One of Fintech’s most disruptive breakthroughs is
the blockchain. Rather than keeping all your data
on a single server, this decentralised ledger system
stores data in many places. This makes it virtually
impossible to hack into and steal or falsify data. It
also creates a way to trade currency independent
of any government or entity. Currently, hundreds
of businesses are looking for ways to incorporate
blockchain technology into their systems so they
can increase security, speed up transactions,
cut costs, and interact more easily with other
The short history shows how diverse blockchain
technology can be and how many companies are
jumping on it. It also shows the extreme volatility
of the companies in this niche as it moves forward
to weed out the winners and losers.
The possibility of cryptocurrencies began with debit
cards and electronic cash. But people concerned
with privacy wanted an undetectable way to
transfer money. Others wanted a secure system
not controlled by any government. In 1983 David
Chaum developed an RSA algorithm that modified
a string of numbers.
A person sending a bank deposit sent it with
one string of numbers. The bank received it with
another set of numbers, based on, but distinct
from the first, so the bank could not trace the origin
of the deposit. This algorithm is the foundation
for blockchain today.
He created DigiCash, but
governments were not receptive to this private
currency. Due to regulations and other issues, it
did not succeed.
PayPal stepped in to provide a way to transact
services on the web with ‘cash’ and prove there was
a market need for web-based currency. Another
online currency company, e-gold
allowed clients
to sell their gold or hold gold in e-based accounts.
They could trade these monies across borders
fairly anonymously. The anonymity let scammers
ourish and in 2005 the US government stepped
in to close it down.
In the United States, the 9/11 attacks of 2001
changed the tolerance for alternative monies.
Now the US government seemed to view every
private money source as a money laundering
method for terrorists, drug dealers, and crime.
While Europe realised these alternative methods
did not necessarily foster crime, they were still not
receptive to start-up companies.
However, the lack of privacy and the reduced trust
in governments and banking institutions led to a
desire for another currency source, and Bitcoin
(BTC) emerged.
14.1 History of the Blockchain
Griffith, Ken ‘A Quick History of Cryptocurrencies BBTC — Before Bitcoin’, Bitcoin Magazine, 16 Apr 2014
Even the origins of Bitcoin are shrouded in privacy
and mystery. The site was anonymously
registered in August 2008. And in October 2008 a
software developer with the pseudonym of Satoshi
Nakamoto posted the Bitcoin paper that explained
the peer-to-peer electronic cash system supported
by the blockchain. It’s possible this founder of
Bitcoin is a group of people. His goal was to create
a currency outside the control of any government.
One that was private and not based on trust but
on verifiable transactions.
2009: In 2009 the first Bitcoin block was mined,
proving the concept worked. And a simple version
of Bitcoin was released on the internet to a
small group of insiders. The first Bitcoin to dollar
equivalency was based on the electric costs to
create the Bitcoin: $1 =1,309.03 BTC.
bitcoins bought a Papa John’s pizza for the first
crypto-currency transaction.
2010: In early 2010, the first Bitcoin exchange was
formed, the value of Bitcoin increased, and Jed
McCaleb opened the Mt.Gox trading exchange.
This year the software became open sourced and
freely available. Anyone could look and check on
the authenticity of the transactions. They could see
how many Bitcoins are in any numbered wallet.
They just wouldn’t know who owns the wallet.
Those who set up the ledgers and facilitate the
transactions are called miners. Because of open
sourcing, anyone can become a miner.
The growth was not without problems. In late
2010 miners exploited a system glitch and created
184 billion Bitcoins. And a government task force
warned about the use of cryptocurrencies to
finance terrorism. Still, by the end of 2010, BTC
was trading at $.50 and the market cap of Bitcoin
exceeded $1million.
‘History of Bitcoin’,
Namecoin was one of the first additional blockchain
technologies. It’s a decentralised name registration
database. It allows the registration of a common
name while giving it a unique blockchain key.
One use could be to match domain names to IP
2011: By mid-year, BTC traded at $10 and was
moving higher. The Silk Road, a drug dealing site
opened using Bitcoin as currency and later in the
year fraud interrupted PayPal/Bitcoin transactions.
The bubble burst and in four days BTC lost over
67% of its value. Mid 2011 also saw 25,000 BTC
stolen from a wallet and major breaches of the
Mt.Gox exchange. Hackers stole passwords and
drained accounts of millions in Bitcoin.
2012: This year brought an FBI report on virtual
currencies and how they could enable illegal drug
and arms deals. While cryptocurrencies and Bitcoin
gained recognition with conferences, magazines,
physical coins, and more, it still struggled with
hacks, Ponzi schemes, and increasing government
Governments expressed concern that
cryptocurrencies could cause a loss of trust
in government currencies. They worried that
anonymity and no regulation would promote crime,
tax evasion, and money laundering. But Bitcoin
also moved toward legitimacy. In 2012 Bitcoin
Central registered as a European bank complying
with bank regulations and in 2013 more tech and
retail stores begin to accept Bitcoin as payment.
Other groups worked to build on and improve
Bitcoin’s blockchain currency. Yoni Assia, eToro
founder, and Vitalik Buterin worked together to
create a new Bitcoin protocol called Coloredcoins,
which allows users to assign attributes to a
transaction. Coloredcoins was designed to allow
users to do more than just transfer value and the
Maltsev, Pavel ‘White Paper- A Next-Generation Smart Contract and Decentralized Application Platform’, March 2017
first implementation was to allow people to create
their own cryptocurrencies.
2013: It took until early 2013 for Bitcoin to surpass
the all-time high of 2011. But volatility continued.
In March 2013, a soft fork, or blockchain glitch,
forced a trading shutdown. BTC suddenly dropped
23% to a low of $37 and then regained most of the
loss by that evening. By mid-April Bitcoin hit $266
and reached a market cap above $1 billion. A hack
crashed the price down below $125 in a matter of
Also in 2013, the US Financial Crimes Enforcement
Network (FINCEN) created the first Bitcoin
regulations. The US government then charged
Mt.Gox exchange, with ‘failure to register as a
money transmitting business’
and subpoenaed
22 other Bitcoin companies for possible violations.
