12 months.

Transaction increase is an indicator of user acceptance growing. The conditions for

Bitcoin’s widespread adoption could be described as a “fire triangle”. Where fire needs
fuel, oxygen, and heat to exist; Bitcoin needs user acceptance, vendor acceptance, and
innovation to ignite. Without all three aspects, bitcoin may not truly become a legitimized
mainstream currency. Bitcoin is currently experiencing an increase in user acceptance and
use, which is driving the other two aspects of the “fire triangle”. Cryptocurrency’s adoption

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Will be an important subject to watch in the future, as it could be a truly transformative
technology that alters the way money is exchanged worldwide. Bitcoin’s increased
adoption has been integrally tied to global market shifts. The current Internet- fueled global
market is very much entangled. If one regional market begins to plummet, it can easily
drag the others with it. Bitcoin, like the Euro, can freely move across many national
borders, creating an environment that promotes global trade, mutual prosperity, and even
peace.
1.1 DEFINITION
A digital currency in which encryption techniques are used to regulate the generation of
units of currency and verify the transfer of funds, operating independently of a central bank.
"Decentralized cryptocurrencies such as bitcoin now provide an outlet for personal wealth
that is beyond restriction and confiscation"

1.2 HISTORY
Cryptocurrency existed as a theoretical construct long before the first digital alternative
currencies debuted. Early cryptocurrency proponents shared the goal of applying cutting-
edge mathematical and computer science principles to solve what they perceived as
practical and political shortcomings of “traditional” fiat currencies.

1. Technical Foundations
Cryptocurrency’s technical foundations date back to the early 1980s, when an
American cryptographer named David Chaum invented a “blinding” algorithm that
remains central to modern web-based encryption. The algorithm allowed for secure,
unalterable information exchanges between parties, laying the groundwork for
future electronic currency transfers. This was known as “blinded money.”
By the late 1980s, Chaum enlisted a handful of other cryptocurrency enthusiasts in
an attempt to commercialize the concept of blinded money. After relocating to the
Netherlands, he founded Digi Cash, a for-profit company that produced units of
currency based on the blinding algorithm. Unlike Bitcoin and most other modern
cryptocurrencies, Digi Cash’s control wasn’t decentralized. Chaum’s company

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 Had a monopoly on supply control, similar to central banks’ monopoly on fiat
currencies.
Digi Cash initially dealt directly with individuals, but the Netherlands’ central bank
cried foul and quashed this idea. Faced with an ultimatum, Digi Cash agreed to sell
only to licensed banks, seriously curtailing its market potential. Microsoft later
approached Digi Cash about a potentially lucrative partnership that would have
permitted early Windows users to make purchases in its currency, but the two
companies couldn’t agree on terms, and Digi Cash went belly-up in the late 1990s.
Around the same time, an accomplished software engineer named Wei Dai
published a white paper on b-money, a virtual currency architecture that included
many of the basic components of modern cryptocurrencies, such as complex
anonymity protections and decentralization. However, b-money was never
deployed as a means of exchange.
Shortly thereafter, a Chaum associate named Nick Szabo developed and released a
cryptocurrency called Bit Gold, which was notable for using the blockchain system
that underpins most modern cryptocurrencies. Like Digi Cash, Bit Gold never
gained popular traction and is no longer used as a means of exchange.
2. Pre-Bitcoin Virtual Currencies
After Digi Cash, much of the research and investment in electronic financial
transactions shifted to more conventional, though digital, intermediaries, such as
PayPal (itself a harbinger of mobile payment technologies that have exploded in
popularity over the past 10 years). A handful of Digi Cash imitators, such as
Russia’s Web Money, sprang up in other parts of the world. In the United States,
the most notable virtual currency of the late 1990s and 2000s was known as e-gold.
E-gold was created and controlled by a Florida-based company of the same name.
E-gold, the company, basically functioned as a digital gold buyer. Its customers, or
users, sent their old jewelry, trinkets, and coins to e-gold’s warehouse, receiving
digital “e-gold” – units of currency denominated in ounces of gold. E-gold users
could then trade their holdings with other users, cash out for physical gold, or
exchange their e-gold for U.S. dollars.

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 At its peak in the mid-2000s, e-gold had millions of active accounts and processed
billions of dollars in transactions annually. Unfortunately, e-gold’s relatively lax
security protocols made it a popular target for hackers and phishing scammers,
leaving its users vulnerable to financial loss. And by the mid-2000s, much of e-
gold’s transaction activity was legally dubious – its laid-back legal compliance
policies made it attractive to money laundering operations and small-scale Ponzi
schemes. The platform faced growing legal pressure during the mid- and late-
2000s, and finally ceased to operate in 2009.

3. Bitcoin and the Modern Cryptocurrency Boom

Bitcoin is widely regarded as the first modern cryptocurrency – the first publicly
used means of exchange to combine decentralized control, user anonymity, record-
keeping via a blockchain, and built-in scarcity. It was first outlined in a 2008 white
paper published by Satoshi Nakamoto, a pseudonymous person or group. In early
2009, Nakamoto released Bitcoin to the public, and a group of enthusiastic
supporters began exchanging and mining the currency. By late 2010, the first of
what would eventually be dozens of similar cryptocurrencies – including popular
alternatives like Litecoin – began appearing. The first public Bitcoin exchanges
appeared around this time as well. In late 2012, WordPress became the first major
merchant to accept payment in Bitcoin. Others, including Newegg.com (an online
electronics retailer), Expedia, and Microsoft, followed. Dozens of merchants now
view the world’s most popular cryptocurrency as a legitimate payment method.
Though few other cryptocurrencies are widely accepted for merchant payments,
increasingly active exchanges allow holders to exchange them for Bitcoin or fiat
currencies – providing critical liquidity and flexibility.

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1.3 FOUR KEY FEAUTURES:

1. Decentralized & No Central Authority

In traditional fiat currencies, central authorities and banks, control the financial system.
However, with Bitcoin and other cryptocurrencies, these transactions can be processed and
validated by a distributed and open network that is owned by no-one. Unlike centralized
banking systems, most cryptocurrencies are decentralized on distributed networks of
computers that are spread around the world, also known as nodes. Transactions are verified
by network nodes through cryptography and recorded in a public distributed ledger called
a blockchain. The transaction is propagated across the peer-to-peer network and is
replicated by every node, reaching a large percentage of the nodes within a few seconds.

2. Anonymous / Pseudo-anonymous
Since there is no need for a central authority, users do not need to identify themselves when
transacting with cryptocurrency. When a transaction request is submitted, the decentralized
network will check the transaction and verify it and record it on the blockchain accordingly.
Cryptocurrencies, like Bitcoin, uses a private key and public key system to authenticate
these transactions. This means users can create anonymous digital identities and digital
wallets to transact on the decentralized system and still be able to securely authenticate
their transactions.

3. Irreversible & Immutable (cannot be undone)

Cryptocurrency transactions are irreversible and immutable. The irreversible and
immutable features of cryptocurrency means that it is impossible for anyone but the owner
of the respective private key to move their digital assets and that transactions cannot be
changed once it is recorded on the blockchain. While it is not impossible to modify the
transaction, secure cryptography makes it very difficult for modification, because it
requires you to alter most nodes in the blockchain. In order to prevent fraudulent
transactions (that cannot be reversed), all transactions are transparently recorded on the
blockchain and open to the public.

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4. Limited Supply & Scarcity
Fiat currencies (e.g. dollars, euros) have an unlimited supply, as the central banks can issue
as much fiat currencies as they want. Central banks often manipulate the value of the
countries’ currencies as part of its economic policies. Most countries often manipulate their
currency to be inflationary over a period of time. The inflationary nature of fiat currencies
would mean a decrease in the value of the currency over time. Therefore, fiat currency
holders might bear the cost of the decrease in value and also face the uncertainty of
currency manipulation. On the other hand, most cryptocurrencies have a limited and pre-
determined supply of the cryptocurrency that is coded into its underlying algorithm when
it is created. For example, Bitcoin has a maximum supply of 21 million, and once this limit
is reached, no new Bitcoin can be mined. Cryptocurrency intentionally creates scarcity to
prevent currency manipulation and the decrease of value over time.

1.4 TYPES OF CRYPTOCURRENCY

Digital currency is designed to work as a medium of exchange. There are many different
types of cryptocurrency, but these six are among some of the more well-known currencies.

