Professional Documents
Culture Documents
prepared By :
1- Mohamed Raheem
2- Bassant Hegazi
3- Mohamed Nour
4- Mariam
5- Dina
What is Cryptocurrency?
Simply we can say it’s a revolutionary technology that enables a new way to send
payments over the internet. You can think of it as an open accounting system where
thousands of computers all over the world work together to track ownership of
digital tokens called bitcoins.
I have been working on a new electronic cash system that fully peers to peer with no
trusted third party.
The post contained a link to a white paper in which satoshi proposed a new type of
payment system for the internet.
It described a protocol that used peer-to-peer networking prof of work and public-
key cryptography.
For years’ computer scientists had been experimenting with these technologies to
create digital money, but satoshi discovered a way to combine them that had never
been done before. In doing so he invented bitcoin.
In October of 2009, the first exchange rate was published listing the value of 1309
bitcoins at one dollar and through the following year, they continued to trade for
fractions of ascent.
In the spring of 2010, a Florida man named Lazlo decided to try using his bitcoins to
purchase something. He offered 10000 bitcoins to anyone who would buy him pizza
and a man in London accepted. we can consider it as the first transaction for tangible
goods.
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-a Tokyo-based exchange named mount gox was the first to take hold of the market
place and trading volume started to pick up by November 2010 already 4000000
bitcoins had been mined and the exchange price briefly spiked to 50 cents per coin.
The market awoke and bitcoin was starting to look like it might have real potential as
a currency.
Bitcoin (BTC) is the preeminent cryptocurrency and the first to be used widely.
However, hundreds of cryptocurrencies exist, and more spring into being every
month.
Functionally, most cryptocurrencies are variations on Bitcoin, the first widely used
cryptocurrency.
For instance, whereas a government can easily freeze or even seize a bank account
located in its jurisdiction, it’s very difficult for it to do the same with funds held in
cryptocurrency — even if the holder is a citizen or legal resident.
On the other hand, cryptocurrencies come with a host of risks and drawbacks, such
as illiquidity and value volatility, that don’t affect many fiat currencies.
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Additionally, cryptocurrencies are frequently used to facilitate gray and black market
transactions, so many countries view them with distrust or outright animosity.
It’s true that the source codes and technical controls that support and secure
cryptocurrencies are highly complex. However, laypeople are more than capable of
understanding the basic concepts and becoming informed cryptocurrency users.
Cryptography
Blockchain Technology
A cryptocurrency’s blockchain is the master public ledger that records and stores all
prior transactions and activity, validating ownership of all units of the currency at
any given point in time.
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Identical copies of the blockchain are stored in every node of the cryptocurrency’s
software network — the network of decentralized server farms, run by computer-
savvy individuals or groups of individuals known as miners, that continually record
and authenticate cryptocurrency transactions.
Unlike traditional payment processors, such as PayPal and credit cards, most
cryptocurrencies have no built-in refund or chargeback functions, although some
newer cryptocurrencies have rudimentary refund features.
During the lag time between the transaction’s initiation and finalization, the units
aren’t available for use by either party. Instead, they’re held in a sort of escrow —
limbo, for all intents and purposes.
Decentralized Control
Cryptocurrencies’ supply and value are controlled by the activities of their users and
highly complex protocols built into their governing codes, not the conscious
decisions of central banks or other regulatory authorities.
Private Keys
Every cryptocurrency holder has a private key that authenticates their identity and
allows them to exchange units. Users can make up their own private keys, which are
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formatted as whole numbers up to 78 digits long, or use a random number generator
to create one.
Once they have a key, they can obtain and spend cryptocurrency. Without the key,
the holder can’t spend or convert their cryptocurrency — rendering their holdings
worthless unless and until the key is recovered.
While this is a critical security feature that reduces theft and unauthorized use, it’s
also draconian. Losing your private key is the digital asset equivalent of throwing a
wad of cash into a trash incinerator.
Although you can create another private key and start accumulating cryptocurrency
again, you can’t recover the holdings protected by your old, lost key.
Savvy cryptocurrency users are therefore maniacally protective of their private keys,
typically storing them in multiple digital locations — although generally not Internet-
connected, for security purposes — and on paper or in other physical form.
