

CRYPTOCURRENCY

Your Ultimate Guide to Understanding the Exciting New Cryptocurrency Revolution of Blockchain, Smart Contracts, ICO, and the Future of Money. Everything You Need to Know to Make Money Through Investing, Trading, Mining, or Issuing Your Own Cryptocurrencies.

# Table of Contents

From the author...

Chapter I Basic definitions of cryptocurrency

Chapter II Introducing the cryptocurrencies

What are cryptocurrencies really?

Cryptocurrencies are real money

Virtual currencies (cryptocurrencies); what is the legal definition?

Cryptocurrencies: Dawn of a new economy in its digital gold

Chapter III What is a Blockchain?

Chapter IV Why do we need the cryptocurrency?

Chapter V Different Types of Cryptocurrencies

Chapter VI Cryptocurrencies vs. Government

Chapter VII Advantages of cryptocurrencies

Chapter VIII What is a fork in cryptocurrencies?

Part IX What is An ICO (Initial Coin Offering)?

What's is the downside?

History of ICOs

Are ICOs Legal?

Chapter X What are Decentralized Application and DAO?

DApps on the Ethereum Blockchain

What is a DAO?

Chapter XI Smart contracts

Examples and ideas of how smart contract can be used

Assassination politics

Smart contract problems

Blockchains with the power to process smart contracts

Chapter XII Why is cryptocurrency valuable?

Chapter XIII How to buy Cryptocurrency?

Part XIV Where to store your coins?

Chapter XV Investment strategy

Part XVI How one can profit from cryptocurrencies

Exploring new opportunities

Chapter XVII Research

Chapter XVIII The World of Cryptocurrency

#  From the author...

The cryptocurrency marketplace is one of the best drivers of wealth in the history of humanity. Even if, sometimes, as we recently saw it's also susceptible to crashes. Some time ago, someone sold two Papa John's pizzas for 10,000 bitcoins. Today, those same bitcoins are worth a fortune.

Take another example of a teenager, who, when turned 13, received a gift of $5,000. Instead of investing it in stocks, he purchased Ethereum, which is the second most popular cryptocurrency. He grew it into his college fund of over $250,000 in less than two years.

In another example, a 21-year-old fitness instructor purchased 5,190 coins of ether for next-to-nothing. Later, he went on vacation and forgot about it. Now, Ethereum is trading above $1,000 for each coin, and it means that his next-to-nothing investment is worth over $5,190,000.

My neighbor's son became interested in cryptocurrencies only several months ago. He invested $500 into one of the cryptocurrencies, and he already has a profit of over $30,000.

The best part is that all of these amazing gains are nothing in comparison to the profits that can be made in recently released cryptocurrencies.

If just two years ago, you purchased only $1,000 of the NEM cryptocurrency; today, you would have more than $2.4 million in your account. If you chose Dash, you'd do even better. $1,000 would turn into a nice junk of more than $8 million.

By the way, that fortune could generate, even at only 3% annual interest rate, a nice income of $240,000 per year, or $20,000 per month.

Is buying newly released cryptocurrencies a no-brainer? Not really. And it's getting harder to choose because of the increasing amount of options. Also, many cryptocurrencies are very volatile and vulnerable to panic buying and selling. Actually, buying fever and sudden selling panics are normal day-to-day events in the cryptocurrency marketplace. There are currently no reliable, standard measures to quantify the value of each offer. It's not easy, even for experts, to isolate diamonds from the rocks. So it's even more difficult for the regular user and investor.

Cryptocurrencies are not a sham. But it is a shame that most people are still confused about it. So, I've decided to do something about it... I will introduce you to and share my experience and know-how to cryptocurrencies, including Bitcoin, Litecoin, Ethereum, Monero, Ripple, Bitcoin Cash, NEM, Stellar, Dash, NEO, and many others.

Here's the key: The murky cryptocurrency marketplace desperately needs educated users who understand the ins and outs of the marketplace. And I'm proud to be one of the first to bring that benefit to investors and users to help you cut through the hype and to help you identify the few truly solid, most promising cryptocurrencies that merit your hard-earned money.

If you'd like to be among the first educated consumers, please read my book.

Wishing you good luck!

# Chapter I

BASIC DEFINITIONS OF CRYPTOCURRENCY

A cryptocurrency is a digital asset. It was designed to work as a medium of exchange (money), and it uses cryptography to secure transactions, as well as to control the creation of additional coins.

Cryptocurrencies make use of decentralized technology to make it possible for users to make secure payments and keep their money without revealing their real name or going to a bank. They rely on a distributed ledger known as blockchain, which is the actual record of all transactions that the currency holders maintain and update.

Bitcoin, Ethereum, Ripple, and Dash are some of the biggest names in cryptocurrencies today.

Among the top cryptocurrencies, Bitcoin is the most popular. The Bitcoin transactions (as well as every other cryptocurrency) are recorded in a file or ledger. Each computer in a Bitcoin network must be furnished with a copy of the said file. The registered numbers don't amount to anything in the real world. They only hold a specific value because there are people who are willing to trade their actual goods and services in exchange for a higher number on their ledger or account.

Here is the list of some definitions used in this book, which should make it easier for many readers.

Fiat currency \- Legal tender, such as US dollars, Euros, Swiss Francs, or British Pounds.

Market cap \- Is the total value of all coins available multiplied by the price of each coin. Commonly used term to approximately measure the worth of the whole network.

Exchange \- A website used to buy and sell cryptocurrency.

