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Description
Alternative currencies have a long and varied history, in which Bitcoin is the latest chapter. The pseudonymous Satoshi Nakamoto created Bitcoin as an implementation of the concept of a cryptocurrency, or a decentralized currency based on the principles of cryptography. Since its creation in 2008, Bitcoin has had a fairly tumultuous existence that limited its adoption. Wide price fluctuations occurred as the appeal of free money by running a piece of computer software drove people to purchase expensive hardware, and high-profile scandals cast Bitcoin as an unstable currency well-suited primarily for purchasing illicit materials. Consumer confidence in the currency was extremely low, and businesses were extremely hesitant to accept a currency that could easily lose half (or more) of its value overnight. However, recent years have seen the currency begin to stabilize as businesses and mainstream investors have begun to accept and support it. Alternative cryptocurrencies, titled "altcoins," have also been created to fill market niches that Bitcoin was not addressing. Governmental intervention, a concern of many following the currency, has been surprisingly restrained and has actually contributed to its stability. The future of Bitcoin looks very bright as it carries the dream of the alternative currency forward into the 21st century.
ContributorsReardon, Brett (Co-author) / Burke, Ryan (Co-author) / Happel, Stephen (Thesis director) / Boyes, William (Committee member) / School of Politics and Global Studies (Contributor) / Department of Information Systems (Contributor) / Department of Finance (Contributor) / Barrett, The Honors College (Contributor)
Created2016-05
Description
The success of Bitcoin has generated significant interest in the financial community to understand whether the technological underpinnings of the cryptocurrency paradigm can be leveraged to improve the efficiency of financial processes in the existing infrastructure. Various alternative proposals, most notably, Ripple and Ethereum, aim to provide solutions to the financial community in different ways. These proposals derive their security guarantees from either the computational hardness of proof-of-work or voting based distributed consensus mechanism, both of which can be computationally expensive. Furthermore, the financial audit requirements for a participating financial institutions have not been suitably addressed.
This thesis presents a novel approach of constructing a non-consensus based decentralized financial transaction processing model with a built-in efficient audit structure. The problem of decentralized inter-bank payment processing is used for the model design. The two key insights used in this work are (1) to utilize a majority signature based replicated storage protocol for transaction authorization, and (2) to construct individual self-verifiable audit trails for each node as opposed to a common Blockchain. Theoretical analysis shows that the model provides cryptographic security for transaction processing and the presented audit structure facilitates financial auditing of individual nodes in time independent of the number of transactions.
This thesis presents a novel approach of constructing a non-consensus based decentralized financial transaction processing model with a built-in efficient audit structure. The problem of decentralized inter-bank payment processing is used for the model design. The two key insights used in this work are (1) to utilize a majority signature based replicated storage protocol for transaction authorization, and (2) to construct individual self-verifiable audit trails for each node as opposed to a common Blockchain. Theoretical analysis shows that the model provides cryptographic security for transaction processing and the presented audit structure facilitates financial auditing of individual nodes in time independent of the number of transactions.
ContributorsGupta, Saurabh (Author) / Bazzi, Rida (Thesis advisor) / Ahn, Gail-Joon (Committee member) / Herlihy, Maurice (Committee member) / Arizona State University (Publisher)
Created2016