Exploration and Discussion for Bitcoin Encryption Algorithms

Keyu Yan

Software Engineering, North University of China, Shanglan street, Taiyuan, China

Keywords: Bitcoin, Hash Functions, ECDSA, Asymmetric Cryptography, Digital Signatures.

Abstract: Bitcoin has played a more and more crucial role today with the popularity of the Internet and it has

unparalleled advantages compared with physical currency since its quality of high safety and privacy-

protection. The development of bitcoin encryption algorithms is engrossing, so this article reviews some main

encryption algorithms. One of the most important functions used in bitcoin encryption is hash function, the

Secure Hash Algorithm-256 (SHA-256) and RACE Integrity Primitives Evaluation Message Digest

(RIPEMD-160) are based on it and the complex process makes sure reliability. Another cryptographic

algorithm the paper will illustrate is Elliptic Curve Digital Signature Algorithm (ECDSA) which is a typical

asymmetric cryptography. The process primarily comprises three sections, which will be elaborated upon in

this paper. These algorithms are broadly implemented in numerous areas of daily life, yet they are not without

their drawbacks. To address these issues, scientists have undertaken extensive optimization efforts, resulting

in the creation of safer and more advanced technologies to satisfy a greater range of needs. Thus, this article

provides a detailed review of Bitcoin encryption algorithms.

1 INTRODUCTION

Before Bitcoin was made available as open-source

software in 2009, Satoshi Nakamoto originally

presented the idea behind the cryptocurrency

(Rahouti et al. 2018). A virtual coin with peer-to-peer

encryption is called Bitcoin. It is projected to reach its

issuance completion by the year 2140, with a total cap

of 21 million units, underscoring its rarity. As a

consensus-driven network, Bitcoin introduces an

entirely digital payment system (Vyas & Lunagaria

2014). To some extent, bitcoin is an excellent

reflection of Internet currency, because of its

characteristics of celerity, security and no national

boundary. In contrast to official cash, bitcoin is

created by network nodes and is distributed globally

instead of being issued by the third-party institution,

so everyone is able to produce it. People just need a

computer which access internet can buy and sell

bitcoin, and outsiders cannot obtain user’s message

during the process of transaction.

Traditionally, physical currency was the norm, but

it posed issues of convenience and was susceptible to

loss or theft. In contrast, bitcoin has several

advantages. Firstly, it enhances personal data

protection. Users of Bitcoin are not at great danger in

the event that a merchant or transaction partner

experiences a cyber-attack and loses traditional

financial or personal data belonging to its clients or

itself (Dumitrescu 2017). Secondly, it has lower

transaction fees. The transaction fees of bitcoin are

almost five times lower than that of credit cards for

the same transaction values (Dumitrescu 2017).

Thirdly, refund fraud is prevented for the merchants

by the rapidity of the transfer. The speed of bitcoin is

quicker than banks (approximately 10 to 30 minutes)

and before they deliver the goods or services, the

sellers have enough time to review the transaction.

Fourthly, it is not affected by inflation (Dumitrescu

2017). Bitcoin also has the advantages of

decentralization, immutability, transparency,

borderless circulation and exclusive ownership, all of

which are crucial features.

The genesis and evolution of Bitcoin present a

fascinating narrative. Wei Dai first proposed a term

called “crypto-currency” on the cypherpunks mailing

list in 1998 to explain the concept of a virtual

currency that is created and transacted using

encryption rather than a central authority (Vyas &

Lunagaria 2014). Bitcoin was regarded as the first

successful implementation of this concept (Vyas &

Lunagaria 2014). Then Satoshi Nakamoto appeared

Yan, K.

Exploration and Discussion for Bitcoin Encryption Algorithms.

DOI: 10.5220/0012819100004547

Paper published under CC license (CC BY-NC-ND 4.0)

In Proceedings of the 1st International Conference on Data Science and Engineering (ICDSE 2024), pages 52-57

ISBN: 978-989-758-690-3

on the cryptography scene in 2008 and published his

famous whitepaper (Ducrée 2022). Then in 2009, the

first bitcoin with serial number 0 genesis and

blockchain was connected to form a chain, marking

the birth of bitcoin.

