Abstract
Cryptocurrencies establish user trust by maintaining complete transparency of creation and transaction histories while accurately capturing all user activities. Recognized as one of the safest and simplest future payment methods, cryptocurrencies have seen rapid adoption by financial institutions in recent years. This paper synthesizes previous research on cryptocurrencies, focusing on data mining methods in Bitcoin transactions. We analyze transaction security, privacy mechanisms, and challenges within traditional banking systems, offering a literature review on electronic currency applications and threats. The evolution from electronic cash to cryptocurrencies is summarized, emphasizing methods to enhance user privacy. Security threats compromising Bitcoin user privacy are highlighted, along with identified research gaps requiring further exploration.
Introduction
Investments aim to generate profit through resale [1]. Cryptocurrencies—a decentralized electronic payment system—have gained global acceptance, particularly impacting emerging economies [2]. Their appeal lies in exchangeability, quantifiable value, and pseudonymization, which conceals user identities while enabling multiparty verification and rapid cross-border transactions [3].
Introduced in 2009, Bitcoin remains the most prominent cryptocurrency, with a market capitalization exceeding $185 billion. Initially perceived as anonymous, Bitcoin's public blockchain allows transaction tracing, raising privacy concerns [4]. This survey explores:
- Privacy and Anonymity: Techniques to protect user data.
- Security Threats: Risks like double-spending and 51% attacks.
- Technological Challenges: Scalability, energy consumption, and regulatory hurdles.
Background of Cryptocurrency
Blockchain Technology
A decentralized ledger comprising linked blocks, blockchain ensures:
- Immutability: Data cannot be altered post-commitment.
- Transparency: All participants access the same transaction history.
- Security: Cryptographic methods like zero-knowledge proofs enhance privacy [5].
Bitcoin Ecosystem
- Benefits: No third-party seizure, lower transaction fees, and theft resistance.
- Challenges: High energy usage, wallet loss risks, and potential for criminal activity [6].
Privacy and Anonymity in Bitcoin
Key Concerns
- Pseudonymity: Addresses (hashed public keys) can be linked to real identities via network analysis [7].
- Traceability: Transparent blockchains enable transaction graph reconstruction, compromising privacy.
Solutions
- Zero-Knowledge Proofs: Verify transactions without revealing details (e.g., ZCash).
- Mixnets: Obfuscate transaction paths (e.g., CoinShuffle) [8].
| Privacy Technique | Advantage | Limitation |
|-----------------------------|----------------------------------------|------------------------------------|
| Zero-Knowledge Proofs | High taint resistance | Computationally expensive |
| Ring Signatures | Untraceability | Requires trust in senders |
Challenges and Applications
Security Threats
- Pump-and-Dump Schemes: Artificial price inflation via coordinated hype [9].
- Double-Spending Attacks: Exploiting transaction confirmation delays.
Price Prediction
Machine learning (e.g., LSTM) analyzes historical data to forecast Bitcoin prices, though volatility remains a hurdle [10].
Future Directions
- Scalability: Solutions like sharding to increase transaction throughput.
- Regulation: Balancing privacy with anti-money laundering (AML) compliance.
FAQs
Q1: How does Bitcoin ensure transaction transparency?
A1: Bitcoin’s public blockchain records all transactions, visible to every network participant.
Q2: What are the main privacy risks in cryptocurrencies?
A2: Address linkage via network analysis and transactional metadata exposure.
Q3: Can quantum computing break blockchain security?
A3: Current systems rely on elliptic-curve cryptography, vulnerable to quantum attacks. Post-quantum algorithms are under development [11].
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Conclusion
Cryptocurrencies revolutionize digital payments but face significant privacy and security challenges. Advances in cryptographic techniques and regulatory frameworks are critical for sustainable adoption. Future research must address scalability, energy efficiency, and quantum-resistant protocols to ensure long-term viability.