Contents 

I​ ntroduction 3 
History 3 
How does cryptocurrency work? 5 
What is Blockchain? 6 
How does a Blockchain work? 7 
Most common cryptocurrencies: 8 
Cryptocurrency Mining 9 
Cryptocurrency Trading 10 
Cryptocurrency market cap 10 
How to store? 1​0 
How to buy? 1​1 
Benefits of Cryptocurrency 1​1 
Drawbacks of Cryptocurrency 1​2 
Future of Cryptocurrency 1​2 
References 1​3 

 
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Introduction 

A  cryptocurrency  is  a  digital  or  virtual  currency  intended  to  function  as  a  means  of 
exchange.  It  uses  cryptography  to  secure  and  verify  transactions,  and  to  control  the 
creation  of  new  cryptocurrency  units.  Cryptocurrencies  are  simply  small  entries  in  a 
database that nobody can alter unless strict criteria are met. 

History 

In the tech boom of the 90s there were many attempts to establish a digital currency, 
with systems such as Flooz, Beenz and DigiCash coming on the market but eventually 
failing. There have been many different reasons for their failures, such as fraud, 
financial issues and even friction between employees of companies and their bosses. 

Notably, all these systems used a Trusted Third Party approach , meaning that the 
underlying companies checked and facilitated the transactions. For a long time, the 
invention of a digital cash system was viewed as a lost cause due to the failures of 
such businesses. 

Then, Bitcoin was created in early 2009 by an anonymous programmer or a group of 
programmers under an alias Satoshi Nakamoto. Satoshi described it as a 'peer-to - 
peer electronic cash system.' It's completely decentralized, meaning no servers are 

 
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involved and no central controlling authority is involved. The definition is closely 
analogous to peer-to - peer file sharing networks. 

Double-spending is one of the most significant issues any payment network has to 
solve. This is a dishonest tactic of investing twice the same amount. The conventional 
solution was a trusted third party-a central repository-which held the balances and 
transactions records. However, this method always entailed an authority basically in 
control of your funds and with all your personal details on hand. 

Every single participant needs to do that job in a decentralized network like Bitcoin. 
This is achieved through the Blockchain-a public ledger of all transactions that have 
ever taken place within the network, open to everyone. Thus, everybody in the 
network can see the balance of every account. 

Each transaction is a file consisting of the public keys (wallet addresses) of the sender 
and recipient, and the amount of coins transferred. The sender also needs to sign off 
the transaction with their private key. All this is just simple cryptography. The 
transaction will eventually be broadcast on the network but it needs to be confirmed 
first. 

Only miners can confirm transactions within a crypto-currency network by solving a 

cryptographic puzzle. They take transactions, mark them as legitimate and disperse 
them across the network. Each network node then adds it to their database. It is 
unforgeable and irreversible until the transaction is verified and a miner earns a 
payout, plus the transaction fees. 

Essentially, every cryptocurrency network is based on the absolute consensus of all 

participants on balance and transaction legitimacy. If network nodes disagree on a 
single balance, the system will ultimately break down. There are however a lot of 
pre-constructed and programmed rules in the network that prevents this from 
happening. 

Cryptocurrencies are so-called, since strong cryptography ensures the 

consensus-keeping process. This, along with the aforementioned factors, makes the 
idea of blind trust and third parties fully redundant. 

 
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How does cryptocurrency work? 

 
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What is Blockchain? 
To exclude third parties from their processes, all cryptocurrencies use distributed 
ledger technology ( DLT). DLTs are shared databases which record transaction 
information. The DLT most used for cryptocurrencies is called the blockchain 
technology. Satoshi Nakamoto designed the first blockchain for Bitcoin. 
 
A blockchain is a database of every transaction that has ever occurred using a 
particular crypto-currency. Data classes called blocks are added one by one to the 
database, creating a very long list. So, a blockchain is a linear block-chain! When 
blockchain information is added it can not be deleted or modified. It remains on the 
blockchain forever and can be seen by everyone. 

The entire database is stored on a network of thousands of so-called nodes. You can 
only add new information to the blockchain if more than half of the nodes agree that 
it's true and right. That is what is called consensus. One of the major differences 
between cryptocurrency and normal banking is the idea of consensus. 

How does a Blockchain work? 

 
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Most common cryptocurrencies: 

● Bitcoin​ — the first crypto-currency ever to start it all. 

● Ethereum​ — A complete programmable currency that allows developers to 

build various distributed applications and technologies that would not work with 
Bitcoin. 