1. Bitcoin (BTC)
One of the most commonly known currencies, Bitcoin is considered an original
cryptocurrency. It was created in 2009 as an open-source software. The author of
the whitepaper that established this digital currency was under the pseudonym
Satoshi Nakamoto. Using blockchain technology, Bitcoin allows users to make
transparent peer-to-peer transactions. All users can view these transactions;
however, they are secured through the algorithm within the blockchain. While
everyone can see the transaction, only the owner of that Bitcoin can decrypt it with
a “private key” that is given to each owner. Unlike a bank, there is no central
authority figure in the Bitcoin. Bitcoin users control the sending and receiving of
money, which allows for anonymous transactions to take place throughout the
world.

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 2. Litecoin (LTC)
Litecoin is a peer-to-peer cryptocurrency and open-source software project released
under the MIT/X11 license. Creation and transfer of coins is based on an open
source cryptographic protocol and is not managed by any central authority. Litecoin
was an early bitcoin spinoff or altcoin, starting in October 2011.Litecoin was
launched in 2011 as an alternative to Bitcoin. Like other cryptocurrencies, Litecoin
is an open source, global payment network that is completely decentralized,
meaning there are no central authorities. Here are a few differences between these
digital currencies:

• Litecoin is believed to feature faster transaction times.

• The coin limit for Bitcoin is 21 million and Litecoin is 84 million.
• They operate on different algorithms, lite coins being “scrypt” and Bitcoin’s is
“SHA-256.”

3. Ethereum (ETH)
Ethereum is an open-source, public, blockchain-based distributed computing
platform and operating system featuring smart contract functionality. It supports a
modified version of Nakamoto consensus via transaction-based state transitions.
Created in 2015, Ethereum is a type of cryptocurrency that is an open source
platform based on blockchain technology. While tracking ownership of digital
currency transactions, Ethereum blockchain also focuses on running the
programming code of any decentralized application, allowing it to be used by
application developers to pay for transaction fees and services on the Ethereum
network.
4. Ripple (XRP)
It is a real-time gross settlement system, exchange and remittance network created
by Ripple Labs Inc., a US-based technology company. Released in 2012, Ripple is
built upon a distributed open source protocol, and supports tokens representing fiat
currency, cryptocurrency, commodities, or other units of value such as frequent

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Flier miles or mobile minutes Ripple purports to enable secure, instantly and nearly
free global financial transactions of any size with no chargebacks. Ripple was
released in 2012 that acts as both a cryptocurrency and a digital payment network
for financial transactions. It’s a global settlement network that is designed to create
a fast, secure and low-cost method of transferring money. Ripple allows for any
type of currency to be exchanged, from USD and Bitcoin to gold and EUR and
connects to banks, unlike other currencies. Ripple also differs from other types of
digital currencies because its primary focus is not for person-to-person transactions,
rather for moving sums of money on a larger scale.

5. Bitcoin Cash
It is a cryptocurrency. In mid-2017, a group of developers wanting to increase
bitcoin's block size limit prepared a code change. The change, called a hard fork,
took effect on 1 August 2017. As a result, the bitcoin ledger called the blockchain
and the cryptocurrency split in two. At the time of the fork anyone owning bitcoin
was also in possession of the same number of Bitcoin Cash units. On 15 November
2018 Bitcoin Cash split into two cryptocurrencies. Bitcoin Cash is a type of digital
currency that was created to improve certain features of Bitcoin. Bitcoin Cash
increased the size of blocks, allowing more transactions to be processed faster.

6. Ethereum Classic
It provides a decentralized Turing-complete virtual machine, the Ethereum Virtual
Machine (EVM), which can execute scripts using an international network of public
nodes. Ethereum Classic and Ethereum have a value token called "ether", which
can be transferred between participants, stored in a cryptocurrency wallet and is
used to compensate participant nodes for computations performed in the Ethereum
Platform. The classic ether token is traded on cryptocurrency exchanges under the
ticker symbol ETC. Gas, an internal transaction pricing mechanism, is used to
prevent spam on the network and allocate resources proportionally to the incentive
offered by the request. Ethereum Classic is a version of the Ethereum blockchain.

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 It runs smart contracts on a similar decentralized platform. Smart contracts are
applications that run exactly as programmed without any possibility of downtime,
censorship, fraud or third-party interface. Like Ethereum, it provides a value token
called “classic ether,” which is used to pay users for products or services.

1.5 RISK

The past couple of decades have seen continual advancements in technology. These
advancements have made it possible to improve many other areas of our lives and culture.

Communications, health care, and business management have all been enhanced with new
and better technology. Therefore, it was only a matter of time before technological
improvements inspired the idea of a better currency.

But just because there’s a new currency out there it does not mean it’s infallible. Although
it’s designed to be more secure through encryption, there are still risks of using
cryptocurrency.

1. Instability of Values

Using cryptocurrency such as Bitcoin to purchase goods and services carries with it a
certain amount of risk. Since its inception, it has gone from zero to nearly $20,000 for a
single Bitcoin in December 2017.

However, the current value, as this post is written, places it at around $6K per Bitcoin. That
is a marked decrease from the high it experiences just six months ago. According to a recent
post from Business Insider, the value of Bitcoin may continue to drop.

Still, this is not the first time such extreme changes in price have happened. But the problem
is that these wild changes in value increase the risks of using cryptocurrency.

If you’re using it to purchase something expensive, what if the price drops before you close
the deal? You may have to fork over more cryptocurrency than you were expecting.
Furthermore, if values rally and rise later it could leave you with buyer’s remorse and huge
losses.

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2. Lack of Acceptance

A lack of acceptance is another of the risks you face when you use cryptocurrency. There
are at least a couple of reasons for this.

Some businesses fear cryptocurrency due to the changes in value it has experienced. This
makes them reluctant to accept it as a form of payment. If you try to pay for purchases
strictly with cryptocurrency you could end up out of luck with some businesses.

Additionally, cryptocurrency is not classified in the U.S. as legal tender. This fact alone
causes some people and businesses to fear it, mistrust it, and not accept it.

3. Transaction Errors

It’s unfortunate that as humans we do make mistakes. We transpose numbers, record them
wrong, and make other errors that are sometimes caught – and sometimes not.

What if an exchange is taking place and the wrong wallet address is entered? You could
lose thousands if not tens of thousands or more.

Clearly, protecting your cryptocurrency is extremely important. Fortunately, there are

ways you can reduce the likelihood of some errors.

4. Theft

Even with encryption to protect cryptocurrency transactions there have been hacks
resulting in substantial losses. This is another of the risks of using cryptocurrency.
Passwords can be stolen or hacked. Hardware can be corrupted or taken. Others you do
business with could be lax in their security. This could result in losses to your
cryptocurrency during a transaction. There are a number of ways thieves can gain access
to your digital currency. As a result, it heightens the risks of using cryptocurrency.
Clearly, as a new form of currency, it still has some kinks to work through. However, it is

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Possible to minimize some of the risks of using cryptocurrency if proper precautions are
taken.

1.6 HOW DOES CRYPTOCURRENCY WORK?

Cryptocurrency is an encrypted, decentralized digital currency transferred between peers

and confirmed in a public ledger via a process known as mining. Below, we take a
simplified look at how cryptocurrencies like bitcoin work. First, let’s review the basics and
essentials of cryptocurrency, and then we will do an overview of the other properties that
have made cryptocurrency what it is today.

1.7 THE CRYPTOCURRENCY BASICS

To understand how cryptocurrency works, you’ll need to learn a few basic concepts.
Specifically:

1. Public Ledgers: All confirmed transactions from the start of a cryptocurrency’s

creation are stored in a public ledger. The identities of the coin owners are
encrypted, and the system uses other cryptographic techniques to ensure the
legitimacy of record keeping. The ledger ensures that corresponding “digital
wallets” can calculate an accurate spendable balance. Also, new transactions can
be checked to ensure that each transaction uses only coins currently owned by the
spender. Bitcoin calls this public ledger a “transaction block chain.”

2. Transactions: A transfer of funds between two digital wallets is called a

transaction. That transaction gets submitted to a public ledger and awaits
confirmation. Wallets use an encrypted electronic signature when a transaction is
made. The signature is an encrypted piece of data called a cryptographic signature
and it provides a mathematical proof that the transaction came from the owner of
the wallet. The confirmation process takes a bit of time (ten minutes for bitcoin)

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 while “miners” mine. Mining confirms the transactions and adds them to the public
ledger.

3. Mining: Mining is the process of confirming transactions and adding them to a

public ledger. To add a transaction to the ledger, the “miner” must solve an
increasingly-complex computational problem (like a mathematical puzzle). Mining
is open source so that anyone can confirm the transaction. The first “miner” to solve
the puzzle adds a “block” of transactions to the ledger. The way in which
transactions, blocks, and the public blockchain ledger work together ensure that no
one individual can easily add or change a block at will. Once a block is added to
the ledger, all correlating transactions are permanent, and they add a small
transaction fee to the miner’s wallet. The mining process is what gives value to the
coins and is known as a proof-of-work system.

