Presentation on : Cryptocurrencies

Presented by :
Aditya Oberai
A2305218017
3CSE1X
Amity School of Engineering and Technology
Introduction
• Today’s world is a virtual world.
• The total internet users across the globe as of March 2019 was 4383
million which accounts for 56.8% of the world population as
compared to just 16 million in December 1995 which was just 0.4%of
the world population then.
• In this virtual world, the very reliability of our commonly-used fiat
currencies is being questioned.
• One consequence of this is that people start looking for better
alternatives to current options, the most popular of which is
Cryptocurrencies.
Definition of a Cryptocurrency
• A cryptocurrency is a virtually available asset that is designed to work
as a medium of exchange through a cryptographic process.
• It permits money transactions online without needing any third-party
or middleman.
• The most crucial aspect we talk about is the lack of governing body or
decentralized nature of cryptocurrencies.
• There are about 2300 active cryptocurrency projects today. The
technical system that forms the basis of all cryptocurrencies was
designed by Satoshi Nakamoto.
Blockchain Technology
• A blockchain is a series of fixed, unchangeable record of information
linked to each other in the form of a list in a chronological sequence.
• The ledger is spread out over the entire network among all the peers and
each peer possesses a copy of the entire ledger.
• All participants in the blockchain network communicate directly without
the presence of a middle man.
• Information in a blockchain can only be added at the end of the last block.
• All changes to the blockchain are checked against certain predefined
criteria and added only after achieving consensus among all the
participating nodes in the network.
Cryptocurrency Mining
• Cryptocurrencies have quite a few differences from fiat currencies in
the method by which their new units created.
• In the case of Proof-of-Work based cryptocurrencies, a process called
mining is used to generate new coins or tokens.
• The miners on the network need to solve a cryptographic puzzle by
trial-and-error in order to discover the right hash pointer associated
with the block so that the block can be encrypted.
• Rewards are given on the basis of successful verification of block.
Consensus Protocols
• A Consensus Protocol is a mechanism which is used to achieve
agreement on a certain data or a particular state of network in multi-
member systems.
• In cryptocurrencies, they are basically used to verify whether the
transaction created by a node or a peer on the block chain network is
genuine or not
• There are various consensus protocols used in the current market, the
most common of which are Proof-of-Work and Proof-of-Stake.
Proof-of-Work
• A Proof-of-Work is a specific information produced by the computer during
the mining process that is used to verify the transaction by other peers in
the network.
• The minimal chance of block being successfully generated makes it
unpredictable to know who gets to create the next block.
• The work done by the miners’ devices to generate a particular block should
be indicated by it by hashing to a value lower than the current target.
• Each block contains the hash of the previous block, thus creating a chain and
amounting to a lot of work, making tampering practically impossible.
• SHA-256 is the most commonly used Proof-of-Work algorithm.
Proof-of-Stake
• Proof-of-Stake needs the coin owners on the network to stake a
measure of their tokens in order to get an opportunity of being
chosen to validate blocks of transactions and get compensated for
doing as such.
• Stake here refers to an amount of coins or tokens that a participant
pledges in order to gain rights to create the next block.
• Ethereum, one of the largest names in the cryptocurrency has
transitioned to PoS in 2019.
Alternate Consensus Protocols
• Proof-of-Burn: Here, miners have to show that they burned a certain number of
tokens. Burning coins basically means sending them to a verifiably unspendable
address. This is very costly from the miners’ perspective but it doesn’t require any
other resources. This also results in a lower availability of the burnt cryptocurrency
which causes the price of that cryptocurrency to increase, too.
• Proof-of-Activity: Proof-of-Activity (PoA) is a basically hybrid of PoS and PoW. In PoA,
the mining process works totally like PoW until a new block is mined, after which it
switches to PoS. It practically eliminates the possibility of a 51% attack.
• Proof-of-Capacity: Proof-of-Capacity (PoC) is another recently designed consensus
protocol that allows the peers on the block chain network to obtain mining rights
based on their available hard drive space. The advantage it provides over PoW is that it
doesn’t require the high computing power and the advantage it provides over PoS is
that miners don’t have to stake a high amount of coins.
Issues in Cryptocurrencies
• Certain cryptocurrencies offer their users complete anonymity. This results in
huge amount of usage of these cryptocurrencies on the Dark Web.
• Large cryptocurrency mining pools have picked up a huge growth rate in their
number of members which is leading to centralization and ever-increasing
probability of 51% attacks.
• There is a lack of a central repository. Since all data is stored on physical data
storage, losing the device or a crash will result in you losing the coins forever.
• Changes in cryptocurrency prices depend on public demand. This causes the
prices to fluctuate wildly at times, resulting in huge returns or losses.
• Despite being one of the most secure encryption algorithms publicly available,
the SHA-256 encryption can also be cracked and coins can be stolen.
Thank You