IndexHow does Bitcoin work?What validates currency transactions?Signature and hashTransactions and malware in transactions (attacks)Digital signatures algorithm uses to protect Bitcoin transactions. In all peer to peer electronic transactions there is no need for a third party to control the register to transfer the amount. Without using any authority, this platform protects all transactions between different people together. It provides security, integrity and non-repudiation for safe and secure transactions. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get Original EssayA peer-to-peer decentralized electronic monetary system was launched as Bitcoin in 2009. At the end of October 2009, this electronic currency was launched as more secure without any supervisory authority. That time no one took him seriously in the financial market. The reason behind the development of this electronic currency was to create the safest public currency in the global market. In 2011, the Japanese company MtGox began exchanging Bitcoin for money, Bitcoin attracted media attention, and an increasing number of miners became involved in Bitcoin mining. The prices of bitcoin and all other cryptocurrencies rise and fall based on demand, not supply. Why? Because the supply or total number of bitcoins is fixed. Cryptography is the science behind security. To protect these transactions without any authorization, the evolution begins with the security system we call Digital Signature. A digital signature is a mathematical scheme for proving the authenticity of a digital message or document, analogous to a physical signature on paper. Authentication can be defined as a process by which you confirm that someone is who they say they are. The purpose of the digital signature is to provide an entity with a means to associate its identity with a piece of information. The signing process involves renewing the message and some secret information held by an entity in a tag called signature. The digital signature represents one of the most used security technologies to guarantee the non-falsification and non-repudiation of digital data. The improved version of the current security on digital signatures or digital authentication is a hot topic for cryptography researchers due to the serious crimes and financing of terrorist groups through cryptocurrencies. Economic warfare for financial chaos, illegal weapons to finance terrorism are happening through different sources or deleting the amount of bitcoin or security breaches. That's why this is an important topic. On February 19, 2018, Oxford University Professor Sean Foley and Jonathan R. Karlsen published a paper on illegal cryptocurrency-related activities with data collected from various resources. According to this document, illegal activity is found to account for a substantial portion of bitcoin users and trading activity. For example, about a quarter of all users (25%) and almost half of bitcoin transactions (44%) are associated with illegal activity. The approximately 24 million bitcoin market participants who use bitcoin primarily for illegal purposes (as of April 2017) conduct approximately 36 million transactions annually, valued at approximately $72 billion, and collectively hold approximately $8 billion worth of bitcoin. A digital signature algorithm (DSA) refers to a standard for digital signatures. It was introduced in 1991 by the National Institute of Standards and Technology (NIST) as the best way to create digital signatures. Along with RSA, DSA is considered one of themost used digital signature algorithms today. DSA, on the other hand, does not encrypt message digests using the private key or decrypt message digests using the public key. Instead, it uses unique mathematical functions to create a digital signature composed of two 160-bit numbers, originating from message digests and the private key. DSAs use the public key to authenticate the signature, but the authentication process is more complicated than RSA. How does Bitcoin work? Bitcoin is a decentralized peer-to-peer digital currency based on public key cryptography first proposed by Satoshi Nakamoto in 2008 and fully operational in 2009. Bitcoin has various interesting properties that make this cryptocurrency so popular across the world. Bitcoin's existence is not inflationary. But based on supply and demand, the price goes up and down with the world currency according to the exchange rate. The number of transactions at the same time is the highest transaction in terms of security and speed. The currency is the property of the owner. Provides separate key to make it more secure. “Are we going to talk about the logic of security and how accidents occur in bitcoin mining and bitcoin transactions?” It is a proof-of-work-based cryptocurrency that allows miners to mint Bitcoin through computation. Unlike other traditional financial currencies, consenting parties make secure transactions based on cryptographic protocols rather than relying on third parties. Since there are no central authorities to keep track of transactions, they are confirmed through a consensus procedure and stored in a distributed manner. Therefore, user privacy in public transactions is protected by using pseudonyms called Bitcoin addresses. In every creation of electronic documents or modified documents, we use the timestamp. You