Smart contracts \- Is a permanent set of commands written to a program that will complete the task automatically based on information received from trusted 3rd party data feed as the truthsayer.

Node \- A computer with a complete copy of the given blockchain. Any cryptocurrency network includes many nodes. Each node is verifying every transaction in the blockchain.

Miner \- A computer that packs transactions into the blocks and adds them to the blockchain.

# Chapter II

INTRODUCING THE CRYPTOCURRENCIES

A little history

Cryptocurrency is a by-product of digital cash. In his announcement of Bitcoin on November 2008, Satoshi said he developed "A Peer-to-Peer Electronic Cash System." His goal was to invent what many people failed to create before the invention of a digital cash system.

The single most important part of Satoshi's invention was that he found a way to build a decentralized digital cash system. In the nineties, there were many attempts to create digital cash, but they all failed.

After seeing all the other attempts fail, Satoshi tried to build his own digital money system without a central party. Same as in a torrent (Peer-to-Peer) network for file sharing.

This decision brought us to the birth of Bitcoin. This was the missing piece Satoshi found to build his digital cash.

Actually, the digital cash was predicted 18 years ago by Milton Friedman, an American economist, who received the 1976 Nobel Memorial Prize in Economic Sciences for his research on consumption analysis, monetary history and theory, and the complexity of stabilization policy.

During an interview conducted by the National Taxpayers Union in 1999, Friedman said:

"I think the Internet will be one of the major forces for reducing the role of government. The one thing that's missing, but that will soon be developed, is a reliable e-cash. A method whereby, on the Internet, you can transfer funds from A to B, without A knowing B or B knowing A. The way in which I can take a 20 dollar bill and hand it over to you, and there's no record of where it came from, and you may get that without knowing who I am. That kind of thing will develop on the Internet, and that will make it even easier for people using the Internet."

This is an almost exact description of how cryptocurrencies work; all you need is the receiver's public address, and you can send them coins without knowing who or even where they are.

For example, if I want to send someone Bitcoin, all they need to do is to simply send me or post somewhere their bitcoin address, then I would copy and send Bitcoin into that address using my Bitcoin wallet. Bitcoin addresses can be anonymous or can be made associated with your name similar to what Wikipedia co-founder, Jimmy Wales, did.

If all of it is a bit technical and complex, don't worry, you'll get it, and when you do get it, you'll know more about cryptocurrencies than most people. So, let's try to make it as easy as possible:

To build a digital cash system, you need a payment network with accounts, balances, and a way to make transactions. That's easy to understand. But one of the biggest problems every payment network has to solve is to prevent the so-called double spending, which means to stop anyone from spending the same amount twice. In the centralized system, this is done by a central entity who keeps records about everyone's balances.

But in a decentralized network, you don't have this entity. So every single entity of the network has to do this job. Every peer in the network needs to have a whole list of all the history of transactions to make sure that future transactions are valid and no attempt is made to double-spend.

But how can all these independent entities keep a consensus about all these records?

If the peers of the network were to disagree about only one single, minor balance, then everything will be broken. They need to have an absolute consensus about every single balance. Normally, you would take a central party to declare the correct balances. But how can consensus be achieved without a central party?

Nobody knew it; in fact, nobody believed it was even possible until Satoshi emerged out of nowhere.

Satoshi proved it was possible. His major innovation was to show how to achieve consensus without a central party. Cryptocurrencies are just a part of this solution. The part that made the solution so breathtaking, which helped it to roll all over the world.

First introduced in January 2009, Bitcoin was the first decentralized cryptocurrency. It was created by Satoshi Nakamoto, which is a pseudonym used by the developer(s) of Bitcoin.

On April 2011, Namecoin was created as an attempt at forming a decentralized DNS, which would make internet censorship very difficult. Soon after, in October 2011, Litecoin was released.

Since then, numerous cryptocurrencies have been created. In fact, we can find almost 1000 of so-called altcoins listed on sites like coinmarketcap.com. Bitcoin, as well as other cryptocurrencies, use decentralized control as opposed to the current centralized banking systems. The decentralized control is possible, thanks to the introduction by Satoshi Nakamoto's blockchain technology and its role in the distributed ledger.

First bitcoin exchanges were negotiated by people on the bitcointalk forum, together with one of the most famous transactions where 10,000 BTC was used to purchase two pizzas.

By 2017, more than 100,000 vendors and merchants accept Bitcoin as means of payment.

As you can see, Bitcoin and cryptocurrencies are only relatively new. Recently, almost everyone talks about them. In fact, the chatter surrounding this industry has reached a new height. According to Google Trends report, we can see the increasing search volume and the interest people have specifically for Bitcoin and cryptocurrencies in general.

## What are cryptocurrencies really?

If you take away all the buzz around Bitcoin and any other cryptocurrency, and cut it down to a simple definition, you will find it to be simply just a limited database entries that none can change without first satisfying specific conditions. This may seem ordinary, but this is exactly how people can characterize a currency.

Take the money in your bank account as an example; what is it more than entries in a database that can only be changed under specific conditions? You can even take physical coins and notes: They are nothing but limited entries in a public physical database that can only be changed if you match the condition that you physically own the coins and notes. Money is all about a verified entry into some kind of database of accounts, balances, and transactions.

Revolutionary properties

If you really think about it, cryptocurrencies, as a decentralized network that keeps a consensus about accounts and balances, are actually more of a currency than the numbers you can see in your own bank account. What are these numbers than simple entries into a database – a database that can be changed by people you don't actually know but by rules that you all previously agreed to?

