CRYPTOCURRENCY

CRYPTOCURRENCY
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Dept of Computer Engineering GPTC Kothamangalam
1. INTRODUCTION
Cryptocurrencies are classified as a subset of digital currencies and are also classified as a
subset of alternative currencies and virtual currencies. Bitcoin, which is regarded as one of
the most populous cryptocurrency, was created in 2009 as the first decentralized
cryptocurrency . Since then, numerous other cryptocurrencies have been created. They are
frequently called ―altcoins‖ as a blend of bitcoin alternative. and its derivatives use
decentralized control 4Bitcoin as opposed to centralized electronic money/centralized
banking systems. The decentralized control is related to the use of bitcoin‘s block chain
transaction database in the role of a distributed ledger.
Bitcoin, first released as open-source software in 2009, is generally considered the first
decentralized cryptocurrency. Since the release of Bitcoin, over 4,000 altcoins (alternative
variants of Bitcoin, or other cryptocurrencies) have been created.
Bitcoin originated with the white paper that was published in 2008 under the pseudonym
―Satoshi Nakamoto.‖ It was published via a mailing list for cryptography and has a similar
appearance to an academic paper. The creators‘ original motivation behind Bitcoin was to
develop a cash-like payment system that permitted electronic transactions but that also
included many of the advantageous characteristics of physical cash. To understand the
specific features of physical monetary units and the desire to develop digital cash, we will
begin our analysis by considering a simple cash transaction.

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2. RELATED WORKS
Decentralized cryptocurrency is produced by the entire cryptocurrency system collectively, at
a rate which is defined when the system is created and which is publicly known. In
centralized banking and economic systems such as the Federal Reserve System, corporate
boards or governments control the supply of currency by printing units of fiat money or
demanding additions to digital banking ledgers. In the case of decentralized 1Andy
Greenberg (20 April 2011). ―Crypto Currency‖. Forbes.com. Retrieved 8 August 2014.
News retrieved 24 October 2017 3Tasca, Paolo (7 September 2015). ―Digital Currencies:
Principles, Trends, Opportunities, and Risks‖. SSRN 265798 4Wilmoth, Josiah. ―What is an
Altcoin?‖. Cryptocoinsnews.com Retrieved 4 March 2014. 5McDonnell, Patrick ―PK‖ (9
September 2015). ―What is the difference between Bitcoin, Forex, and Gold‖. NewsBTC.
Retrieved 15 September 2015. 6Allison, Ian (8 September 2015). ―If Banks Want Benefits
of Blockchains, They Must Go Permissionless‖. NewsBTC. Retrieved 15 September 2015. 7
cryptocurrency, companies or governments cannot produce new units, and have not so far
provided backing of other firms, banks or corporate entities which hold asset value measured
in it. The underlying technical system upon which decentralized cryptocurrencies are based
was created by the group or individual known as Satoshi Nakamoto. As of October 2017,
over a thousand cryptocurrency specifications exist; most are similar to and derived from the
first fully implemented centralized cryptocurrency, bitcoin. Within cryptocurrency systems
the safety, integrity and balance of ledger are maintained by a community of mutually
distrustful parties referred to as miners: members of the general public using their computers
to help validate and timestamp transactions adding them to the ledge in accordance with a
particular timestamping scheme. Miners have a financial incentive to maintain the security of
a cryptocurrency ledger. Most cryptocurrencies are designed to gradually decrease production
of currency, placing an ultimate cap on the total amount of currency that will be in circulation
mimicking previous metals (Andy, 2011). Compared with ordinary currencies held by
financial institutions or kept as cash on hand, cryptocurrencies can be more difficult for
seizure by law enforcement (Andy, 2011). This difficulty is derived from leveraging
cryptographic technologies. A primary example of this new challenge of law enforcement
comes from the Silk Road case, where Ulbricht‘s bitcoin stash ―was held separately and
encrypted‖ .

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3. OVERVIEW
3.1 WHAT IS CRYPTOCURRENCY
A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of
exchange using cryptography to secure the transactions and to control the creation of
additional units of the currency.
3.2 ARCHITECTURE
Decentralized cryptocurrency is produced by the entire cryptocurrency system collectively, at
a rate which is defined when the system is created and which is publicly known. In
centralized banking and economic systems such as the Federal Reserve System, corporate
boards or governments control the supply of currency by printing units of fiat money or
demanding additions to digital banking ledgers. In case of decentralized cryptocurrency,
companies or governments cannot produce new units, and have not so far provided backing
for other firms, banks or corporate entities which hold asset value measured in it. The
underlying technical system upon which decentralized cryptocurrencies are based was created
by the group or individual known as Satoshi Nakamoto. As of May 2018, over 1,800
cryptocurrency specifications existed. Within a cryptocurrency system, the safety, integrity
and balance of ledgers is maintained by a community of mutually distrustful parties referred
to as miners: who use their computers to help validate and timestamp transactions, adding
them to the ledger in accordance with a particular timestamping scheme. Most
cryptocurrencies are designed to gradually decrease production of that currency, placing a
cap on the total amount of that currency that will ever be in circulation. Compared with
ordinary currencies held by financial institutions or kept as cash on hand, cryptocurrencies
can be more difficult for seizure by law enforcement. This difficulty is derived from
leveraging cryptographic technologies.
3.2.1 BLOCKCHAIN
The validity of each cryptocurrency's coins is provided by a blockchain. A blockchain is a
continuously growing list of records, called blocks, which are linked and secured using
cryptography. Each block typically contains a hash pointer as a link to a previous block, a
timestamp and transaction data.By design, blockchains are inherently resistant to
modification of the data. It is "an open, distributed ledger that can record transactions
between two parties efficiently and in a verifiable and permanent way". For use as a
distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively
adhering to a protocol for validating new blocks. Once recorded, the data in any given block
cannot be altered retroactively without the alteration of all subsequent blocks, which requires
collusion of the network majority. Blockchains are secure by design and are an example of a
distributed computing system with high Byzantine fault tolerance. Decentralized consensus
has therefore been achieved with a blockchain. It solves the double spending problem without
the need of a trusted authority or central server.