must have seen it on Google Docs or Microsoft Word or any other word processor “Last edited at 6.30pm. " So time stamping is a use of electronic timestamping to demonstrate the temporal sequence between events. It is first proposed by Haber and Stornetta in 1991 to certify when an electronic document was last created or modified. Since the Bitcoin transactions are announced publicly, a timestamp system is needed so that participants can agree on the order of the transaction. The principle of timestamping is that the information stored in blocks is arranged in a chain and the hash of the block of elements is assigned a. timestamp while each timestamp includes the previous timestamps in its hash value, it is possible to prove the data existing at that time. What validates currency transactions? the details before the transaction.In cryptocurrency transaction, it uses a cryptographic scheme that is easy to verify but difficult to produce the defined form of result without obtaining a large amount of computational work. This scheme is proposed in Hack-hash by Adam Back. The principle of proof of work is that for many hash functions, finding an input to generate a value with a predefined initial substring is a low probability event and requires a lot of trial and error. In Bitcoin, searching for suitable inputs is used in block creation called mining. The main block in Bitcoin contains the transaction to be validated, the hash of the previous block (implements the timestamp), and a nonce. The hash algorithm used is Secure Hash Standards (SHA256) and several nonces will be tried until the SHA256 hash value of the block meets the requirements. This will consume a lot of computing power and is a testament to the work of theminers. In addition to validating the transaction to ensure the integrity of the block, the Proof-of-Work protocol is also used to regulate the supply of Bitcoin and reward miners. The Merkle tree is an important element in Bitcoin. It is a binary hash tree proposed by Ralph Merkle that is used to verify data integrity efficiently and securely. In this tree, each non-leaf node is the "concatenate then hash" value of its child node, and the leaves are computed blocks of data. The final hash value - n in the Merkle tree - is called the Merkle root and will be stored in the block header. Since the non-leaf node is expected to have two child nodes, the missing child node is a special case of Merkle tree, just like the child node. In this kind of situation, the solution in Bitcoin is simple. When forming nodes in a row, if there is an odd number of nodes, the last node will be duplicated. One of the strengths of Merkle Tree is that you don't need to rehash all the data if a block of data changes. For example, if the block is changed, only one branch from and finally root n will be recalculated. It requires much fewer hash calculations and makes the process more efficient. Signature and Hash In Bitcoin transaction, two cryptographic primitives are used to prevent malicious users from breaking into the system. A digital signature is used to ensure that the information is signed by the person complained about and to verify whether the information is modified by malicious people. The signing process contains signature generation and verification. Given a message, the signer generates a signature using his private key, and the verifier can use the signer's public key to verify the authenticity of the message. A cryptographic hash function is applied to the original message to produce a digest of the message for performance reasons. The Digital Signature Algorithm (DSA) was the first digital signature scheme legally accepted by the US government and proposed by NIST in August 1991. ECDSA is a digital signature scheme based on the ECC public key cryptosystem, instead to work in a subgroup of Zp ⇤ in DSA , ECDSA works in the elliptic curve group E(Zp). It has been standardized by many standards committees such as ISO, ANSI, IEEE and FIPS. Hash function is any function that maps data of arbitrary length to a value of fixed size, which is difficult to reverse. A small change on the inputs will produce outputs with a big difference. Therefore, hash functions can be used to ensure data integrity. Hash functions are adopted by the Bitcoin system mainly in generating Bitcoin addresses, generating transactions and blocks. Bitcoin addresses are generated by hashing the ECDSA public key. When it comes to Bitcoin transactions and block generation, two consecutive SHA256 hashes are used. Transactions and malware in transactions (attacks) Bitcoin transaction is the process of transferring ownership of Bitcoin from one Bitcoin address to another. A Bitcoin address is a 160-bit hash of the ECDSA public key and stored in the Bitcoin wallet along with its private key. The Bitcoin wallet stores one or more Bitcoin addresses and each can only be used once. A Bitcoin transaction contains zero or more inputs and outputs. An input is a reference to the outputs of another previous transaction, and the values ​​of the transactions are added together and used in the current transaction. An input normally contains three parts: previous tx is the hash of the previous transaction, Index is the output of the referenced transaction, and ScriptSig contains a signature and a public key. The ECDSA signature comes.