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Basics of Blockchain and Cryptocurrencies

Presentation · March 2020

DOI: 10.13140/RG.2.2.21818.54728

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Chibuzor Emmanuel
Michael Okpara University of Agriculture, Umudike
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NAME: EMMANUEL, CHUBUZOR PRECIOUS
EMAIL: Emmaprecious1212@gmail.com

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CRYPTOCURRENCY BASICS
Cryptocurrency is a currency in digital form in which every transaction is carried out
online without any physical exchange. It is a medium of exchange like any other fiat
such as Nigerian Naira (NGN), USD, EUR, etc. but differs from fiat in the sense that
it was designed to exchange digital information through a process known as
cryptography. Cryptocurrencies leverage blockchain technology to gain
decentralization, transparency, and immutability.
Cryptocurrency empowers ordinary people because no centralized power is required
to transact with cryptocurrencies.
Bitcoin is the first and most popular Cryptocurrency which was invented by Satoshi
Nakamoto in 2009. Currently there over three thousand cryptocurrencies which are
classified as tokens or coins. Every other cryptocurrency but Bitcoin is called an
Altcoin.
A token is a cryptocurrency that is built on existing blockchain. Tokens do not have
their own blockchain but depend or exist on an existing blockchain of a
cryptocurrency. Examples of tokens include Basic Attention Token (BAT), Bancor
(BNT), Status (SNT), etc.
A coin is a cryptocurrency that is independent of any other blockchain. A coin
operates on its own independent blockchain and acts like a native currency within a
specific financial system. Examples of coins include Bitcoin (BTC), Ethereum
(ETH), Ripple (XRP), Tron (TRX), etc.
BLOCKCHAIN TECCHNOLOGY
Blockchain is a distributed, decentralized public ledger. We can say, blockchain
simply means chain of blocks. This simply means digital information (“the block”)
stored in a public database (“the chain”). Blocks on a blockchain has three parts:
a. Blocks show information like date, time and amount.
b. Blocks store information about who carried out the transaction by using digital
signature instead of identifiable names.
c. Blocks store information that makes them different from other blocks by the
use of a unique code called HASH.

HOW CRYPTOCURRENCIES WORK

Cryptocurrencies can be sent directly between two parties through the use of public
keys. One interesting thing about this is that this transfer incurs very minimal
transaction fees and solves the problem of steep fees charged by traditional financial
institutions.
PROPERTIES OF A CRYPTOCURRENCY
1. Irreversible: After confirmation of a cryptocurrency transaction, it cannot be
reversed by anybody. If you send your asset to a wrong address or a hacker
stole your asset, the asset is gone forever.
2. Permissionless: Cryptocurrency transaction doesn’t require a permission
from anybody before it is carried out. It just requires software which anybody
can download and use without any restriction.
3. Secured: A blockchain is a series of blocks that records data in hash functions
with timestamps so that the data cannot be changed or tampered with. As data
cannot be overwritten, data manipulation is extremely impractical, thus
securing data and eliminating centralized points that cybercriminals often
target. Cryptocurrencies are locked in a public key cryptography which makes
it impossible to access without the private keys.
4. Pseudonymous: Cryptocurrency transfers occur through public addresses
which are not connected to the real-world identities of the users.
 5. Fast and across border: Cryptocurrency transactions happen almost
instantaneously in the Blockchain network and confirmation occurs in few
minutes notwithstanding the distance between the sender and the receiver.
HOW CRYPTOCURRENCY VALUE IS DETERMINED:
The price of cryptocurrencies is governed by the law of demand and supply. This
simply means that buyers and sellers of these cryptocurrencies control their value.
The price of various cryptocurrencies is highly volatile and so, it is a high-risk
investment at least for now. If there are more sellers than buyers, the price drops and
vice versa. One spectacular aspect of cryptocurrencies is that various
cryptocurrencies have a fixed supply called Maximum Supply. This means that a
particular amount of a cryptocurrency will ever exist forever as a result, many
cryptocurrencies are expected to be scarce in the future as many people will acquire
and hold them. For example, Bitcoin has a maximum supply of 21,000,000.
Unlike fiat currencies, Bitcoin can not be minted at will by a central body because,
it is limited algorithmically. There will ever be 21,000,000 Bitcoin in existence.
BITCOIN HALVING
Every ten minutes, a block of bitcoin transaction is solved by miners and is added to
Blockchain network. This is an expensive and hectic task which consumes a lot of
electricity and requires sophisticated hard wares.
People mine because the algorithm rewards miners with new BTC, which are
generated and added to the circulating supply every 10 minutes. The distribution of
new BTC is known as “block reward”.
At the beginning, block reward was 50 BTC which means that every 10 minutes,
new block reward is added to the circulating supply.
Every four years, halving occurs in the bitcoin network. This means that when
halving occurs, the mining difficulty increases and the mining reward is reduced by
half. The first Bitcoin halving occurred on the 28th November, 2012 with block
210000 and Bitcoin mining reward was reduced to 25BTC. On the 9th day of July,
2016, the second halving took Bitcoin mining reward to 12.5BTC. the next Bitcoin
halving which will take Bitcoin mining reward to 6.25BTC is expected to occur in
the month of May, 2020.
CRYPTOCURRENCY WALLETS
A cryptocurrency wallet is a software program that stores private and public
keys and interacts with various blockchain to enable users to send and receive
digital currencies and monitor their balance.
When a person sends bitcoin or any other type of digital currency, they are
essentially signing off ownership of the coins to your wallet’s address. To be
able to spend those coins and unlock the funds, the private key stored in your
wallet must match the public address the currency is assigned to. If the public
and private keys match, the balance in your digital wallet will increase, and the
sender’s will decrease accordingly. There is no actual exchange of real coins.
The transaction is signified merely by a transaction record on
the blockchain and a change in balance in your cryptocurrency wallet.

