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66BLOCKCHAIN AND CRYPTOCURRENCY Krylov A.V.1, Gritsai I.P.2
'Krylov Alexey Vladimirovich — Student, FACULTY OF IT-SYSTEMS AND TECHNOLOGIES; 2Gritsay Irina Petrovna - Senior Lecturer, DEPARTMENT OF SCIENTIFIC TECHNICAL TRANSLATION AND PROFESSIONAL COMMUNICATION,
DON STATE TECHNICAL UNIVERSITY, ROSTOV-ON-DON
Abstract: this article contains information about Blockchain history, the notion and history of Bitcoin, perspectives of Bitcoin regulation and risks of Bitcoin. This papier pays much attention to the system and work of blockchain, cryptography and cryprocurrency work.
Keywords: bitcoin regulation, blockchain, bitcoin, transaction, private key cryptography, a distributed network, a shared ledge, an incentive to service the network's transactions, record-keeping and security.
History of Blockchain
A lot of the technologies we now actively use were quiet revolutions in their time. Just think about how much smartphones have changed the way we live and work. It used to be that when people were out of the office, they were gone, because a telephone was tied to a place, not to a person. Now we have global nomads building new businesses straight from their phones. And to think: Smartphones have been around for merely a decade.
We're now in the midst of another quiet revolution: blockchain, a distributed database that maintains a continuously growing list of ordered records, called "blocks." Consider the history of this technology.
Bitcoin
The first major blockchain innovation was bitcoin. This is the most popular cryptocurrency. The market cap of bitcoin now hovers between $10-$20 billion dollars, and is used by millions of people for payments, including a large and growing remittances market. In November 2016 bitcoin cost an average of $ 751, but in November 2017 bitcoin cost an average of $ 7641. It is an amazing increase.
In 2008, Satoshi Nakamoto (Personality of this person is unknown) published a white-paper called Bitcoin: A Peer to Peer Electronic Cash System. In this paper, he argued that he had solved the issue of double-spend for digital currency via a distributed database that combined cryptography, game theory, and computer science. Satoshi's creation was a huge innovation because it enabled one entity to confidently transact value directly with another entity without relying on a trusted third party to stand between them.
To illustrate the issue of double-spend, consider purchasing a book from internet with a credit card. You are using digital cash to purchase that book. Because digital cash consists of a digital file it can be duplicated, which is why an institution (often a bank) needs to verify these transactions. Sending bitcoins is like transferring a book from hand to hand. You hand it over and you no longer possess it. Remember, money is not just coins or banknotes, it's basically trust. Money is arguably the most efficient and universal system of mutual trust ever invented. In countries such as Argentina and Venezuela where inflation is astronomical, Bitcoin is used to pay for some goods. Bitcoin may become a de facto store of value similar to Gold and can be viewed as a hedge against instability and inflation. The way Satoshi set up the protocol, Bitcoin is issued every 10 minutes until the total supply equals 21 million Bitcoins. There will only ever be 21 million Bitcoins, a hard money rule similar to the gold standard (i.e., a system in which the money supply is fixed to a commodity and not determined by government) and roughly two thirds have been released. Given the set number of bitcoins in circulation and the expected future funds pouring into the asset class, it's possible that Bitcoin could reach a price 10-20 multiples higher than its current value. Bitcoin is largely uncorrelated to other asset class, which means a movement in another asset class will not strongly affect Bitcoin. Many consider Bitcoin's meteoric rise to be a bubble and the Bitcoin price to be heavily inflated. Bitcoin have many problems.
Bitcoin faces scaling issues. Currently, the Bitcoin blockchain can process roughly 7 transactions per second. For context, Visa can do 1000s. Without getting too deep into the technical details, the Bitcoin community is split over how to solve this scaling issue. A new method of computation has been proposed by some but others have threatened to copy and paste the Bitcoin codebase and start a rival coin, if this new method of computation is adopted.