Cryptocurrency Wallets
Wallets can be stored on the cloud, an internal hard drive, or an external storage
device. Regardless of how a wallet is stored, at least one backup is strongly
recommended.
Note that backing up a wallet doesn’t duplicate the actual cryptocurrency units,
merely the record of their existence and current ownership.
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Miners
Using vast amounts of computing power, often manifested in private server farms
owned by mining collectives that comprise dozens of individuals, miners use highly
technical methods to verify the completeness, accuracy, and security of currencies’
blockchains.
The scope of the operation is not unlike the search for new prime numbers, which
also requires tremendous amounts of computing power.
Miners’ work periodically creates new copies of the blockchain, adding recent,
previously unverified transactions that aren’t included in any previous blockchain
copy — effectively completing those transactions.
Each addition is known as a block. Blocks consist of all transactions executed since
the last new copy of the blockchain was created.
The term “miners” relates to the fact that miners’ work literally creates wealth in the
form of brand-new cryptocurrency units.
In fact, every newly created blockchain copy comes with a two-part monetary
reward: a fixed number of newly minted (“mined”) cryptocurrency units, and a
variable number of existing units collected from optional transaction fees — typically
less than 1% of the transaction value — paid by buyers.
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Although transaction fees don’t accrue to sellers, miners are permitted to prioritize
fee-loaded transactions ahead of fee-free transactions when creating new blocks,
even if the fee-free transactions came first in time.
This gives sellers an incentive to charge transaction fees, since they get paid faster by
doing so, and so it’s fairly common for cryptocurrency transactions to come with
fees.
Although it’s theoretically possible for a new blockchain copy’s previously unverified
transactions to be entirely fee-free, this almost never happens in practice.
The goal is to keep the average interval between new blockchain creations steady at
a predetermined level. Bitcoin’s is 10 minutes, for instance.
Finite Supply
Generally, this means miners receive fewer new units per new block as time goes on.
Eventually, miners will only receive transaction fees for their work, although this has
yet to happen in practice and may not for some time.
If current trends continue, observers predict that the last Bitcoin unit will be mined
sometime in the mid-22nd century, for instance — not exactly around the corner.
Cryptocurrency Exchanges
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Many lesser-used cryptocurrencies can only be exchanged through private, peer-to-
peer transfers, meaning they’re not very liquid and are hard to value relative to
other currencies — both crypto- and fiat.
These platforms allow holders to exchange their cryptocurrency holdings for major
fiat currencies like the U.S. dollar and euro, and for other cryptocurrencies, including
less-popular currencies.
In return for their services, they take a small cut of each transaction’s value —
usually less than 1%.
Cryptocurrency exchanges play a valuable role in creating liquid markets for popular
cryptocurrencies and setting their value relative to traditional currencies. You can
even trade cryptocurrency derivatives on certain crypto exchanges or track broad-
based cryptocurrency portfolios in crypto indexes.
However, exchange pricing can still be extremely volatile. For example, Bitcoin’s U.S.
dollar exchange rate fell by more than 50% in the wake of Mt. Gox’s collapse, then
increased roughly tenfold during 2017 as cryptocurrency demand exploded.
History of Cryptocurrency
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Early cryptocurrency proponents shared the goal of applying cutting-edge
mathematical and computer science principles to solve what they perceived as
practical and political shortcomings of “traditional” fiat currencies.
Before Bitcoin
About 15 years later, an accomplished software engineer named Wei Dai published a
white paper on b-money, a virtual currency architecture that included many of the
basic components of modern cryptocurrencies, such as complex anonymity
protections and decentralization.
The late 1990s and early 2000s saw the rise of more conventional digital finance
intermediaries.
Chief among them was PayPal, which made Tesla founder and noted cryptocurrency
advocate Elon Musk’s first fortune and proved to be a harbinger of today’s mobile
payment technologies that have exploded in popularity over the past 10 years.
But no true cryptocurrency emerged until the late 2000s when Bitcoin came onto the
scene.
Bitcoin is widely regarded as the first modern cryptocurrency — the first publicly
used means of exchange to combine decentralized control, user anonymity, record-
keeping via a blockchain, and built-in scarcity.