It shut down the Silk Road, seized $3.6 million in
Bitcoin and charged the Vice Chair of the Bitcoin
Foundation with money laundering. In the same
year, the US and Germany declared Bitcoin to
be money. China’s Baidu began to accept Bitcoin
but in late 2013 China’s central bank banned any
Bitcoin transactions and Baidu stopped accepting
Bloomberg started showing Bitcoin as XBT a
currency and Ben Bernanke, the US Federal
Reserve Chairman, gave praise for Bitcoin at the
senate’s digital currency hearings.
This is the year
the Winklevoss twins made their first attempt to
establish an ETF based on Bitcoin. By November,
Bitcoin soared above $1000, only to spend the
next few years retrenching.
Vitalik Buterin decided blockchain technology
needed more changes than Bitcoin could allow
and began building Ethereum. This coin allows
contracts to be written within the blockchain.
Pixby. CC0 Public Domain.Free for commercial use. No attribution required
‘History of Bitcoin’,
‘History of Bitcoin’,
2014: 2014 brought a new level of respectability.
UK government gave Bitcoin VAT-free status
as HM Revenue and Customs classified it as
private money. The European Banking Authority
recommended virtual currencies be held to the
same regulatory standards as banks when it
comes to money laundering and anti-terrorism.
This added legitimacy to the currency, as did the
establishment of a regulated Bitcoin investment
fund (GABI) and the first Bitcoin derivative trading
on an equity platform. Microsoft began accepting
Bitcoin as payment for products and services.
2015: By 2015, Bitcoin transactions exceeded
100,000 per day.
Bitcoin started the year at
$238 but gained traction and topped $400 by
the end of the year. The HM Treasury Report
issued concerns about consumer protection and
technical standardisation for Bitcoin and reports
by the European Central Bank looked for ways to
control volatility. The Winklevoss brothers once
again tried to establish a Bitcoin ETF. Companies
begin to create crypto-tokens and other alternative
2016: Many international, national, and local
companies began to accept Bitcoin as payment.
The Chinese became the largest Bitcoin traders as
people tried to evade government capital controls.
80% of Bitcoin transactions were processed in
Bitcoin more than doubled in price to a
peak of $997. Competitive currencies and crypto-
tokens began to multiply. The UN’s World Food
Programme started using Ethereum blockchain in
their programmes to feed the hungry.
2017: The Winklevoss brothers again tried and
failed to get a Bitcoin ETF. Speculation on the ETF
caused Bitcoin prices to spike over $1300 and
drop to $975 on word of the failure. However, they
rapidly climbed back to $1200 in just a few days
later and have continued climbing. Canada opened
Jessop, ‘Brief History’
Jessop, ‘Brief History’
Campbell, Rebecca ‘The UN’s WFP Uses the Blockchain to Feed Hungry Families’, Cryptocoins News, 22 March 2017
the first peer-to-peer Bitcoin exchange. Fortune
500 companies joined together to find ways to
take advantage of blockchain technology to add
security and lower costs. Companies found private
blockchain systems could increase security, ensure
accurate authentication, and offer real-time hack
checking. IBM promoted its own cloud blockchain
with regulation compliant solutions for healthcare,
finance, and government use.
Japan officially recognised Bitcoin as a legal method
of payment. Japan’s point-of-sale giant AirREGI,
used at more than 260,000 retail locations, began
accepting Bitcoin as payment. Since AirREGI is
compatible with China’s Alibaba’s Alipay, visiting
Chinese tourists can pay with Bitcoin.
This new
acceptance may be part of the reason Bitcoin has
nearly tripled in the first half of the year alone. It
has not occurred without extreme volatility, even
dropping 36% only to rebound.
Don’t be thrown off by the language surrounding
cryptocurrencies. It’s easy to learn and soon you
will feel like an expert.
Bitcoin (BTC) is the original blockchain
cryptocurrency. An alternative, decentralised
currency. Also known as ‘digital gold’.
Blockchain collects transactions and data and puts
them into blocks in a public ledger. The records
are securely linked together with hash codes to
prevent hacking.
Cryptocurrencies are a new digital money outside
government systems based on a blockchain.
Crypto-tokens are tradeable coins that hold part
ownership in a company instead or as well as being
a source of currency.
DAO or Distributed Autonomous
14.2 Cryptocurrency Terminology
Wilson, Greg ‘The Biggest Bitcoin News No One Is Talking About’, The Palm Beach Daily 14 Apr 2017
Organisation, is a company built around the
blockchain technology.
Decentralised means many computers and
people have access to the data. It is the opposite
of a single government controlling the source.
Fork or Hard Fork is a change in blockchain
protocol that changes block history. Users either
continue the old way or split off and update to
the newest protocol to continue building the
Hash or Hashtag closes off a block in the
blockchain with a secure number. It is created by a
complex mathematical formula that draws on past
blocks to make it unhackable.
ICO or Initial Coin Offering is when a blockchain
company offers cryptocoins as ownership in the
company instead of stock at a public sale.
Miners are people with sets of high energy
computer processors who build the ledger or
blockchain to store cryptocurrencies.
Nodes are any unique network addresses that
hold the complete and updated copy of the
cryptocurrency blockchain. Your private wallet
would be a node.
Nonce is a slight variation in the hash computation
that lets miners adjust the calculations while
seeking a hash that starts with enough zeros to
qualify as a hash.
Proof of Stake is a blockchain system where
those who own the most coins help create the
cryptocurrency hash and earn coins.
Proof of Work is the difficult hashtag producing
system that verifies the blocks and pays the miners.
Pump-and-Dump is when unscrupulous
cryptocurrency investors manipulate the price by
buying gradually and selling all at once. They hype
it up so the price increases, then let it fall.
Wallet is a secure online place where your
cryptocurrency is stored. This is separate from a
trading platform.
Blockchains, such as Bitcoin, use cryptographic
protocols. These are complex code systems built on
advanced mathematics and engineering principles.
They encrypt data so it can be transferred securely
while making them nearly impossible to duplicate
or counterfeit. This prevents scams or cheating by
spending the same money twice. You can transfer
coins with a chain of numbers and letters. There
are public and private keys. Your personal key is
not seen in the the public transaction and ensures
Since the transaction is based on cryptographic
proof, it eliminates the need to use a third-party
financial institution like a bank or trading platform
to verify the trade and ensure each party will fulfil
their part of the agreement.
