Cryptocurrency: a quick guide to understanding cryptocurrencies by Kynchin Rivera - HTML preview

CRYPTOCURRENCY

A quick guide to understanding cryptocurrency

Kynchin Rivera

BY

Text Copyright

©2018 by Kynchin Rivera

All rights and reserved.

All rights and reserved.

This book or any portion thereof may not be reproduced or used in any manner.

Whatsoever without the express written permission of the publisher except for the

use of brief quotations in a book review.

Disclaimer Notice

Please perform the information contained in this book at your own risk.

Table of Contents

Introduction

Chapter 1

Cryptocurrency………………………………………………………………………….……2

What is Mining in Cryptocurrency?...........................................................3

Best Wallets to Try......................................................................................5

Chapter 2

Kinds of Cryptocurrencies………………………………………………………………..6

Chapter 3

Why Growing Numbers of People Invest In Cryptocurrency?.................13

Advantages and Disadvantages.…………….…………………………………………13

Best Cryptocurrency to Invest……………….…………………………………………15

Chapter 4

How Digital Currency Works in Our Daily Life?......................................16

Can it change our lives?.............................................................................16

Characteristic of Cryptocurrency..............................................................17

Chapter 5

The Future of Cryptocurrency…………………………………………….……………19

What is Blockchain?.................................................................................20

Introduction

Technology has come-up into a new level – from digital phones, tablets,

computers, and now the Digital Currency or known as the Cryptocurrency

of the new generation. Many people use debit and credit cards instead of

a physical money coming from their pocket wallets to pay for their

purchases, but there is more than a card to pay for your commodities at

this millennium, and it is actually the ‘Cryptocurrency’. Not everyone

know what cryptocurrency is, some even think that this is a scam, some

people think it’s not true until they know how is it done.

There are many types of cryptocurrency, the Bitcoin or BTC is the most

popular specially for beginners. Next to bitcoin is the Ethereum, Litecoin,

Ripple, Dash, IOTA, Monero, Zcash, Cardano, Stellar, NEM, NEO and

Tron. The said cryptocurrencies have their sorts of similarities and

differences, when it comes to uses, trading, and policies. Japan has

officially open its door for digital currencies as a mean of payment right

next to real money. Japan and South Korea drives a high traffic of

cryptocurrency exchanges according to CoinMarketCap, in fact South

Korea is making major improvements as of 2017 for more safety

transactions in the Bitcoin World.

Some says that cryptocurrencies tend to be bad because of their bubble

like characteristic. There are also people who find it very useful, in fact,

some make money from it while in the four corners of their houses. There

are lots of merchandisers and big companies that are now accepting

virtual money as a form of payment for every purchase done. Booking

flight and buying software online is also covered by virtual money, you can

now book flights and purchase software from Microsoft using Bitcoins

with hassle free transaction.

1

Chapter 1

Cryptocurrency

Cryptocurrency is a virtual currency that uses cryptography to secure

every transaction made, thus counterfeiting this kind of currency is very

impossible to do because of this security feature. The invention of the so

called digital currency is not really intended by Satoshi Nakamoto the

inventor of Bitcoin, which is the first cryptocurrency. In 2008, Nakamoto

said that he has developed a “Peer-to-Peer Electronic Cash System,” and

announced the first release of Bitcoin in 2009, which is an electronic cash

system that prevents double-spending. Bitcoin is completely

decentralized with no central authority or server.

The first cryptocurrency to run online as a virtual is Bitcoin – launched in

the year 2009 under the pseudonym Satoshi Nakamoto. As of February 6,

2016 there is about 15.2 million Bitcoins circulating in the world.

Cryptocurrency is just like a real physical money, you can keep it, spend

it, and even do an investment with it. However, cryptocurrency can be

wiped out by a system crash if a back-up copy doesn’t exist, since it is a

virtual money and it doesn’t have any central repository. Cryptocurrencies

are designed to decrease the production of money – The first

cryptocurrency Bitcoin has an ultimate cap of 21 million BTC in total.

Mean to say, there are only 21 million Bitcoins can be mined, once the

Bitcoin miners unlock this total number of BTC the supply will be totally

tapped.