1.8 THE STRUCTURE OF CRYPTOCURRENCY

Although there can be exceptions to the rule, there are some factors (beyond the basics
above) that make cryptocurrency so different from the financial systems of the past:

1. Adaptive Scaling: Adaptive scaling means that cryptocurrencies are built with
measures to ensure that they will work well in both large and small scales.
Adaptive Scaling Example: Bitcoin is programmed to allow for one transaction
block to be mined approximately every ten minutes. The algorithm adjusts after
every 2016 blocks (theoretically, that’s every two weeks) to get easier or harder
based on how long it took for those 2016 blocks to be mined. So, if it only took 13
days for the network to mine 2016 blocks that means it’s too easy to mine, so the
difficulty increases. However, if it takes 15 days for the network to mine 2016
blocks that shows that it’s too hard to mind, so the difficulty decreases.
Other measures are included in digital coins to allow for adaptive scaling including
limiting the supply over time (to create scarcity) and reducing the reward for mining
as more total coins are mined.

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2. Cryptographic: Cryptocurrency uses a system of cryptography (AKA encryption)
to control the creation of coins and to verify transactions.

3. Decentralized: Most currencies in circulation are controlled by a centralized

government so their creation can be regulated by a third party. Cryptocurrency’s
creation and transactions are open source, controlled by code, and rely on “peer-to-
peer” networks. There is no single entity that can affect the currency.

4. Digital: Traditional forms of currency are defined by a physical object (USD

existing as paper money and in its early years being backed by gold for example),
but cryptocurrency is all digital. Digital coins are stored in digital wallets and
transferred digitally to other peoples’ digital wallets. No physical object ever exists

5. Open Source: Cryptocurrencies are typically open source. That means that
developers can create APIs without paying a fee and anyone can use or join the
network.

6. Proof-of-work: Most cryptocurrencies use a proof-of-work system. A proof-of-

work scheme uses a hard-to-compute but easy-to-verify computational puzzle to
limit exploitation of cryptocurrency mining. Essentially, it’s similar to a difficult to
solve “captcha” that requires lots of computing power. NOTE: Other systems like
proof-of-work (such as proof-of-stake) are also used.

7. Pseudonymity: Owners of cryptocurrency keep their digital coins in an encrypted

digital wallet. A coin-holder’s identification is stored in an encrypted address that
they have control over – it is not attached to a person’s identity. The connection
between you and your coins is pseudonymous rather than anonymous as ledgers are
open to the public (and thus, the ledgers could be used to glean information about
groups of individuals in the network).

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8. Value: For something to be an effective currency, it has to have value.
The US dollar used to represent actual gold. The gold was scarce and required
work to mine and refine, so the scarcity and work gave the gold value. This, in
turn, gave the US dollar value.

THE DIFFERENT STRUCTURE OF CRYPTOCURRENCY

Cryptocurrency trading is very similar to securities trading. However, the trading

mechanism behind both are still quite similar. In the traditional global securities
market, there are different types of market structures in place. Here is a list of a
few popular ones:

Order Driven Markets

These exchanges match buyers and sellers with each other and there is no
middleman. The price is determined by limit order of traders. There is usually an
auction process where buyers are looking for the lowest prices and sellers are
looking for the highest prices. A match between the two would result in a trade
execution. Order driven markets is best used for liquid markets where a large
number of traders are willing to buy and sell the security. The larger the number of
traders in a market, the more competitive the prices become, meaning the prices are
better for traders. With the advances of technology, this is usually done by an API
on most online exchanges.

Quote-Driven Markets/ Dealer Markets

This model is where buyers and sellers engage in transactions with market makers
or dealers. Market makers or dealers display what price they are willing to buy or
sell. This is more popular with bond markets, forex, and some equity markets

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 Brokered Markets

Brokers in the markets actively search to match buyers and sellers to arrange
trades. Brokers start looking to fill an order when their clients ask them to, and
they also initiate search to suggest trades to their clients.

Hybrid Markets

This is a mixture of quote-driven markets, order driven markets, and brokered

markets. NYSE is the best example of this. Not only does NYSE have an order-
driven market, it also utilizes dealers to provide liquidity, and there are also block
brokers to arrange negotiations for large trades for NTSE issues to bring to the
trading floor for executions. Most exchanges for cryptocurrencies use the order
book markets model. As it is a simple model with APIs for most exchanges. In the
cryptocurrency market, an order book is basically a ledger that contains all of the
outstanding orders. Since most exchanges use order books, they match the buyers
and sellers with orders currently in the book.

Cryptocurrency works similarly regarding value. In cryptocurrency, “coins” (which are

nothing more than publicly agreed on records of ownership) are generated or produced by
“miners.” These miners are people who run programs on specialized hardware made
specifically to solve proof-of-work puzzles. The work behind mining coins gives them
value, while the scarcity of coins and demand for them causes their value to fluctuate. The
idea of work giving value to currency is called a “proof-of-work” system. The other method
for validating coins is called proof-of-stake. Value is also created when transactions are
added to public ledgers as creating a verified “transaction block” takes work as well.
Further, value comes from factors such as utility and supply and demand.

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1.9 Advantages and disadvantages of cryptocurrency

1.9.1 Advantages of cryptocurrency

1. Easy to Use.

You know the procedure for opening a simple bank account they are asking you
several documents if there are any mistakes in documents then they refuse to open
an account, also accessing your funds in different geographical location is a little
bit hard. In the case of cryptocurrency, you just need a device that able access the
internet with the help of the device, you can create your wallet and use where ever
and whenever you want.

2. Decentralization.

You know that most of the cryptocurrencies have no central authority to control,
the network is distributed to all participants, and each computer mining nodes is a
member of this system.

This means that the central authority has no power to dictate rules for owners of
coins. And even if some part of the network goes offline, the payment system will
continue to operate stably. When you talk about transactions using cryptocurrencies
then there are no limits. You may be in a different part of the world and the receiver
might be in some other hemisphere, you can still transfer the amount without any
hassle. The inter-country transaction is extremely easy with cryptocurrency because
its function is not under the control of any central bank. Also, coins cannot be faked,
copied or spent twice. These capabilities guarantee the integrity of the entire
system. Every month the number of online shops, resources, and companies to
accept BTC is expanding.

3. Low Operation Cost.

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 Transferring money by using any other online forum or bank gateway is expensive
as they levy considerable fees for the transaction. If you transfer crypto no need to
pay commission and fees to banks and other organizations. That does not mean
cryptocurrencies are free for transactions, crypto is charging a very small amount
of the transaction as a fee, and in crypt’s, it is the buyer paying the small fee. The
issue with these fees is that they often pile up and could quickly pile up. Transaction
fees are very small and only the buyer gets hit with it.

4. You Can Do Unlimited Transactions.

In cryptocurrencies, you can pay using your wallet to anyone, anywhere and any
amount. The transaction cannot be controlled or prevented, so you can make
transfers anywhere in the world wherever another user with a crypto wallet is
located.

5. Fast Transactions.

With crypto, you don’t need to wait a couple days for your business to receive the
money. Cryptocurrencies are based on the blockchain technology, it removes
delays, payment of fees and a host of other third-party approval that might have
been present.

6. Transparency.

In cryptocurrency, every transaction recorded on the blockchain. The blockchain

keeps information about everything. If anyone has publicly used the crypto address,
then anyone can see how much crypto is owned. If the address is not publicly
confirmed, then no one will ever know that it belongs to someone.

7. Anonymity.

In cryptocurrencies, you’re able to create an infinite number of wallets without

reference to the name, address or any other information.

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 8. Highly Secured.

All your transactions will be secure as it is using cryptography. It is next to

impossible for any person other than the owner of the wallet to make any payment
from the wallet unless they were hacked, don’t worry there are many ways to
protect yourself.

9. No Inflation.

Coins are limited to use and mine in cryptocurrencies therefore neither political
forces nor corporations able to change this order, there is no possibility for
development of inflation in the system.

10. Peer-to-Peer Cryptocurrency Network.

Cryptocurrencies do not have any master server to manage all transactions.

Exchange of information is between 2-3 or more software clients. All installed by

users’ program-wallets are part of a crypto network. Each client stores a record of
all committed transactions and the number of crypto in each wallet. Transactions
are made by hundreds of distributed servers. Neither banks or taxes nor
governments can control the exchange of money between.

1.9.2 Disadvantages of cryptocurrency

1. Lack of Knowledge.

Most people are not aware of how to use cryptocurrency and hence open
themselves to the hacker. The digital currency technology is somewhat complex
and therefore one needs to be mindful of it before investing.

