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1
BLOCKCHAIN AND CRYPTOCURRENCY
JEAN AMYOT
3
JEAN AMYOT
No part of this publication may be copied, reproduced in any format, by any means,
electronic or otherwise, without prior consent from the copyright owner and publisher of
this book.
Contents
Introduction ......................................................................................................................... 6
Chapter one: Bitcoin ........................................................................................................... 7
Chapter two: Ethereum ..................................................................................................... 10
Chapter three: Litecoin ..................................................................................................... 12
Chapter four: Initial coin offering ..................................................................................... 14
Chapter five: Application of Blockchain Technology ...................................................... 17
References ......................................................................................................................... 19
5
Introduction
Blockchain history
The Blockchain was initially defined in the original source code for Bitcoin. Bitcoin
is a virtual currency that was invented in October 2008 and the code was
released as open source in January 2009. The Bitcoin network started in 2009
when Satoshi Nakamoto mined the first Bitcoins. Bitcoin progressed over the
years but really took off in the year 2013 because more websites began
accepting the currency as investors started funding more Bitcon-related start-
ups.
As Bitcoin’s popularity soared, it faced scrutiny from law enforcement.
Blockchain as a technology
The times when Bitcoin was the only existing Blockchain, there was little
difference between the terms and they could be used interchangeably. As the
technology matured and a wide spectrum of Blockchains flourished, the uses
rapidly diverged from the pure money aspect.
Units used
The unit of account of the Bitcoin system is Bitcoin. As per the year 2014, tickers
used to represent Bitcoin were BTC and XBT.
Bitcoin history
On the 18th of August, 2008, the domain name Bitcoin.org was registered. Later
on in November of that same year, a link to a paper that was authored by Satoshi
Nakamoto was posted to a cryptography mailing list. Nakamoto then
implemented the Bitcoin software as an open source code and released it in
January 2009.
In January 2009, the Bitcoin network came into existence after Satoshi
Nakamoto mined the first ever block on the chain, which was referred to as the
genesis block for a reward of fifty Bitcoins. One of the initial supporters, adopters,
contributors and receivers of the first Bitcoin transaction was Hal Finney, a
programmer. He downloaded the Bitcoin software the day it was released and
received ten Bitcoins from Nakamoto in the world’s first Bitcoin transaction.
Other early supporters included Wei Dai, creator of Bitcoin predecessor b-
money, and Nick Szabo, the creator of bit gold. Nakamoto was estimated to have
mined one million Bitcoins when he started off. He then handed over the
leadership to a developer known as Gavin Andresen who went on to become
Bitcoin’s lead developer at the Bitcoin foundation.
On the 6th of August, 2010, a major loop-hole in the Bitcoin protocol was realized;
transactions were not efficiently verified before they were included in the
Blockchain and this enabled users to bypass Bitcoin’s restrictions and create an
indefinite number of Bitcoins.
On the 15th of August, the vulnerability was exploited and over 184 billion
Bitcoins were generated in a transaction and sent to two addresses on the
network. Fortunately, the transaction was realized within hours and erased from
7
the transaction log after the bug was fixed and the network upgraded to an
updated version of the Bitcoin protocol.
On the 1st of August, 2017, Bitcoin was split into two derivative digital currencies;
the classic Bitcoin (BTC) and a hard fork, Bitcoin cash (BCH).
Transactions
They are defined by forth-like scripting language and consist of one or more
inputs as well as outputs. When a user sends Bitcoins, the user designates each
address and the amount of Bitcoin being sent to that address in an output. So as
to avoid double spending, each input must refer to a previous unspent output
within the Blockchain.
The use of multiple inputs corresponds to the use of multiple coins in a cash
transaction. Due to the multiple outputs in a transaction, users can send Bitcoins
to multiple recipients in one transaction. Just like in a cash transaction, the sum
of inputs (the coins used for payment) can exceed the targeted sum of payments.
In case this happens, an extra output is used, returning the change back to the
payer.
Transaction fees
An actual Bitcoin transaction includes the fee from a web-based Cryptocurrency
exchange to a hardware wallet even though the transaction fee is optional.
Miners can therefore choose which transactions to process and give priority to
ones that pay higher fees. The fees are based on the size of storage of the
generated transaction, which in turn depends on the number of inputs used to
create the transaction. Moreover, priority is given to older unspent inputs.
Ownership
Bitcoins are registered to Bitcoin addresses. To create a Bitcoin address, you
pick a random but valid private key and compute the corresponding Bitcoin
address. This process takes seconds. On the other hand, computing a private
key from a Bitcoin address is mathematically impossible. For one to spend
Bitcoins, he or she must know the corresponding private key and digitally sign
the transaction. The network then verifies the signature using the public key.
If you lose your private key, the Bitcoin network cannot recognize any other
evidence of ownership and this renders the coins unusable and they are
eventually lost. For instance, in the year 2013, a user claimed to have lost 7,500
Bitcoins worth $7.5 million when he accidentally discarded a hard drive that had
his private key.