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The block time is the average time it takes for the network to generate one extra block in the
bltechnologies. Some blockchains create a new block as frequently as every five seconds. By
the time of block completion, the included data becomes verifiable. This is practically when
the money transaction takes place, so a shorter block time means faster transactions.
3.2.2 TIMESTAMPING
Cryptocurrencies use various timestamping schemes to "prove" the validity of transactions
added to the blockchain ledger without the need for a trusted third party. The first
timestamping scheme invented was the proof-of-work scheme. The most widely used proof-
of-work schemes are based on SHA-256 and scrypt.The latter now dominates over the world
of cryptocurrencies, with at least 480 confirmed implementations.Some other hashing
algorithms that are used for proof-of-work include CryptoNight, Blake, SHA-3, and X11. The
proof-of-stake is a method of securing a cryptocurrency network and achieving distributed
consensus through requesting users to show ownership of a certain amount of currency. It is
different from proof-of-work systems that run difficult hashing algorithms to validate
electronic transactions. The scheme is largely dependent
on the coin, and there's currently no standard form of it.
3.2.3 MINING
In cryptocurrency networks, mining is a validation of transactions. For this effort, successful
miners obtain new cryptocurrency as a reward. The reward decreases transaction fees by
creating a complementary incentive to contribute to the processing power of the network. The
rate of generating hashes, which validate any transaction, has been increased by the use of
specialized machines such as FPGAs and ASICs running complex hashing algorithms like
SHA-256 and Scrypt. This arms race for cheaper-yet-efficient machines has been on since the
day the first cryptocurrency, bitcoin, was introduced in 2009. With more people venturing
into the world of virtual currency, generating hashes for this validation has become far more
complex over the years, with miners having to invest large sums of money on employing
multiple high performance ASICs. Thus the value of the currency obtained for finding a hash
often does not justify the amount of money spent on setting up the machines, the cooling
facilities to overcome the enormous amount of heat they produce, and the electricity required
to run them. Some miners pool resources, sharing their processing power over a network to
split the reward equally, according to the amount of work they contributed to the probability
of finding a block. A "share" is awarded to members of the mining pool who present a valid
partial proof-of-work.

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Given the economic and environmental concerns associated with mining, various "minerless"
cryptocurrencies are undergoing active development. Unlike conventional blockchains, some
directed acyclic graph cryptocurrencies utilise a pay-it-forward system, whereby each
account performs minimally heavy computations on two previous transactions to verify.
Other cryptocurrencies like Nano utilise a block-lattice structure whereby each individual
account has its own blockchain. With each account controlling its own transactions, no
traditional proof-of-work mining is required, allowing for feeless, instantaneous transactions.
As of February 2018, the Chinese Government halted trading of virtual currency, banned
initial coin offerings and shut down mining. Some Chinese miners have since relocated to
CanFortune. One company is operating data centers for mining operations at Canadian oil
and gas field sites, due to low gas prices. In June 2018, Hydro Quebec proposed to the
provincial government to allocate 500 MW to crypto companies for mining. According to a
February 2018 report from Fortune, Iceland has become a haven for cryptocurrency miners in
part because of its cheap electricity. Prices are contained because nearly all of the country‘s
energy comes from renewable sources, prompting more mining companies to consider
opening operations in Iceland. The region‘s energy company says bitcoin mining is becoming
so popular that the country will likely use more electricity to mine coins than power homes in
2018. In October 2018 Russia will become home to one of the largest legal mining operations
in the world, located in Siberia. More than 1.5 million Russians are engaged in home mining.
Russia‘s energy resources and climate provide some of the best conditions for crypto mining.
3.2.4 GPU PRICE RISE
An increase in cryptocurrency mining increased the demand of graphics cards (GPU) in
2017.[49] Popular favorites of cryptocurrency miners such as Nvidia‘s GTX 1060 and GTX
1070 graphics cards, as well as AMD‘s RX 570 and RX 580 GPUs, doubled or tripled in
price – or were out of stock.[50] A GTX 1070 Ti which was released at a price of $450 sold
for as much as $1100. Another popular card GTX 1060's 6 GB model was released at an
MSRP of $250, sold for almost $500. RX 570 and RX 580 cards from AMD were out of
stock for almost a year. Miners regularly buy up the entire stock of new GPU's as soon as
they are available. Nvidia has asked retailers to do what they can when it comes to selling
GPUs to gamers instead of miners. "Gamers come first for Nvidia," said Boris Böhles, PR
manager for Nvidia in the German region.