2. Strong Volatility.

Since from the beginnings, cryptocurrencies having highly volatile nature. This
is one of the main reasons mass adoption is taking longer than it should. Many
corporations don’t want to deal with a form of money that is going to go through
huge swings in volatility.

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 3. Large Risks of Investing in Cryptocurrency.

Crypto investments are involved high risk because of its volatile nature and
terrorist and other illegal activity financings, lack of a central issuer, which
means that there is no legal formal entity to guaranty in case of any bankruptcy.

4. Not Accepted Widely.

Still, cryptocurrencies are not acceptable in countries and online websites, very
few countries have legalized the use of cryptocurrencies. It makes it impractical
for everyday use. Due to a lack of acceptance.

5. Not Able to Reverse the Payment.

If you mistakenly pay someone by using cryptocurrency, then there is no way

to get a refund of the amount paid. All you can do is to ask the person for a
refund and if your request is turned down, then just forget about the money.

6. Storing of Cryptocurrencies.

If you have stored digital currency on your phone or computer, you better
remember your password and not lose those devices. Losing your coins means
you won’t be able to retrieve it.

There is always pros and cons to everything in life and this is why you need to weigh
both actions thoroughly before making a decision.

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1.10 Cryptocurrency regulation in India

Cryptocurrencies: Not-legal-tender
Cryptocurrency exchanges: Effectively illegal – regulations being considered

Cryptocurrencies are not legal tender in India, and while exchanges are legal, the
government has made it very difficult for them to operate. Although there is
currently a lack of clarity over the tax status of cryptocurrencies, the chairman of
the Central Board of Direct Taxation has said that anyone making profits from
Bitcoin will have to pay taxes on them. Other Income Tax Department sources have
suggested that cryptocurrency profits should be taxed as capital gains.

1. Exchanges

Cryptocurrency exchange regulations in India have grown increasingly

harsh. While technically legal, in April 2018 the Reserve Bank of India
(RBI) banned banks and any regulated financial institutions from
“dealing with or settling virtual currencies”. The sweeping regulation
prohibited trade of cryptocurrencies on domestic exchanges
– And gave existing exchanges until 6 July 2018 to wind down.

2. Future Regulation

India’s government seems to be looking at the possibility of less

prohibitive cryptocurrency regulations. In 2017, the Special Secretary of
Economic Affairs formed a committee to suggest ways of dealing with
the potential AML/CFT and consumer protection issues related to
cryptocurrencies. In 2018, reports suggested that a government
committee was drafting new legislation which introduced greater
cryptocurrency protections for “the common man”.

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1.11 Countries with surprising cryptocurrency

Cryptocurrency is a completely new asset class. Most governments in the world are
unsure on how to regulate this type of new economy. As with all new inventions,
there are always new regulations needed for society to move forward. Here are 5
countries with surprising cryptocurrency laws.

1. Malta

The world’s first crypto island as it was the first country with official crypto
laws. On July 4th of 2018, Maltese Parliament established the first regulatory
framework for blockchain, cryptocurrency and Distributed Ledger
Technology (DLT) space. The 3 bills that they passed will be effective in
November of 2018. The three bills are “The Virtual Financial Assets Act”
(VFA), “The Malta Digital Innovation Authority Act”, and “Technology
Arrangements and Services Bill”. The Virtual Financial Assets Act will
regulate ICOs, and it requires new companies raising capital through ICOs to
publish white papers to outline a detailed description for the entire project as
well as making their financial history public. The Malta Digital Innovation
Authority Act establishes a new regulatory body for the industry which will
carry out regulations by a Board of Governors and headed by a private
industry CEO. The Technology Arrangements and Services Bill has the
process down for registration and certification of technology service
providers and technology arrangements. This is to attract entrepreneurs who
want to start a crypto business to start it in Malta. Although the 3 bills are not
going to be enforced, it is already paving the way and attracting startups to
move to Malta. Binance, a cryptocurrency exchange already announced its
intention to set up shop in Malta. OkEx also intends to expand to Malta.

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2. Gilbrator

It is attracting crypto startups to move there in order to prepare for Brexit.

The regulatory framework prepared by the Gilbrator Financial Services
Commission (GFSC) was set to “promote good business, protect the public
from financial loss and enhance Gilbrator’s reputation as a quality financial
center.”

3. Singapore

In order to keep up with a rapidly evolving fintech world, Singapore uses a

fintech regulatory sandbox for startups. The Monetary Authority of
Singapore encourages startups to try out their ideas in Singapore and abroad.
It is surprisingly open-minded with cryptocurrency regulations.

4. Bermuda

Bermuda recently amended banking acts in order to favor blockchain

startups. Its Premiere and Minister of Finance of Bermuda David Burt
Introduced new regulations on ICOs. Its requirements for ICOs are very
minimal. It also established the Digital Asset Business Act 2018, which
protects the rights of cryptocurrency existing and potential clients.

5. Venezuela

It used to be the richest country in Latin America with the oil money, but its
government used the oil boom to borrow heavily from foreign countries. The
government then printed out bolivar (local money) to repay debt. This
overprinting of bolivar caused hyperinflation in the country. The bolivar was
losing value so bad that in order to buy a candy, one might need to bring a
bag of bolivar. People started saving sugar instead of money to keep safe
their value. Some people were using oil to mine cryptocurrency in order to
keep up with living expense. In order to control the situation,

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 The government then controlled the exchange rate to other currency in the
bank. Then, there was a startup named Airtime allowing users to trade in their
bolivar to dollars in a free market manner, and 216 people ended up being
arrested for allowing free trade to happen. However, the socialist government
of Venezuela refused to abandon the bolivar and use the dollar instead
because it did not want to be colonized by the dollar system. Instead, it
launched a new petro cryptocurrency, which is a commodity backed digital
currency.

1.12 Top 10 Cryptocurrencies currently

Without regulations, it is hard for investors and entrepreneurs to be involved in

cryptocurrency. These new laws in these countries are not perfect yet, but they
definitely pave a road forward for the new economy.

Let’s face it: there are a lot of cryptocurrencies out there, with new ones coming out
almost daily and old ones disappearing seemingly just as fast as they appeared. It’s
easy to get overwhelmed.

1) Bitcoin (BTC)

The king of the crypto world, Bitcoin is now a household name; to many, it is
synonymous with “cryptocurrency.” Its purpose is to provide a peer - to-peer
electronic version of cash to allow payments to be sent online without the
need for a third party (such as MasterCard). The rapid rise in Bitcoin’s price
has brought about an explosion of new Bitcoin investors. With the huge
increase in interest has come a rise in merchants accepting Bitcoin as a
legitimate form of payment. Bitcoin is fast moving towards its goal of
becoming a currency accepted worldwide. Bitcoin’s development is led by
Bitcoin Core developer Vladimir J. van der Laan, who took over the role on
April 8, 2014. Bitcoin’s changes are decided democratically by the
community.

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2) Ethereum (ETH)

Ethereum is the revolutionary platform which brought the concept of “smart

contracts” to the blockchain. First released to the world in July 2015 by then
21-year-old Vitalik Buterin, Ethereum has quickly risen from obscurity to
cryptocurrency celebrity status. Buterin has a full team of developers
working behind him to further develop the Ethereum platform. For more
background information on Buterin, read our article, “Vitalik Buterin: The
Face of Blockchain.” Ethereum has the ability to process transactions
quickly and cheaply over the blockchain similar to Bitcoin, but also has the
ability to run smart contracts.”

3) Ripple (XRP)

Ripple aims to improve the speed of financial transactions, specifically

international banking transactions.

Anyone who has ever sent money internationally knows that today it
currently takes anywhere from 3-5 business days for a transaction to clear. It
is faster to withdraw money, get on a plane, and fly it to your destination than
it is to send it electronically! Not to mention you will be paying exorbitant
transaction fees — usually somewhere around 6% but it can vary depending
on the financial institution.

Ripple’s goal is to make these transactions fast (it only takes around 4
seconds for a transaction to clear) and cheap. The Ripple team currently
comprises over 150+ people, making it one of the biggest in the
cryptocurrency world. They are led by CEO Brad Garlinghouse, who has an
impressive resume which includes high positions in other organization s such
as Yahoo and Hightail.

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4) Bitcoin Cash (BCH)

Bitcoin Cash was created on August 1, 2017 after a “hard fork” of the Bitcoin
blockchain. For years, a debate has been raging in the Bitcoin community on
whether to increase the block size in the hope of al levitating some of the network
bottleneck which has plagued Bitcoin due to its increased popularity.

