Table of ContentsHow Bitcoin Works?What Validates Currency Transactions?Signature and HashingTransaction and Malware in Transactions (Attacks)L The digital signature algorithm used to secure Bitcoin transactions. In all peer to peer electronic transactions, no third party needs to verify the ledger to transfer the amount. Without resorting to any authority, this platform secures 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 should not be banned”?Get the original essayA decentralized peer-to-peer electronic money system was launched under the name Bitcoin in 2009. In late October 2009, this electronic money was launched under the name of most secure without controlling authority. At that time, no one in the financial markets took this seriously. The reason behind the development of this electronic currency was to create the most secure public currency in the global market. In 2011, the Japanese company MtGox began trading Bitcoin for cash, 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. For what? Because the supply or total number of bitcoins is fixed. Cryptography is the science behind security. To secure these transactions without any authority, the evolution begins with a security system that we call Digital Signature. A digital signature is a mathematical scheme for demonstrating the authenticity of a digital message or document, analogous to a physical signature on paper. Authentication can be defined as a process by which we corroborate that a person is who they claim to be. The purpose of the digital signature is to provide a means for an entity to link its identity to a piece of information. The signing process involves transforming the message and some secret information held by an entity into a tag called a signature. Digital signature represents one of the most widely used security technologies to ensure the tamper-proof and non-repudiation of digital data. The current security enhancement on digital signatures or digital authentication is a hot topic for crypto researchers due to serious crimes and terrorist financing. groups via cryptocurrencies. Economic warfare to financial havoc, illegal weapons to finance terrorism take place through different sources or wipe out the amount of bitcoins or security breaches. This is why this is an important topic. On February 19, 2018, Professor Sean Foley and Jonathan R. Karlsen from the University of Oxford published an article on illegal activities related to cryptocurrencies with data collected from various resources. According to this article, they find that illegal activities represent a substantial proportion of users and trading activities in Bitcoin. 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 each year, worth approximately $72 billion, and holdcollectively about $8 billion worth of bitcoins. 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 method for creating digital signatures. Along with RSA, DSA is considered one of the most widely used digital signature algorithms today. DSA, on the other hand, does not encrypt message digests using a private key nor decrypt message digests using a public key. Instead, it uses unique mathematical functions to create a digital signature consisting of two 160-bit numbers, taken from the message digests and private key. DSAs use the public key to authenticate the signature, but the authentication process is more complicated than that of 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 around the world. The existence of Bitcoin is not inflationary. But depending on demand and supply, the price goes up and down with the world currency depending on the trade. The number of transactions in one go is the highest transaction in terms of security and speed. The currency belongs to the owner. It provides separate key to make it more secure. “We will talk about security logic and how incidents occur in Bitcoin mining and Bitcoin transactions? It is a proof-of-work based cryptocurrency that allows miners to create Bitcoin through computation. Unlike other traditional financial currencies, consenting parties carry out secure transactions by relying on cryptographic protocols rather than third-party trust. Since there is no central authority to keep records of transactions, they are confirmed by a consensus procedure and stored in a distributed manner. Thus, user privacy in public transactions is protected using pseudonyms called Bitcoin addresses. In each electronic document creation or document modification, we use a timestamp. You must have seen this on Google Docs or Microsoft Word or any other word processor “Last edited at 6:30 p.m. “Time stamping is therefore a use of electronic timestamping to prove the temporal sequence between events. It was first proposed by Haber and Stornetta in 1991 to certify the creation or last modification of an electronic document. Since Bitcoin transactions are announced publicly, a timestamp system is necessary so that participants can agree on the order of the transaction. The principle of timestamping is that the information stored in the blocks is arranged in a chain and the hash of the block of elements is timestamped while each timestamp includes the previous timestamps in its hash value. With timestamp, data that existed at the time can be proven. What validates currency transactions? Until digital currency, we all checked with a third party (bank or government) to verify the details before the transaction. In cryptocurrency transactions, use a cryptographic scheme that is easy to verify but difficult to produce the defined form of result without requiring a large amount of computational work. This scheme is proposed in Adam Back's Hack-hash. The principle of proof of work is that for many hash functions, findan input to generate a value with a predefined substring is a low probability event and requires a lot of trial and error. In Bitcoin, searching for such suitable entries is used in block creation called mining. The main Bitcoin block contains the transaction to be validated, the hash of the previous block (implements the timestamp), and a nonce. The hashing algorithm used complies with the Secure Hashing Standards (SHA256), and different nonces will be tried until the block's SHA256 hash value meets the requirements. This will consume a lot of computing power and is proof of the miners' work. 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 part of Bitcoin. It is a binary tree of hashes proposed by Ralph Merkle which 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 calculated on data blocks. The final hash value - n in the Merkle tree - is called the Merkle root which will be stored in the block header. Since the non-leaf node is supposed to have two child nodes, the missing child node is a special case of the 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 the Merkle tree is that there is no need to recalculate the hash of all data if a block of data changes. For example, if the block has changed, only one branch of, and finally the root n will be recalculated. This requires a much smaller number of hashing calculations and makes the process more efficient. Signature and Hashes In Bitcoin transactions, two cryptographic primitives are used to prevent malicious users from breaking the system. A digital signature is used to ensure that the information is signed by the claimed person as well as to test if the information is modified by malicious people. The signing process contains signature generation and verification. Given a message, the signer generates a signature using their 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 message digest for performance reasons. The Digital Signature Algorithm (DSA) was the first digital signature system legally accepted by the United States government and proposed by NIST in August 1991. ECDSA is a digital signature system based on the key cryptography system public ECC, instead of working in a subgroup of Zp ⇤ in DSA. , ECDSA works in the group of elliptic curvesE(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 that 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 Bitcoin address generation, transactions and block generation. Bitcoin addresses are generated by hashing the ECDSA public key. Regarding Bitcoin transactions and generation.