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In early 2009, Nakamoto released Bitcoin to the public, and a group of enthusiastic
supporters began exchanging and mining the currency.
By late 2010, the first of what would eventually be dozens of similar cryptocurrencies
— including popular alternatives like Litecoin — began appearing. The first public
Bitcoin exchanges appeared around this time as well.
In late 2012, WordPress became the first major merchant to accept payment in
Bitcoin. Others, including online electronics
retailer Newegg.com, Expedia, Microsoft, and Tesla followed. Countless merchants
now view the world’s most popular cryptocurrency as a legitimate payment method.
Although few cryptocurrencies other than Bitcoin are widely accepted for merchant
payments, increasingly active exchanges allow holders to exchange them for Bitcoin
or fiat currencies — providing critical liquidity and flexibility. Since the late 2010s, big
business and institutional investors have closely watched what they call the “crypto
space” too.
Facebook’s closely guarded Libra project could be the first true cryptocurrency
alternative to fiat currencies, although its growing pains suggest that true parity
remains well in the future.
Cryptocurrency Examples
Although exact active currency numbers fluctuate and individual currencies’ values
are highly volatile, the overall market value of all active cryptocurrencies is generally
trending upward. At any given time, hundreds of cryptocurrencies trade actively.
The cryptocurrencies described here are marked by stable adoption, robust user
activity, and relatively high market capitalization (greater than $10 million, in most
cases, although valuations are of course subject to change):
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1. Bitcoin
Bitcoin is the world’s most widely used cryptocurrency and is generally credited with
bringing the movement into the mainstream.
Its market cap and individual unit value consistently dwarf (by a factor of 10 or more)
that of the next most popular cryptocurrency. Bitcoin has a programmed supply limit
of 21 million Bitcoin.
2. Ethereum
Although “smart contracts” represent an important move toward addressing the lack
of chargebacks and refunds in cryptocurrencies, it remains to be seen whether
they’re enough to solve the problem completely. Still, they’re at least partly
responsible for Ethereum’s success.
3. Litecoin
The encryption algorithm is slightly different as well. Litecoin is often the second- or
third-most popular cryptocurrency by market capitalization.
4. Ripple
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Released in 2012, Ripple (XRP) is noted for a “consensus ledger” system that
dramatically speeds up transaction confirmation and blockchain creation times —
there’s no formal target time, but the average is every few seconds.
Ripple is also more easily converted than other cryptocurrencies with an in-house
currency exchange that can convert Ripple units into U.S. dollars, yen, euros, and
other common currencies.
However, critics have noted that Ripple’s network and code are more susceptible to
manipulation by sophisticated hackers and may not offer the same anonymity
protections as Bitcoin-derived cryptocurrencies.
5. Dogecoin
It has a shorter blockchain creation time (one minute) and a vastly greater number of
coins in circulation — the creators’ target of 100 billion units mined by July 2015 was
met, and there’s a supply limit of 5.2 billion units mined every year thereafter, with
no known supply limit.
6. Coinye
Coinye was developed under the original moniker “Coinye West” in 2013, and
identified by an unmistakable likeness of hip-hop superstar Kanye West. Shortly
before Coinye’s release, in early 2014, West’s legal team caught wind of the
currency’s existence and sent its creators a cease-and-desist letter.
To avoid legal action, the creators dropped “West” from the name, changed the logo
to a “half man, half fish hybrid” that resembles West — a biting reference to a
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“South Park” episode that pokes fun at West’s massive ego — and released Coinye
as planned.
Given the hype and ironic humor around its release, the currency attracted a cult
following among cryptocurrency enthusiasts. Undaunted, West’s legal team filed
suit, compelling the creators to sell their holdings and shut down Coinye’s website.
Although Coinye’s peer-to-peer network remains active and it’s still technically
possible to mine the currency, person-to-person transfers and mining activity have
collapsed to the point that Coinye is basically worthless.
