The development of blockchain has led to the emergence and widespread use of decentralized cryptocurrencies around the globe. As of 2021, the global market capitalization of cryptocurrencies has crossed two trillion dollars. With increasing popularity and adoption, investors have begun to see cryptocurrencies as an alternative to conventional financial assets. However, the volatility associated with cryptocurrencies makes them a highly risky investment. This gives rise to the need for accurate and efficient price prediction models which can help reduce risks associated with cryptocurrency investments. The model aims at predicting the price of two popular cryptocurrencies: Bitcoin and Ethereum. Tensor processing unit (TPU) is used for providing a distributed environment for the proposed model. The results show that the distributed TPU-trained model performed significantly better than the conventional CPU-trained model in terms of training time while maintaining a high degree of accuracy.
TopIntroduction
The exchange of services and commodities has taken place through a variety of means and mediums throughout the history of human civilization. The majority of these are physical in nature, such as a metal coin or paper currency. However, with the advancement of technology, particularly computer and internet technology, a digital mode of transaction has emerged. When it comes to physical currency transactions, most financial institutions and governments encourage people to use online payment because it is a safe and quick method of doing so. This type of currency usage is an attempt to digitize physical currency through the use of the internet. In recent years, complete and true digital currencies (i.e., those that have no physical form) have also been introduced from time to time in various forms. Most of these digital currencies are completely virtual and intangible, with just a small number of tangible counterparts. Bitcoin and other digital tokens are referred to as cryptocurrency, where the term “crypto” refers to complex cryptography that allows a particular digital token to be generated, stored, and transacted safely as well as, in many cases, anonymously. These digital currencies allow for instantaneous and borderless transactions between their respective holders.
Bitcoin is world's first decentralized cryptocurrency and first practical implementation of blockchain technology. Since its launch in 2009, Bitcoin has revolutionized the technical and financial world. As of 2021, Bitcoin has market capitalization of over 1 trillion USD making it world’s largest cryptocurrency by market capitalization (CoinMarketCap, 2021).
Value of Bitcoin has grown tremendously over past decade, going from less than 2500 USD in 2014 to more than 10000 USD in 2020 as depicted in Weighted Price Graph in Figure 1.
Figure 1. Bitcoin weighted price graph
Specialty of Bitcoin is its algorithm that limits its quantity to 21 million and ensures that all the payments are irreversible and anonymous. Apart from immutability and anonymity, another key characteristic of Bitcoin is decentralization. Decentralization implies that there is no central regulatory authority or any other financial institutions in charge of looking after Bitcoin network's administration. Bitcoin is rather managed by a protocol that is maintained in a peer-to-peer system by a community of people, with no requirement for a third party intervention. To ensure consistency and authenticity of transactions, all transactions must first be validated by network nodes before they can be stored in form of blocks on the Bitcoin’s blockchain, which is a publicly accessible distributed ledger. This process of validation and addition of new transaction is known as mining. Mining is carried out using a mechanism called Proof-of-Work. Proof-of-Work requires complex computational problem to be solved in order to add new blocks on blockchain. Bitcoins are produced as a prize for participating in Proof-of-Work process, in which users give their system’s computational power in exchange for the ability to verify as well as record transactions onto the Bitcoin’s blockchain.
Bitcoins are held in a wallet, which contains cryptographic credentials for the user’s Bitcoin holdings and allows users to access them when they log into their respective account. Wallet makes use of public-key cryptography, which generates two keys, one public and one private, for each transaction. The public key may be compared to an account number or a name, whereas the private key can be compared to ownership credentials. Once an owner transfers possession of Bitcoin to a new owner, the prior owner uses their private key to publish a record into the system declaring that the ownership has been transferred to the new public key, thus transferring ownership of Bitcoin to the new owner. (Oyamada & Nakadai, 2017). Similar to Bitcoin, Ethereum is a popular cryptocurrency. It is world’s second largest cryptocurrency by market capitalization. As of 2021, it has a market capitalization of more than 400 billion USD, second only to Bitcoin (CoinMarketCap, 2021). Ethereum was conceptualized as an open source blockchain by Vitalik Buterin in 2013. The main aim of Ethereum is to provide an efficient platform for development of decentralized applications. One of the key features of Ethereum is Smart Contracts which make it a suitable platform for implementation of various use cases in different domains.