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3.2.5 WALLETS
A cryptocurrency wallet stores the public and private "keys" or "addresses" which can be
used to receive or spend the cryptocurrency. With the private key, it is possible to write in the
public ledger, effectively spending the associated cryptocurrency. With the public key, it is
possible for others to send currency to the wallet.
3.2.6 ANONYMITY
Bitcoin is pseudonymous rather than anonymous in that the cryptocurrency within a wallet is
not tied to people, but rather to one or more specific keys (or "addresses"). Thereby, bitcoin
owners are not identifiable, but all transactions are publicly available in the blockchain. Still,
cryptocurrency exchanges are often required by law to collect the personal information of
their users. Additions such as Zerocoin have been suggested, which would allow for true
anonymity. In recent years, anonymizing technologies like zero-knowledge proofs and ring
signatures have been employed in the cryptocurrencies Zcash and Monero, respectively.
Cryptocurrency anonymizing implementations such as Cloakcoin, Dash, and PIVX use built
in mixing services, also known as tumblers
3.2.7 FUNGIBILITY
Most cryptocurrency tokens are fungible and interchangeable. However, unique non-fungible
tokens also exist. Such tokens can serve as assets in games like CryptoKitties.
3.3 ECONOMICS
Cryptocurrencies are used primarily outside existing banking and governmental institutions
and are exchanged over the Internet.

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3.3.1 TRANSACTION FEES
$0.33, Transaction fees for cryptocurrency depend mainly on the supply of network capacity
at the time, versus the demand from the currency holder for a faster transaction. The currency
holder can choose a specific transaction fee, while network entities process transactions in
order of highest offered fee to lowest. Cryptocurrency exchanges can simplify the process for
currency holders by offering priority alternatives and thereby determine which fee will likely
cause the transaction to be processed in the requested time. For ether, transaction fees differ
by computational complexity, bandwidth use and storage needs, while bitcoin transactions
compete equally with each other. In December 2017, the median transaction fee for ether
corresponded to while for bitcoin it corresponded to $23.
3.3.2 EXCHANGES
Cryptocurrency exchanges allow customers to trade cryptocurrencies for other assets, such as
conventional fiat money, or to trade between different digital currencies.
3.3.3 ATOMIC SWAPS
Atomic swaps are a proposed mechanism where one cryptocurrency can be exchanged
directly for another cryptocurrency, without the need for a trusted third party such as an
exchange.
3.3.4 ATMs
Jordan Kelley, founder of Robocoin, launched the first bitcoin ATM in the United States on
20 February 2014. The kiosk installed in Austin, Texas is similar to bank ATMs but has
scanners to read government-issued identification such as a driver's license or a passport to
confirm users' identities. By September 2017, 1,574 bitcoin ATMs had been installed around
the world with an average fee of 9.05%. An average of 3 bitcoin ATMs were being installed
per day in September 2017.
3.3.5 INITIAL COIN OFFERINGS
An initial coin offering (ICO) is a controversial means of raising funds for a new
cryptocurrency venture. An ICO may be used by startups with the intention of avoiding
regulation. However, securities regulators in many jurisdictions, including in the U.S., and
Canada have indicated that if a coin or token is an "investment contract" (e.g., under the
Howey test, i.e., an investment of money with a reasonable expectation of profit based
significantly on the entrepreneurial or managerial efforts of others), it is a security and is
subject to securities regulation. In an ICO campaign, a percentage of the cryptocurrency

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(usually in the form of "tokens") is sold to early backers of the project in exchange for legal
tender or other cryptocurrencies, often bitcoin or ether. According to
PricewaterhouseCoopers, four of the 10 biggest proposed initial coin offerings have used
Switzerland as a base, where they are frequently registered as non-profit foundations. The
Swiss regulatory agency FINMA stated that it would take a ―balanced approach― to ICO
projects and would allow ―legitimate innovators to navigate the regulatory landscape and so
launch their projects in a way consistent with national laws protecting investors and the
integrity of the financial system.‖ In response to numerous requests by industry
representatives, a legislative ICO working group began to issue legal guidelines in 2018,
which are intended to remove uncertainty from cryptocurrency offerings and to establish
sustainable business practices.
3.3.6 LEGALITY
The legal status of cryptocurrencies varies substantially from country to country and is still
undefined or changing in many of them. While some countries have explicitly allowed their
use and trade, others have banned or restricted it. According to the Library of Congress, an
"absolute ban" on trading or using cryptocurrencies applies in eight countries: Algeria,
Bolivia, Egypt, Iraq, Morocco, Nepal, Pakistan, and the United Arab Emirates. An "implicit
ban" applies in another 15 countries, which include Bahrain, Bangladesh, China, Colombia,
the Dominican Republic, Indonesia, Iran, Kuwait, Lesotho, Lithuania, Macau, Oman, Qatar,
Saudi Arabia and Taiwan. In the United States and Canada, state and provincial securities
regulators, coordinated through the North American Securities Administrators Association,
are investigating "bitcoin scams" and ICOs in 40 jurisdictions. Various government agencies,
departments, and courts have classified bitcoin differently. China Central Bank banned the
handling of bitcoins by financial institutions in China in early 2014. In Russia, though
cryptocurrencies are legal, it is illegal to actually purchase goods with any currency other
than the Russian ruble. Regulations and bans that apply to bitcoin probably extend to similar
cryptocurrency systems. Cryptocurrencies are a potential tool to evade economic sanctions
for example against Russia, Iran, or Venezuela. In April 2018, Russian and Iranian economic
representatives met to discuss how to bypass the global SWIFT system through decentralized
blockchain techsanction. Russia also secretly supported Venezuela with the creation of the
petro (El Petro), a national cryptocurrency initiated by the Maduro government to obtain
valuable oil revenues by circumventing US sanctions. In August 2018, the Bank of Thailand
announced its plans to create its own cryptocurrency, the Central Bank Digital Currency
(CBDC).