The blockchain ledger, a foundation of any crypto-
currency, is decentralised. It is not held in one
place, such as the national reserve. Instead, the
ledger is copied to many places. Let’s take Bitcoin
for example.
Bitcoin collects each time period of transactions
into a ‘block’. These blocks are kept in a general
ledger which is a long list of blocks or a ‘blockchain’.
This provides a way to go back and check any
transaction. Each new block is added to the old.
14.3 What is a Blockchain?
Nakamoto, Satoshi, ‘Bitcoin: A Peer-to-Peer Electronic Cash System’
To prevent it from being tampered with, miners
take the string of numbers that is the block and put
it through a mathematical formula. This produces
a new, shorter, random-looking sequence of letters
and numbers called a hash. This hash is put at the
end of each block. Just by looking at the hash, you
can’t tell the data in the block.
But if even one character in the block is changed,
the hash will completely change. Information from
the previous block is also used to create the hash,
so it’s impossible to remove any blocks. Because
this entire blockchain is stored on the computer
of every miner, a change in one blockchain would
be immediately revealed by its difference from the
blockchains held by others.
This feature opens the door to authenticating
records, keeping records and transactions secure
and unhackable, verifying contracts, accounting
for inventory, and enhanced security for business
and financial transactions. Legal contracts, health
records, equity trading, and banking transactions
all would benefit from hack-proof storage,
transmissions, and transactions.
A lot of virtual currencies use many computer
engineers or groups of engineers called ‘miners’.
They perform the complex calculations to come up
with the hash codes that verify and time-stamp the
transactions. Miners compete to produce the hash
code that seals off the block. Miners are paid in the
cryptocurrency for their efforts. For example, each
successful Bitcoin hash is rewarded with 12 BTCs.
While it’s easy to compute a hash, Bitcoin makes
the process more difficult. It requires ‘proof of
work’. That means the hashtag must have a certain
number of zeros at the beginning. Miners can’t
predict this, so they must rework the transaction
over and over. They can vary the data with one
random bit of information called a ‘nonce’ to try to
find an acceptable hash number.
It takes high energy usage, exceptionally fast
computing, and specialised equipment to mine.
Often miners join a mining pool in the hopes
that their combined computing power will
produce the right hash. As of March 2017, it took
3,596,936,257,000,000,000 attempts per second
to produce a hash and one is created every 10
Bitcoin protocol permits only a certain number
of coins to be mined each year. By the year 2040
21 million Bitcoins will have been mined and the
number will stop. Since one Bitcoin may be worth
thousands of pounds, Bitcoin is set up to be divided
into relatively smaller parts. That way it is still
useful for smaller transactions. It can be tracked
out eight decimal points to the ten millionth place.
0.00000001 of a Bitcoin is called a Satoshi, named
after Bitcoin’s anonymous founder who went by
the pseudonym Satoshi Nakamoto.
Bitcoin can be bought and sold on a variety of
online exchanges, at Bitcoin ATMs, or even in some
physical Change Spots.
Buyers can fund their
Bitcoin in dollars, euros, yen, etc. through credit
cards, PayPal, cash, and bank transfers.
The security of the blockchain ledger makes
it attractive for a wide range of applications.
Secure, non-hackable but traceable transactions
have use in government, business, financial, and
informational markets. Blockchain technology
stands to vastly reduce costs for these transactions
as well. As companies expand to explore this new
Berg, Henry, ‘In today’s Bitcoin mining difficulty, how many TH/s are needed to get 1 coin per day?’ Quora, 28 March 2017
‘A Complete Guide about Bitcoin’. Investoo. Accessed 15 July 2017.
‘Complete Guide’
14.4 Building on the Blockchain:
technology, they are using blockchain technology to
finance their companies as well. This revolutionary
kind of start-up no longer requires IPO or angel
investing in the traditional sense.
Instead of offering stock in a company in return for
equity, they are selling crypto-tokens in what is now
called Initial Coin Offerings (ICO). The advantages
of this kind of offerings are:
Tradable any time, day or night
Liquid with fewer investor limitations compared
to equity
Anyone can issue
Reduced restriction and regulation
Raises a lot of money very quickly
Small investors can participate
You can find new coin offerings on sites such as, CryptoCompare, and Smith & Crown.
Some of these coins require you to hold them for
a time before trading them. These crypto-coins are
not really intended for a currency replacement.
Instead, they act more like a share in the company.
The value is based on how investors believe the
technology will pan out and how the company is
Using virtual currency lets companies incorporate
virtually. They don’t need a physical location; they
can live on the blockchain. Everything is in the
ether. Each coin is similar to a share of stock and
it can trade on any cryptocurrency exchange that
accepts it. The company or project is called a DAO
or Distributed Autonomous Organisations.
What makes these companies different from
geography-based businesses is that the
management system is different. Blockchain is
‘CoinDash, The Operating system for Crypto Assets’ PDF of powerpoint
established and based on computer formulas, not
people guiding a company in a traditional way.
A development team supports the application,
but it cannot define how it runs once it starts.
Wise investors look at the development team for
experience, success rate, and ethics to determine
the potential of the DAO.They check out it’s ability
to problem solve and the publicity put forth to
promote the novel solution to users.
However, once the crypto-company is up and
running, it’s the technology and the problems it
solves that will make the success or failure of the
venture. Often the technology is open source so
it can be viewed by those who want to know the
strength of the technology.
These new blockchain companies don’t necessarily
grant legal protection or voting rights to those
who buy the coins. At this point, they don’t seem
to fall into any government’s jurisdiction so it’s a
wide-open field. While this freedom allows people
around the world to invest in new companies and
new technologies, it also opens the possibilities to
scams, frauds, wild successes, and disappointing
Some of the markets are completely undeveloped
at this date. These new companies offer speculation
and hope. Exercise care and research well. The
exciting part is that small investors can buy what
is essentially an IPO, or stock sale, of a company by
buying their crypto-tokens. These coins can range
in value from a few pence to many pounds. As the
company gains traction, builds software, and finds
clients, investors expect the value of the company
and the price of the tokens will increase.