Many countries have indicated their intention to regulate Bitcoin and Japan recently introduced some legislation to do the same. It's unclear whether Bitcoin will be regulated as a currency and how governments will react.
A few investors known as "whales" own enough Bitcoin to move the market at will. Chinese investors own a significant portion of Bitcoin.
There aren't many places you can actually spend Bitcoin while going about your everyday life. You can't, for example, buy food in most grocery stores.
Blockchain
In 2014, public attention was shifted to blockchain (the technology on which bitcoin is based). Though Bitcoin and blockchain are often referred to interchangeably, that's incorrect. Bitcoin is built on a version of a blockchain. A blockchain is an open, decentralized ledger that can record transactions between two parties efficiently and in a verifiable and permanent way without the need for a central authority. The key qualities of this distributed ledger are that it is time-stamped, transparent (anyone can see the ledger of transactions), and decentralized (the ledger exists on multiple computers, often referred to as nodes).
The second innovation was called blockchain, which was essentially the realization that the underlying technology that operated bitcoin could be separated from the currency and used for all kinds of other interorganizational cooperation. Almost every major financial institution in the world is doing blockchain research at the moment, and 15% of banks are expected to be using blockchain in 2017.
Many have hailed blockchain technology as revolutionary and claim it has the potential to dramatically lower the cost of transactions, just as the protocols of the Internet lowered the cost of connection. Take, for instance, a typical stock transaction. The transaction can be executed in microseconds but the settlement—the ownership transfer of the stock -usually takes a week. This is because the parties have no access to each other ledgers and therefore can't automatically verify that the assets are in fact owned and can be transferred. A number of intermediaries (banks, government) act as guarantors of assets as the transaction is verified and the ledgers individually updated.
After that, many new crypto-currencies appeared, for example: ZCash, Ethereum, Ethereum classic and others...
How it works
Blockchain it is a technology of blocks. This technology is similar to Parallelization of tasks technology "Execution speed is also dependent on an enabled computer architecture, operating parallel processors, competently composed algorithm for solving tasks and subtasks, and the style of writing programs." [2]
This technology consists of three technologies:
1) private key cryptography
2) a distributed network with a shared ledge
3) an incentive to service the network's transactions, record-keeping and security.
Cryptographic keys
Two people wish to transact over the internet. They hold a private key and public key. The main purpose of this component of blockchain technology is to create a secure digital identity reference. Identity is based on possession of a combination of private and public cryptographic keys. The combination of these keys can be seen as a dexterous form of consent, creating an extremely useful digital signature. In turn, this digital signature provides strong control of ownership.
A Distributed Network
But strong control of ownership is not enough to secure digital relationships. While authentication is solved, it must be combined with a means of approving transactions and permissions (authorisation). For blockchains, this begins with a distributed network.
The benefit and need for a distributed network can be understood by the 'if a tree falls in the forest' thought experiment. If a tree falls in a forest, with cameras to record its fall, we can be pretty certain that the tree fell. We have visual evidence, even if the particulars (why or how) may be unclear. Much of the value of the bitcoin blockchain is that it is a large network where participants in the transaction , like the cameras in the analogy, reach a consensus that they witnessed the same thing at the same time. Instead of cameras, they use mathematical verification. The size of the network is important to secure the network.
System of record and protocol
When cryptographic keys are combined with this network, a super useful form of digital interactions emerges. The process begins with A taking their private key, making an announcement of some sort — in the case of bitcoin, that you are sending a sum of the cryptocurrency — and attach it to B's public key. A block - containing a digital signature, timestamp and relevant information - is then broadcast to all nodes in the network.