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3.3.7 ADVERTISING BANS
Bitcoin and other cryptocurrency advertisements are banned on Facebook, Google, Twitter,
Bing, Snapchat, LinkedIn and MailChimp. Chinese internet platforms Baidu, Tencent, and
Weibo have also prohibited bitcoin advertisements. The Japanese platform Line and the
Russian platform Yandex have similar prohibitions.
3.3.8 U.S. TAX STATUS
On 25 March 2014, the United States Internal Revenue Service (IRS) ruled that bitcoin will
be treated as property for tax purposes. This means bitcoin will be subject to capital gains tax.
In a paper published by researchers from Oxford and Warwick, it was shown that bitcoin has
some characteristics more like the precious metals market than traditional currencies, hence
in agreement with the IRS decision even if based on different reasons.
3.3.9THE LEGAL CONCERN OF AN UNREGULATED GLOBAL
ECONOMY
As the popularity of and demand for online currencies has increased since the inception of
bitcoin in 2009, so have concerns that such an unregulated person to person global economy
that cryptocurrencies offer may become a threat to society. Concerns abound that altcoins
may become tools for anonymous web criminals.
Cryptocurrency networks display a lack of regulation that has been criticized as enabling
criminals who seek to evade taxes and launder money.
Transactions that occur through the use and exchange of these altcoins are independent from
formal banking systems, and therefore can make tax evasion simpler for individuals. Since
charting taxable income is based upon what a recipient reports to the revenue service, it
becomes extremely difficult to account for transactions made using existing cryptocurrencies,
a mode of exchange that is complex and difficult to track.
Systems of anonymity that most cryptocurrencies offer can also serve as a simpler means to
launder money. Rather than laundering money through an intricate net of financial actors and
offshore bank accounts, laundering money through altcoins can be achieved through
anonymous transactions.

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3.3.10 LOSS, THEFT, AND FRAUD
In February 2014 the world's largest bitcoin exchange, Mt. Gox, declared bankruptcy. The
company stated that it had lost nearly $473 million of their customers' bitcoins likely due to
theft. This was equivalent to approximately 750,000 bitcoins, or about 7% of all the bitcoins
in existence. The price of a bitcoin fell from a high of about $1,160 in December to under
$400 in February.
Two members of the Silk Road Task Force—a multi-agency federal task force that carried
out the U.S. investigation of Silk Road—seized bitcoins for their own use in the course of the
investigation. DEA agent Carl Mark Force IV, who attempted to extort Silk Road founder
Ross Ulbricht ("Dread Pirate Roberts"), pleaded guilty to money laundering, obstruction of
justice, and extortion under color of official right, and was sentenced to 6.5 years in federal
prison. U.S. Secret Service agent Shaun Bridges pleaded guilty to crimes relating to his
diversion of $800,000 worth of bitcoins to his personal account during the investigation, and
also separately pleaded guilty to money laundering in connection with another
cryptocurrency theft; he was sentenced to nearly eight years in federal prison.
Homero Josh Garza, who founded the cryptocurrency startups GAW Miners and ZenMiner in
2014, acknowledged in a plea agreement that the companies were part of a pyramid scheme,
and pleaded guilty to wire fraud in 2015. The U.S. Securities and Exchange Commission
separately brought a civil enforcement action against Garza, who was eventually ordered to
pay a judgment of $9.1 million plus $700,000 in interest. The SEC's complaint stated that
Garza, through his companies, had fraudulently sold "investment contracts representing
shares in the profits they claimed would be generated" from mining.
On 21 November 2017, the Tether cryptocurrency announced they were hacked, losing $31
million in USDT from their primary wallet. The company has 'tagged' the stolen currency,
hoping to 'lock' them in the hacker's wallet (making them unspendable). Tether indicates that
it is building a new core for its primary wallet in response to the attack in order to prevent the
stolen coins from being used.
In May 2018 Bitcoin Gold (and two other cryptocurrencies) were hit by a successful 51%
hashing attack by an unknown actor, in which exchanges lost estimated $18m. In June 2018,
Korean exchange Coinrail was hacked, losing US$37 million worth of altcoin. Fear
surrounding the hack was blamed for a $42 billion cryptocurrency market selloff. On 9 July
2018 the exchange Bancor had $23.5 million in cryptocurrency stolen.
The French regulator Autorité des marchés financiers (AMF) lists 15 websites of companies
that solicit investment in cryptocurrency without being authorised to do so in France.