As a transaction currency, bitcoin mainly uses

three functions of cryptography: hash functions,

asymmetric cryptography and digital signatures. The

development of bitcoin encryption algorithm has

experienced long periods. MD5 was designed in 1992

as an improvement of MD4, but its collisions have

been attacked so the function is not safe today (Wang

& Yu 2005). Then The National Institute of Standards

and Technology (NIST) adopted a function called

Secure Hash Algorithm-1(SHA-1) in 1995, which

produces 160-bit hashes (Gayoso Martinez et al.

2020). However, many international organizations

and institutions abandoned it after its collisions were

found (Gayoso Martinez et al. 2020).Another

function that also offers 160-bit hashes is the RACE

Integrity Primitives Evaluation Message

Digest(RIPEMD-160) function which was designed

in 1996 and its collision resistance has not been

compromised, so the function is still utilized in

certain situations today. Then the SHA-2 Hash

Family Standard, which includes SHA-256, SHA-

384, and SHA-512, was introduced by the NIST in

2002 (Sun et al. 2007). Its implementation has the

ability to replace the MD5 and SHA-1 hash functions

in an efficient manner, resulting in enhanced

protection strength (Sun et al. 2007). In addition to

hash algorithm, there is an asymmetric encryption

algorithm in bitcoin called Elliptic Curve Digital

Signature Algorithm (ECDSA), which has gained

popularity in this day and age. Meanwhile, some new

research has been done to optimize the existing

algorithms and develop a higher security based on

bitcoin today.

The rise of cryptocurrency is unquestionably

poised to have a substantial impact on the global

economic landscape (Fauzi et al. 2020). Bitcoin

encryption ensures the security and stability of the

Internet. It not only is a digital currency, but also

provides a creative innovation in the future. Therefore,

it is necessary to summarize the encryption algorithm

of bitcoin and its development, which is the aim of

this paper. The rest of this review paper is divided into

three sections. Section 2 investigates some main

bitcoin encryption algorithms. Section 3 discusses

some defects, current development and future

prospects of bitcoin encryption. Finally, conclusions

are presented in Section 4.

2 MAIN BITCOIN ENCRYPTION

ALGORITHMS

2.1 Framework of Encryption

Algorithm Related to the Bitcoin

The hash function that is mainly used technology for

encryption algorithm in the bitcoin has been applied

in widespread fields such as communication, finance,

and confidential computation as a fundamental

cryptographic algorithm (Yang et al. 2017). There are

some obvious features of hash functions: the

information being provided can be any length, while

the outcome has a set length; fast calculating speed;

hiding and one-way. Furthermore, hash functions

have the quality of collision resistance which refers

that finding any two diverse inputs x, y, then making

H(x)=H(y) is computationally infeasible. The initial

hash functions were suggested for application in

digital signature protocols with the aim of enhancing

their efficiency. This was achieved by constructing

signatures using the digest of data elements rather

than the entire elements (Gayoso Martinez et al.

2020). Digital signature has played a more and more

important role nowadays due to its feature of

unforgeability and non-repudiation.

Another encryption algorithm used in bitcoin is

ECDSA which is an asymmetric cryptography system.

The ECDSA is a simulation of digital signature

algorithm (DSA) using Elliptic Curve Cryptography

(ECC) (Abidi et al. 2014). The process of ECDSA

mainly involves three distinct phases and ECDSA

provides integrity, authentication, and non-

repudiation. The safety of ECDSA algorithms is the

primary factor determining the cybersecurity of

Bitcoin (Wang 2014).

2.2 Hash Functions

2.2.1 SHA-256

For any length of message, a 256-bit long hash value

will be generated, known as the message digest. The

process of the algorithm includes two sections:

preprocessing and digest computing (Algredo-

Badillo et al. 2013).

The preprocessing is required to add additional bits

to the message until it reaches a size that is a multiple

of 512 bits. Subsequently, the padded message is

divided into N message blocks, denoted as

𝑀



,𝑀



,...,𝑀



, with each block having a size of 512

bits. The specific implementation method is to

append a bit 1 and k bits 0 at the end of the message

Exploration and Discussion for Bitcoin Encryption Algorithms

to satisfy L  1  k  448 mod 512 (The "L" stands

for the original message's length, expressed in bits.)

(Kammoun et al. 2020). It is vital to emphasize that

padding is still required, regardless of whether the

message’s initial length has become a multiple of 512

(Kammoun et al. 2020). So, Padding is to add at least

one character, up to a maximum of 512 characters.

Then, to reflect the length of the initial text, the end

of the message need insert 64 more bits. Finally, the

padded message is broken into n blocks of 512-bit.