Mining
This is a service for record keeping that is done using computer processing
power. Miners keep the Blockchain consistent, complete and unalterable by
regularly verifying and collecting newly broadcast transactions into a new group
of transactions called a block.
Every block contains a cryptographic hash of the previous block using the SHA-
256 hashing algorithm which links it to the previous block and giving the
Blockchain its name. To be accepted by the rest of the network, a new block
must have a proof of work which requires miners to find a number called nonce
such that when the block content is hashed along with the nonce, the result is
numerically smaller than the network’s difficulty target.
This is the process of adding transaction records to Bitcoin’s public ledger of past
transactions or Blockchain. Bitcoin mining is intentionally tailored to be resource-
intensive and hard so that the number of blocks found each day by miners is
always steady.
9
Chapter two: Ethereum
Smart contract
This is a phrase that is used to describe computer code that can facilitate the
exchange of money, content, property, shares or anything of value. When
running on the Blockchain, a smart contract is similar to a self-operating
computer program that automatically executes when specific conditions are met.
Even though all Blockchains have the ability to process code, a majority of them
are greatly limited. Ethereum is different though; instead of giving a set of limited
operations, it allows developers to create whichever operations they desire.
Uses of Ethereum
It enables developers to create and deploy decentralized applications which
serve some specific purpose to its users. Benefits of decentralized networks
include:
Immutability
Corruption and tamper
Security
Any centralized services can be decentralized using Ethereum. Furthermore,
Ethereum can also be used to build Decentralized Autonomous Organizations
(DAO). DAO is a fully autonomous and decentralized organization with no single
leader.
DAOs are run by programming codes on a collection of smart contracts written
on the Ethereum Blockchain. The code is designed to replace the rules and
structures of traditional organization as well as eliminating the need for people
and centralized control. A DAO is owned by everyone who buys tokens but rather
than each token being equal to equity shares and ownership, they act as
contributions that offer people the rights to vote.
11
Chapter three: Litecoin
This refers to a peer to peer Cryptocurrency and open source software project
released under the MIT/X11 license. The creation and transfer of coins is based
on an open source cryptographic protocol and is not under one central
administration. Even though this is nearly similar to Bitcoin, Litecoin has some
technical differences as compared to Bitcoin as well as other major
Cryptocurrencies.
Litecoin’s uniqueness allows for a greater number of transactions to be
processed by the network within a given time, thereby reducing potential
bottlenecks. Additionally, Litecoin has almost nil payment costs and facilitates
payments roughly four times faster than Bitcoin.
Brief history
Litecoin was released through an open source client on GitHub on October 7,
2011 by a former Google employee, Charlie Lee. This network went live on
October 13 of the same year. Litecoin was a fork of the Bitcoin core client and
differed by having a reduced block generation period, increased number of coins
and the hashing algorithm was also slightly altered.
During the month of November 2013, the total value of Litecoin experienced
great growth which included a 100% rise within a day. In May 2017, Litecoin
became the first of the top five, by market cap, Cryptocurrencies to adopt
Segregated Witness.
Chan
Volume Circulatin
# Name Market Cap Price ge Price Graph (7d)
(24h) g Supply
(24h)
-
$96,030,884 $5767. $1,844,850 16,649,800
Bitcoin 2.96
,962 69 ,000 BTC
%
-
Ethereu $28,141,310 $295.1 $275,165,0 95,355,806
1.05
m ,000 2 00 ETH
%
-
$7,816,122, $0.202 $34,092,00 38,531,538
Ripple 0.86
670 850 0 ,922 XRP *
%
Bitcoin $5,951,367, $355.7 $426,134,0 16,727,050 4.86
Cash 301 9 00 BCH %
-
$2,959,602, $83,609,20 53,559,607
Litecoin $55.26 2.27
140 0 LTC
%
-
$2,148,812, $281.0 $40,060,00 7,646,504
Dash 1.59
946 2 0 DASH
%
-
$1,776,591, $0.197 8,999,999,
NEM $4,477,710 1.44
000 399 999 XEM *
%
-
BitConn $1,552,088, $212.3 $13,751,10 7,310,449
2.75
ect 818 1 0 BCC
%
$1,430,185, $30,988,90 50,000,000 0.95
NEO $28.60
000 0 NEO * %
-
$1,334,510, $30,501,50 15,274,000
Monero $87.37 1.62
804 0 XMR
%
13
Chapter four: Initial coin offering
Characteristics of an ICO
Each ICO is unique in its own way but there are common similarities:
The project is a technology project associated with Cryptocurrencies or
decentralization.
Investor documents are normally a webpage, whitepaper and selected
internet forum posts.
Identification is light on both sides.
The raised amount is transparent but can be gamed.
Has a tier or early investor advantage.
Coin retention and price discovery.
Minimums and maximums.