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3.3.11 DARKNET MARKETS
Cryptocurrency is also used in controversial settings in the form of online black markets,
such as Silk Road. The original Silk Road was shut down in October 2013 and there have
been two more versions in use since then. In the year following the initial shutdown of Silk
Road, the number of prominent dark markets increased from four to twelve, while the amount
of drug listings increased from 18,000 to 32,000.
Darknet markets present challenges in regard to legality. Bitcoins and other forms of
cryptocurrency used in dark markets are not clearly or legally classified in almost all parts of
the world. In the U.S., bitcoins are labelled as "virtual assets". This type of ambiguous
classification puts pressure on law enforcement agencies around the world to adapt to the
shifting drug trade of dark markets.
3.4 RECEPTION
Cryptocurrencies have been compared to Ponzi schemes, pyramid schemes and economic
bubbles, such as housing market bubbles. Howard Marks of Oaktree Capital Management
stated in 2017 that digital currencies were "nothing but an unfounded fad (or perhaps even a
pyramid scheme), based on a willingness to ascribe value to something that has little or none
beyond what people will pay for it", and compared them to the tulip mania (1637), South Sea
Bubble (1720), and dot-com bubble (1999). While cryptocurrencies are digital currencies that
are managed through advanced encryption techniques, many governments have taken a
cautious approach toward them, fearing their lack of central control and the effects they could
have on financial security. Regulators in several countries have warned against
cryptocurrency and some have taken concrete regulatory measures to dissuade users.
Additionally, many banks do not offer services for cryptocurrencies and can refuse to offer
services to virtual-currency companies. Gareth Murphy, a senior central banking officer has
stated "widespread use [of cryptocurrency] would also make it more difficult for statistical
agencies to gather data on economic activity, which are used by governments to steer the
economy". He cautioned that virtual currencies pose a new challenge to central banks' control
over the important functions of monetary and exchange rate policy. While traditional
financial products have strong consumer protections in place, there is no intermediary with
the power to limit consumer losses if bitcoins are lost or stole One of the features
cryptocurrency lacks in comparison to credit cards, for example, is consumer protection
against fraud, such as chargebacks. An enormous amount of energy goes into proof-of-work
cryptocurrency mining, although cryptocurrency proponents claim it is important to compare
it to the consumption of the traditional financial system.

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There are also purely technical elements to consider. For example, technological
advancement in cryptocurrencies such as bitcoin result in high up-front costs to miners in the
form of specialized hardware and software. Cryptocurrency transactions are normally
irreversible after a number of blocks confirm the transaction. Additionally, cryptocurrency
can be permanently lost from local storage due to malware or data loss. This can also happen
through the destruction of the physical media, effectively removing lost cryptocurrencies
forever from their markets. The cryptocurrency community refers to pre-mining, hidden
launches, ICO or extreme rewards for the altcoin founders as a deceptive practice. It can also
be used as an inherent part of a cryptocurrency's design. Pre-mining means currency is
generated by the currency's founders prior to being released to the public. Paul Krugman,
Nobel Memorial Prize in Economic Sciences winner does not like bitcoin, has repeated
numerous times that it is a bubble that will not last and links it to Tulip mania. American
business magnate Warren Buffett thinks that cryptocurrency will come to a bad ending. In
October 2017, BlackRock CEO Laurence D. Fink called bitcoin an 'index of money
laundering'. "Bitcoin just shows you how much demand for money laundering there is in the
world," he said.
3.5 HOW TO USE CRYPTOCURRENCY
There are people who understand the basics of cryptocurrency. However, some do not know
how to use, store, buy, and sell cryptocurrency, which is very important because using
cryptocurrency has a lot of benefits. This article will explain all the possible ways you can
use cryptocurrency.
3.5.1 CRYPTOCURRENCY WALLET
First of all, because cryptocurrency is a digital currency, you will need a wallet. Millions of
people use cryptocurrency wallets, but there is considerable misunderstanding about how
they work. Unlike traditional ‗pocket‘ wallets, digital wallets don‘t store currency. In fact,
currencies don‘t get stored in any single location or exist anywhere in any physical form. All
that exists are records of transactions stored on the blockchain. Cryptocurrency wallets are
software programs that store your public and private keys and interface with various
blockchain so users can monitor their balance, send money and conduct other operations.
When a person sends you bitcoins 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 public and private keys match, the balance in your digital wallet
will increase, and the senders 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

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TYPES OF WALLETS
There are several types of wallets that provide different ways to store and access your digital
currency.
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.
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. 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 a mobile.
Security of Wallets
Wallets are secure to varying degrees. The level of security depends on the type of wallet you
use and the service provider. Online wallets can expose users to possible vulnerabilities in the
wallet platform which can be exploited by hackers to steal your funds. However, diligent
security precautions need to be implemented and followed when using any wallet. Remember
that no matter which wallet you use, losing your private keys will lead you to lose your
money. Similarly, if your wallet gets hacked, or you send money to a scammer, there is no
way to reclaim lost currency or reverse the transaction. You must take precautions and be
very careful!
Are Wallets Anonymous?
Kind of, but not really. Wallets are pseudonymous. While wallets aren‘t tied to the actual
identity of a user, all transactions are stored publicly and permanently on the blockchain.
Your name or personal street address won‘t be there, but data like your wallet address could
be traced to your identity in a number of ways. While there are efforts underway to make
anonymity and privacy easier to achieve, there are obvious downsides to full anonymity.