Some companies combine the equity token with
a currency function. For example, Voxelus
is a
virtual reality (VR) content platform. It created Volex
token through crowdfunding, giving investors a
Somensatto, Jason ‘How are Cryptocurrency Investments Different than Securities Investments?’,, 11 Feb, 2015
Menezes, Nuno ‘Vitual Reality and Cryptocurrency: Volexus and uphold join forces’ Bitcoinist, 31 January 2016
stake in the company (the equity portion). However,
Voxelus VR users can create designs and assets to
be used in virtual reality. They can exchange the
designs for Volex tokens, other currency, or to buy
content for their own virtual worlds (the currency
is a blockchain social media platform
where users earn tokens for posts and can share
in the profits of the company. And Peerplay
is a
gaming and wagering platform using blockchain.
It offers the security of trusting your wagering
partner to pay-out even if you don’t know them.
Due to the security of the blockchain, users can
trust the system will be a level playing field without
hacking or cheating. Again, coins can be used to
make transactions on the platform or to participate
in the profits from the company.
Some investors do not want to go to the bother and
effort of exchanging their government currency to
cryptocurrency. They can still take advantage of the
price movement of these highly volatile currencies
using online trading platforms.
The CryptoCurrency Market Capitalizations site
listed 971 different cryptocurrencies in July 2017
and the number keeps growing!
At that time only
seven coins were had $1 Billion market cap: Bitcoin,
Ethereum, XRP, Litecoin, Ethereum Classic, Dash,
and NEM.
In less than one month in 2017, the number of
cryptocurrencies in the million dollar market cap
increased nearly 50%. Who can imagine which
14.5 Cryptocurrencies and Tokens
‘CryptoCurrency Market Capitalizations’
coins will climb to the top? Which will fail? Bitcoin
emerged in the last 7 years. Ethereum only began
July 30, 2015, and in under 2 years reached a billion
in market cap. So it’s possible any of these small
players could rocket to prominence, and equally
likely some of the more familiar coins might fade.
Because the coins are designed to do different
things or to handle some problems faster or easier,
there is room in the blockchain world for a number
of successful coins. And as with many volatile assets,
they offer great trading opportunities. The volatility
also increases risk, so trade with caution. Let’s take
a look at the most popular cryptocurrencies and
tokens as of May 2017.
Augur: Augur (REP) is a software built on the
Ethereum blockchain that facilitates betting and
gaming. It uses open source coding to build a
predictive decentralised market. Augur seeks to
learn more about crowd wisdom, or collective
intelligence, to become the most accurate
forecasting tool. It collects data without bias
because it’s a machine. The coin was crowdfunded
to begin the company.
Anyone can set up a bet on real world events. Want
to guess which team will win the championship or
who will win the election? You establish a bet and
know that the contracts are secure and payment
will be made. Pay $.50 to cast your vote. If you are
right, you win $1 for each vote.
Bitcoin: Bitcoin (BTC) is the grandfather of all
cryptocurrency and by far the largest. It has a
market cap of over $39 billion (as of this writing)
and is about twice as large as its closest competitor
Ethereum. Bitcoin was designed as a currency
replacement, immune to quantitative easing
because the number of tokens is fixed.
It is open source coded and not controlled by
any specific government. It could be considered
community money. Bitcoin only exists because
people believe in it and attribute a specific value
to it. Bitcoin is accepted as currency at thousands
of outlets from reputable companies such as Del,
Amazon, and Microsoft, to corner pubs, bookstores,
and clothing shops.
Currently, Bitcoin is the entryway to most all
blockchain technology. It is the base currency to
which all other coins are tied. People typically need
to buy Bitcoin first with their fiat currency such as
euros or sterling. Then they are free to trade Bitcoin
for any of the hundreds of other cryptocurrencies.
As the price rises and more investors buy Bitcoin,
the transaction speed has slowed down. It takes
10 minutes or more to make a trade. That’s still
substantially faster than the three days it may take
to transfer assets with fiat currencies.
As of April 2017, Bitcoin faced the risk of a hard
fork. This is when an unalterable change is made
to the blockchain code. Some programmers want
to change the code so the transaction speed can
increase. Others say the strength of the coin is
the inviolate nature of the code and it should not
be changed. If the coin forks, investors will get a
proportional amount of both currencies. In past
forks with other blockchains, one currency declined
and one rose to the top. But no one can be sure
which will be the winner. Some traders also worry
that a fork will damage the Bitcoin brand strength
and allow newcomers to overtake it.
If you are entering the cryptocurrency market,
Bitcoin is an essential coin to own. An increasing
number of platforms trade Bitcoin as a currency.
While a Bitcoin ETF has been rejected by the SEC
again in 2017, other Bitcoin ETFs are in the wings
seeking approval.
BitConnect: A newcomer, BitConnect (BCC) hit
the markets in January 2016 with an ICO. It offers
security, speed of transaction, and decentralisation
built on the blockchain technology. It also gives
every owner the opportunity to earn interest on
their coins. It uses both proof of work and proof of
stake to mine the coins. Because of the sharp rise
in price in just a few months, BCC had to increase
the difficulty of its mining.
BitConnect has a strong community of investors
and lenders. It eliminates banks and other
institutions in offering secure lending. Using the
newest technology, mining BCC is much less
energy intensive than mining Bitcoin. Total coins
are expected to reach 28 million coins before
stopping production.
ColoredCoin: This coin was designed to create
a protocol or standardisation for the creation
of other digital currencies. It’s an open source
banking system for digital money. Imagine a
company like Amazon wanting their own money.
Or even a movie theatre that uses coins for tickets.
The attraction is that you could never double-sell a
seat. This platform allows a new currency to issue
a ‘colour’ tied to a specific Bitcoin. The user could
then hold a wallet with only these coloured coins.
They could track the coloured coins through the
Bitcoin system.
ColoredCoins could act like coupons to redeem air
miles. Or it could become a ‘currency’ where one
coin equalled one rental car for a day. Because it
builds on the Bitcoin blockchain, users know they
have security, privacy, and the item will not be sold
Dash: In March 2015 Darkcoin changed its name
to Xcoin, then to Dash (DASH). When it was created,
there were many emerging altcoins, or alternatives
to Bitcoin. Some of them were scams or ashes
Maltsev, ‘White Paper’ pg 7
in the pan. Over time, Dash has solved early
problems, risen above the pack, and developed
into a solid cryptocurrency. Its strongest benefits
are the features of privacy, anonymity, and speed
of transaction.
Like many cryptocurrencies, in early 2017, Dash
saw an unexpected and sudden rise in price from
about $14 per coin to above $100 in a matter of
days. In one day alone, it increased 34% in value.