Pros of ICO’s
1. Liquidity- investors can trade tokens in secondary markets instead of
having value locked up in a company’s equity. A vibrant secondary market
also means investors can get real-time pricing based on the progress of a
company, as understood by the crowd. This potentially brings greater
transparency to an otherwise secretive private market with very little
disclosure.
2. Democratization- ICO’s promise to break the monopoly on money and
democratize funding.
3. More social enterprise- ICO provides a way to aggregate enough financial
muscle to compete with the centralized sharing economy.
4. Increases virality gained from word of mouth consequently reducing the
need for expensive marketing and user acquisition.
5. They also offer an outlet to invest profits from Bitcoin or Ether, converted
into a crypto-token which in turn adds to their scarcity and pushes up the
price thereby creating a self-reinforcing loop.
Cons of ICOs
1. Liquidity- as much this as an advantage, it is also a challenge. The guys
you back can pull out at the point of ICO before any real value has been
delivered or gradually dump their holdings over time ahead of the market if
they have a feeling things will not work out.
2. Misalignment of incentive and inefficiency of capital- liquidity issue leads
to this. ICOs potentially make entrepreneurs too comfy too soon.
Moreover, it is common that ICOs are oversubscribed and provide a
surplus of capital which will most likely be spent creating a market
inefficiency. Additionally, ICOs offer no way of knowing if early investors
still have faith in the team.
3. Timing and pressure of going public- I am of the view that most start-ups
are naïve when it comes to ICO. They are not aware of Crowdfunding
implications.
4. Quality control/ fraud/ scams
5. Regulation is poor.
ICO Reports
1. SENSE
Sensay is a cross-platform messaging app and bot network that allows users and
communities to connect through routing them to each other as required. This is
among the first Blockchain-based smart contracts through a token which rewards
a community of knowledge workers for their conversational contributions across
Sensay and or any other application in the ecosystem.
The Crowdsale starts on November 7th, 2017 and ends on November 21st, 2017.
It will take place through a widget that will appear on the website when the
Crowdsale begins. The price per SENSE token is $0.10.
Social Media
Facebook: https://www.facebook.com/sensaybot/
Twitter: https://twitter.com/sensay
Telegram: https://t.me/joinchat/AAAAAEQzTJW8N35CcmHlZA
Bitcointalk:https://Bitcointalk.org/index.php?topic=2096600.msg20951702#msg2
0951702
Reddit: https://www.reddit.com/r/SENSEtoken/
2. AGORA
Holding Agora tokens permits you, approximately every thirty days, to withdraw a
gain made by a fee applied to every transaction made over the marketplace.
15
Social Media
Twitter: https://twitter.com/TheAgoraICO
Facebook: https://www.facebook.com/TheAgoraICO/
Slack: https://theagoramarketplace.slack.com/
Reddit: https://www.reddit.com/r/TheAgoraMarketplace/
BitcoinTalk: https://Bitcointalk.org/index.php?topic=2066979.0
3. GAMEFLIP
This is at the forefront of addressing the demand for liquidity for digital goods
through the decentralized ecosystem where digital goods on all gaming platforms
such as mobile, PC, console etc. additionally, Gameflip is dedicated in creating a
transparent, safe and frictionless infrastructure for the buying and selling of digital
goods among gamers.
The Crowdsale will begin on the 28th of November, 2017 at 19:00 UTC and ends
on the 30th of December, 2017 at 19:00 UTC. The price per FLIP is 200 FLIP per
Ether.
Social Media
Telegram: https://t.me/flip_token
Bitcointalk: https://Bitcointalk.org/index.php?topic=2234801.new
Github: https://github.com/Gameflip/tokensale
Chapter five: Application of Blockchain Technology
Notary
Since a small amount of data can be attached to a transaction record, using the
Bitcoin Blockchain as a notary service is simple and affordable. For as little as $2
worth of Bitcoin, you can notarize the date and time you publish for example your
essay about Blockchain applications in PR.
Through apps like Uproov, Smartphone multimedia can be notarized immediately
after creation.
17
research your options to find the one that is best for you. The popular wallets are
Blockchain, Coinbase and change Tip.
Cryptocurrency Predictions
Siluk, Shirley (2 June 2013). "June 2 "M Day" promotes millibitcoin as unit of
choice". CoinDesk. Archived from the original on 7 August 2017. Retrieved 25
May 2017.
Jason Mick (12 June 2011). "Cracking the Bitcoin: Digging Into a $131M
USD Virtual Currency". Daily Tech. Archived from the original on 20
January 2013. Retrieved 30 September 2012.
Ron Dorit; Adi Shamir (2012). "Quantitative Analysis of the Full Bitcoin
Transaction Graph" (PDF). Cryptology ePrint Archive. Archived (PDF)
from the original on 21 October 2012. Retrieved 18 October 2012.
Jerry Brito & Andrea Castillo (2013). "Bitcoin: A Primer for Policymakers"
(PDF). Mercatus Center. George Mason University. Archived (PDF) from
the original on 21 September 2013. Retrieved 22 October 2013.
19
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