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3.6 HOW TO BUY AND SELL CRYPTOCURRENCY
Buying cryptocurrency is not as easy as an outsider might expect. However, the number of
options is constantly increasing. Everyone can choose an option of purchasing cryptocurrency
that suits their needs, some of which don‘t even require Internet access.
1) ATM’s: Despite being a very new concept, cryptocurrency ATMs appear in cities all over
the world and their number is constantly growing. The machines charge a commission on top
of the normal exchange price, but they provide users with the most private cryptocurrency
buying experience. All you need to do is insert cash into the ATM, and either scan your
mobile wallet QR code or receive a paper receipt with the codes and instructions on how to
transfer the funds to your wallet. As cryptocurrency gains popularity, such ATMs have a
potential of becoming one of the most common ways of buying the cryptocurrency. It goes
without saying that cryptocurrency ATMs are very unlikely to appear in countries where
cryptocurrency is banned or outlawed. You can find your nearest cryptocurrency ATM using
a designated map service, such as CoinATMRadar.
2) Face-to-Face: If you prefer to keep your transactions anonymous and don‘t want to deal
with the banking complications, a face-to-face trade with a local seller would be the easiest
way of buying cryptocurrency. For example, LocalBitcoins is the most popular platform for
facilitating such Bitcoin transactions. Most of cryptocurrency transactions now happen in
public places and both parties should take all the precautions they‘d normally take when
carrying and exchanging big amounts of cash. Besides, the buyer needs access to their wallet
to confirm the transaction, so having a smartphone or a laptop with you and having active
Internet access is another thing to consider. Those who are not open to a one-on-one meeting
can always look for a local meetup, where they can buy the cryptocurrency within a group
environment and enrich their knowledge about cryptocurrency in the process. Information on
these meetings can be found on meetup.com and other similar websites. Of course, you don‘t
necessarily need to meet with a seller face to face to conduct a transaction. Some sellers are
open to trading over the Internet, but you need to be extremely careful, as you will be running
a massive risk of losing your money. There is always an option of using payment services
like PayPal that guarantee the reception of goods, but most sellers these days prefer non-
reversible hard cash due to the constant fluctuation of cryptocurrencies‘s prices. Depending
on a seller, you will need to pay a 5 to 10 percent fee for privacy and convenience on top of
the original exchange price. Some sellers would negotiate the overall price before the
meeting, while others will only sell cryptocurrency at the exact rate established during the
transaction. This has to be done in case the value of the traded cryptocurrency takes a
dramatic shift.

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3)Exchanges: It is the easiest and fastest way of buying cryptocurrency. Every new potential
buyer will find an array of various exchanges competing for their business. Choosing the
right one depends on many different factors, with location being perhaps the most important
one (some exchanges might be banned in your country). An exchange has to be regulated by
the government as well as meet ‗know your customer‘ and anti-money laundering
requirements. Therefore, if you choose this way of buying cryptocurrency, you eliminate the
risk of losing your money. In addition, buying cryptocurrency on an exchange will is cheaper
than using ATMs or meeting Face-to-Face
3.7 TO EXCHANGE CRYPTOCURRENCY
You can use exchanges to easily buy cryptocurrency. In addition, exchanges allow you to
exchange various types of cryptocurrency. Exchanges do offer an unparalleled choice of
trading options. Whether you‘re looking for a full-blown platform for institutional traders or a
simpler solution for a one-time trade, you will find an exchange that suits your needs.
Moreover, most platforms can be accessed through both desktop and mobile devices,
allowing users to trade from anywhere. Exchanges vary in payment options that they accept,
security levels, buying limits, fees, verification requirements and so on. Exchanges are the
best way to buy and trade cryptocurrency.

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16
4. APPLICATIONS
Travel Industry
Travelling is one of the most thrilling ways to use your cryptocurrency. A good example here
is Cheapair.com which has been accepting Bitcoin as a form of payment when purchasing
flights, hotels, car rentals and cruises since 2013. So, if you have always wanted to go for a
tour, it‘s time to travel the world with your Bitcoins.
Real estate
How about buying a house using your cryptocurrency? Well, Blockchain just made it
possible. Propy.com is the world‘s first international real estate that accepts as payment to
enable you to buy property. MyCOINrealty.com also advertises homes you can purchase
using your Bitcoin. A few examples of transactions already made here include; the purchase
of a spectacular villa in Indonesia worth 1000 BTC in 2014, 3 acres of land in Paradise Bay
and 157,000 BTC home in Vegas.
Social media
Gone are the days when all you could do on social media is state your thoughts and feelings.
Currently, social media has grown to the extent that even if you are jobless, you can earn
here. One such social media website helping in the career circle is vanywhere. Vanywhere is
a social media platform utilizing Blockchain technology. It is a gig economy platform that
uses the Blockchain to connect users with specialized skills to those users who may be in
need of these particular skills. Transactions on the platform are purely done through
cryptocurrencies.
Education
The education system is also taking a sip from the cryptocurrency jar. Some education
institutions are now accepting cryptocurrency as a form of payment. Futurism.com states that
a couple of universities in Cyprus, Switzerland, United States and Germany now accept
Bitcoin payments.
The University of Nicosia (in Cyprus) is the first accredited university in history to accept
Crypto for tuition as well as other fees through Bitpay (a popular payment processor). It is
clear that this form of payment is bound to increase with an increase in its popularity.

