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Contents
A history of digital currencies. 4 
Why ‘Cryptocurrencies’? 4 

A Guide to Blockchain 5 
So what is “Blockchain”? 6 
Security 7 
Blockchain and Energy consumption 7 

What are Nodes? 8 

What is mining? 9 
The Mining Rig 10 
How does a mining rig work? 10 
What is a Hash? 11 
What is Hash rate? 11 

What is a Merkle Tree? 12 

Blockchain payments 13 

Other uses of blockchain technology 14 

Bitcoin 15 
How many Bitcoins are there? 15 
Who is Satoshi Nakamoto? 15 

Ethereum 16 
How many Ether are there? 16 

Bitcoin Cash 17 

Litecoin 17 

NEO 17 

Dash 17 

Qtum 17 

Monero 17 

Ethereum Classic 18 

Cryptocurrency Market Volatility 18 

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Note: This material has been prepared for informational purposes only, and is not intended to provide,
and should not be relied on for, investment advice. You should consult your a qualified financial
advisor before engaging in any transaction.

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A history of digital currencies.
 
The concept of digital currencies is not new. Many attempts were made during the technology boom 
of the 90s using a Trusted Third Party approach but for various reasons such as fraud, financial 
problems and personal conflicts, these companies failed, and with them the digital currency.  
 
You have no doubt heard of, and probably even used, PayPal. Paypal was launched with ambitions 
to be a digital currency, but morphed into a digital payments system. 
 
Peter Thiel, co-founder of PayPal: 

“PayPal  had  these  goals  of  creating  a  new  currency.  We  failed  at  that,  and  we 
just created a new payment system.” ​[​SOURCE​] 

Why ‘Cryptocurrencies’?
 
The record keeping consensus process is secured with strong cryptography which masks everything 
with a complicated code that can only be understood with the public or private keys. 
 

Built on basic cryptography every Cryptocurrency transaction is a file containing the public keys 
(wallet addresses) of the sender and recipient and the amount of coins transferred. The transaction 
also needs to be signed with a private key by the sender. In a cryptocurrency network ‘miners’ solve 
a cryptographic puzzle to confirm transactions by using their own computer processing power. The 
miner receives a reward, plus a transaction fee in return. The transaction needs marked as legitimate 
before it is broadcast to the network. When a transaction is confirmed every node in the network 
adds it to its database and it becomes permanent, irreversible and unforgeable. 
 
Cryptocurrency networks are based on absolute consensus that balances and transactions made are 
completely legitimate. If nodes on the network were to disagree on any balance, the system would 
not function. There are pre-built rules programmed into the network to prevent this type of crash 
occurring. 

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A Guide to Blockchain
 
One critical thing that a payment network need to ensure does not happen is spending the same 
amount twice or “double-spending”, as it is known. Traditionally, a trusted third party controlling a 
central server to keep records of 
transactions and balances, was 
the only solution.  
 
An authority in control of the 
funds and personal details of the 
users is required for this to work, 
and this is what we see in 
traditional banking systems 
closely controlled by governments 
and banks, who make 
considerable profits from being 
the ‘middleman’ in this arrangement.   
 
Blockchain offers a fresh alternative to the traditional banking model with no Trusted 3rd Party 
blockchain relies on consensus to verify transactions. 

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So what is “Blockchain”?
 
As the name suggests Blockchain has blocks connected by a chain. A chain of blocks containing 
digital information. Each block has a code called a hash. A hash is a set of characters (eg. 
“1hi715A719H” ) made up of the information contained in the block. 
 
The next block contains the previous block’s hash and that joins them permanently together in an 
unchangeable sequence.  
 
As the first Block in the chain cannot contain the hash of a previous block, this is called the genesis 
block. Here is a simplified diagram of a blockchain.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Blockchains are complex which, in real world terms, means slow they can process just 7 transactions 
a second, but those transactions could take several hours to verify.   
 

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Security
 
If someone tried to change one of the blocks the next block would not contain the correct hash so the 
chain would break. 
 
Even if someone were successful in maliciously updating all the subsequent blocks, as there is no 
single copy where the data is stored all the nodes in the chain wouldn't be the same. A copy of the 
program and the data is stored on every computer in the chain and updated by executing all the 
programs. Therefore if erroneous changes occur the majority would overrule and disregard the 
malicious changes. But of course only 51% is enough to be a majority, so if 51% of the nodes were 
compromised, the information they hold would be considered true. This was a known flaw at the 
inception of blockchain and is so called the “51% Attack”.  
 
So like everything in life, Blockchain is not 100% safe. With no central server to store the data if 
every computer in the chain were to go down the chain would be dead.  
 