Put it simply; cryptocurrencies are database entries about token in decentralized databases kept in consensus. They are called CRYPTOcurrencies because the mechanism of keeping consensus among all the peers is secured by strong cryptography. Simply stated, all the cryptocurrencies are built on solid cryptography. They are not secured by some central authority, and no-one has to trust anyone because the whole system is secured by math. It is more likely that an asteroid will fall on your house than that a bitcoin address is compromised.

In order for us to describe the properties of cryptocurrencies, we need to separate those properties between transactional and monetary properties. While most cryptocurrencies do share a set of typical properties, they are not set in stone.

Transactional properties:

1.) Irreversible: After the block is confirmed by the network, no transaction can be reversed for any reason. No exceptions for anyone, and that means exactly anyone. Not for you, not for your bank, and not for president of the United States. If for any reason you send your money, it means you send it. Period! And now, no one can help you, even if you sent your funds to a crook or if some hacker was able to steal them from your computer. There is nothing anyone can do.

2.) Pseudonymous: No transaction or account is linked to the actual real-world people. You and every other user of cryptocurrency receive coins to the so-called address that looks like a random string of characters, and while it could be possible to analyze the flow of transactions, it is not easy or sometimes even possible to connect them to real people with that information.

3.) Fast and global: Transactions are spread almost immediately throughout the network, and usually will be confirmed in a couple of minutes. Since they happen in the global network, they are neutral to your real location. It really doesn't matter if I send my coins to my next-door neighbor or to someone on the other side of the world.

4.) Secure: Cryptocurrency funds exist in a cryptographic system. The owner is the only one who has the private key and can send cryptocurrency. Strong cryptography makes it impossible to break this system. A Bitcoin address is more secure than your bank account.

5.) Permissionless: You don't have to ask permission to use cryptocurrency. It's just a software, and anyone anywhere can download it for free, install it, and then receive or send Bitcoins or other cryptocurrencies. No one can stop you from doing it. There is no gatekeeper.

Monetary properties:

1.) Controlled supply: Most cryptocurrencies limit the supply of coins. In Bitcoin's case, the supply will be decreasing with time, and eventually will reach its final number somewhere in or around 2140. All cryptocurrencies control the supply of their coins by the rules specified in the code. This means the monetary supply of a cryptocurrency in every given moment of the future can roughly be calculated today. There are no surprises.

2.) No debt but bearer: The Fiat-money that you have in your bank account were created by debt, and nothing but debts. It's a system of IOUs. Cryptocurrencies, just like gold, don't represent debts. They just represent themselves. They are money as hard as coins of gold.

To understand the revolutionary impact of cryptocurrencies, you need to consider both properties. Bitcoin and other cryptocurrencies are a permissionless, irreversible, and pseudonymous means of payment, which is an attack on the control of banks and governments over the monetary transactions of their citizens. You can't prohibit someone to use cryptocurrency as you can't preclude someone to accept a payment as well as you can't undo a transaction.

As money with a limited, controlled supply that is not changeable by a government, a bank or any other central institution, cryptocurrencies attack the core of the monetary policy of the transfer of wealth from productive members of society to bankers and government parasites. They take away the control that central banks have over inflation or deflation by influencing the monetary supply.

## Cryptocurrencies are real money

What is money? Money is any item or verifiable record that is generally accepted as payment for goods and services, and repayment of debts.

The main functions of money are

  * a medium of exchange;

  * a unit of account;

  * a store of value;

Any item or verifiable record that fulfills these functions can be considered as money.

Medium of Exchange

As a medium of exchange, cryptocurrency is on par with fiat (regular currencies like USD, Euro, etc.) currency. You can use both of them to buy the same things. And as the proliferation of the Silk Road type online deep-web stores show us, you may be able to purchase some things easier with cryptocurrency than with regular currency.

Portability

The portability prize goes to cryptocurrency over fiat currency.

With the scan of a QR-code, a tap of a smartphone app, or click of a web wallet, cryptocurrency is quickly and conveniently sent and received. Sending the equivalent value in today's fiat currency would require a money transfer agent like Western Union or MoneyGram, and that would incur outrageous charges. But even those charges can be exceeded by the fees charged by the bank for wire transfers.

Moving cryptocurrency is not inhibited by the size and weight. Paper money doesn't have that leisure. Try moving large sums of paper money from one place to another. It is burdensome, inconvenient, and risky, and in the case of undeclared, cross-border transfers, it could even be highly illegal.

Unit of account

As a unit of account, cryptocurrency is identical to fiat currency. One coin of cryptocurrency always has the same value of another coin of the same cryptocurrency. That is exactly the same as with fiat currencies.

Store of value (it can't be counterfeited)

The store of value prize goes to cryptocurrency over fiat currency.

In the cryptocurrency world, the different name for counterfeiting is used and is called "double spend," which means using the same money twice and making both transactions fraudulent. In the real world, it has many names, like central banking, Quantitative easing (QE), deficit financing, and many other names, but what it all really means is currency counterfeiting and the destruction of the store of value. Cryptocurrency was created from scratch to prevent this "double spend" problem. This is accomplished with Blockchain technology and the different consensus mechanisms built into all cryptocurrency systems. These traits make cryptocurrency a superior to paper currency in the store of value department.