CRYPTOCURRENCY
17
Fundraising
The traditional means of getting funds no longer works for the new age startups. Currently,
many startups are going the cryptocurrency way when it comes to raising funds for their
ideas, services and products. Why? Well, because it is easy to track and obtain money this
way. You can support a project by making a donation to a crypto crowdfund. Lighthouse is a
great example of a startup that has successfully crowd funded using Bitcoin.
Fast Food Restaurants
Fast food restaurants are also getting a piece of cryptocurrency. Subway, a major player in
the fast food industry, is accepting cryptocurrency as a form of payment. In Downtown
Toronto, you can have a cup of coffee at Snakes and Lattes and pay using your Bitcoin.
Pizzaforcoins is yet another company that accepts crypto payments- they accept about 50
types of crypto coins.
Motor Industry
If you have been looking to buy a fancy car and you have some cryptocurrency, look no
further. Apparently, in December 2013 a Tesla model S was reported to have been bought at
a whopping price of 91.4 Bitcoins. Later a 2014 Lamborghini Gallardo LP 550–2 Coupe was
also purchased for 216.8 Bitcoins.
Retail
The retail industry is also accepting cryptocurrency when transacting. Overstock an online
shopping center is accepting Bitcoins as a form of payment for the goods sold.

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18
5. ADVANTAGES AND DISADVANTAGES
5.1 ADVANTAGES
Easy access Cryptocurrency is readily available to the general public. Almost anyone can
make use of it. It is a decentralized operation and investors from all over the world have easy
access to them. You can find various projects trying to raise funds through cryptocurrency.
Almost anyone that can make online fund transfers can become part of such projects.
Quick and easy payments Making payments using cryptocurrency is very easy. You can do it
in just a matter of a few seconds. It is very fast because you don‘t require to feed many
details, you don‘t even need to enter your credit/debit card details. All you need is the address
of the wallet of the person or enterprise to whom you wish to make the payment too. The
amount shall credit to the receiver within few seconds to a few minutes depending on the
crypto. The ease of transfer and the low transaction fees makes it very desirable.
Fast Settlements With cryptos, you don‘t need to wait a couple days for your business to
receive the money. Due to the technology cryptocurrencies are based on, the blockchain, it
removes delays, payment of fees and a host of other third party approval that might have been
present. For traditional businesses, there are often hiccups and bottlenecks due to the number
of middlemen that you have to cut through. With cryptocurrency transactions, there is a quick
settlement as the peer-to-peer nature of the networking structure cuts off the middleman.
Crypto contracts were designed to eliminate the bottlenecks that have come to characterize
traditional settlement. The settlement is immediate and can be completed for a fraction of
time and expense that it would have taken a traditional transfer.
Lower Fees We‘ve all been there and sometimes it could be painful just to view your monthly
account statements from your bank. You‘ll often be shocked at the number of fees chalked
up. Transferring money by using any other online forum or bank gateway is expensive as
they levy considerable fees for the transaction. Credit card processing companies charge
hefty fees. But it is not the case with cryptocurrency as the costs are nil or negligible. With
credit

CRYPTOCURRENCY
19
cards or debit cards, the seller is the one paying a fee but for crypto‘s, it is the buyer paying
the small fee. The issue with these fees is that they often pile up and could quickly pile up.
Transaction fees are very miniscule and only the buyer gets hit with it.
Private You don‘t need to share your identity or whereabouts or the details of the transactions
made between you and the beneficiary. No information is required to share with the
government and the bank regarding the deal. It is truly decentralized.
Highly secured All your transactions will be secure as it is using NSA created cryptography.
It is next to impossible for any person other than the owner of the wallet to make any
payment from the wallet, unless they were hacked which there are many ways to protect
yourself from. Remain anonymous – Some coins can help you stay anonymous but contrary
to popular belief, not all of them can. Bitcoin is pseudonymous which means people won‘t
know exactly who you are on the blockchain but they can get some information from it.
Identity Theft Nobody can steal your personal information from merchants, which ensures
the privacy of your sensitive data. By creating a proxy ID, you can make sure that no one
knows anything about you. Among the benefits that come from using cryptocurrency is the
protection of your online identity. Using the old fiat method requires providing your credit
card information to a merchant who gets to access every detail through the ―pull‖ basis
where the card pulls out your details before debiting your account. With cryptocurrency
transactions, it is almost impossible for your private key to be found or hacked unless you‘re
not smart about it. Your transaction history can be seen but only if someone has your public
key
5.2 DISADVANTAGES
Difficult to understand Cryptocurrencies are relatively new and come with a learning curve.
People end up investing without proper knowledge and lose money to something they did not
learn about.
Lack of knowledge People are not aware of how to use cryptocurrency and hence open
themselves to hacker. The technology is somewhat complex and therefore one needs to be
mindful of it before investing.
Not accepted widely Not many websites and companies accept digital currencies yet. Very
few countries have legalized the use of cryptocurrencies. It makes it impractical for everyday
use. Due to lack of acceptance, before buying or investing online or offline, you need to make
sure that it‘s accepted at that place where you want to use it. Although it is slowly getting the
acceptance