Blockchain and Energy consumption

Opponents of Blockchain or more specifically cryptocurrencies, are quick to point out one major 
downside of blockchain, it is energy inefficient. As they are distributed systems that constantly 
re-record data on every node, this is data which they have already have, but to ensure consensus 
and security, each time a transaction in the ledger is created every node has to rewrite their copy of 
the distributed ledger. This means the bigger they grow the more energy they consume. And mining 
exponentially consumes more and more power as more miners join, the more complex the ‘puzzles’ 
become, the more energy is required to make the growing number of hashes. 

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What are Nodes?
 
A node is a powerful computer that runs the cryptocurrency software and keeps the blockchain alive. 
Running a node is as simple as downloading free software and configuring a normal computer, with 
enough storage space and processing power, and setting its connection to leave a certain port open. 
Running a node consumes a lot of energy and storage space. One of the biggest costs to mining is 
the electricity running costs and the high end processor. Graphics cards have been proved as best 
suited processors for mining. And some of the top hardware vendors such as NVIDIA are launching 
graphics cards specifically geared towards the task of mining crypto. 
 
Nodes send information about cryptocurrency transactions across the network by sending to other 
nodes that it is aware of. A node doesn’t need to know all the nodes in the chain. But each node that 
a node is aware of is aware of different nodes and so the network grows and the information goes 
across the entire network quick quickly. 
 
Not all nodes are involved in the task of mining some just spread the information. 
 
The Mining nodes run the task of grouping outstanding transactions into blocks and adding them to 
the blockchain by solving a complex mathematical puzzle in the cryptocurrency software. The puzzle 
is to find a number that is the result of combining the data in the block and passing it through what is 
called a hash function. This produces an integer (number) which is called a nonce. Each 
cryptocurrency will have a range that all the nonces will be between. For example the range for 
Bitcoin is 0 and 4,294,967,296. 
 
The hash function disguises the number and makes it impossible to predict the output so a miner 
actually has to guess the number and apply the hash function to a combination of that number and 
the data in the block.  
 
It is impossible to know which number will work. Two consecutive integers produce very different 
results and there may be more than one nonce that produces the result, or none. 
 
When a miner gets a hash result within the target range the success is announced to the whole 
network and the miner gets rewarded some new crypto coins for the success. Other miners in the 
network stop working on that block and start searching for the number for the next block.  
 
 

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What is mining?
 
We know that digital or cryptocurrencies are not something we can touch so we can easily guess 
that mining is not the same physical process as mining for coal or mining for precious metals. But 
many people don’t understand the process or even why do we call it mining? 
 
Cryptocurrency exists but needs discovering, we don't know exactly where it is. So in that way it is 
similar to mining. Cryptocurrencies exist in their protocol's design (like gold or diamonds exist 
underground), but they haven't been discovered or revealed yet (again like gold or Diamonds).  
 
We know that the Bitcoin protocol is coded so that a total of 21 million bitcoins will exist at some 
point. What "miners" do is discover or reveal them, a few at a time. Cryptocoin designers do not 
need to limit the number, but there are many reasons why they might choose to. 
 
Miners are give a known partial input and they must guess the hashed output which is derived from 
the current state of the blockchain. It is completely random so there is no way to mathematically 
predict the output. The miners need to guess by trying many different combinations containing the 
known ’partial’ input and the required number of zeros at the end. As you can imagine, this requires 
many attempts to correctly guess so computers are used to generated and try many variations until 
the correct one is discovered. 
 
New cryptocurrencies are revealed as a reward for the creating validated transaction blocks and 
adding them into the blockchain. It is this incentive that miners receive that ensures that they all 
agree on the ledger being correct. 
 
Before any transaction on the network is processed it must be validated, to be validated miners must 
‘guess’ the key. The key allows the transaction to be added to the open ledger. Guessing the key 
enables the miner who guessed it first to re-publish the ledger with the new transaction added and 
receive a financial reward (usually paid in the cryptocurrency of the blockchain). The other miners 
can no longer earn a reward from that transaction, so they want to start work on the next 
transaction. In order to do that they need to accept the new ledger and they add it to their own 
distributed copy. 
 
The more miners that join the network, the more complicated the hash becomes. This is to balance 
the number of blocks that can be found. On average one block every 10 mins is allowed. 
 

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The Mining Rig
 
A Mining rig is the computer used to mine 
cryptocurrency. A rig can be dedicated for that 
purpose or a computer used for other tasks 
and put to work, mining when not in use. A 
mining rig can be an expensive sophisticated 
computer or it could be a homemade ensemble 
built with affordable graphics cards. The more 
powerful a rig is the more hashes it can 
process per second and the more successful it 
will be. 
 
Miners can join together to combine resources 
in a mining pool 

How does a mining rig work?

 
Mining rigs work by using mining software to link the hardware to a pool of miners and pointing its 
hash rate at the pool and joining in verifying and completing transactions on the network. 
Rewards are given when a rig helps the pool of computers add a block to the blockchain. 
 