● Ripple ​— Unlike most cryptocurrencies, it does not use a Blockchain to reach a 

consensus for transactions across the network. Instead, there is an iterative 
consensus mechanism that makes it cheaper than Bitcoin but more vulnerable 
to hacker attacks. 

● Bitcoin Cash​ — A Bitcoin fork that is supported by the largest Bitcoin mining 
company and a Bitcoin mining chip manufacturer of ASICs. It has existed only 
for a few months but in terms of market cap, it has already soared to the top five 
cryptocurrencies. 

● NEM​ — Unlike most other cryptocurrencies that use a Proof of Work algorithm, 
it uses Proof of Importance which requires users to already possess certain 
quantities of coins to be able to obtain new ones. It allows users to invest their 
funds and monitors the transactions to assess how important a single user is to 
the NEM network as a whole. 

● Litecoin​ — A cryptocurrency developed with the goal of being the 'digital silver' 
compared to Bitcoin's 'digital gold.' It's just a bitcoin fork, but unlike its ancestor, 
it can produce blocks four times faster and have a maximum number of coins at 
84 mln four times greater. 

● IOTA​ — The breakthrough ledger technology for this cryptocurrency is called 

'Tangle' and requires the sender to do a Proof of Work that approves two 
transactions in a transaction. Thus, IOTA took committed miners off the cycle. 

● NEO​ — It's a smart contract network that allows all sorts of financial contracts 
and applications distributed by third parties to be built on top of that. It has 
many of the same objectives as Ethereum, but it is built in China, which due to 
strengthened ties with Chinese regulators and local businesses may potentially 
give it some advantages. 

● Dash​- It 's a network with two tiers. The first tier is miners who secure network 

 
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transactions and record transactions, while the second tier consists of 
'masternodes' which relay transactions and allow transaction type InstantSend 
and PrivateSend. The former is much quicker than Bitcoin, while the latter is 
totally anonymous. 

● Qtum​ — It's a combination of the technologies used by Bitcoin and Ethereum to 
address business applications. The network promises the stability of Bitcoin, 
while allowing for the use of smart contracts and distributed software, much of 
how it functions within the Ethereum network. 

● Monero​ — A cryptocurrency with capabilities for private transactions, and one of 
the most involved groups due to its transparent and privacy-focused values. 

● Ethereum Classic​- An original Ethereum version. The split occurred after 

hacking a decentralized autonomous organisation, built on top of the original 
Ethereum. 

Cryptocurrency Mining 

Cryptocurrency mining, or cryptomining, is a 

process in which transactions are verified 
and added to the digital blockchain ledger 
for various forms of crypto-currency. 

Each time a cryptocurrency transaction is 

made, it is the responsibility of a 
cryptocurrency miner to ensure authenticity 
of the information and update the 
blockchain with the transaction. The mining 
method itself involves competing with other 
cryptominers to overcome complicated mathematical problems associated with 
cryptographic hash functions associated with a block containing the transaction data. 

 
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Cryptocurrency Trading 
Buying and selling cryptocurrencies has become a very big business. The total value 
of all the cryptocurrencies in the world is more than 350 billion US Dollars. 

Cryptocurrency market cap 

(stats retrieved on Nov. 10, 2017) 

Name  Market Cap  Price  Volume  Circulating  Change 

Supply  (24hrs) 

Bitcoin  $112,735,453,9 $6760.9 $5,136,770,0 16,674,425  -5.43% 

36  8  00  BTC 

Ethere $29,227,540,7 $305.58  $894,988,00 95,647,370  -4.84% 

um  06  0  ETH 

Bitcoin  $15,121,119,94 $901.17  $4,500,640, 16,779,413  37.68% 

Cash  2  000  BCH 

Ripple  $8,088,155,33 $0.2099 $140,243,00 38,531,538, -3.47% 

5  10  0  922 XRP 

Litecoi $3,297,343,82 $61.33  $294,950,00 53,767,732  -5.75% 

n  5  0  LTC 

Dash  $2,601,563,98 $338.71  $115,739,00 7,680,801  3.18% 

 
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6  0  DASH 

NEO  $1,893,495,50 $29.13  $59,589,000  65,000,000  -8.16% 

0  NEO 

NEM  $1,804,086,0 $0.2004 $10,806,300  8,999,999,9 -6.32% 

00  54  99 XEM 

Moner $1,675,861,20 $109.28  $87,656,500  15,335,901  -8.11% 

o  1  XMR 

Ethere $1,457,787,43 $14.98  $299,410,00 97,318,182  5.69% 

um  9  0  ETC 
Classic 

IOTA  $1,441,775,712  $0.5187 $48,539,100  2,779,530,2 -5.46% 

12  83 MIOTA 

Qtum  $862,271,130  $11.71  $132,988,00 73,651,804   

0  QTUM 

How to store? 