Having on hand a digital money requires ‘Mining’, while others uses to

trade theirs. People behind this gigantic invention still remains a secret,

no one knows who is Satoshi Nakamoto is – can’t even figure out if it’s a

group or a single individual behind it

2

What is Mining in Cryptocurrency?

As a beginner, maybe you’re being confused of the word ‘Mining’, well to

explain this in a very simple way try to imagine golds and how they are

being mined. But before you think of buying a physical shovel and

mattock, let me explain how mining is done virtually. Crytocurrencies like

Bitcoin are mined with the use of computers. Mining requires specialized

computerswhich can find solutions to difficult math problems in order to

add a new block into the blockchain. Anyone who has access to the

internet with the right equipment’s can participate to mining and earn

bitcoin rewards.

Mining is not that easy, but it depends on how much effort you are putting

in your network. To start mining bitcoins, you need to have the all

necessary equipment’s for a more effective and successful mining process.

Things you need:

1. Get a Mining Rig- Mining rig can be costly, some chooses to

customize their own, while others often make investment of buying

the best rig to use.

2. Bitcoin Wallet- You can consider this one as an online wallet

where you can store your bitcoins etc... safely. Once you’ve signed

up for a wallet, make sure to get your wallet address – you can see it

as a long sequence of numbers and letters. In keeping your coins,

you must copy your wallet address on a sheet of paper or you can

use some storage device as your back-up in case your computer

crashes. So why you have to do this? It’s just simply because when

3

your computer crashes all your bitcoins will disappear and they will

be gone forever unless you know your wallet address.

3. Find a Mining Pool- Mining pool is a group of miners that

combines their computing powers to get more Bitcoins. Joining a

pool will give an easier and smaller algorithm to solve. But before

deciding to join a pool you have to considered few things first, and

these questions must be answered clearly.

 What is the reward method in the pool?

 How stable is the pool?

 What are the fees and charges for withdrawal?

 How easy is withdrawing funds?

 How frequent they find a block?

4. Mining Program- Choose a software depending on the equipment

you are using – when GPUs and FPGAs you must use a host

computer running these two; the standard bitcoin wallet, and the

mining software. Consider also the OS (Operating System) you are

using, for Windows the best software would be the Bitcoin Miner

and BTCMiner, for Linux you can try CG Miner BFG Miner and

EasyMiner, and if you’re using Mac OS, RPC Miner is the best for

you.

The mining software will the one to instruct the hardware to do the

work of mining.

4

5. Start Mining- All is set and you need to start the mining process,

connect your miner and power up – to start you need to put the

mining pool, username, and password. Once configured you can

now mine your first bitcoin reward.

Best Wallets to Try

1. Coinbase- This online wallet was founded by Brian Armstrong and

Fred Ehrsam in the year 2011. The company launched buy and sell

bitcoin services in October 2013 This application operates

exchanges of cryptocurrencies such as Bitcoin, Ethereum, Litecoin

and Bitcoin Cash. This cryptocurrency has already assisted 10

million customers, and transacts worth $50 billion worth of digital

currency exchanges so far according to their site.

2. Electrum- This is one of the most popular Bitcoin wallet online. It

is beneficial to both beginners and experts – Electrum focuses on

speed and simplicity using low resource of usage. This electronic

wallet can handle complicated parts of Bitcoin system by the use of

remote servers. If ever you lose the wallet online during a computer

crash, you can easily recover the wallet using a secret phrase.

3. Trezor- Trezor is the first hardware wallet in the market, and the

first to implement the passphrase feature. The passphrase feature

secures the funds and if ever the owner loss the device. Trezor is an

small device designed to protect private keys from possible hacking

online.

5

4. Nano Ledger S- This wallet support almost all the popular

cryptocurrencies and allow you to store. It has an special feature that

can store 2 kinds of currency at the same time in the same wallet,

unlike others that allows only one.