Because no agreement could be reached, the original Bitcoin blockchain was

forked, leaving the Bitcoin chain untouched and in effect creating a new
blockchain which would allow developers to modify some of Bitcoin’s
original programmed features. Generally speaking, the argument for Bitcoin
Cash is that by allowing the block size to increase, more transactions can be
processed in the same amount of time. Those opposed to Bitcoin Cash argue
that increasing the block size will increase the storage and bandwidth
requirement, and in effect will price out normal users. This could lead to
increased centralization, the exact thing Bitcoin set out to avoid. Bitcoin
Cash does not have one single development team like Bitcoin. There are now
multiple independent teams of developers.

5) Stellar Lumens (XLM)

In a nutshell, Stellar Lumens seeks to use blockchain to make very fast

international payments with small fees. The network can handle thousands
of transactions a second with only a 3 -5 second confirmation time. As you
may know, Bitcoin can sometimes take 10 -15 minutes for a transaction to
confirm, can only handle a few transactions a second and, in turn, has very
high transaction fees.

If this sounds a lot like Ripple, you’re right! Stellar Lumens was based off
of the Ripple protocol and is attempting to do similar things. Some of Stellar
Lumens’ main uses will be for making small daily payments
(micropayments), sending money internationally, and mobile payments.

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 Stellar Lumens is focusing on the developing world and, more specifically,
the multi-billion dollar industry of migrant workers who send money back to
their family in impoverished countries. The Stellar Lumens team is led by
Jed McCaleb, who has worked in numerous successful startups in the past
such as eDonkey, Overnet, Ripple, and the infamous Mt. Gox.

6) EOS (EOS)

Billed as a potential “Ethereum Killer,” EOS proposes improvements that can

challenge Ethereum as the dominant smart contract platform. One main issue EOS
looks to improve is the scalability problems which has plagued the Ethereum
network during times of high transaction volume, specifically during popular ICOs.

A perhaps more profound difference EOS has, compared to Ethereum, is the

way in which you use the EOS network. With Ethereum, every time you make
modifications or interact with the network, you need to pay a fee. With EOS,
the creator of the DAPP can foot the bill, while the user pays nothing

In addition to this, EOS has a few other technical advantages over Ethereum
such as delegated proof of stake and other protocol changes. Just know that
EOS has some serious power under the hood to back up the claim of
“Ethereum Killer.”

EOS was created by Dan Larimer who is no stranger to blockchain or

startups. He has been the driving force behind multiple successful projects
in the past such as Bit Shares, Graphene and Steem.

7) Litecoin (LTC)

Similar to Bitcoin, Litecoin is a peer-to-peer transaction platform designed

to be used as a digital currency. Due to some notable technical

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 Improvements, Litecoin is able to handle more transactions at lower costs.
Litecoin has been designed to process the small transactions we make daily.

Litecoin is sometimes referred to “digital silver” while Bitcoin is known as

“digital gold.” This is because traditionally silver was used for small daily
transactions while gold was used as a store of wealth and was not used in
everyday life.

The Litecoin blockchain is a fork from the Bitcoin chain. It was initially
launched in 2011 when its founder, Charlie Lee, was still working for Google.
Well-known as a cryptocurrency expert, Charlie Lee is backed by a strong
development team who appear to be achieving what they set out to do. They
have recently achieved a very notable accomplishment with the first
successful atomic swap.

8) Cardano (ADA)

Cardano is a smart contract-focused blockchain. It was originally released under

the name Input Output Hong Kong by Charles Hoskinson and Jeremy Wood, a few
of the early team members of Ethereum, and later rebranded into Cardano.

Cardano is trying to fix some of the largest problems the cryptocurrency world
which have been causing ongoing issues for years such as scalability issues and
democratized voting. They have the potential to challenge Ethereum’s dominance
in the smart contract world. Cardano is developing their own programing language
similar to Ethereum; however, they are

Focusing more heavily on being interoperable between other cryptocurrencies.

While some cryptocurrencies are all bite but no bark, Cardano is quite the opposite.
They are quietly focusing on a strong software which will be completely open-
source. Cardano’s team comprises

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 Some of the best minds in the industry, and they seek to create a strong foundation
which others can build upon for years to come.

9) Monero (XMR)

Monero is a digital currency designed to be used as a completely anonymous

payment system. A common misconception with Bitcoin is that it is
completely anonymous. In reality, all payments processed on the Bitcoin
network are recorded on a public ledger (blockchain), so Bitcoin is actually
only partially anonymous or “pseudonymous.”

This means that you can, in theory, trace back every transaction a coin has
been involved with from its creation. Though users aren’t able to inherently
link the public key on the blockchain with the private keys used to store the
coins themselves, there will always exist a correlation between the two.

Monero has solved this problem by implementing cryptonic hashing of

receiving addresses, therefore separating the coin from the address it is
going to. This can be hugely valuable for anyone wishing to conceal their
purchases.

The Monero development team consists of 7 core developers, only two of

which are publicly known. There have been over 200 additional contributors
to the project and software updates are implemented every six months or so.

10) Tether

UDTether is a cryptocurrency token issued on the Bitcoin blockchain.

According to the Tether team, each USDT is backed by one US Dollar. The
goal is to facilitate transactions with a rate fixed to the USD. Amongst other
things, Tether looks to fix some of the legal issues which can arise

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When trading cryptocurrencies and it aims to protect people from market volatility.

Tether has faced constant scrutiny over the years, in particular with regards
to whether or not their currency is truly backed by USD. A full discussion of
this issue can be found in:

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 CHAPTER 2: RESEARCH METHODOLOGY

A) Research statement

The following research statement is framed. “acceptance of cryptocurrency in world”.

B) Objectives of research

The objectives of the study are as follows. To analysis the use of cryptocurrency
• To understand the working of cryptocurrency
• To understand the acceptance of cryptocurrency in world

C) Hypothesis
• NULL HYPOTHESIS
The following hypothesis is framed:
H0: People are still not comfortable using cryptocurrency.

• ALTERNATE HYPOTHESIS
The following hypothesis is framed:
H1: People are comfortable using crypto currency.

D) Scope of study
The survey was conducted for cryptocurrency
Area was restricted to Navi Mumbai

E) Data collection:

The study is based on the secondary data which is collected from secondary sources
via newspaper, magazines, blogs, and through various search engines

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 Primary data

The primary data was collected through the help of survey method. It was
collected from various people in mentioned in above locality

Secondary data

The secondary data was collected though the internet, company’s websites,
blogs and books and magazine available in library.

F) Sample size

The survey was restricted to Navi Mumbai. In total 33 people were selected and
a detailed information was collected through the help of questionnaire and the
interpretation was made. Since it was possible to cover more area in given time.

G) Tools and techniques used

• PIE diagram

• Two-Sample Assuming Unequal Variances

• F-Test Two Sample for Variances

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 Chapter 3: Review of literature

Babaioff et al. 2012

Bitcoin protocol (Andrychowicz) et al. 2014, Babaioff et al. 2012, Bentov etal. 2014,
Jayasinghe et al. 2014, Kumaresan and Bentov 2014). In addition, Bentov et al. (2014)
state, that all other cryptocurrencies share the same fundamentals and ideas with Bitcoin.
Only Danezis et al. (2013) and Miers et al. (2013) have researched Zero coin, which
implements a stronger transaction anonymity than other CCs. All papers analyze the Bitcoin
protocol, identify existing weaknesses and develop enhancement to the existing protocol.
Bentov et al. (2014) see a "Tragedy of the Commons" problem in the
protocol, in that fees from transactions could not cover the mining costs. A Proof of A
activity protocol is developed to solve the problem and to "decentralize the power that
synchronizes the transaction in a quite pronounced fashion" (Bentov et al. 2014).
Kumaresan and Bentov have also developed a Bitcoin protocol enhancement which
"captures the amount of computational effort required to validate Bitcoin transactions"
(2014). This change would foster honest behavior and boost the robustness of Bitcoin
transactions. Babaioff et al. (2012) suggest changes to the Bitcoin protocol to incentivize
information sharing in Bitcoin.

Danezis et al. 2013

The developed protocol from Jayasinghe et al. "guarantees strong-fairness while

preserving anonymity of the consumer and the merchant" (2014). Andrychowicz et al.
(2014) engineer a protocol to secure multiparty lotteries without a trusted authority which
is builton the Bitcoin protocol. Only the work of Danezis et al. (2013) and Miers et al.
(2013) are builton Zero coins, a cryptocurrency for anonymous decentralized transactions.
The protocol uses" modern techniques based on quadratic arithmetic programs resulting in
smaller proofs and quicker verification" (Danezis et al. 2013). As all papers focus on the
technical development or enhancement of cryptocurrency protocols, a design science
orientation for all papers can be stated (Hevner et al. 2004). Therefore, three of the papers
discuss the protocol on a conceptual basis (Babaioff et al. 2012, Bentov et al. 2014, and Dane

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Et al. 2013). Andrychowicz et al. (2014), Jayasinghe et al. (2014), Kumaresan and Bentov
(2014) and Miers et al. (2013) use prototyping methods with their proposed changes
implemented and tested iteratively.