CRYPTOCURRENCY
20
around the world, it will take time to take the idea entirely out of the shadows. While popular
cryptocurrency such as bitcoin is currently being used in different ways, there is still a long
way to go for it to be used for commerce, international bank transfers as well as electronic
payments. For cryptocurrency to get to this level, smart and scalable applications will need to
be built for handling the wide scale of money transfer as well as micropayment services. With
Request Network is waiting to launch the miannet, adoption isn‘t too far away.
Can lose your wallet
There is a possibility of losing your wallet. If you have stored the money in the form of
digital currency on your phone or computer, you better remember your password and not lose
those devices. Losing your coins means you won‘t be able to retrieve it, even with the help of
legal assistance so that is just one of Bitcoins flaws.
No way to reverse the payment
If you mistakenly pay someone by using cryptocurrency, then there is no way to get a refund
of the amount paid. All you can do is to ask the person for a refund and if your request is
turned down, then just forget about the money.
Uncertainty & Volatility
Since cryptocurrencies are so new, they are also very volatile. This is one of the main reasons
mass adoption is taking longer than it should. Many corporations don‘t want to deal with a
form of money that is going to go through huge swings in volatility.
Scaling
Based on the way smart contracts are designed, there is a limit to the speed and number of
transactions it can process at a time which has hindered the widespread adoption of digital
currencies. With the introduction of Lightning Networks, the crypto community has put a
foot in the right direction which gives breathes hope into the idea that cryptocurrency could
one day replace conventional credit card transactions.

CRYPTOCURRENCY
21
6. FUTURE SCOPE
A cryptocurrency is a digital currency that is created and managed through the use of
advanced encryption techniques known as cryptography. Cryptocurrency made the leap from
being an academic concept to (virtual) reality with the creation of Bitcoin in 2009. Some of
the limitations that cryptocurrencies presently face – such as the fact that one‘s digital fortune
can be erased by a computer crash, or that a virtual vault may be ransacked by a hacker – may
be overcome in time through technological advances. What will be harder to surmount is the
basic paradox that bedevils cryptocurrencies – the more popular they become, the more
regulation and government scrutiny they are likely to attract, which erodes the fundamental
premise for their existence. While the number of merchants who accept cryptocurrencies has
steadily increased, they are still very much in the minority. For cryptocurrencies to become
more widely used, they have to first gain widespread acceptance among consumers.
However, their relative complexity compared to conventional currencies will likely deter
most people, except for the technologically adept. A cryptocurrency that aspires to become
part of the mainstream financial system may have to satisfy widely divergent criteria. It
would need to be mathematically complex (to avoid fraud and hacker attacks) but easy for
consumers to understand; decentralized but with adequate consumer safeguards and
protection; and preserve user anonymity without being a conduit for tax evasion, money
laundering and other nefarious activities. Since these are formidable criteria to satisfy, is it
possible that the most popular cryptocurrency in a few years‘ time could have attributes that
fall in between heavily-regulated fiat currencies and today‘s cryptocurrencies? While that
possibility looks remote, there is little doubt that as the leading cryptocurrency at present,
Bitcoin‘s success (or lack thereof) in dealing with the challenges it faces may determine the
fortunes of other cryptocurrencies in the years ahead.

CRYPTOCURRENCY
22
7. CONCLUSION
he Bitcoin creators‘ intention was to develop a decentralized cash-like electronic payment
system. In this process, they faced the fundamental challenge of how to establish and transfer
digital property rights of a monetary unit without a central authority. They solved this
challenge by inventing the Bitcoin Blockchain. This novel technology allows us to store and
transfer a monetary unit without the need for a central authority, similar to cash. Price
volatility and scaling issues frequently raise concerns about the suitability of Bitcoin as a
payment instrument. As an asset, however, Bitcoin and alternative blockchain-based tokens
should not be neglected. The inno T vation makes it possible to represent digital property
without the need for a central authority. This can lead to the creation of a new asset class that
can mature into a valuable portfolio diversification instrument. Moreover, blockchain
technology provides an infrastructure that enables numerous applications. Promising
applications include using colored coins, smart contracts, and the possibility of using
fingerprints to secure the integrity of data files in a blockchain, which may bring change to
the world of finance and to many other sectors.

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23
REFERENCES
1. ^ a b Andy Greenberg (20 April 2011). "Crypto Currency". Forbes.com. Archived from the
original on 31 August 2014. Retrieved 8 August 2014.
2. ^ Cryptocurrencies: A Brief Thematic Review Archived 25 December 2017 at the
Wayback Machine.. Economics of Networks Journal. Social Science Research Network
(SSRN). Date accessed 28 August 2017.
3. ^ Schueffel, Patrick (2017). The Concise Fintech Compendium. Fribourg: School of
Management Fribourg/Switzerland. Archived from the original on 24 October 2017.
4. ^ McDonnell, Patrick "PK" (9 September 2015). "What Is The Difference Between
Bitcoin, Forex, and Gold". NewsBTC. Archived from the original on 16 September 2015.
Retrieved 15 September 2015.
5. Allison, Ian (8 September 2015). "If Banks Want Benefits of Blockchains, They Must Go
Permissionless". NewsBTC. Archived from the original on 12 September 2015. Retrieved 15
September 2015.
6. ^ "Cryptocurrency FAQ - What is Distributed Ledger Technology?". Cryptocurrency
Works. Retrieved 21 May 2018.
7. Matteo D‘Angelo. "All you need to know about Bitcoin". timesofindia-economictimes.
Archived from the original on 26 October 2015.
8. ^ Sagona-Stophel, Katherine. "Bitcoin 101 white paper" (PDF). Thomson Reuters.
Archived from the original (PDF) on 13 August 2016. Retrieved 11 July 2016.
9. ^ "Archived copy" (PDF). Archived (PDF) from the original on 18 December 2014.
Retrieved 26 October 2014.
10. ^ "Archived copy" (PDF). Archived (PDF) from the original on 3 September 2011.
Retrieved 10 October 2012.

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