Its precipitous rise launched Dash into the select
billion dollar market cap group. Then dropped 40%
in value, climbed back, and continues to be highly
Dash expects to limit total supply to 22 million
coins. However, the master node owners of Dash
need to keep 1000 Dash in a secure wallet to own
a master node and benefit from distributions. This
keeps some coins out of circulation. Simply buying
those 1000 coins lets anyone move into the duties
and benefits of the master node position. The
purpose of master nodes is to provide a second tier
network that’s used to execute Dash’s PrivateSend
and InstaSend. Master nodes also help with Dash
governance, while miners perform tasks similar to
Bitcoin miners. The profits from mining and master
noding are split three ways:
45% to miners
45% to master nodes
10% to the budget or treasury to be used for
projects that improve Dash
Dash offers digital cash similar to PayPal. It lets you
make instant, private, secure payments. You can
pay online or in-store at some locations. Payments
are accepted for transactions such as:
Payments to friends and family
Gaming and gambling
Gold and precious metals
Buntinx, JP ‘Dash Price Surges Past US$50, Gains 34% Value in just One Day’, Aeternity 2 Mar 2017
Web and graphic designs, digital mining
equipment, Virtual Private Networks (VPN)
Commodities like cigarettes, water, plants,
jewellery, clothing, wine, books
Services like photography, law, health
It uses an open source, peer-to-peer, secure
exchange like Bitcoin. Your money is privately
held on your computer giving you full control.
Transactions happen instantaneously. Dash may
be the first cryptocurrency to offer a debit card.
Cryptocurrency platforms like let
people buy and sell Dash and other coins. Some
fiat currency trading platforms allow traders to
trade Dash as well.
Decred: This coin is billed as ‘[t]he first
cryptocurrency of the people, for the people, and
by the people’.
Rather than having miners or
stakeholders control the cryptocurrency, Decred
(DCR) lets every member, every coin-holder, have
a say in deciding the direction of the coin and the
technology. Miners and coin-holders will vote to
implement Lightening Network’s payment process
and then vote to improve or add features. If agreed
on, developers work on projects in full view of the
Currently, Decred offers coin-holders opportunities
to solve puzzles for high stakes prize money.
They work against the clock as the prize money
decreases with time.
Dogecoin: Dogecoin (DOGE) started in December
of 2013 as a joke. But it gained a fan base and
by March 2016 it had a market capitalization of
$22.2 million USD. It uses a private key and a
public key like many other cryptocurrencies and
is mined similar to litecoin. This means miners can
switch between coins and mine either DOGE or
LIT. Dogecoin is used by the Reddit community for
Bitcoin PR Buzzfeed. ‘Decred Releases v1.0: The World’s First Cryptocurrency of the People, for the People, and by the People’ 20 Apr 2017
fundraising and as a form of tipping. They’ll send
coins as a way of rating comments.
Dogecoin bills itself as a fun peer-to-peer internet
currency and has a mascot, a Shiba Inu dog native
to Japan.
Its meme reects the playful nature of
the coin and its community. Doge claims a friendly
user base that supports charitable causes. They
even have a Dogecoin Foundation to support and
grow this cryptocurrency.
Surprisingly, Dogecoin has been traded more
frequently than Bitcoin and has been the most
traded cryptocurrency to date.
Coins have a small
value calculated in Satoshis or 1/10,000,000 of a
Bitcoin. As of April 2017, Dogecoins were valued
at about 0.00000033 Bitcoin. In other words, it
takes about 27 DOGE to equal one cent USD. As
DOGE expects to continue unlimited mining, the
price may stay low. Even with this small amount of
money, however, Dogecoin enthusiasts have been
able to raise money for a NASCAR racer, a water
bore hole in Africa, and sponsor the Jamaican
bobsled team for the Olympics.
Several online currency exchanges now offer
DOGE trading. It’s possible to trade DOGE/BTC,
DOGE/ LTC (litecoin) and even DOGE with the yuan,
the USD, and the Canadian dollar. Traditionally,
DOGE has been one of the most stable of the
Ethereum: Ethereum (ETH) was launched in 2015
and by June 2017 it had rocketed to a $32 billion
market cap. It has been called Bitcoin 2.0 since it
solves many of Bitcoin problems and can perform
more applications than Bitcoin. Ethereum founder
Vitalik Buterin realised there needed to be radical
changes to the blockchain protocol to realise the
full potential of the technology.
‘Dogecoin’, Wikipedia
OConnell, Justin ‘A Dogecoin Pump-And-Dump to Start 2016’, Cryptocoin News 19 Feb 2016
The Ethereum platform makes it possible for any
developer to build and publish next-generation
distributed applications. It allows smart contracts
to be written into the code on the blockchain. This
means that once the contract is fulfilled, the money
is released. Ethereum stands to be an incredibly
disruptive technology. It’s possible to do all banking
transactions, all securities trading, or record all
deeds and attorney contracts on this blockchain
platform. It has wide applications for:
Currencies and banking
Financial derivatives
Hedging contracts
Savings wallets
Full-scale employment contracts
Data feeds
Computational problems
Title registries
Online voting
And thousands of other applications
Since the contract is written into the code, it needs
no third party to verify it. No judge. No Jury. Just the
code. And it’s fast. The transactions can take place
in 1.5 minutes. With open source coding, anyone
can write an app for Ethereum. They can create
their own rules for ownership and transaction
formats. Many applications are too small to
go to the cost and effort of creating their own
blockchain. Ethereum makes it possible for these
small decentralised applications to work together
or independently on the Ethereum system.
Ethereum’s code is written in a low-level, stack-
based bytecode language called Ethereum Virtual
Machine code or EVM code. Each byte represents
an operation.
Ethereum’s method of block
building and storage allows it to use between five
and 20 times less space than Bitcoin, saving on
computer storage.
Maltsev, ‘White Paper’, pg 11
Ethereum differs in other ways from Bitcoin. While
Bitcoin has a fixed number of coins, Ethereum
will continue to produce coins called ether. Ether
is the cryptofuel used to power the applications
Ethereum produces. So businesses will need to
spend ether in order to run the applications. The
more complex the contract or transaction, the
more ether it will consume.