• Some factors of cryptocurrency value stem from the image and efficiency of the
private blockchain-related corporations
• Scarcity stands for the finite nature of the digital coins. In a perfect scenario, the
demand should exceed the supply of the coins, to make it more valuable
• There is also stablecoins cryptos, whose value is pegged to fiat money or traded
commodities, e.g. Tether, True USD
• Capital Appreciation, and Income potential: dividends And some of the Myths on
cryptocurrencies
Regulatory Risk :
This is despite the fact that, the initial attractions towards cryptocurrencies were
their lack of regulation
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The main reason why cryptocurrencies have a lot of excitement is that most
investors lack insight on virtual currencies before investing, and just end up listening
to the noise to invest. The cryptocurrency hype in 2017 was one the many drivers of
the fast and-furious market surge, and later leading to panic
Security Risk:
Liquidity Risk :
Cryptocurrencies have a risk of not being able to sell (or liquidate) an investment
quickly at a reasonable price. Liquidity is important for any virtual asset.
The forex market is considered the most liquid market in the world.
But even in the forex market, the lack of liquidity of cryptocurrency may be a
problem
The history of cryptocurrency has shown that many different cryptocurrencies are
currently in the market.
Many are introduced regularly, however many of these altcoins have or may
disappear from the market for various reasons, while others continue to flourish
Taxing of profits or gain Risk There is an underreporting in relation to cryptocurrency
investment and related activities.
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How does Cryptocurrency transactions Work?
• The cashier asks everyone in the network to see whether they have enough coins
to buy the book
• All the cryptocurrency records holders using technology check their records to
verify the buyer’s coins
• If you do have enough, each node gives the thumbs up to the cashier
Understanding the basics of Initial Coin Offerings Initial coin offering is equivalent to
an initial public offering for a new start-up. With exception that the new idea
revolves around a new cryptocurrency rather than a business idea The user is trying
to raise “money” in the form of other, already established cryptocurrencies In other
words, an ICO is crowdfunding, using other cryptocurrencies, for a new
cryptocurrency that’s (hopefully) connected to a particular product
How it works-
• Create platform for potential funders, e.g. create a tab in the website
dedicated to ICO funding
tokens
• A token does not operate on its own Blockchain but has its own network
(Ethereum)
Centralized cryptocurrency is where the majority of the supply of coins and assets is
managed by a single entity, such as Ripple The more the currency is centralized, the
more its management, supply, operations, rules associated with etc.
is controlled by that particular single entity/authority Mining (you cannot mine coins,
but can only do the trade) and governance (development and management by a
team of the entity)
centralization are the major reasons which the decentralization and limitation of the
cryptocurrency
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Decentralized Cryptocurrencies The core principle of decentralization which means
no single entity manages the crypto coins attracted the traders to invest in the
cryptocurrency Blockchain technology-based digital currency utilizes a number of
entities and distribute the load of a network amongst multiple computers of the
network - distributed ledger-based decentralized currency as network provides easy
traceability, transparency of transactions and relatively less prone to cyber attacks
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• Therefore, we have no alternative but to refer to existing accounting standards –
apply the hierarchy of using the accounting standards Some of the financial reporting
challenges include;
• Classification of cryptocurrencies
• They represent specific amounts of digital resources which the entity has the right
to control, and whose control can be reassigned to third parties Characteristics for
classification
• Future economic benefits are expected -crypto assets have value in exchange
and/or value in use
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• Controlled by the holder entity -holder of private key, other criteria depending on
contractual arrangements, jurisdictional regulation etc.
• Exclusivity and control where the holder of a private key has exclusive control of
the crypto asset
• Certainty of crypto assets -similar to financial assets, which may exist only until
they are cancelled, redeemed, repaid or exercised 23 Accounting for
cryptocurrencies Cash and cash equivalent (IAS 7) Consideration
• Cryptocurrencies are not supported by a central bank (not centrally controlled and
regulated) or recognised as legal tender in most jurisdictions
• Value of cryptocurrencies are highly volatility and risk as the leading factors behind
their decision
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• A cryptocurrency is not a debt security, nor an equity security (although a digital
asset could be in the form of an equity security) because it does not represent an
ownership interest in an entity
• Cryptocurrencies held for resale in the ordinary course of the business satisfy the
definition of inventory
Egypt Cryptocurrency Laws
In 2018, Egypt’s Dar al-Ifta, the primary Islamic legislator in Egypt, issued a religious
decree classifying commercial transactions in bitcoin as haram (prohibited under
Islamic law).