Durability

Cryptocurrency exists online and is not a tangible item. Physical deterioration is impossible. Based on this fact that cryptocurrencies do not have a tangible form, some people have alleged that cryptocurrency is not a real money. However, in the modern age, the currency we use is more often than not is represented as digits in a computer than physical paper and coins. While it is true that you can still have physical currency, most people today use credit cards to do their banking transactions both online and in brick and mortar stores.

However, is your bank account the safest place to keep your savings? We are not only talking about inflation that will eat your buying power, but also because the government may just decide to take it away as was proven by the Cyprus bank crisis. And look at what happened to Saudi Arabia Prince Alwaleed bin Talal. Less than a month after Prince Alwaleed declared that Bitcoin will implode and that it was: "Enron in the making," and that "

It just doesn't make sense. This thing is not regulated, it's not under control, it's not under the supervision of any central bank," the world's richest Arab became a poster boy for owning cryptocurrency. He wouldn't have the problems if he were holding the cryptocurrency. He was under 'house arrest' in the Ritz hotel in the Saudi capital, Riyadh, where he was sleeping on an inflatable mattress. Saudi authorities have confiscated bin Talal's assets totaling around $33 billion as part of an alleged crackdown on corruption by King Salman. He dissed Bitcoin and then he had all his wealth confiscated.

That would score another one for cryptocurrency over paper money as it wins hands down in the durability category.

## Virtual currencies (cryptocurrencies); what is the legal definition?

From the legal standpoint, you need to define what the cryptocurrency is. Since this is a part of positive laws (as opposed to natural law), it's not as simple as it may sound. For example, despite what most people think, the so-called Pyramid or Ponzi schemes are legal business practices. The problem to make them illegal is to describe it.

If you do so, then no one would be able to tell the difference between a pyramid scheme and an insurance company, bank or social security; they are all the same. There's no single federal statute the U.S. government can use to specifically prosecute pyramid schemes. However, they can try to prosecute pyramid schemes for deceptive trade practices, or claim it as a fraud. Also, most states have their own laws, but again, they are going against recruitment and have nothing against the pyramid scheme itself.

For example, Florida, under its Florida's Deceptive and Unfair Trade Practices Act; prohibits the use of "a chain referral sales technique to get a consumer to purchase a product or service over $100, where the consumer is promised money or commission to recruit more members," which really goes against recruitment practices and have nothing to do with the pyramid scheme itself.

So, in order to make a show that they are illegal, for legal purposes, cryptocurrency is often defined as a virtual currency, and as such is also known as virtual money.

The U.S. Treasury defined it as "is a type of unregulated, digital money, which is issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community."

A little different definition was given by the European Banking Authority in 2014, who defined virtual currency as "a digital representation of value that is neither issued by a central bank or a public authority, not necessarily attached to a fiat currency, but is accepted by natural or legal persons as a means of payment and can be transferred, stored, or traded electronically."

On the other hand, the IRS resolved in March 2014 to treat bitcoin and other virtual currencies as property for tax purposes, not as currency. So, some people have implied that this would make Bitcoin not fungible. It would mean that one Bitcoin is not identical to another Bitcoin, unlike one gallon of crude oil being identical to another gallon of crude oil. But that would make Bitcoin useless as money.

Here is what we have from the NY state 2015 BitLicense application:

"Virtual Currency means any type of digital unit that is used as a medium of exchange or a form of digitally stored value. Virtual Currency shall be broadly construed to include digital units of exchange that;

(i) have a centralized repository or administrator;

(ii) are decentralized and have no centralized repository or administrator; or

(iii) may be created or obtained by computing or manufacturing effort.

Virtual Currency shall not be construed to include any of the following:

(1) digital units that;

(i) are used solely within online gaming platforms,

(ii) have no market or application outside of those gaming platforms,

(iii) cannot be converted into, or redeemed for, Fiat Currency or Virtual Currency, and

(iv) may or may not be redeemable for real-world goods, services, discounts, or purchases.

(2) digital units that can be redeemed for goods, services, discounts, or purchases as part of a customer affinity or rewards program with the issuer and/or other designated merchants or can be redeemed for digital units in another customer affinity or rewards program, but cannot be converted into, or redeemed for, Fiat

Currency or Virtual Currency; or

(3) digital units used as part of Prepaid Cards;"

## Cryptocurrencies: Dawn of a new economy in its digital gold

Essentially because of its revolutionary qualities, cryptocurrencies became such a success their inventor, Satoshi Nakamoto, most likely never ever imagined. Even though other attempts to build a digital cash system didn't bring a critical mass of users, Bitcoin had something that provoked excitement, devotion, and passion.

Cryptocurrencies are digital gold. Sound money that is secure from political control. Money with a commitment to protect and grow its buying power over time. Cryptocurrencies are also a quick and convenient means of payment to any part of the world with no restrictions, and they are private and anonymous enough to serve as a means of payment for black markets and any other outlawed economic activity.

Albeit cryptocurrencies are more used to make payments, and its benefits as a method of speculation and a store of value are tiny relative to the payment aspect. Cryptocurrencies gave birth to an amazingly dynamic, quickly-expanding market for both investors and speculators. Exchanges like Bitfinex or Kraken permit the trade of hundreds of cryptocurrencies. Their daily trade volume may soon exceed that of major European stock exchanges.

In the meantime, the practice of Initial Coin Distribution (ICO), mostly aided by Ethereum's smart contracts, gave life to amazingly effective and fruitful crowdfunding campaigns, in which, frequently, an idea is sufficient to raise millions of dollars. As an example, in the case of "The DAO," the organizers were able to collect more than 150 million dollars.