TYPES OF CRYPTOCURRENCY WALLETS

1. Desktop: wallets are downloaded and installed on a PC or laptop. They

are only accessible from the single computer in which they are
downloaded. Desktop wallets offer one of the highest levels of security
however if your computer is hacked or gets a virus there is the possibility
that you may lose all your funds. An example is Atomic wallet.
2. Online: wallets run on the cloud and are accessible from any computing
device in any location. While they are more convenient to access, online
wallets store your private keys online and are controlled by a third party
which makes them more vulnerable to hacking attacks and theft. An
example is Myetherwallet (MEW).
3. Mobile: wallets run on an app on your phone and are useful because they
can be used anywhere including retail stores. Mobile wallets are usually
much smaller and simpler than desktop wallets because of the limited
space available on mobile. An example is Trust Wallet.
4. Hardware: wallets differ from software wallets in that they store a
user’s private keys on a hardware device like a USB. Although hardware
wallets make transactions online, they are stored offline which delivers
increased security. Hardware wallets can be compatible with several
 web interfaces and can support different currencies; it just depends on
which one you decide to use. What’s more, making a transaction is easy.
Users simply plug in their device to any internet-enabled computer or
device, enter a pin, send currency and confirm. Hardware wallets make
it possible to easily transact while also keeping your money offline and
away from danger. An example is Ledger Nano.
5. Paper: wallets are easy to use and provide a very high level of security.
While the term paper wallet can simply refer to a physical copy or
printout of your public and private keys, it can also refer to a piece of
software that is used to securely generate a pair of keys which are then
printed. Using a paper wallet is relatively straightforward. Transferring
Bitcoin or any other currency to your paper wallet is accomplished by
the transfer of funds from your software wallet to the public address
shown on your paper wallet. Alternatively, if you want to withdraw or
spend currency, all you need to do is transfer funds from your paper
wallet to your software wallet. This process, often referred to as
‘sweeping,’ can either be done manually by entering your private keys
or by scanning the QR code on the paper wallet.
HOW TO BUY AND SELL CRYPTOCURRENCIES
1. Find a good Bitcoin wallet: The first thing one needs to buy and sell
cryptocurrencies is a cryptocurrency wallet which will be used to store and
transact the cryptocurrencies. The choice of a cryptocurrency wallet depends
on the type of cryptocurrency one wants to acquire. Some wallets are
compactible with almost all cryptocurrencies irrespective of the blockchain
such cryptocurrencies are built on. These wallets are multi-chain wallets. A
good example of this is Trust Wallet. Some wallets are known to be
compactible with ERC-20 tokens (tokens built on Ethereum blockchain). An
Example of this this is Myetherwallet (MEW).

2. Choose the right cryptocurrency exchange: A cryptocurrency is exchange

is a platform where one cryptocurrency can be converted to another
cryptocurrency. Cryptocurrency exchanges are classified into centralized
exchanges and decentralized exchanges.
 In centralized exchanges (CEx), the buyers and sellers trust a third party who
holds their assets and processes transactions as instructed by the traders.
Trading in centralized exchanges is very risky because the trusted middleman
can vanish with all the assets because he holds the private key to the wallet(s)
that holds all the user’s assets. An example is the recent vanishing of Idax
exchange CEO with the Exchange’s wallet private key which resulted to loss
of assets by many of all their users including me. An example of a centralized
exchange is http://binance.com.

Decentralized exchange (DEx) is the safest exchange to trade

cryptocurrencies but the problem here is that decentralized exchanges don’t
support many tokens built on some blockchain and one cannot exchange fiat
to cryptocurrencies and vice versa here. Decentralized exchanges are trustless
in the sense that no middleman and each user hold his or her assets. This
means that there is no fear of loss of assets through scam and hacking. An
example of a decentralized exchange is https://idex.market.

3. Step 4: Buy some Bitcoin and store them in your wallet: like I said above,
one can purchase a cryptocurrency using fiat from some centralized exchanges.
You can make payment to such exchanges with your credit card or debit card.
Many people often buy Bitcoin or Ethereum and use any of them to exchange
for other cryptocurrencies. One can buy Cryptocurrencies using fiat from
exchanges like http://binance.com, http://pro.coinbase.com etc.

4. Transfer your cryptocurrencies to your personal wallet: It is often

recommended that one doesn’t leave any assets not current used for trading on
centralized exchanges to avoid loss. Once you bought your Cryptocurrencies,
store them on your personal wallet.

THINGS TO CONSIDER WHILE CHOOSING A CRYPTOCURRENCY

EXCHANGE
1. Cryptocurrencies supported by an exchange.
2. Fees collected by the exchange.
3. Reputation of the exchange.
4. Verification requirements of the exchange.
 5. Payment method available on an exchange.
6. Geographical restrictions.
7. Exchange rate.
WAYS OF MAKING MONEY WITH CRYPTOCURRENCIES
1. Buying and holding
2. Holding for dividends
3. Mining
4. Serving as Cryptocurrency merchant
5. Day trading
6. Bounties
7. Staking
8. Working for cryptocurrency projects
9. Arbitrage trading.
10. Airdrops
To gain practical understanding on how to make money in cryptocurrency business
through the above ways contact me on:
Email: emmaprecious1212@gmail.com
Tel: +2347065623162
Telegram: @Prexy500

THANK YOU
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