Network servicins protocol
How do you attract computing power to service the network to make it secure? If you offering your computer processing power to service the network, then you get a reward (for example bitcoin). A person's self-interest is being used to help service the public need. It is called "mining"
This is how bitcoin seeks to act as gold, as property. Bitcoins and their base units (satoshis) must be unique to be owned and have value. To achieve this, the nodes serving the network create and maintain a history of transactions for each bitcoin by working to solve proof-of-work mathematical problems. They basically vote with their CPU power, expressing their agreement about new blocks or rejecting invalid blocks. When a majority of the miners arrive at the same solution, they add a new block to the chain. This block is timestamped, and can also contain data or messages. The type, amount and verification can be different for
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each blockchain. It is a matter of the blockchain's protocol - or rules for what is and is not a valid transaction, or a valid creation of a new block. The process of verification can be tailored for each blockchain. Any needed rules and incentives can be created when enough nodes arrive at a consensus on how transactions ought to be verified.
Blockchain it is a technology of the future, and this technology will be used actively in the future.
References
1. Harvard Business Review - "A Brief History of Blockchain" by Vinay Gupta.
2. increasing the speed of tasks solving by parallelization of tasks Gritsay I.P., Brook A.S. // European Journal of Natural History. 2015. № 5. C. 44.
ANALYSIS AND MANAGEMENT OF CREDIT RISKS IN THE BANKING
SECTOR Akhmer Ye.Zh.
Akhmer Yerassyl Zhanbolatuly — Master Student, SPECIALTY: INFORMATION SYSTEMS, INTERNATIONAL INFORMATION TECHNOLOGY UNIVERSITY, ALMATY, KAZAKHSTAN
Abstract: in the current macroeconomic situation, the importance of effective strategic management and risk management as factors predetermined by the stability of credit institutions was fully manifested. Currently, for the banking sector the most significant is the credit risk. The solution of the problem of minimizing credit risks today is necessary in legislative, methodological and organizational terms. A comprehensive development of this problem is required, therefore, reducing credit risks is not only extremely urgent, but also a difficult economic task.
Keywords: banking system, credit risk, credit score.
In the current situation, the most important problem for banks is the evaluation and analysis of the risks of loan portfolios, as an increase in the share of problem loans affects the positions held by the bank in the credit market. For successful lending, banks must develop and implement effective credit risk management systems. Modern research is increasingly focused on identifying factors that can have the greatest impact on the formation of key performance indicators of the bank, such as profit, interest margin and net worth. The main goal of any business activity is, as you know, and profit maximization, which should be based on a thorough and in-depth evaluation of all the factors that influence it. That is why the problem of risk analysis becomes particularly important.
Crediting to customers is one of the main activities of any commercial bank. Recently, the credit activity of banks has become increasingly diverse: old loan products are being modified, new ones appear on the market, and customers require a more careful, individual approach to the formation of complex credit products. This all makes the credit activity of banks more diverse, and the risks associated with lending activities are more complex and large in scope.
Credit is one of the main elements of bank assets, even a slight decrease in the value of the loan portfolio will lead to serious losses of capital. Credit operations are the most profitable article of the banking business. At the same time, the structure and quality of the loan portfolio are linked to the main risks to which the bank is exposed in the course of operating activities. Among them, the central place is taken by credit risk (or the risk that the borrower does not repay principal and interest on the loan in accordance with the terms and conditions of the loan agreement). The profitability of a commercial bank is directly dependent on this type of risk, since the cost of the credit part of the bank's portfolio of assets is largely influenced by the non-return or partial repayment of loans, which in turn affects the bank's own capital [1].
Credit risk is formed from factors that may lie on the borrower's side and on the side of the bank. The factors that lie on the borrower's side include, for example, the creditworthiness and the nature of the concluded loan transaction. The factors that lie on the side of the bank include the organization of the credit process.
Credit risk is a complex concept. Its magnitude in the country is affected by both macro- and microeconomic factors. Macroeconomic factors include: the general state of the country's economy, the conditions for the functioning of the country's main financial markets and banking system, the degree of development of banking legislation and the state's policy in the banking business. The impact of microeconomic factors, such as the risk of a specific borrower, the share of overdue loans, the quality of collateral, etc., is due to transactions conducted by a specific bank. Limiting the negative impact of these factors is the task of bank managers who, in the current