In Feb 2017 JP Morgan, Intel, Microsoft, and
other companies joined together in an Enterprise
Ethereum Alliance. The purpose? To seek ways
of using Ethereum to lower costs and increase
This news shot ETH from about $15.40
a share to over $53. By June 2017 it spiked over
Ethereum is traded on cryptocurrency exchanges
and the eToro platform.
Ethereum Classic: A hard fork in Ethereum split
the coin into Ethereum (ETH) and Ethereum
Classic (ETC). In April of 2016 Ethereum created a
decentralised autonomous organisation (DAO) - a
method of creating new applications built on the
ability of Ethereum to handle contracts. However,
a hacker used an error in the DAO smart contracts
code to steal $60 million.
The blockchain technology showed where the
money went. But reversing the transaction was
against the immutable structure of Ethereum.
To retrieve the money would take a change in
the code and a hard fork. The Ethereum group,
led by founder Vitalik Buterin, voted to change
the code and retrieve the money. The classic
fork side claimed changing the code violated the
immutability of the blockchain.
Many people expected the classic fork to die after
the split. It dropped in price to about $.75 but by
June 2017 it had risen past the forked price to over
Durden, Tyler,’Ethereum To Soar After JPMorgan, Intel, Microsoft And Others Form Blockchain Alliance’, Zero Hedge 27 Feb, 2017
$18.00 per coin.
Ethereum Classic has the same advantages of
Ethereum listed above. It’s competing with ETH
by claiming its protocol in keeping the blockchain
immutable gives it superiority. Ethereum Classic
also intends to grow coins beyond the current 89.3
million, but limit total coins to 230 million. And it
seeks to highlight its transparency and diversified
group of miners. Enthusiastic management
may help Ethereum Classic keep a place in the
cryptocurrency world.
Factom: Factom (FCT) works as a publishing and
auditing engine that secures data by several layers
of encryption. With Factom all parties can verify
and audit the data as needed. It proves the truth
of the data and makes it impervious to fraud or
manipulation. It’s like a private notarization system,
which makes it attractive to banks, governments,
and security organisations. The Department of
Homeland Security in the USA is running a trial of
Factom to see how well this increases their security.
Factom is faster and cheaper than Bitcoin and can
handle more volume. It works on top of Bitcoin
and anchors itself into the Bitcoin blockchain for
redundant security. It allows users to theme track,
or link together, data they want to track without
including unneeded data.
Factom uses factoids as currency which can be
traded on exchanges like other cryptocurrencies.
Factoids are created by mining and ICOs and used
or ‘burned’ when paid as entry credits used to run
Golem: Golem (GNT) is a decentralised system
that rents computer usage all over the world for
business computing and programming. You can
rent out your computing power and earn money.
Some call it the Airbnb of computing. It makes
high-speed computing available for a fraction of
the cost. Need to render a complex computer
generated image? You can do it in minutes instead
of days with Golem.
As companies discover this fast computing for
less, Golem expects to prosper. It is built on the
Ethereum blockchain and offers a highly skilled
programming team and high-quality software
development. In February 2017 Golem nearly
doubled in value overnight.
Litecoin: Litecoin (LTC) is a peer-to-peer internet
currency that was one of the earliest competitors
to Bitcoin. It was established in October 2011 and
came as the result of a hard fork in Bitcoin. The
major differences are shortened block generation
times and increased transaction speed. It also
excels in lower transaction costs.
Litecoin uses technology and miners nearly
identical to Bitcoin and Dash. The open source
software allows anyone to verify the code. Mining
blocks will be halved every 4 years until a total of
84 million litecoins are produced. That’s about
four times as many as Bitcoin’s ultimate total. LTC
doubled in price in one month in late 2013 reached
the $1 billion market cap. It retraced, but in mid-
2017 it soared about 700% in a month
The advantages of litecoin are:
Near instantaneous transactions
Low-cost transactions
Capability of higher transaction volume without
Wallet security lets you see your transactions
and account balance, but you must enter your
password before spending for added protection
from wallet-stealing viruses.
Recently litecoin had a breakthrough. OpenBazzar,
an open source market, is working to add other
‘Golem World Wide Supercomputer’,
d’Anconia, Frisco ‘Golem Rises Almost 100 Percent Overnight, Now Number 11 on CoinMarketCap’, Cointelegraph 18 Feb 2017
coins as payment since the cost of Bitcoin fees
is rising. Charlie Lee, the creator of Litecoin, has
offered developers to help OpenBazzar incorporate
LTC can be traded on cryptocurrency platforms as
well as some forex trading and CFD platforms.
MaidSafeCoin: MaidSafeCoin (MAID) is designed to
fight cyber crime by decentralising and encrypting
data. It connects unused global computing
capacity to create storage space. It also slices and
dices data to send to various locations, making
hacking virtually impossible. The files are moved
autonomously as computers are turned on and off.
MaidSafeCoin started as an ICO, but coins will
continue to be generated as people loan their
computer storage. The loaned storage allows
them to ‘farm’, or earn, the crypto-tokens as
their resource is used by the system. Eventually,
SAFE software will host messaging, email, social
networks, video conferencing, data storage and
more as more apps are built on the system.
This uses P2P technology and a Proof of Resource
(POR) model that pays users for hosting data on
their computers. When the system is fully running,
MaidSafeCoins will be exchanged 1:1 for SAFEcoins.
Metacoin: Metacoin (MET) is an add-on protocol to
Bitcoin. It saves in costs of mining and development
since it piggybacks on the Bitcoin technology. But it
adds advanced features and protocols that Bitcoin
is not equipped to handle. Metacoins may be able
to handle things like financial contracts, name
registration or a decentralised exchange. One
weakness in this system is that metacoins can’t
ensure Bitcoin does not encode the rejected or
erroneous transactions from the protocol.
Monero: Monero (XMR) sprang to life in an
Coleman, Lester ‘As Bitcoin Fees Rise, OpenBazaar Looks at Altcoin Payments’, Cryptocoins News 9 April 2017
‘What is MAID?’ Eobot,
Maltsev, ‘White Paper’, pg 7
awkward birth from a Bytecoin fork in 2014. Early
scams and miners squabbling made for a difficult
However, Monero broke away from
the pack as core developers used solid technology
to make a stronger coin. Monero seems to be
committed to continued change to improve the
currency, placing high value on privacy.