In this abundant ecosystem of coins and tokens, users encounter intense volatility. It's common that a coin grows 10 percent a day and occasionally 100 percent, but it would lose it or even more the next day. If you are lucky enough, your coin's price goes up to 1000 percent in one or two weeks.

Although Bitcoin stays by far the most influential cryptocurrency, investors and users should keep an eye on alternative cryptocurrencies also. Here in chapter V, we will introduce the most popular cryptocurrencies of today.

What is the future of Cryptocurrency?

The market of cryptocurrencies is hot and intense. Almost every day, new cryptocurrency is arising, old coins perish, some early investors get wealthy, and some lose money. All cryptocurrencies come with an idea, mostly a big story to make the world a better place. Minority survive the first months, and some are pumped and dumped by speculators and live on as zombie coins until the last bagholder will lose his hope to ever see his investment again.

In a couple of years, I think cryptocurrencies will be able to gain legitimacy one way or another as a way for business transactions and micropayments. It will be able to overtake the Western Union as the preferred way to transfer funds. As far as business transactions – there'll be two paths: there will be financial businesses, which will use it for it's almost free, nearly-instant ability to move any amount of money around the world, and there will be those that will employ it for its blockchain technology. Blockchain technology will provide the biggest benefit with trustless auditing, single source of truth, smart contracts, and color coins.

Cryptocurrencies are here to stay – and here to change the world. This is already happening. People all over the world buy cryptocurrency to guard themselves against devaluation of their national currencies. Recently, a new powerful market for Bitcoin remittance has developed, and the Bitcoin utilizing darknets of cybercrime are prospering. More and more companies are exploring the power of Smart Contracts or token on Ethereum, the first real-world utilization of blockchain technologies appear.

The transformation is already occurring. Even institutional investors are already buying cryptocurrencies. Banks and governments already realize that this invention has the power to draw their authority away. Cryptocurrencies will transform the world for the better, step-by-step. You can either stand by and just witness the changes – or you can become a part of the history in the making.

As the trend advances, the average person will no longer be able to afford to buy one whole bitcoin. As global economies continue to inflate and markets show signs of recession, the people will turn to Bitcoin as a hedge against fiat turbulences and an escape against capital controls. Bitcoin is the way out, and cryptocurrencies in aggregate are never going away, they are going to expand in use and acceptance as they evolve.

# Chapter III

WHAT IS A BLOCKCHAIN?

Can blockchain technology become the new internet?

"The practical consequence [...is...] for the first time, a way for one Internet user to transfer a unique piece of digital property to another Internet user, such that the transfer is guaranteed to be safe and secure, everyone knows that the transfer has taken place, and nobody can challenge the legitimacy of the transfer. The consequences of this breakthrough are hard to overstate."

\- Marc Andreessen

On the one hand, the blockchain is a perpetual digital register of different economic activities that can be programmed to record practically anything valuable. But, for all its value, blockchain technology is not a new invention. Rather, it is a merger of already proven technologies used in a new way. It was this specific composition of all three technologies (the Internet, private key cryptography, and an incentivization protocol) that made Satoshi Nakamoto's idea so effective.

The result is a structure for digital communications that does not require a trusted central party. The arrangement of acquiring digital relationships is implied — provided by the beautiful, straightforward, yet powerful network architecture of blockchain technology itself.

Defining digital trust

Trust is a risk exposure judgment between different parties, and in the digital world, deciding on trust often reduced down to verifying identity and confirming authorization.

In simple terms, we need to know, 'Are you really who you say you are?' and 'Should you be able to do what you want?'

In this case, of blockchain technology, cryptography provides a powerful ownership tool that accomplishes authentication requirements. Possession of a private key is the ownership. It also saves a person from having to provide more personal information than they needed to for an exchange, leaving them open to hackers.

Authentication is not enough. Authorization, which means having enough money, broadcasting the correct transaction type, etc. – requires a distributed, peer-to-peer network from the outset. A distributed network will diminish the risk of centralized fraud or breakdown.

This distributed network also has to be committed to the recording network's transactions and security. Authorizing transactions is the outcome when the whole network employs the rules upon which it was designed (the blockchain's protocol).

Authentication and authorization provided this way allow for interactions in the digital world without requiring trust. Today, businesses and individuals in different industries around the world have awakened to the significance of this revolutionary advancement – undreamed-of, new and powerful digital relationships are now possible. Blockchain technology is often defined as the backbone for a transactional layer of the Internet, the bedrock of the Internet of Value. And now, everyone from governments to banks to IT firms is trying to build this transaction layer.

Authentication and authorization, vital to digital transactions, are established as a result of the configuration of blockchain technology.

The idea can be applied to any need for a trustworthy system of record.

A distributed database

Imagine a spreadsheet that is copied hundreds of times all across a network. Then picture that network is constructed to routinely update this spreadsheet. Now, you have some essential understanding of the blockchain.

Information held by the blockchain exists as a shared and constantly reconciled database. This way of using the network has recognizable benefits. The blockchain database isn't kept in any one place, which means that the records it keeps are really public and can easily be verified. No central version of this database exists for anyone to corrupt. Stored on thousands of computers at the same time, its information can be accessed by anyone, at any time through the internet.

A blockchain is a digital distributed ledger of all cryptocurrency transactions. It is constantly growing as 'completed' blocks (recent transactions) are registered and added to it in its historical order, that lets users keep track of currency transactions without central recordkeeping. Each node (a computer connected to the network) receives its copy of the blockchain when it connects to the network, and it's downloaded automatically.