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Dar al-Ifta has stated that cryptocurrencies could damage national security and
central financial systems, and could also be used to fund terrorism and terrorist
activities.
The Central Bank of Egypt (“CBE”) then issued a warning in January 2018 against the
trading of cryptocurrencies, such as bitcoin, due to the extremely high risk
associated with such currencies.
The Central Bank also asserted that commerce within the Arab Republic of Egypt is
confined only to the official paper currencies approved by the Bank
In 2019, however, the CBE announced that it was working on a draft law that would
only ban the creation, trading, or promotion of cryptocurrencies without a licence.
The statement revealed the CBE’s changing outlook on digital currencies and
cryptocurrencies in particular.
In 2020, the Egyptian Parliament enacted the Central Bank and Banking Sector Law
No.194 of the year 2020.
Law No.194 introduced several technological and digital means to aid with the
digital transformation of the banking and financial sector in Egypt. These means
include the digital finance, digital settlement of cheques, E-Money, cryptocurrency,
FinTech and RegTech.
The new CBE Law also set forth definitions and licensing instructions with regards to
‘Digital Banks’.
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How many crypto owners in Egypt?
It is estimated that over 1.7 million people, 1.8% of Egypt’s total population,
currently own cryptocurrency.(1)
The demand for bitcoin has surged in Egypt and has registered a fresh all time high.
Egypt recorded a record peer-to-peer Bitcoin trading volume of over 2.2million
Egyptian pounds in 2020.(2)
Egyptian economist Wael al-Nahhas said young Egyptians “started investing in small
amounts despite the increase in the value of the bitcoin” and noted that bitcoin
mining and trading are attracting thousands of Egyptian. (3)
Meanwhile, a video report shared by a P2P platform tries to offer possible reasons
why crypto trading has become more popular in Egypt. In the report, it is suggested
that many of the Egyptian crypto traders “are looking for additional sources of
income (either through) trading or holding bitcoin.” Further, the report notes that
with 67% of the adult population currently unbanked, cryptocurrencies inevitably
become a practical alternative for those that are financially excluded. (4)
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The Central Bank of Egypt (CBE) has allowed on Thursday banks to issue
electronic currencies subject to its supervision provided that each coin in the
mobile payment service equals one Egyptian pound. In its third version of
mobile payment regulations, the CBE explained that the issuance of
electronic currencies is only limited to banks under its supervision and that
get its prior consent to take this step. The CBE said that the authorised banks
will operate a system for managing the records of electronic currencies,
which show the value of the issued money, the system users, and service
providers.
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Egypt into a cashless society. A digital currency would increase efficiency and
security in transactions across nations and banks.
Tunisia was the first MENA country to launch a digital currency, the eDinar, to
facilitate trade and exchange. Israel and the UAE are also looking into their
own digital money in order to link mobile apps for payment anywhere.
Perhaps though the biggest incentive for Egypt is to include the informal
sector in the economy. The informal sector in Egypt comprises half the
economy, and is untaxed, unbanked, and unregulated. Its formal inclusion
with mobile banking and e-payment service has been a major goal of the
government since 2015.
Its inclusion would increase Egypt’s GDP by more than 40%, and while only
14% of the country has a bank account, 100% have a mobile phone. Thus the
best way to increase the financial inclusion of the unbanked population is
through their phone, why Fawry and other financial tech companies have
been growing at a fast pace with governmental support.
While countries and central banks around the world initially saw
cryptocurrency as a competitor to national currency, and potentially
destructive, the international mood is beginning to shift their conception
towards adopting cryptocurrency. Digital currency makes online transactions
easier and cheaper, and corruption-free. Seeing as we are moving into an age
where $6.6 trillion moves across borders daily, it’s important for the
government to be able to quickly track exchanges, and shift policy when
needed
1. https://triple-a.io/crypto-ownership/
2. https://coin.dance/volume/localbitcoins/EGP
3. https://news.bitcoin.com/bitcoin-egypt-economic-crisis-unemployment/
4. https://news.bitcoin.com/egypts-growing-p2p-volumes-being-driven-by-
crypto-traders-under-the-age-of-34/
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