Monero conceals the sending address and
creates stealth addresses for the receiving
address. In January 2017, Monero introduced Ring
Confidential Transactions that provided an added
measure of security by obscuring the amount of
money transferred to everyone not a part of the
Part of Monero’s attraction is the
ability to hide the blockchain and to reveal it with a
viewkey. This viewkey specifically allows transaction
transparency in situations that require it, such as
auditing or the public display of charity finances.
This makes it an ideal blockchain for banks and
other financial institutions that must work within
government regulations.
XMR expects to produce about 18 million coins over
eight years. Rather than halving the coin mining, it
will gradually reduce them. Even after mining stops,
it will permit minimal mining to provide less than
1% annual ‘ination’.
Its strengths are:
In the first six months of 2017 the price has moved
from $10 to nearly $60 USD, and market cap has
ranged from $11 million to over $736 million.
Trading takes place on cryptocurrency platforms
and some forex sites.
NEM: Created by the New Economic Movement,
NEM (XEM) is more blockchain technology than
Latapie, David ‘History of Monero’, Monero Forum
‘Monero (Cryptocurrency)’, Wikipedia
strictly cryptocurrency. NEM was a community-
based movement to create a new cryptocoin. It
rolled out originally in June 2014 with the latest
update in March 2015. NEM is not mined and coins
are expected to top out at 4 billion. Originally, about
3000 stakeholders received 75% of the coins.
As users create more and larger transactions,
those trades give NEM users more power and
control over the system. This is called proof-of-
importance as opposed to Bitcoin’s proof-of-work
and Ethereum’s proof-of-stake. NEM offers a peer-
to-peer platform that lets users manage payments,
messages, and names and build assets. The
EigenTrust++ system lets NEM run securely and
efficiently. Japanese banks are working with NEM.
PIVX: PIVX (PIVX) stands for Private Instant Verified
Transactions. It is a fork from Dash and a name
change from Darknet. PIVX has a strong community
base with over 1,800 masternodes to add to
This is a fast blockchain payment system.
Its SwiftTX give users transactions that happen in a
matter of seconds, allowing you instant proof and
security guarantees.
XRP by Ripple Labs was created as an international
payment system with a goal to help banks move
large amounts of money around the world. It’s
designed to work much faster and at a lower
cost than current methods. This direct-to-bank
settlement eliminates intermediate financial
institutions and currency exchanges. It offers
instant settlement and real-time processing of
funds so they can be promptly verified.
XRP is less expensive and more secure than
Bitcoin. It can transact huge payments using
a fiat currency like dollars or euros as well as
cryptocurrencies, commodities, or any other unit
of value. Other units of value include things such
as mobile minutes or frequent yer miles.
‘Yes, PVIX Is Now Top 20 CryptoCurrencies In the World’, 22 March 2017
It can also escrow funds and release them without
needing trusted intermediaries.
As of April 2017 more than 75 banks have signed
on with Ripple Labs, including heavyweights such
as Standard Chartered, SHRB, UniCredit, and ATB
The Bank of England FinTech Accelerator
recently selected XRP to illustrate cross-border
XRP by Ripple Labs is designed to
handle tens of thousands of transactions per
second, as fast as Visa.
XRP began in 2012 priced about $.004 per XRP
and quickly grew to 10 times that at $.05 only to
drop back to the fractions of a cent. It lingered
there with only a brief surge in Jan 2015 until it
shot up to $.43in May 2017, reaching a market cap
of over $16 million USD, only to drop 48% in the
next month.
This volatile cryptocurrency trades on
cryptocurrency and some forex platforms.
Stratis: Stratis (STRAT) is a flexible blockchain
development platform. It builds applications to
run with Bitcoin, Ethereum, and Bitshares. Its
strength is that it lets businesses take advantage
of blockchain technology in a faster, easier, and
less costly way.
It simplifies and speeds up the
development process for new applications. Stratis
combines the latest advances in blockchain
security and stability with innovation in speed and
scalability of applications. It uses proof of stake to
produce STRAT coins that can be used to purchase
or run the applications. They are exchanged on
several cryptocurrency exchange sites.
TaaS: TaaS (Token as a Service) uses
cryptocurrencies as an investment fund. TaaS
launched with an ICO in 2017. It is a closed fund
that invests in cryptocurrencies. The contract
is built on Ethereum. The fund holds 10-30% in
Roberts, Daniel ‘More Than 75 Banks Are Now on Ripple’s Blockchain Network’, Yahoo News, 26 April 2017
Leonard, Shanna ‘Ripple Selected to Participate in the Bank of England FinTech Accelerator’, Ripple 17 Mar 2017
Vias, Miguel ‘New Features Increase XRP Ledger Transaction Throughput to Same Level as Visa’ Ripple 31 March 2017
Bitcoin and the rest in different cryptocurrencies.
Investors receive quarterly dividends (in Ethereum)
of 50% of the profits. One-half of the remaining
profit is reinvested in cryptocurrencies and the
final 25% is paid to the development team.
TaaS distributed 100% of its tokens in the ICO. They
will be available for trading on currency platforms,
but no more coins will be issued. TaaS stands out
from other funds in that it is transparent and on
the blockchain. It also has reputable leadership.
This is unlike other managed high yield investment
programmes that invest in cryptocurrencies. They
lack the transparency of TaaS and thus are at much
greater risks of scams.
Tether: Tether ties the blockchain technology to
fiat currency such as the US dollar (USDT), euro
(EURT) and Japanese yen (JPYT). This vastly reduced
the volatility of this cryptocurrency. It holds 100%
of the fiat currency in reserve and claims to be
transparent. So you can compare the number
of Tether coins with the dollars or euros held in
The advantage is you can store, send, or receive
these digital tokens across the globe nearly
instantly for a very low fee. You do have to comply
with the ‘know your customer’ process and prove
your identity before getting the coins.
Zcash: Zcash (ZEC) began with impressive
parentage at Johns Hopkins, Massachusetts
Institute of Technology and Israel’s Technion
working together to create an improved Bitcoin.
The cryptocurrency they produced is a unique
code and completely separate from Bitcoin. Design
began in 2014 and it was formally announced in
January of 2016.
It is faster, more efficient, and offers greater
privacy than Bitcoin. The payments show on the
‘The Stratis Platform’ 14 June 2016
Anderson, Weston. ‘TaaS Token Sale (ICO): A Closed-End Crypto-Asset Fund’. Smith & Crown. 23 March 2017.