Blockchains, with what's known as distributed ledger technology (DLT), are now appearing in a variety of commercial applications. Even though, currently, the technology is primarily used to verify transactions in digital currencies, it is possible to digitize, code, and insert practically any document into the blockchain. By doing so, we create a permanent record that cannot be changed; additionally, the record's authenticity can be verified by the whole community using the blockchain instead of a single party.

A block is the part of the blockchain; when created, it would have records of some or all of the recent transactions. Once finalized, a block goes into the blockchain as a part of the permanent database. Any time a block gets finalized, a new one is created. There are endless numbers of such blocks in the blockchain, connected to each other in linear, historical order. Every block must contain a hash of the previous block. The blockchain has all the information about different user addresses and their balances right from the genesis block to the last finalized block.

The blockchain was designed so that these transactions would be unchangeable and enduring. The blocks are added through cryptography, guaranteeing us that they will stay without interference. That way, information can be dispersed, but not meddled with.

The blockchain is the main revolutionary invention of Bitcoin. Bitcoin isn't regulated by any government or any other central authority. Instead, its users govern and confirm transactions when one person transfers another payment, removing any need for a third party to handle or maintain payment history. The completed transaction is first recorded into the block and ultimately into the blockchain, where it's confirmed and broadcasted by other Bitcoin users. In the case of Bitcoin on average, a new block is added to the blockchain every 10 minutes.

In accordance with Bitcoin protocol, the blockchain database is shared by all nodes involved in the system. When the new node joins the system, it receives a copy of the blockchain, which has all the records and stands as proof of every single transaction ever been executed by the network. This way, it can provide understanding facts like how much value belonged to a specific address at any point in the past.

If we use the traditional bank as a comparison, the blockchain is like a whole history of a bank's transaction, and each block is similar to each individual bank statement.

Blockchain Durability and robustness

Blockchain technology is similar to the internet in the sense that it has a built-in robustness. By keeping blocks of data that are identical all over the network, the blockchain cannot:

  * Be controlled by any one party.

  * Has no single point of failure.

Transparent and incorruptible

The blockchain system exists in a state of consensus, one that continuously checks in with itself. It's like a self-auditing ecosystem of a digital value, and the system integrates every transaction that happens in the block. Two important features come from this:

  * Data transparency is rooted in the system as a whole; by definition, it is public.

  * It cannot be changed; by modifying just one piece of information on the blockchain, it would mean using a huge amount of computing power that would be able to exceed the entire network.

The Bottom Line

Given the extraordinary possibility for decentralization, blockchain technology offers the capability to build businesses and organizations that are both flexible and secure. Whether businesses will succeed in expanding blockchain technology to develop products and services that consumers will trust and adopt is yet to be seen. However, this is certainly a place to watch. The demand for blockchain-based services is growing, and the technology is maturing quickly.

The possible applications for blockchain technology are practically limitless. At present, many of these applications are still in its development stage. But with all the money that are pouring into the blockchain-based startups, we should see blockchain related services and products coming to us in the near future.

# Chapter IV

WHY DO WE NEED THE CRYPTOCURRENCY?

The main reason for the existence of the cryptocurrency is actually freedom. Freedom from:

  * Counterfeiting

  * Regulations

  * Confiscations

  * We also need it as:

  * A medium of exchange

  * Store of value

Counterfeiting

When government creates additional currency, it is called inflation, but what it really does is counterfeiting. Inflation is the official counterfeiting of the currency. Basically, counterfeiting is that monetary fraud, which is the root of most today's economic and political problems.

What it does is it redistributes wealth from productive members of society to non-productive. The best example would be the standard of living in the United States; it stopped growing in 1970 when the United States officially went off the gold standard and was able to counterfeit unlimited amount of dollars.

Consider this relatively to unprecedented productivity growth during that same time period. Compare that to the gold standard years. In simple terms, extra wealth created by the economy and its growing productivity is transferred not to the people as it was under the gold standard, but to the counterfeiters. Using the gold standard years, it's about 4% per year, or in other words, today's salary of $30,000 could have been at least $90,000 if the economy didn't have such a huge counterfeiting problem.

Cryptocurrency in that regard is similar to the gold standard, and it would not allow any counterfeiting to be done by anybody. Therefore, no parasitic entities would be able to grow around it and consume the efforts of productive members of society. Productive members would enjoy much higher and constantly growing standard of living unlike under a fiat system where most of their efforts are consumed by the parasites.

Regulations

Even according to new and official study from the Mercatus Center at George Mason University, it admits that because of regulatory burden on the U.S. economy, it is $4 trillion smaller than it would have been otherwise. Just try to think about it!!! That's nearly $13,000 per each American. The family of 4 is losing $52,000 each year on regulatory nuisance.

Their astonishing conclusion: Annual output in 2005 was "28 percent of what it would have been should regulation remained at its 1949 level." If not for the growth in the regulatory burden, the gross domestic product would have been $53.9 trillion in 2011 instead of $15.1 trillion that represents a 2 percent annual reduction in economic growth amassed in over 56 years. Americans are much poorer today because of federal regulations, without which the 2011 U.S. per capita income would be nearly four times higher; instead of $48,000, it would be $168,000.

The compliance costs by themselves are humongous. The Competitive Enterprise Institute's report Ten Thousand Commandments 2015 estimated that it costs consumers and businesses close to $1.9 trillion. That is more than 11 percent of the current GDP to comply with existing federal regulations. That actually even surpassed the $1.82 trillion that the IRS was expected to collect for both individual and corporate income taxes in 2015.