Fig. 1 depicts the particular procedure.

Figure 1: Preprocessing in SHA-256 (Original).

Following the completion of the padding phase, the

8 state registers A to H are set to predetermined 32-

bit constants h0 to h7 for the initial message block

(Gilbert & Handschuh 2003). The eight hash original

values are shown in Fig. 2. The second step is to break

each block into sixteen 32-bit big-endian words:

𝑊



,…,𝑊



, and expand them into 64 words 𝑊



𝑊



, One for each iteration of the compression

function (Gilbert & Handschuh 2003). The message's

corresponding block breaks down the first 16 words

immediately, then the remaining words can be

computed by the formula (Gilbert & Handschuh

2003): 𝑊



𝜎



𝑊



 2𝑊



 7 𝜎



𝑊





15𝑊



 16 (where σ



x



x⨁R



x⨁S



x and σ



x



x⨁R



x⨁S



x). Finally, 64 iterations for

the compression function which operates on a 512-bit

block generated by the padding process need to be

executed using some intricate formulas and 64 fixed

constants K



. Fig. 3 illustrates the process.

Figure 2: Eight original hash values which have been

defined in advance so they can be used directly (Original).

Figure 3: The process of 64 iterations in SHA-256.𝐾



is the

t th key, corresponding to the 64 fixed constants. Four

formulas have been shown and ⋀ , ⨁ ,  respectively

represent the bitwise AND, bitwise XOR and bitwise

NOT.𝑅



,𝑆



are respectively right rotation and right shift n

bits (Picture credit: Original).

2.2.2 RIPEMD-160

The input format of RIPEMD-160 is similar to that of

SHA-256 which based on MD5, and generates a 160-

bit output (Ng et al. 2004). Firstly, the message that

was entered needs to be padded to make sure the

overall input size is a multiple of 512 bits and the

method is identical with that of SHA-256(appending

a single 1 followed by a sequence of 0s, with the

number of 0s ranging from 0 to 511) and each block

is divided into 16 32-bit words. Each word is used as

a block, and 5 words are input each time to enter a

hash operation, then a hash value with 32 bits is

output.5 32-bit hash values will be gained after all the

blocks are computed and a 160-bit hash value can be

obtained when connecting them together (Preneel et

al. 1997).

Fig. 4 reveals the operation of RIPEMD-160.Each

5 32-bit words does the operation 16 times. In each

iteration, there are two concurrent lines, and five

distinct non-linear functions that correspond to the

five rounds. When the left and right wheel each

calculate 80 rounds of the operation, the value of the

chaining variable is modified by incorporating the

five preceding variables values, five succeeding

variables values and the present value of the chaining

variable (Ng et al. 2004).

ICDSE 2024 - International Conference on Data Science and Engineering

Figure 4: Operation of RIPEMD-160 (Picture credit:

Original).

The basic operation is the same in each round, the

difference is only in the F function which is called

compression function. The input of F is 32  3 

96bits,but the output is only 32bits.The output after

each computation is computed as the input for the

next round,transforming the F function every 16 turns

until the end of the fifth round of 16.The input word

is denoted as 𝑋



, and 𝐾



represents one of the ten

32-bit constants utilized in the algorithm which have

been defined in advance. 𝑆



is indicative of the 4-bit

control for the left rotation operation, and “≪ 10”

signifies a 10-bit left cyclic shift operation.

2.3 SCDSA

In the ECDSA, the process of Generating and

verifying signatures closely resembles that of the

DSA algorithm, and creating key is derived from the

ECC algorithm (Wang 2014).

2.3.1 Key Creation

The key couple of an entity A is linked to a specific

set of elliptic curve domain parameters D= (q, FR, a,

b, G, n, h). The method to generate cryptographically

secure domain parameters has been thrown light on

(Johnson et al. 2001). Every entity A carries out the

subsequent actions:

1) Choose a random integer d that satisfy 1 ≦ d ≦

n  1.

2) Compute Q  dG.

3)The public key of A is Q, and its private key is d.

2.3.2 Signature Generation

The step is to exploit the domain parameters of A and

private key d to sign a given message M. The process

is shown below (Wang 2014; Algredo-Badillo et al.

2013):

1) Select an arbitrary integer k (1 ≦ k ≦ n  1).

2) Compute kG 







and r  x



mod n(Return to step 1 if r  0).

