Trade Volume of Bitcoin faced significant downfall regarding Chinese Yuan in January 2017. The Chinese Central Bank decided to limit bitcoin buyers with new regulations.
Chart 1.1: Bitcoin Trade Volume in years. (Million USD)
Chart 1.2: Bitcoin market price in years (Thousand USD)
1. Design of Bitcoin
Cryptography is the method of writing a message in an encrypted text with protecting a secret from unauthorized or malicious parties. Professional cryptography also protects the key and the whole cryptosystem. There is three premises of cryptography; Encryption and decryption algorithms, Hashing functions and Digital Signature Schemes.
1.1.1 Encryption and Decryption Algorithms
Encryption is a process of coding information into cipher text a form unreadable without a decoding key. 2 This can be a file, mail message or any other document that includes information. Decryption is the reverse process of converting encoded data to its original form.
Encryption was the first use of cryptography. Today, those algorithms are widely used in our life, securing personal and financial information, ensuring data has been sent over the Internet. Any stolen data would be easily readable without encryption and decryption algorithms by the thief and could be used as a fraud.
1.1.2 Hashing Algorithms
Hashing algorithms are a family of cryptographic hash functions. The Hash function is any function that can be used to map data or arbitrary size to data of fixed size. The values returned by a hash function are called hash values or hash codes. The hashing algorithms are for ensuring data integrity.
1.1.3 Digital Signature Schemes
Digital signature schemes are used to assure that a given entity has sent a certain message. Basically, Entity has a private key and corresponding public key which is linked to entity’s identity. The entity generates a signature string which depends on the message to sign and their private key.
Digital signatures are the main elements of most cryptographic protocols. Commonly used for software distribution and financial transactions.