Bissias et al. (2014)

Network Layer The second cluster of cryptocurrency related research focuses on the
network layer. The majority of the papers grouped in this section examine the Bitcoin peer-
to-peer network, only Bissias et al. (2014) included Litecoin as alternative to Bitcoin into
their research. Anish Dev (2014) names also other cryptocurrencies, but sees them as
derivate of Bitcoin.

The research on the peer-to-peer network of cryptocurrencies is multi-faceted. One of the

earliest papers on cryptocurrency research (Reid and Harrigan 2011) analyses the anony
mity in the Bitcoin network. The author’s state, that despite the claim that Bitcoin is a secure
and anonymous currency, peers in the network can easily be identified by analyzing the
topology of the Bitcoin network.

Luo et al. (2013)

Methods to analyze the Bitcoin network are described by Luo et al. (2013). They use a
parallel computing approach to analyze transaction, making tracing and searching of
transactions faster and easier. By adding available external information and the tracking of
marked Bitcoins, de-anonymization of user is very easy for the everyday user. Biryukov et
al. (2014) also use network topology methods to DE anonymize user even if they are
connected to the Bitcoin network via a Tor network (which masks the user's IP address).
The authors state, that" the cost of the DE anonymization attack on the full Bitcoin network
is under 1500 EUR"(Biryukov et al. 2014). Therefore, anonymity should not be seen as a
core feature of cryptocurrencies (Reid and Harrigan 2011).

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Karame et al. 2012

The second stream of research on the network layer of cryptocurrencies analyzes fast
transaction support in Bitcoin. As each transaction needs an average time of ten minutes to
be included into the blockchain and up to one hour to be robust against double spending
attacks, Bitcoin is not suitable for e-Commerce scenarios where the exchange of services
or goods and Bitcoins happens at the same time (Karame et al. 2012). Singh et al. (2013)
develop a scheme for fast transaction support in Bitcoin, as long as payer and payee know
and trust each other. If both parties of the transaction do not trust each other, other
mechanisms have to be found. Bamert et al. (2013) suggest that the payee connect to
random peers in the network and check if inconsistencies occur during the validation phase
of a Bitcoin transaction. This gives the attacker only a "0.088% chance of performing a
successful double-spending attack"(Bamert et al. 2013). The authors tested their proposal
at a snack vending machine accepting Bitcoins. An alternative, suggested by Karame et al.
(2012), introduces observer to the Bitcoin network which informs peers about double-
spending attacks.

Gervais et al. 2014a

Simplified payment verification (SPV) clients are an additional important concept to foster
Bitcoin as an alternative for e-Business transactions. As specific devices (like mobile
phones) have a limited amount of data storage and cannot store the complete blockchain.
SPV clients allow peers to extract Bitcoin transactions relevant for the client while
outsourcing transaction validations to more powerful network peers (Gervais et al. 2014a).
Gervais et al. Show that these "filters incur serious privacy leakage in existing SPV client
implementations"(2014a) and suggest a lightweight modification of the SPV clients.

Hevner et al. 2004

Research on the network layer has a strong design science orientation (Hevner et al. 2004).
Based on identified limitation of the existing cryptocurrency peer-to-peer network, several
papers (like Biryukov et al. (2014), Luo et al. (2013) or Singh et al. (2013)) design solutions
to meet the limitations. Research methods for designing concepts are based on conceptual

40
work like Miller et al. (2014) who introduce a concept to use the Bitcoin network for
distributed storage of archival data or use experiments (Anish Dev 2014) or prototyping
methods (Bissias et al. 2014). In addition, a more descriptive or analytical approach can be
identified. Authors like Decker and Wattenhofer (2013) analyze the public available
Bitcoin blockchain to research information shared in the Bitcoin network. This quantitative
data analysis approach is also used by Karame et al. (2012) and Reid and Harrigan (2011).

El Defrawy and Lampkins (2014)

Ecosystem Layer The majority of literature looked at examined the cryptocurrency

ecosystem. Like in the previous sections, Bitcoin is the dominant CC examined. El
Defrays and Lampkins (2014), Malone and O'Dwyer (2014) and Taylor (2013) mention
other cryptocurrencies like Litecoin, but base their research on Bitcoin.
Many papers in this section are new introductions to the Bitcoin ecosystem. Papers like
Cusumano (2014), Evans-Puget et al. (2014), Grier (2014), Hurlburt and Bojanova (2014),
Parthemer and Klein (2014), Peck (2012) and Peck (2013) give positivistic insights to the
ecosystem and explain how Bitcoin works. This type of research can be used as a good
starting point for researchers who want to understand the Bitcoin ecosystem. Introductory
papers without scientific rigor are reasonable if the research field is quite new.

Meiklejohn et al. (2013)

Give a characterization of the Bitcoin ecosystem but emphasize criminal behavior,

notably fraud. Although, "Bitcoin does not provide a particularly easy or effective way to
transact large volumes of illicitly obtained money" (Meiklejohn et al. 2013), the ecosystem
is vulnerable to money thefts, money laundering and illegal transaction. Christin (2013)
describes how Bitcoin was used to purchase illicit items like narcotics through the online
marketplace Silk Road. The author shows, that 4.5% to 9% of all Bitcoin transactions can
be linked to Silk Road sales. In addition, users with the intention of buying illicit goods
"had about25% - 45% more bitcoins (within the 95% Confidence Interval) than those who
had not spent bitcoins on illicit goods" (Bohr and Bashir 2014). Moser et al. (2013) and
Stokes (2012) research money laundering which is used to mask the illicit nature of money.

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With mixing methods and services like Bit Laundry, described by Moser et al. (2013), it is
possible to anonymize transactions. However, it has been suggested that this is only
possible for small amounts of illicit money as a large "movement with money laundering,
it would incur attention both within the Bitcoin community and, ultimately at a law
enforcement level" (Stokes 2012). Gad (2014) suggests implementing regulations for
exchanging Bitcoins into fiat currencies to prevent misuse of crypto

Gervais et al. (2014b)

Users' intentions to participate in the Bitcoin ecosystems are described

by Glaser et al., suggesting that "new users tend to trade Bitcoin on a speculative
investment intention basis and have low intention to rely on the underlying network as
means for paying goods or services" (2014).

Van Alstyne (2014) supports this argument, but sees this development as necessary to give
Bitcoin a value. Gervais et al. (2014b) examine the claim of Bitcoin as a decentralized
currency and show that, despite the decentralized peer-to-peer network, parties can
influence the development of Bitcoin. Protocol maintenance is performed by a small
number of core developers, and other participants only have limited influence on them.
Other central parties include mining pools which provide a large portion of computational
resources in the Bitcoin ecosystem, but "if these pools colluded to acquire more than 50
percent of computing power share, they could effectively control all transactions, for
example, preventing certain transactions’ execution, approving a specific set of
transactions, or approving double-spending Cryptocurrencies and Bitcoin Twenty-first
Americas Conference on Information Systems, PuertoRico, 2015 10 transactions" (Gervais
et al. 2014b). To overcome this limitation, Ben-Sasson etal. (2014) and El Defrays and
Lampkins (2014) propose new currencies scheme with stronger cryptographic methods and
more sustainable decentralization currencies.

Taylor (2013)

A different stream of Bitcoin ecosystem's research is about mining hardware and their
development. Because mining is a resource consuming process, new types of hash

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calculating hardware have emerged. Taylor (2013) describes four phases of hardware
development. In the first phase, the Bitcoin mining was based on CPU, which were
replaced by graphical processor units (GPU) in the second phase. The third phase started
mid 2011 with the introduction of field programmable gate arrays (FPGA) for Bitcoin
mining. These FPGA were stepping-stone for the fourth phase, the introduction of
application-specific integrated circuits (ASIC) providing a higher cost and energy
efficiency. Malone and O'Dwyer calculated that "the entire Bitcoin mining network is on
par with Ireland for electricity consumption" (2014).