3)Compute s  k





SHA  1





 dr



mod n

(Return to step 1 if s  0).

4) The signature of A for the message M is(r,s).

2.3.3 Signature Verification

B has the public global domain parameters D=(q, FR,

a, b, G, n, h) and the public key Q of A. After

receiving the message which sent by A and the digital

signature, the verification is followed:

1) Check whether r and s are integers from 1 to n-

2) Calculate w  s



mod n.

3) Calculate 𝑢



𝑆𝐻𝐴1



𝑀



𝑤 𝑚𝑜𝑑 𝑛 and

𝑢



𝑟𝑤 𝑚𝑜𝑑 𝑛.

4) Calculate X  u



G  u



Q .If X  0 ,then reject

the signature. Otherwise, transform x



into an

integer when X 







and calculate v 



mod n.

5) When v  r,accept A’s signature.

3 DISCUSSION

SHA-256 provides higher security than MD5 and

SHA-1 thanks to its more intricate process that

provides resistance to various attacks. Moreover, it is

not viable for some attack techniques to assault SHA-

256 such as Chabaud and Joux’s attack, Dobbertin’s

Attack and Differential Attacks (Gilbert &

Handschuh 2003). However, its slower operational

speed is a notable drawback, making the process quite

time-intensive. Many researches have challenged its

collision resistance. Besides, making minor

adjustments to the SHA-2 criteria leads to a hash

function that lacks collision resistance, such as

Symmetric Constants and Exor (Gilbert &

Handschuh 2003). The RIPEMD-160 algorithm is

utilized for the creation of the bitcoin account in

conjunction with SHA-256 today. Although

numerous hash algorithms within the MD-SHA hash

family have been compromised, RIPEMD-160

continues to be resilient (Liu et al. 2023). There are a

wide range of applications in bitcoin encryption

algorithms based on hash functions because of their

evident advantages such as the blockchain and cyber

security domain. The RIPEMD-160 has high

computing speed performance and can complete the

hash calculation of a large amount of data in a short

time, while there are still certain limitations. For

instance, with the development of quantum

computing technology, the algorithm may face the

risk of quantum attack. The most advanced collision

attack was able to penetrate only 34 out of 80 rounds,

Exploration and Discussion for Bitcoin Encryption Algorithms

as reported in the CRYPTO 2019 conference (Liu et

al. 2023). Meanwhile, a new collision attack on

RIPEMD-160 using a novel approach for selecting

variations in messaging and implementing new

methods to effectively manage differing conditions in

parallel across both branches has been reported in the

paper. As a result, persistent evaluation and

improvement should be valued.

As for ECDSA algorithm, it has garnered

significant interest from researchers since its

incomparable advantages over other public key

cryptographic algorithms, so various institutions due

to their ability to offer security and high efficiency in

applications e.g. electronic finance, online

transportation, education and so on. Algorithms

utilizing elliptic curves offer significantly higher

strength-per-key-bit and the unit bit power of the

cryptography exceeds compared to that of other

public key schemes. The algorithms boost security

measures against a range of attacks while also

enhancing system efficiency in speed, recall, and

decreasing computing complexity and energy

consumption within resource-constrained and large-

scale systems (Al-Zubaidie et al. 2019).

Not only researchers have implemented many

optimizations on existing encryption algorithms, but

also some new technologies have appeared to

increase protections. For instance, ciphertext-policy

hierarchical attribute-based encryption (CP-HABE)

has been developed to keep users’ privacy from

illegal users when an illegal transaction happens. In

this scheme, a novel signature algorithm is employed

to create wallet key pairs, replacing the elliptic curve

signature, thereby linking wallet addresses with

encrypted identities. The implement process has been

demonstrated clearly and it is resistant for chosen-

plaintext attacks (CPA) in the standard model,

adapting the Bilinear Diffie-Hellman Exponent

(BDHE) presumption (Wang & Gao 2018). Moving

forward, the researchers will more concentrate on the

domain and enhance the quality of the algorithms.

Meanwhile, the majorization of the existing bitcoin

encryption algorithms should also be a main research

topic especially for the collision resistance and

calculation speed.

4 CONCLUSION

This paper described bitcoin and its importance as

well as development. Besides, the detailed implement

process of some main bitcoin encryption algorithms

was provided, including SHA-256, RIPEMD-260 and

ECDSA. Then, the current advantages and limitations

of these algorithms have been shown and this paper

discussed some new cryptography based on bitcoin.