But as bad as that is, regulatory compliance costs look trivial relative to the loss of tens of trillions of dollars in the overall wealth of the nation.

Confiscations

Cryptocurrency is the first and only unseizable store of value in human history. Unlike gold, equities, or fiat, it can't be confiscated.

\- Ari Paul

Government confiscations, oppression, and capital controls are still a thing. But cryptocurrencies, if handled correctly, can't be confiscated, and that has enormous value for a lot of people around the world. Cryptocurrency is also easier to transfer over the border than good old gold or cash.

Remember when the then President Franklin Roosevelt confiscated (more correctly stolen) the nation's gold and devalued the U.S. dollar to $35 per ounce from $20.

Some Argentinians have bought bitcoins to protect their savings from high inflation and the chance that a government could confiscate their savings accounts.

During the 2012–2013 Cypriot financial crisis, many Cypriots purchased bitcoin due to fears that savings accounts would be confiscated or taxed.

According to a report in The Guardian, Musa Jimoh, a deputy director of the Central Bank of Nigeria noted that "the nature of the technology, which gives users autonomy over the private keys that access blockchain-linked data, enables the creation of forms of money that are beyond restriction and confiscation."

Saudi Arabia's Bin Talal is the world's richest Arab. He wouldn't have his problems if he instead of bashing Bitcoin and calling it "Enron in the making," and saying that it's a bad thing because "This thing is not regulated, it's not under control, it's not under the supervision of any central bank." Instead of him to have purchased Bitcoin or other cryptocurrencies, and now his wealth would not have been confiscated.

Store of value

Fundamental tension always remained between two main purposes of money. Currencies that are recognized as the best stores of value, like gold, make for poorer mediums of exchange. Fiat currencies at the same time are great medium of exchange, but make for unreliable stores of value and that would impact its versatility as a unit of account and a benchmark of deferred payment.

Supply Scarcity and the Store of Value

As the store of value, many investors recognize gold, and lately, bitcoin as the second to none. Since 1971, gold has appreciated from $35 per ounce to around $1,300, a gain of over 3,500%. Bitcoins have done even more extraordinary. On July 19, 2010, a bitcoin was valued at $0.08. And at this time, it's priced close to $10,000 per bitcoin, an advance of over 9,000,000% in seven years. That is some excellent accomplishment!

Whether gold or bitcoin actually are stores of value is not agreed upon by everyone. If looked from a fiat currency point of view, such as the U.S. dollar, bitcoin or gold are not without its risk. Gold had a 70% fallback between 1980 and 1998, but relatively to bitcoin, the gold market looks quiet. Bitcoin, in its short life, has experienced declines of 93% and 84%. With that being said, the logic why gold and bitcoin are recognized as the store of value is plain and simple: their money supply growth slowly.

Both gold and bitcoin money supply is driven by the mining production. Over the past 50 years, new gold mining has produced somewhere from 1.1% to 2.4% yearly relatively to the existing stock. Generally, gold prices lean to go contrary with the degree of mining output coming to the market. There is no comparing with the money supply of the U.S. dollar.

Even before the 2008 financial crisis, the Federal Reserve's balance sheet, one of many proxies for the amount of money in the system, grew by 5.6% per year. But starting the fall of 2008, it has expanded by nearly 20% per year.

Cryptocurrencies have a very specific procedure for increasing their money supply, which, in case of Bitcoin, is mining technology with a rigid ceiling. The stringent money supply guidelines make the price go up when demand goes up.

Bitcoin's mining supply this year will likely grow around 4.2% and then drop to below 2% per year after 2020. It is projected that around 2140, the last new bitcoin will ever be mined, bringing the total to 21 million. The bitcoin market expects this; thus we have an amazing bull market in the digital currency. This difference with gold, whose price has been distressed by about 94 million new ounces coming to market each year.

Although bitcoin has delivered its owners breathtakingly, even if extremely volatile gains, but what's even more incredible is how little it's worth, even at $10,000 per coin. If one considers that there will only be 21 million coins in the world by 2140, that means their combined current value will only come to $120 billion. And while it is nice valuation, it is nothing in relation to the impressive value of the approximately 5 billion ounces of already mined gold, whose total worth is over $6 trillion at the present prices.

Additionally, the 94 million ounces that come out of the world's mines in 2017 have a value of nearly $120 billion at current market prices, which is roughly the same value of all the bitcoins that will ever come into the world. Though there is no compelling reason to expect that bitcoin should have a value similar to the value of gold, but if it did, each bitcoin could be worth almost $285,000, which is 28 times the current market price. As such, one might think: is bitcoin still vastly undervalued even after a 9,000,000% rally?

Medium of Exchange

Although, gold has proved itself as a great, even if volatile, store of value, practically none, however, uses gold as a medium of exchange. The problem for gold as a medium of exchange is plain and simple: why would you use it now if you think that it can be worth more in the future? This problem applies even more to bitcoin and other cryptocurrencies. Wouldn't you regret paying 20 bitcoins for a $40,000 car in June 2017 only to see the same 20 bitcoins valued at nearly $200,000 by November of the same year?

Essentially, the vast part of transactions is in fiat currencies created by central banks. These currencies were created and managed, so they would lose their value over time, not just against gold and bitcoin, but also against the goods included in consumer price indices. The only difference is that some fiat currencies lose their value slowly, while others do so more quickly.