There are two different different types of mining rig 
CPU mining rigs and GPU mining rigs. With the latter being more common now, due to better 
performance. It can still be worthwhile mining newer alt coins with a CPU rig. But as it is slower it 
generally a less profitable method. 
 
A GPU mining rig uses a high end graphics card, which has more hashing power than a CPU rig, and 
can be used to mine different cryptocurrencies with different hashing algorithms. 
 
An efficient GPU rig can be expensive. 
 

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What is a Hash?
The first thing to note about a hash is that it is a ‘one way’ 
function. 
 
A Hash function is an algorithm that can be run on a digital 
record and it will output a string of numbers and text. This is 
called a Hash. A digital record can be anything from a video, 
document or details of a transaction. In fact, any file on a 
computer. This is because whenever a computer reads or 
processes any ‘file’ it just sees as a series of 0 and 1. This is 
called Binary and is the basis of all computer related things. 
 
Each time the same ‘file’ is put through the hash function it will output exactly the same result. 
But if the file is changed even in the slightest way, (like adding a comma in a book) then the output 
would be completely different. Therefore is impossible to process in the opposite direction and find 
out the original content from the hash. 
 

What is Hash rate?

 
Hash rate is the number of calculations per second that the hardware can perform every second. 
Hash rates are measured in megahashes (MH/s), gigahashes (GH/s), and terahashes (TH/s) per 
second. 
 
A crypto mining rig needs a high hashrate to have more chance of winning the race to secure and 
verify transactions. 
 
Mining consumes a lot of power and electricity costs are consequently quite high. 
 
So Basically the Hash rate is the number of guesses per second that the mining rig can perform 

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What is a Merkle Tree?
A Merkle tree is part of a blockchain that is essential to verify the integrity of data. 
 
Blocks in the chain can contain multiple transactions for example if 
a block contains 4 transactions each transaction is passed through 
a hash function to produce four hashes.  
 
These four hashes are each combined into pairs and put through 
the hash function to produce two hashes and these two hashes are 
again put through the hash function to produce a root hash.  
 
The root hash can be used to verify any of the transactions and this 
set of hashes is called a M
​ erkle Tree​. 
 
There is a Merkle root in every block made-up from the hashes of all 
its transactions. 
 

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Blockchain payments
The following diagram shows the simplified process for sending a payment using a blockchain based 
digital currency, such as Bitcoin. The scenario is that Person A wants to send Person B some money.   
 

 
In this diagram the concept and function of miners is not shown. Their role would appear within the 
network approving and validating the transaction. Miners are effectively competing for the chance to 
approve the transaction and claim the reward. Everyone in the network validates the transaction, 
then starts work on the next block. 

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Other uses of blockchain technology
Blockchain apps don’t have to be just payments systems or cryptocurrencies. It could be anything, 
like a social network, a learning platform anything where you are looking to remove the ‘trusted’ third 
party.  
 
Blockchain can be used to decentralise other things besides banking, as we migrate more and more 
data to the ‘cloud’ prevalent blockchain offers additional security and less reliance on vulnerable 
centralised companies who ultimately control the security of, and cost of, storage. 
 
Peer to peer messaging, social networking, and websites, can leverage blockchain encryption for 
security, resilience to censorship, and even to provide dynamic customized content to visitors. 
 
Verifiable and auditable voting systems could use blockchain technology to ensure voting is 
tamperproof and legitimate. Blockchain can be applied to pretty much any situation requiring proof of 
ownership from property to works of art as advanced protection against theft. 
 
   

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Bitcoin 
 
In 2009 Bitcoin was introduced to the world by Satoshi Nakamoto an alias for a programmer or 
group of programmers. They described Bitcoin as a ‘peer-to-peer electronic cash system.’ The 
difference between Bitcoin and previous attempts at creating digital currencies was that there are no 
3rd Parties in the loop. 
 
Bitcoin is decentralized, this means there are no servers, no central controlling authority. In a 
decentralized network of this type, rather than one authority controlling the funds and trans actions, 
every single participant needs to do this job. 
 
If there is no controlling authority, how do we know who has funds and when transactions occur? 
Bitcoin solved this by implementing a public ledger, available to everyone, of all the transactions 
within the network, that have ever taken place. The Blockchain. Therefore, everyone in the network 
can see the balance of every account. 
 

How many Bitcoins are there?

By the second quarter of 2018 there are over 17 Million Bitcoins in circulation. On the Day of its 
launch, 3rd Jan 2009, 50 coins were mined a Year late 1.6 Million, 2 years later over 5 Million. But 
there is a finite number of bitcoins that can be mined it is estimated that about 85% of the total 
number of Bitcoins have already been mined. But the number of Bitcoins is capped only 21 million 
Bitcoins that can be mined in total. Once miners have unlocked this many Bitcoins, unless Bitcoin's 
protocol is changed there will never be anymore available. 
 