However, this article did not contain some new

domains which combining bitcoin with other

emerging fields like AI models and machine learning.

A more thorough investigation and more specialized

article will be planned to completed in the future.

REFERENCES

M. Rahouti, K. Xiong, and N. Ghani. Bitcoin concepts,

threats, and machine-learning security solutions.Ieee

Access 6: 67189-67205(2018).

C. Vyas and M. Lunagaria. Security concerns and issues for

bitcoin. Int. J. Comput. Appl, 10-12(2014).

G. Dumitrescu. Bitcoin–a brief analysis of the advantages

and disadvantages. Global Economic Observer, 5(2):

63-71(2017).

J. Ducrée. Satoshi Nakamoto and the Origins of Bitcoin--

Narratio in Nomine, Datis et Numeris. arXiv preprint

arXiv:2206.10257 (2022).

X. Wang, H. Yu. How to break MD5 and other hash

functions. Annual international conference on the

theory and applications of cryptographic techniques.

Berlin, Heidelberg: Springer Berlin Heidelberg, 19-

35(2005).

V. Gayoso Martinez, L. Hernández-Álvarez,L. Hernandez

Encinas. Analysis of the cryptographic tools for

blockchain and bitcoin. Mathematics, 8(1): 131(2020).

W. Sun, H. Guo, H. He, et al. Design and optimized

implementation of the SHA-2 (256, 384, 512) hash

algorithms. 2007 7th International Conference on

ASIC. IEEE, 858-861(2007).

M. Fauzi, N. Paiman, Z. Othman. Bitcoin and

cryptocurrency: Challenges, opportunities and future

works. The Journal of Asian Finance, Economics and

Business (JAFEB), 7(8): 695-704(2020).

Y. Yang, F. Chen, X. Zhang, et al. Research on the hash

function structures and its application. Wireless

Personal Communications, 94: 2969-2985(2017).

A. Abidi, B. Bouallegue, F. Kahri. Implementation of

elliptic curve digital signature algorithm (ECDSA).

2014 Global Summit on Computer & Information

Technology (GSCIT). IEEE, 1-6(2014).

D. Wang. Secure implementation of ECDSA signatures in

bitcoin. MSc in Information Security (2014): 1-78.

I. Algredo-Badillo, C. Feregrino-Uribe, R. Cumplido, et al.

FPGA-based implementation alternatives for the inner

loop of the Secure Hash Algorithm SHA-256.

Microprocessors and Microsystems, 37(6-7): 750-

757(2013).

M. Kammoun,M. Elleuchi,M. Abid, et al. FPGA-based

implementation of the SHA-256 hash algorithm. 2020

IEEE international conference on design & test of

integrated micro & nano-systems (DTS). IEEE, 1-6

(2020).

H. Gilbert, H. Handschuh. Security analysis of SHA-256

and sisters. International workshop on selected areas in

ICDSE 2024 - International Conference on Data Science and Engineering

cryptography. Berlin, Heidelberg: Springer Berlin

Heidelberg, 175-193 (2003).

C. Ng, T. Ng, K. Yip. A unified architecture of MD5 and

RIPEMD-160 hash algorithms. 2004 IEEE

International Symposium on Circuits and Systems

(ISCAS). IEEE, 2: II-889(2004).

B. Preneel, A. Bosselaers, and H. Dobbertin. The

cryptographic hash function RIPEMD-160. (1997): 9-

14.

D. Johnson, A. Menezes, S. Vanstone. The elliptic curve

digital signature algorithm (ECDSA). International

journal of information security, 1: 36-63(2001).

F. Liu, et al. Analysis of RIPEMD-160: New Collision

Attacks and Finding Characteristics with

MILP. Annual International Conference on the Theory

and Applications of Cryptographic Techniques. Cham:

Springer Nature Switzerland (2023).

M. Al-Zubaidie,Z. Zhang, and J. Zhang. Efficient and

secure ECDSA algorithm and its applications: A

survey. arXiv preprint arXiv:1902.10313 (2019).

Y. Wang, and J. Gao. A regulation scheme based on the

ciphertext-policy hierarchical attribute-based

encryption in bitcoin system. IEEE Access 6 (2018):

16267-16278.

Exploration and Discussion for Bitcoin Encryption Algorithms