Principles of Blockchain Protocols

Wiehann Olivier () and Pieter Buys ()
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Wiehann Olivier: North-West University & Forvis Mazars South Africa, Applied Research in Management Cybernetics
Pieter Buys: North-West University, Applied Research in Management Cybernetics

Chapter Chapter 3 in Auditing Bitcoin, 2026, pp 31-51 from Springer

Abstract: 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.

Keywords: Auditing; Bitcoin; Blockchain technology; Cryptographic principles; Digital assets (search for similar items in EconPapers)
JEL-codes: M15 M42 O31 O33 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-981-95-5775-2_3

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DOI: 10.1007/978-981-95-5775-2_3

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