‘About Tether’. Tether. Accessed 15 July, 2017.
open source blockchains, but the sender, receiver,
and amount remain private. Zcash is mined and will
max out at 21 million units. While Zcash uses open
source it is not an open source community but has
been established as a company.
The founders
put money in to develop the coin. In return, the
founders charge a 20% ‘tax’ on the first 4% of the
mined coins.
The above listed cryptocurrencies were the top
20 as of May 2017. Cryptocurrencies and tokens
will continue to emerge, rise, and fall. This book
can only give you a spot-check on the status of the
coins, as they are constantly in ux. You will likely
be shocked at the price changes between the time
the book goes to press and when you read it. Price
changes of 100% to 1000% are not uncommon and
market caps will continue to expand exponentially.
On Trading Cryptocurrencies
On 20 April 2017 Yoni Assia, Founder and CEO of
eToro said:
“The entire Crypto currencies market cap is under
30 billion where the stock markets are measured
in trillions - but I have little doubt that in 10 years,
the cryprocurrency world will surpass the trillion
USD market cap - and therefore as an investment
platform we should be a part of it”
As of 7 June 2017 the Cryptocurrency market Cap
topped $100B
In late 2017 eToro moved from CFDs to buying
and selling the actual bitcoin on the trading site.
Your fiat money can now be converted to bitcoin.
You may also sell bitcoin using CFDs, although no
leverage is offered for any cryptocurrency trading.
‘What is Zcash?’, Cryptocompare
14.6 Trading Cryptocurrencies
Buying Coins: Buying most all cryptocurrencies
involves trading your country’s currency for virtual
currency. You can upload your dollars, pounds,
euros or yen to the platform via bank transfer,
wire, or PayPal. At the moment, only a few sites
accept fiat currency. Often the platform that will
accept your fiat currency will not host a multitude
of cryptocurrencies. Once you’ve converted your
currency into Bitcoin, or perhaps Ethereum or
Litecoin, you are free to buy other currencies and
trade on a platform that hosts multiple currencies.
Most cryptocurrency owners trade by buying and
selling the coins on these exchanges.
Some ICO offerings accept fiat currency. Their sites
may be set up to allow purchases of the coins. But
more often the purchase must be made in Bitcoin
or perhaps Litecoin or Ether. Sometimes those
crypto-tokens from ICOs are not easily exchanged
for other cryptocurrencies. Either they are only
available on the digital platform that issued them,
or they are not listed on many of exchanges
because they are so small.
Bitcoin Exchanges:
BTCC - China
BTC-e - origin unknown - Germany
Bitfinex - Hong Kong
Bitstamp - US
Coinbase - US and Europe
Cryptopay - UK
Huobi - China and Hong Kong
Kraken - US - worldwide p2p
OKCoin - China
Trading Cryptocurrencies on eToro: eToro
has been at the forefront of the cryptocurrency
movement. CEO and founder Yoni Assia delved
into Bitcoin back in 2011 buying Bitcoin when it
was just $1 a coin. Fascinated with the technology,
he started a Coloredcoins project in September of
2012. It is likely that eToro will be the first trading
platform to use blockchain technology to facilitate
transactions. This could mean faster service and
lower prices. Yoni is committed to offering the
strongest cryptocurrencies to trade on eToro.
In 2017, eToro began offering trading in Bitcoin,
XRP , to let you enter the cryptocurrency trading
market. You don’t have to go through the process
of converting your currency into cryptocurrencies.
You need not own a ‘wallet’ and have your fiat
money tied up and hard to access.
When you daytrade cryptocurrencies you’ll want to
to forecast price changes. Cryptocurrencies seem
more susceptible to drastic changes due to
political, legal, or business decisions rather than
chart patterns. For example, news of hacking,
China restricting BTC transactions, or Microsoft
starting to accept BTC payments all affected the
price. However, in quieter periods, you can see
chart patterns with trading between support and
Crypto-Currency CopyFund™: One of the easiest
ways to play the cryptocurrency market is through
eToro’s new Top Cryptocurrency CopyFund™.
It focuses strictly on the leaders: Bitcoin and
Ethereum. In July 2017, the fund weights a little
heavier with 65% in Bitcoin and the remaining 35%
in Ethereum. The fund’s assets will be rebalanced
monthly by the eToro investment committee as the
volatile prices and market caps change.
CryptoFund CopyFund™: This fund is different
from the Crypto-currency CopyFund™ in that it
takes advantage of all the cryptocurrencies traded
on eToro plus a few more that are not yet traded
on the platform. It currently invests in Bitcoin,
Dash, Ethereum, Ethereum Classic, Litecoin and
XRP. The fund’s initial allocations gave Bitcoin
the greatest weight at above 50% with Ethereum
taking the next quarter of the pie. The remaining
cryptocurrencies have about 5% each with XRP
holding slightly less. The eToro management
team will adjust the percentages as the currencies
Cryptocurrencies seem to trade in a narrow
range and then break to the up or downside in a
wildly dramatic manner. Due to the exceptionally
volatile nature of cryptocurrencies, smart traders
use preplanned trailing stops. They offer a high
potential trade for the adventurous trader and
a financial instrument to hold for the chance for
above average growth.
Bitcoin Cash (BCH): On 1 August 2017, Bitcoin
Cash (BCH) forked off from Bitcoin. The 1 MB
size of Bitcoin was causing high fees and very
slow confirmation times. This made Bitcoin less
effective as a currency and merchants began
moving to other cryptocurrency choices.
Bitcoin Cash miners voted to fork because they
embraced the vision of Bitcoin as a low fee, fast
confirmation, peer-to-peer digital money. Bitcoin
Cash increased the maximum block size to 8 MB
and can be adjustable to scale even higher.
In November 2017, Bitcoin rejected the planned
‘Segwit2x’ hard fork to speed transactions since it
risked causing another split in the network. The
lack of another big block solution made Bitcoin
Cash more attractive and boosted its credibility
and price.
Your capital is at risk. Cryptocurrencies can uctuate widely in prices and are therefore not appropriate for all investors. Trading cryptocurrencies is
not supervised by any EU regulatory framework. Past performance does not guarantee future results. This information is for educational purposes
and not investment advice.