Hevner et al. 2004

Research on the ecosystem layer leans towards a behavioral perspective (Hevner et al.
2004). All introductory papers (like Grier 2014) are based on archival data analysis,
although not all sources are clearly referenced in this type of paper. Archival data analysis
is also used by Gervais et al. (2014b) and Stokes (2012) with a stronger scientific rigor. A
different research method used is quantitative data analysis (e.g. Glaser et al. 2014).
Taylor’s (2013) work about the hardware development relies on case study research. More
design-science oriented papers used experiments (van den Hooff et al. 2014) or a
conceptual approach (Szeferand Lee 2013). Some papers, like Christin (2013), discuss the
ethics of their research, suggesting that researching illegal activities like money laundering
and platforms selling illicit goods might stimulate further usage and activate new users. In
addition, analyzing data from those activities might have unintended consequences for
users. Researchers must be aware of these consequences and consider strategies to mitigate
the risk. One strategy described by Christin (2013) and Moser et al. (2013) are proposals
of intervention strategies (e.g. blacklisting of Bitcoins) which prevent further illegal
activities in the Bitcoin ecosystem.

Banville and Landry 1989

Cryptocurrency Research and its Link to IS Research: The papers discussed above, while
discussing phenomena that are IT-enabled, never link the phenomena to IS research. Nor
has cryptocurrency research drawn much attention from major IS conferences and journals.

43
The question therefore remains: Are cryptocurrencies a potential research area for IS
research? From a general view, IS research is typically based on a core subject or
phenomenon, such as an IT artifact (Banville and Landry 1989, Orlikowski and Iacono
2001). For cryptocurrency research, this core artifact could be the cryptocurrencies’
protocol or the peer-to-peer network or both.

Lee 1999

In addition, IS research has "a research focus on the rich phenomena that emerge whenever
the technological and the social come into contact with, react to, and transform each other"
(Lee 1999). Further, rich phenomena based on the intertwining of technological artifacts
and social context can be found in cryptocurrencies. Just a few examples range from the
open source development of the cryptocurrency protocol to fast transaction support for e-
Commerce to new services and business models based on the cryptocurrencies’ protocol
and network. From a general view, it is justified to say that research about cryptocurrencies
belongs to Information Systems Research. A stronger consideration of cryptocurrencies in
IS would also enlarge the diversity of the discipline (Benbasat and Weber 1996, Robey
1996). In order to illustrate the potential that cryptocurrency research has for IS research, I
have linked the three broad fields of examination in previous research to specific AIS SIGs
and tracks from AMCIS, ECIS, ICIS and HICSS. This has been done with reference to
keywords of the article, the text itself and the research background of the authors. This
illustration therefore serves as a starting point for the inclusion of cryptocurrency research
into IS research, while also showing just how untapped this new and emergent phenomenon
is.

Protocol Layer

SIGSEC

Papers researching the protocol layer may raise interest for the communities of SIG on
Information Security (SIGSEC) and of the SIG on E-Business (SIGeBIZ). Most of
reviewed paper in this layer have a technical approach and construct an IT artifact. Papers
like Bentov etal. (2014) and Kumaresan and Bentov (2014) analyze "system vulnerabilities

44
And risk exposure"(Siponen et al. 2015) and present solutions to cope with these risk
exposures. Other papers (e.g. Andrychowicz et al. 2014, Jayasinghe et al. 2014) discuss
"technologies to facilitate negotiations and auctions" (Shaw et al. 2015) or support
"Internet-based procurement and sales" (Shaw et al.2015).

Network Layer

Most of the papers in the network layer can be linked to SIGSEC and SIGeBIZ. Authors
like Bamert et al. (2013), Gervais et al. (2014a) and Singh et al. (2013) research SPV clients
that allow e-Commerce transactions on smart devices. Others analyze privacy and
anonymity in the Bitcoin network (e.g. Biryukov et al. 2014 and Reid and Harrigan 2011)
ae-establish privacy in Bitcoin transactions (Bissias et al. 2014). These papers could have
the chance to be accepted for AMCIS 2015 - Information Systems Security and Privacy
(SIGSEC)Track organized by SIGSEC. The paper from Anish Dev (2014) can be linked
to the SIG Services (SIGSVC) community, as the author researches collaborative mining
methods and contributes to "Service and crowd-sourcing or micro-tasking" (Böhmann
2014). Only for Luo etal. (2013), it was not possible to align an IS research area.

Ecosystem Layer

As the number of papers researching the ecosystem layer is higher, the research is more
multifaceted. Again, most of the papers would raise interest in the communities of SIGBeIZ
and SIGSEC. Papers like Grier (2014), Peck (2013) and van Alstyne (2014) give insights
into digital currencies and might be of interest for the communities of SIGBeIZ. New
services and business models in cryptocurrencies (e.g. securing cloud computing
applications by using Bitcoins as deposit) might stimulate new research from the SIGSVC
community. Security and risk exposure are also discussed in the reviewed papers. Selling
and purchasing illicit goods using Bitcoins (Christin 2013) or money laundering (Moser et
al. 2013, Stokes 2012) exemplify potential Crimes while using Bitcoins. Cryptocurrency
research can be relevant for the SIG Adoption and Diffusion of Information Technology
(SIGADIT) as well. Papers like Bohr and Bashir (2014) and Glaser et al. (2014) give

45
insights into the Bitcoin community and discuss how "individuals become aware of, decide
to use, and appropriate" (Jeyaraj 2015) cryptocurrencies.

Open Research Questions Shaw et al. 2015

Overall it can be stated, that research about cryptocurrencies have a strong alignment to
E-Business and Security, because cryptocurrencies are an example for "Internet-
based payment models" (Shaw et al. 2015) using cryptographic methods to build up
secure and trustful transactions. Nevertheless, a full understanding about cryptocurrencies
has not been reached yet. More investigation should also be done in the field of the
influence of culture on cryptocurrencies. Although mentioned in a few papers (e.g. Bohr
and Bashir 2014), the focus of the reviewed papers still lies on anonymous transactions
without cultural influences (Glaser etal. 2014, Meiklejohn et al. 2013). However, due to
cryptocurrencies and especially Bitcoin as a currency scheme crossing national borders,
cultural issues are an important aspect nowadays. This is a possible area for future research.

CoinDesk 2015a

New business models are not discussed in cryptocurrency research so

far. Nevertheless, I see entrepreneurs who have built up their businesses around crypto
currencies, especially Bitcoin (CoinDesk 2015b).

In addition, more and more merchants accept Bitcoin as

a payment method (CoinDesk 2015a). It is a possible future research area to understand t
hemotivation of the entrepreneurs and merchant to participates, which business models
they use and which approaches they use to form the ecosystem. Cryptocurrencies present
a challenge for the existing financial industries as potential clients using alternative
financial tools and methods without banking support (e.g. van Alstyne 2014). Banks but
also intermediaries like consultants or insurances have to change and adapt their business
models to become Cryptocurrencies and Bitcoin Twenty-first Americas Conference on
Information Systems, Puerto Rico, 2015 12member of the cryptocurrency ecosystem or

46
built up trust or alternatives to be more attractive for these potential clients (Palmer 2015).
This is also a possible area for future research.

CoinDesk 2015b

Cryptocurrencies and Bitcoin had to face extreme events and disruptions in the recent past.
Examples are the lost Bitcoins from the largest Bitcoin exchanges Mt.Gox and Bitstamp,
which have let to distrust in the Bitcoin ecosystem and might harm cryptocurrencies as a
whole (CoinDesk 2015b). It is not clear, how and why these crisis and disruptions occur
and how the users of the cryptocurrencies react to this events. As stated above, research
methods examining cryptocurrencies are oftentimes quantitative and design science
oriented. The valuable results need to be complemented with qualitative methods. First
approaches can be found (Taylor 2013) but a stronger inclusion of qualitative methods in
the research process and mixed-methods approaches is an important future research
question. Research on cryptocurrencies, however, is not limited to the IS field of research.
It might be worthwhile exploring other disciplines, such as business, law, organizational
science and sociology. This could lead to an interdisciplinary field of research and lead to
a fruitful enrichment of practice as well as academic. For further research, it might be also
reasonable to analyze cryptocurrencies from a more socio material perspective. While
comparing the performance of the top 5 cryptocurrencies in the third quarter of this year,
Bitcoin has emerged as the leader, gaining 74% Bitcoin Cash was not considered, as it did
not trade for the full quarter.

The second largest cryptocurrency by market capitalization, Ethereum, turned out a weak
performance, rising only 8% in the third quarter. This is in stark contrast to its staggering
rally of500% in the second quarter of this year. This shows that traders will make money
only if they are invested in the right cryptocurrency.

47
 Chapter 4: Data interpretation and Presentation

THE DATA WAS COLLECTED FROM 33 RESPONDENTS.

1. Gender distribution

Particulars No. of respondent Percentage

Male 18 54.5
Female 15 45.5

Interpretation: The above analysis shows that 46% and 54% of the respondents are female
and male respectively. The above survey shows that both the genders are equally necessary
and important of the survey and analysis of both the gender is equally important.