Who is Satoshi Nakamoto? 

Satoshi Nakamoto is the name, noted as the author of the scientific work describing the theoretical 
foundations of bitcoin is not know if it is a real person or pseudonym. Nakamoto is the name on a 
Peer-2-Peer profile, which also reads that he is a man born on 5 April 1975 who lives in Japan. 
An Australian security expert named Craig Steven Wright has claimed to be the elusive Nakamoto, 
then later denied and refused to prove or disprove it. I should be noted that in 2015 the Australian 
government raided his apartment and he slipped through the net. 
Nakamoto did not invent blockchain, but he was (or they were) the first to apply the concept to a 
digital currency. 

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Ethereum
Developing a new blockchain and building your a community of miners and users would be difficult 
and this is where Ethereum has additional functionality over Bitcoin. It Is programmable currency 
that can host code and let developers build distributed applications, issue their own tokens. 
Ethereum takes care of the heavy work by its ability to host your code. Of course you need to pay a 
fee for this which varies depending on the computational costs but it is a major advantage in some 
instances.   

How many Ether are there?

Ethereum Coins are called Ether and unlike Bitcoin there is no cap on the total number of coins 
available. However, there is one restriction - only 18 million Ether can be mined every year.  
 
 

Ripple
Does not use Blockchain and you can't mine it, it is designed to be a method of payment transfer, not 
a payment currency. XRP is designed especially for Financial Institutions and Payment Companies. 
As a Blockchain-less cryptocurrency it uses an iterative consensus process, which is faster than 
Bitcoin but less secure. 
 
 

NEM  

NEM stands for New Economy Movement and is a peer-to-peer network that uses a 
proof-of-importance(POI) protocol that facilitates currency, messages, assets, and smart contracts. 
Proof of Importance, requires users to already have coins in order to get new ones. 
NEM is the platform. . XEM is the currency used on the platform. NEM was built 100% from scratch 
in java and javascript, it is not a fork of an existing blockchain cryptocurrency.  
 

IOTA  

Is not actually a cryptocurrency it is a crypto token designed to integrate an altered blockchain to the 
“Internet of Things”, maximizing the efficiency of the payments made between IoT devices. It uses 
‘Tangle’, not blockchain to approve two transactions, the work of the nodes is assured by companies 
like cryptocurrency exchange. Therefore, there are no miners, and it is proving that it can function 
well without users’ fees. 

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Bitcoin Cash
A quickly growing and relatively new player that is a fork of Bitcoin and supported by a Bitcoin 
mining company and manufacturer of ASICs Bitcoin mining chips.  
 

Litecoin
If bitcoin is ‘digital gold’ Litecoin is ‘digital silver’. Also a fork of Bitcoin, but can generate blocks four 
times faster and four times the maximum number of coins. 
 

NEO
A Chinese developed smart contract network allowing all financial contracts and third-party 
distributed apps to be developed on it. It is similar to Ethereum. 
 

Dash
A two-tier network. Tier One is for miners that record transactions,and secure the network. Tier two 
contains ‘masternodes’ that relay transactions. 
 

Qtum
Brings together Bitcoin’s and Ethereum’s technologies targeting business applications. Basically 
Bitcoin’s reliability smart contracts and distributed applications. 
 

Monero
This cryptocurrency is open and privacy-focused and allows private transactions. It has an active 
community. 
 

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Ethereum Classic
An original version of Ethereum. Reborn after a decentralized organisation built on the original 
Ethereum was hacked. 

Cryptocurrency Market Volatility

 
In late 2017 Cryptocurrency was thrust into mainstream vocabulary when the value of Bitcoin soared 
in value and created frenzied interest in crypto. Some conspiracy theorists now claim that maybe this 
was the biggest scam in history. You see the funny thing about a digital currency is that it ONLY has 
value, if people think it has value. True, the same thing could be said for many things, take gold for 
example. If people didn’t agree that it was valuable, the price would drop. But the difference 
between gold and digital currency is that gold would still have some value, it is a tangible material 
and shiny. Digital currencies on the other hand are intangible. Take the perception of value out of 
them and what you have left is... nothing 
 
You may have heard of Tulipmania or in Dutch Tulpenwindhandel, when 17th-century holland was in 
a frenzy about the speculative buying of tulip bulbs. The Crypto currency market has been, likened, 
by some to tulips This is the reason the value of currencies like bitcoin seem unpredictable and 
fluctuate so much. Whenever a country bans or releases a statement that they are considering 
banning it the perception of its value goes down, people worry maybe it will crash and when people 
start to panic sell, this is when it will plummet. 
 

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