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Principles of Blockchain Protocols

In: Auditing Bitcoin

Author

Listed:
  • Wiehann Olivier

    (North-West University & Forvis Mazars South Africa, Applied Research in Management Cybernetics)

  • Pieter Buys

    (North-West University, Applied Research in Management Cybernetics)

Abstract

This chapter examines the foundational technological principles, architecture, and dynamics of the Bitcoin blockchain and its native currency to inform the development of a Bitcoin Audit Framework (BTC_AF). It explores critical audit considerations for bitcoin-associated transactions and balances, highlighting the Bitcoin blockchain’s decentralized nature. This blockchain operates without intermediaries and relies on cryptographic principles and consensus mechanisms, such as proof-of-work (PoW), to ensure security, transparency, and resilience. Key components, including transaction processing and wallet management, are analyzed, with a focus on their implications for audit evidence. Furthermore, the role of mining in maintaining network integrity is explored, addressing challenges related to a blockchain’s scalability, security, and decentralization. Advanced cryptographic features are introduced as critical tools for enhancing transaction security and enabling auditors to verify ownership and ensure data reliability. The analysis highlights the economic complexities of auditing bitcoin-associated balances and transactions. These complexities are driven by global, continuous trading and market volatility, which necessitate robust principles for accurate valuation and reporting. This chapter offers a fundamental understanding of the Bitcoin blockchain’s technical and economic intricacies, equipping auditors with the foundational knowledge to assess transaction reliability and address the unique challenges of auditing blockchain-based digital assets.

Suggested Citation

  • Wiehann Olivier & Pieter Buys, 2026. "Principles of Blockchain Protocols," Springer Books, in: Auditing Bitcoin, chapter 0, pages 31-51, Springer.
    • Handle: RePEc:spr:sprchp:978-981-95-5775-2_3
    DOI: 10.1007/978-981-95-5775-2_3
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    Keywords

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    JEL classification:

    • M15 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - IT Management
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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