Cryptocurrencies are digital, unlike most traditional currencies, which implies a 

completely different approach, especially when it comes to storing it. Technically, 
people don't store your cryptocurrency units; rather, it's the private key you are using 
to sign for transactions that need to be stored safely. 

There are several types of cryptocurrency wallets that suit different needs. People 
may want to opt for a paper or a hardware wallet if your goal is privacy. Those are the 
 
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safest ways to store your cryptofunds. There are also 'cold' (offline) wallets stored on a 
hard drive and online wallets which can be either affiliated with exchanges or 
independent platforms. 

How to buy? 

When it comes to buying Bitcoins there are a number of different choices. For 
example, nearly 1,800 Bitcoin ATMs currently exist in 58 countries. In addition, you can 
use gift cards, cryptocurrency exchanges, investment trusts to purchase BTC and you 
can even trade face-to - face. 

The purchasing options aren't as diverse when it comes to other, less common 
cryptocurrencies. There are however still numerous exchanges where you can 
purchase different crypto-coins for flat currencies or bitcoins. Also, face-to - face 
trading is a common way to acquire coins. Buying options depends on specific 
cryptocurrencies, their popularity and your location. 

Benefits of Cryptocurrency 

● No Middle Man-​Cryptocurrencies don't use middlemen, so transactions are 

usually easier, faster and require less or no additional transaction fees. 

● More Confidential​- Each cryptocurrency transaction is a unique exchange 

between two parties, which protects users from issues like identity theft. 

● Potential to help the "unbanked"- ​On a global scale, more people have access 
to the internet than they have to banks or other currency exchange systems. 
This opens the opportunity for underprivileged people to establish credit. 

● Easier international exchanges- ​Cryptocurrency offers an opportunity for 

international business people or parties to make one-on-one exchanges online 
without the complications and added fees that traditionally come with 
international currency exchanges that involve third parties. 

 
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Drawbacks of Cryptocurrency 

● Scalability​- Probably the biggest concerns with ​cryptocurrencies​ are the 

problems with scaling that are posed. While the number of digital coins and 
adoption is increasing rapidly, it is still dwarfed by the number of transactions 
that payment giant, VISA, processes each day. Additionally, the speed of a 
transaction is another important metric that cryptocurrencies cannot compete 
with on the same level as players like VISA and Mastercard until the 
infrastructure delivering these technologies is massively scaled. 

● Cybersecurity issues​- Cryptocurrencies are subject to cybersecurity breaches, 

and may fall into the hands of hackers.  

● Price volatility and lack of inherent value​-​ ​Price volatility, tied to a lack in 
inherent value, is a major problem, and one of the specifics that Buffet referred 
to specifically a few weeks ago when he characterized the cryptocurrency 
ecosystem as a bubble. It is an important concern, but one which can be 
overcome by linking the cryptocurrency value directly to tangible and intangible 
assets 
● Regulations​- Even if we improve the technology and get rid of all of the 
problems mentioned above, there will be increased risk of investing in this 
technology before the technology is implemented and controlled by federal 
governments. 

Future of Cryptocurrency 

 
If cryptocurrencies continue their upward trajectory, a restructuring in, e.g. the bank 
model, can easily be foreseen. Actually banks offer financial services and serve as 
custodians of the money of the clients. Bitcoin and blockchain technology will 
theoretically enable the performance of banking services without having to trust the 
banks with your money. 

Many potential uses of cryptocurrency include smart property (sales machines, Uber 
ridesharing service), insurance contracts, contract exchanges, notary services, escrow, 
oracle-automated transfers (sending money to A when X occurs), and others. 

 
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References 

● Retrieved from: ​https://blockgeeks.com/guides/what-is-cryptocurrency/ 

● Retrieved from: ​https://www.bitdegree.org/tutorials/what-is-cryptocurrency/ 

● Retrieved from: 

https://www.webopedia.com/TERM/C/cryptocurrency-mining.html#:~:text=Cr
yptocurrency%20mining%2C%20or%20cryptomining%2C%20is,to%20the%20bloc
kchain%20digital%20ledger.&text=In%20order%20to%20be%20competitive,a%20
computer%20with%20specialized%20hardware​. 

● Retrieved from: 

https://www.prescouter.com/2019/11/disadvantages-of-cryptocurrencies/ 

● Retrieved from: 

https://www.foxbusiness.com/money/what-are-the-benefits-of-cryptocurren
cy 

 
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