48
 2. AGE DISTUBUTION

Age Below 20 20-30 30-40 50 above

No. of people 4 26 1 2

INTERPRETATION: The above analysis shows that 12.1% of age below 20, 78.8% of
age between 20-30, 3% of age between 30-40 and 6.1% of age above 50 is respondents
who have attempted the survey.

49
 3. EMPLOYMENT STATUS

Particular Employed Unemployed Student Other

No. of 9 0 24 0
respondent

INTERPRETATION: The above analysis shows that the maximum number of respondent
were the students (24) with 72.7% and there were 9 employed with 27% in above diagram

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 4. INCOME LEVEL

Income No. of respondent

Below 100000 20
100000-200000 3
200000-300000 0
300000-400000 6
400000-500000 0
500000 above 4

INTERPRETATION: The above analysis shows that around 60% of the respondents
belong to a group which has an annual income of below Rs.1, 00,000 followed by 9.1%
who belong to the group of annual income between Rs.100000-200000. 18.2% of the
respondents fall under the group of annual income more than Rs.30000-4, 00,000 whereas
12% of the respondents who have an annual income above Rs 500000.

51
 5. Awareness of other cryptocurrencies (Litecoin, bitcoin, etc.)

INTERPRETATION: The above analysis show that there 87.9% of respondent who
know about various cryptocurrencies that are used around the world and 12.1% did not
know other currency.

52
 6. Sometimes it is hard to understand the concept of cryptocurrency, would
this defer you from choosing one?

INTERPRETATION: The above analysis shows that 69.7% selected yes and 30.3%
selected no as the maximum number of respondents would choose to postpone from using
the cryptocurrency.

53
 7. Cryptocurrency is in, intangible form does this diminish the value of
currency?

INTERPRETATION: The above analysis shows that the value of cryptocurrency is

decreasing due to intangible form as 66.7% respondents agreed and 33.3% respondents
disagreed to the question

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 8. Can the interest in using cryptocurrency increase if users are offered more
freedom?

INTERPRETATION: The above analysis shows that the respondents who would show
interest using cryptocurrency increase if they are offered more freedom so about 87.9 %
preferred it and 12.1% didn’t preferred it.

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 9. Does the interest in using cryptocurrency increase if the operational cost is
decrease compared to other currency?

INTERPRETATION: The above analysis shows that if the operational cost is decreased
compared to other currency would be the respondent would show interest using it. So about
78.8% preferred showing interest if the operational cost is decreased compared to other
currency and 21.2% preferred to show no interest if operational cost is decreased

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 10. Will you accept cryptocurrency if under goes changes in near future?

INTERPRETATION: The above analysis shows 90.9% would accept cryptocurrency as

a investments if only it goes under changes in near future and 9.1% would not accept it

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 HYPOTHESIS TESTING

Test 1: Two-Sample Assuming Unequal Variances

heard about understand Cryptocurre Can the interest in using cryptocurrency
increase if users are offered more
the bitcoin the ncy is in its
freedom?
concept intangible
form does
this
diminish the
value of
currency?
29 23 11 26
4 10 22 7

t-Test: Two-Sample Assuming Unequal Variances

variable1 Variable2
Mean 22.25 10.75
Variance 62.25 62.25
Observations 4 4
Hypothesized Mean
Difference 0
Df 6
t Stat 2.061309
P(T<=t) one-tail 0.042451
t Critical one-tail 1.94318
P(T<=t) two-tail 0.084902
t Critical two-tail 2.446912

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INTERPRETATION:
t Critical one-tail 0.042451

t Critical two-tail 2.446912

Hence, we accept H0 (Null hypothesis) = People are still not comfortable using
cryptocurrency.

TEST2: F- Test Two- Sample for variances

Does the interest in using cryptocurrency increase if the operational cost is decrease
compared to other currency?
Options No. of the respondent
Yes 23
No 10

Will you accept cryptocurrency if it undergoes changes in near future?

Option No. of the respondent
Yes 11
No 22

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 Does the interest in using cryptocurrency Will you accept cryptocurrency if it
increase if the operational cost is decrease undergoes changes in near future?
compared to other currency?

F-Test Two-Sample for Variances

Yes No
Mean 17 16
Variance 72 72
Observations 2 2
Df 1 1
F 1
P(F<=f) one-tail 0.5
F Critical one-tail 0.006193959
F critical one tail: 0.006193959

Interpretation:
The correlation between the interest in using cryptocurrency increase if the operational cost is
decrease if the operational cost is decrease compared to other currency to acceptance of
cryptocurrency in future after undergoing changes is 0.006193959.
So hence we say that the correlation between both of them is positive.

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 CHAPTER 5: CONCLUSION

1. Obstacles
Cryptocurrencies such as Bitcoin still have numerous significant obstacles to
overcome before they could totally replace current currency systems. The most
immediate is the simple opposition from existing financial institutions, which
wield great power and have incentives to discourage the proliferation of
cryptocurrencies. Other large corporations, even when amenable to the idea of
cryptocurrencies, do not currently consider them stable enough to keep as assets
for long periods of time.
In addition to battling the current economic system, cryptocurrencies have some
internal challenges to overcome. Attempting to convert the entire world
financial system to the Bitcoin model, for example, could cause such a massive
growth in blockchain size that the distributed ledger model would become
impractical. It is also still unclear whether blockchain technology could be
successfully adapted to use cases which require very high speeds with high
volumes (on the order of seconds instead of hours), and would be poorly suited
for any application which required some degree of reversibility. Finally,
because of the substantial energy costs and diminished rewards over time
associated with the "mining" process, users may eventually be forced to bear
increasingly high and unreasonable transaction costs.
2. Short-term (3-5 years)
Increasing Efficiency in the Financial Industry. Since the 2008 financial crisis,
large banks are increasingly feeling pressure to increase efficiency and cut costs
wherever possible. To that end, a May 2016 report from Goldman Sachs
estimates that the financial industry alone could realize up to $6 billion/year in
savings through use of blockchain technology. However, this would not
necessarily include decentralized cryptocurrencies such as Bitcoin, but may
involve the creation of new proprietary centralized cryptocurrencies.

61
 The introduction of cryptocurrencies may also lead to increased levels of
transparency and few incidents of fraud. Under current systems, the correct
identification of fraud is very manual-labor intensive and prone to error.
However, cryptocurrencies are designed to be explicitly transparent and
automatically detect fraud, greatly alleviating the costs associated with
managing associated systems.
3. Emerging Markets
Because cryptocurrencies require only an Internet connection, and are not
dependent on established institutions such as banks, they are ideally suited for
societies without a well-developed financial infrastructure. As with how many
individuals emerging markets skipped over landlines and went straight for
mobile phones, the same individuals may skip the overhead of the traditional
banking system and engage directly in mobile banking. For these reasons, we
expect cryptocurrencies to become a major influence in emerging markets over
the next 3-5 years.
4. Long-term (5-10 years)
Financial Market Disruption. Within the cryptocurrency community, one of the
most popularized goals is the total replacement of banks and other centralized
financial intermediaries. Although such institutions may never be fully replaced
by a democratized network, their role (and associated profitability) may steadily
diminish with rise of cryptocurrencies, hopefully leading to the prevention of
future financial catastrophes on the scale of the 2008 crisis. Although
cryptocurrencies have the possibility to replace functions of the existing
financial infrastructure, their greatest potential may be in incorporating with
other technologies to facilitate a true revolution. The blockchain model is
ideally suited for Internet of Things transactions, which require both efficient
simplicity and robust security. For example, imagine if every time you needed
to fill up a car with gas, your car could pay the gas station automatically.

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5. Expanding Industries
In addition to revolutionizing the financial system, the blockchain technology
of underlying cryptocurrencies has the potential to expand across nearly any
industry that involves large-scale record-keeping. Blockchain could be a
massive boon to proponents of effective protection of intellectual property
rights, such as with music and film. New companies such as Ascribe are
pioneering methods for creating secure limited copies of digital media, in order
to ensure that artists are properly compensated for their work, instead of being
financial damaged by pirates. Other examples include the growing "Sharing
Economy" which can use blockchain to ease identity and reputation
management, and "Smart Grid" utility companies which could use blockchain
to introduce efficient micro transactions for energy consumption.
6. Far Future (10+ years)
In the very far future, global and democratized cryptocurrencies have the
potential to replace government-backed fiat currencies as the primary means of
conducting financial transactions. With that end in mind, Microsoft has also
begun facilitating large-scale simulation tests on behalf of banks and other large
corporations interested in understanding the potential ramifications for such a
large-scale shift in the global economy

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