Bitcoin is a “cryptocurrency”, a decentralised electronic payment scheme based on cryptography. It can be obtained through bitcoin mining.  It implements a particular type of peer-to-peer financial anarchy. It has very recently gained excessive popularity and attracted a lot of attention in the mainstream press and media. Scientific research on this topic is less abundant. A paper at Financial Cryptography 2012 conference explains that Bitcoin is a system which uses no fancy cryptography, and is by no means perfect.

Bitcoin depends on well-known cryptographic standards such as SHA256. In this paper we revisit the cryptographic process which allows one to make money by producing new bitcoins. The authors of this paper reformulate this problem as a specific sort of Constrained Input Small Output (CISO) hashing problem and reduce the problem to a pure block cipher problem. They estimate the speed of this process and show that the amortised cost of this process is less than it seems and it depends on a certain
cryptographic constant which is estimated to be at most 1.89. These optimisations enable Bitcoin miners to save tens of millions of dollars per year in electricity bills.

Bitcoin mining operations face many economic incertitudes such as high volatility. In this paper, the authors point out that there are fundamental incertitudes in bitcoin mining which depend very strongly on the bitcoin specification and that this is specification is NOT written in stone. The energy efficiency of bitcoin miners have already been improved by a factor of about 10,000 since bitcoin have been invented, and the writers claim that further improvements are inevitable.

Discover what those improvements are by downloading this research paper.