Chapter 2

Kinds of Cryptocurrency

Since bitcoin have been introduced, hundreds of cryptocurrencies enter

the market. Many alternative cryptocurrencies or altcoins have been

launched – following the success of Bitcoin, and they have grown into 700

in number. Some are being sold cheaper than Bitcoin, while some tend to

be more accessible than Bitcoin. In this section of the book – 12 of the

most popular cryptocurrencies will be told. Maybe you already heard

about Bitcoin and have some mysterious things on how it works, but this

time you will be entering the world of cryptocurrency and understand

what are the playful currencies inside cryptocurrency.

1. Bitcoin

Bitcoin is the first and most popular cryptocurrency in the world,

some are not aware of its existence but it actually stands as a

worldwide payment system. Bitcoin has no bank; in fact, it is based

on mathematical proofs. Just like the technology of E-mail, no one

owns nor control the system of Bitcoin. Even the group and person

behind it still remain a secret, only the pseudonym Satoshi

Nakamoto is has been introduced to public.

6

To have a Bitcoin on hand you have to sign up for an online wallet

first. Yes, a virtual wallet for a virtual money, there are sorts of

online wallets you can sign-up for and they’re all free to use. Next is

to buy a bitcoin directly from other people using marketplaces

online, but you can also use digital currency exchanger like

Coinbase, Kraken, Bitstamp, CEX.IO and BitFinex. Most exchanger

requires to connect any of your cards or bank accounts to make a

purchase. You can now go to the exchange’s buy section and select

the amount of bitcoin you want to buy. Bitcoin changes its value

from time to time, it can increase or decrease value – no one knows.

Bitcoin has a public ledger called ‘Blockchain’, which serves as a

record for every Bitcoin transaction. The blockchain has a growing

list records called blocks that is secured by cryptography, once the

block has been recorded they can’t be altered anymore.

Bitcoin can be used in purchasing goods, sending money, travel

booking online, and buying digital products – by this, transactions

are made with no middle man, meaning no banks involved at all.

2. Ethereum

In 2011 a programmer named Vitalik Buterin from Toronto first

grew interest on Bitcoin. Buterin, 19-year-old at that time have co-

dounded the online news website Bitcoin Magazine, and wrote

hundreds of articles about cryptocurrency world. In the year 2013

Buterin have released the white paper. Which describes an

alternative platform designed for any decentralized application a

developer wants to build. The system was then called Ethereum, just

like Bitcoin, Ethereum is also a distributed public blockchain

network. Though there are some technical differences between the

7

two cryptocurrency, because in Ethereum, miners work to earn

Ether instead of mining. Ether is a piece of code that allows the

program or application to run – no one owns Ethereum, but its

system supporting its function isn’t free. Unlike Bitcoin, Ether

doesn’t have a cap limit, in fact, 13 million Ether are mined per year.

In order to buy an Ether, you need to find online or a person who

has it and at the same time wants to trade it for cash. There is also

another option if you want to have an Ether on hand, some try to

purchase a bitcoin first from trusted bitcoin exchangers then trade

it for Ethereum.

3. Litecoin

This cryptocurrency is also generated by mining; it was created by

Google’s former engineer Charles Lee in October 2011. Litecoin is

created to enhance the speed of mining from the opposed time 10

minutes to 2.5 minutes when generating a block. The said online

currency has faster transaction than bitcoin because it uses “scrypt

algorithm”, which favors large amount of high-speed RAM that’s

why scrypt is being called as the ‘memory hard problem’. Just like

Bitcoin, the Litecoin has also its limit of 84 million coins and a

market cap of $540, 274,528.26.

 Litecoin can handle high volume of transactions

 Reduces double-spending attack

 Fast confirmation especially for merchants

8

4. Ripple

What is Ripple? Is Ripple same as Bitcoin? Well, it’s a big NO. Ripple

is a currency exchange and remittance network that uses a common

ledger managed by a network and is validated by independent

servers. The Ripple Labs, a global money transaction firm which is

former OpenCoin, was co-founded by CEO Chris Larsen and CTO

Jed McCaleb who is well-grounded in digital currency. Jed McCaleb

is currently handling the majority Bitcoin trades in the world. While

Larsen used to be the co-founder of the financial company E-LOAN

– the rest of the Ripple developers also have a background in

Bitcoin. Ripple is based on shared public database – a big difference

with Bitcoin that is generated by energy and computing intensive

proof of work. Ripple is doesn’t use the blockchain technology, the

companies goal is to keep the money flowing freely.

5. Dash

Dash was first launched as Xcoin, then changed its name into

Darkcoin, and in 2015 the Darkcoin has been rebranded into Dash,

which is now the 6th biggest cryptocurrency in the world. Dash is a

peer-to-peer cryptocurrency that was forked out from Bitcoin

engaging to a faster and more private transactions. Dash is the first

to have a decentralized blockchain governance system, just like

many cryptocurrencies Dash is also trying to solve some of the

Bitcoin’s inconveniences. It provides faster transactions and more

anonymous service to its users. Dash transactions are made within

4 seconds, far from the transaction process of Bitcoin which usually

takes 10 minutes to finish. Dash is also earned by mining, just like

Bitcoin.

9

6. Monero

Monero is a cryptocurrency that has the most anonymity when it

come to their transactions made. It is a secure and untraceable

currency system that uses special kind of cryptography for a 100%

unlikeable transaction. The Monero receives high-level of

popularity due to its privacy oriented features after it was launched

in 2014. The mining process used by Monero is based on Egalitarian

concept.

7. IOTA

The cryptocurrency IOTA is very much different from majority

online currencies – it’s designed for machine but can’t be mined.

IOTA stands for ‘Internet of Things Application, it addresses the

scalability issues of blockchain and the transaction fees at the same

time by getting rid of the block and chain. The mechanics is to

simply verify two previous transactions, in order to submit it to the

IOTA ledger. The total supply of this coins are fixed into

2,779,530,283,277,761 coins. Miners doesn’t have to power-up the

network and there is no central ledger for this cryptocurrency.

8. Zcash

Zcashis launched by Roger Ver, Barry Seibert, and the Pantera

Capital in October 28 2016.Zcash is a decentralized and open-source

cryptocurrency, it uses a special secured network called ‘zk-snark’.

This special feature allows the network to maintain and secure the

ledger without disclosing the amounts in every transaction.

10

9. Stellar

Jed McCaleb the co-founder of Ripple is the founder of this Stellar

Cryptocurrency, which is also a payment technology. Stellar is

almost the same as the other payment technologies – a

decentralized server runs the network with a distributed ledger the

is updated every 2-5 seconds. It does not only depend on miners,

instead it uses Federated Byzantine Agreement (FBA) Algorithm,

which helps for a faster transaction.

10.

NEM

NEM is launched in March 31,2015 as a peer-to-peer cryptocurrency

and blockchain platform, written in Java and C++ programing

language. NEM stands for ‘New Economy Movement’, unlike most

cryptocurrencies NEM have its own consensus algorithm. This can

prevent attacks against the network and all the trasnactions made.

NEM aims to create a smart asset blockchain, which can perform

heavy workloads.

11.

NEO

NEO is the first decentralized and opensource cryptocurrency in

China, which was founded by Da Hongfei. Neo is a cryptocurrency

and blockchain platform at the same time, it was launched in 2014

as ‘Antshares’ and debranbed last June 2017 as ‘NEO’. Neo can

support 10,000 transactions per second – using the Byzantine Fault

Tolerance (Dbft) consensus mechanism.

12.

TRON

This cryptocurrency was first introduce in September 9, 2017, and

was founded by the TRON Foundation – a non-profit organization

11

from Singapore. Tron is also a decentralized open-sourced

cryptocurrency, but has a feature of an application. Tron’s

technology is a storage facility that allows users access content in

every part of the world, without any assistance from Google Play

Store. It also allows content creators to earn from sharing their

content.

13.

Steem

Steem is a blockchain-based social media platform where you can

earn rewards. It was launched in July 2016 and currently has 70,000

users, from then Steemit has grown considerably. Steem is very

much different than the other cryptocurrencies, it has a built-in

inflation of 100% annually without any coin limit. Steem supports

online communities and even social media platforms by giving

rewards through virtual currency.

12

Chapter 3

Why Growing Numbers People Invest in

Cryptocurrency?

Nowadays many people are deciding to invest with