#  Chapter V

DIFFERENT TYPES OF CRYPTOCURRENCIES

Bitcoin (BTC) is considered to be digital gold. It started the global sensation and is famous for its groundbreaking blockchain technology conceived and released by Satoshi Nakamoto back in 2009. Based on research published by Cambridge University in 2017, there were from 2.9 to 5.8 million individual users that were using a cryptocurrency wallet. Most of those users were using Bitcoin. The word bitcoin first appeared and was defined in the white paper that was published on 31 October 2008. It is a combination of two words; bit and coin.

Ethereum (ETH) launched in 2015, is an open-source, decentralized blockchain-based software platform that enables Smart Contracts and Distributed Applications (ĐApps) to be built and run without any downtime, fraud, control, or interference from a third party. Ethereum is what many consider as programmable contracts and money. Ethereum was proposed in late 2013 by Vitalik Buterin. Development was funded by an online crowdsale between July and August of 2014. The system went live on 30 July 2015.

Ripple (XRP), released in 2012, is what can be described as an Enterprise payment settlement network. Ripple's currency exchange and remittance network also called the Ripple protocol was built upon a distributed open source Internet protocol, consensus ledger, and native cryptocurrency called XRP (ripples). Ripple is a real-time global settlement network that offers instant, certain, and low-cost international payments. Ripple's consensus ledger - its method of confirmation - doesn't need mining, a feature that deviates from bitcoin and other altcoins. Since Ripple's structure doesn't require mining, it reduces the usage of computing power and minimizes network latency.

Dash (DASH) - stands for "Digital Cash" and was originally released on January 18, 2014. Privacy-focused Bitcoin clone, Dash, is a more secretive version of Bitcoin. Dash offers more anonymity as it works on a decentralized mastercode network that makes transactions almost untraceable. It also features instant transactions and private transactions. It also operates a self-governing and self-funding model that enables the Dash network to pay individuals and businesses to perform work that adds value to the network. Dash's decentralized governance and budgeting system makes it a decentralized autonomous organization (DAO).

Nxt (NXT) - is an open source cryptocurrency and payment network launched in November 2013 by an anonymous software developer, BCNext. It was specifically designed as a flexible platform to build applications and financial services around its protocol. It uses proof-of-stake to reach consensus for transactions—as such there is a static money supply and, unlike bitcoin, no mining. It has an integrated Asset Exchange (comparable to shares), messaging system, and a marketplace. Users can also create new currencies within the system. It also has Multisignature capabilities and a plugin-system for the client.

Nem (XEM) - is a peer-to-peer cryptocurrency and blockchain platform launched on March 31, 2015. Sometimes called as Batteries-included digital assets, NEM was written in Java, with a C++ version in the works. Initially, NEM was inspired by Nxt and even the initial plan called for NEM to be created as a fork of NXT.

But later, that idea was dismissed, and coders went for a new codebase. It has introduced new features to blockchain technology, such as its proof-of-importance (POI) algorithm, multisignature accounts, encrypted messaging, and an Eigentrust++ reputation system. The NEM blockchain software is used in a commercial blockchain called Mijin, which is being tested by financial institutions and private companies in Japan and internationally.

Steemit (STEEM) - the project was founded in 2016. As some people called it, "Reddit with money voting." The general concept is similar to other blogging websites or social news websites like Reddit, but the text content is saved in a blockchain. Using a blockchain enables rewarding comments and posts with secure tokens of value.

User accounts can upvote posts and comments, and the authors who get upvoted can receive a monetary reward in a cryptocurrency token named STEEM and US dollar-pegged tokens called Steem Dollars. People are also rewarded for curating (discovering) popular content. Curating involves voting comments and post submissions. Vote strength and curation rewards are influenced by the amount of STEEM Power held by the voter.

Steemit has a reputation system, where new accounts start with a reputation of 25. An account's received votes can influence its reputation up and down, incentivizing online etiquette and interaction with the community.

# Chapter VI

CRYPTOCURRENCIES VS. GOVERNMENT

The idea of a global currency that would be free and independent from any country or its central bank on the one hand, but would also be designed for a global economy has always captivated economists, computer experts, businessman, and anti-government advocates. The ideal currency would support privacy to its users, safeguard from inflation for its savers, and provide security from theft and fraud for its holders. These dreams led to the idea of a digital cash, allowing for the idea of a digital cash or its equivalent to be used all over the Internet. Bitcoins (BTC) and other cryptocurrencies are the latest and most advanced and popular outcome of those efforts to create a practical digital currency.

Advantages of the new currency:

  * Instant transfer can be made to anyone and anywhere without any restrictions

  * Payments cannot be reversed for any reason

  * Third parties are unnecessary

  * The supply of cryptocurrency cannot be manipulated or changed by anyone, including government, bank, organization, or individual

  * Privacy and anonymity of transactions

  * Security from theft or confiscation, including by government

However, precisely those things that make cryptocurrency appealing like anonymity, the simplicity of transfer from one person to the other, the absence of government control, available in any country without any capital controls and not subject to any banking regulation are condemned by different governments.

The reason for this is that cryptocurrencies stand for everything that the government stands against, which is your freedom. Think of everything that government stands to give up, including its power over you. Its power to take your money away, to keep some fruits of your labor and generally keep its nose in your life.

They would not be able anymore to expand or contract the money supplied and increase or decrease interest rates, effectively losing their ability to transfer your savings to their coffers without you even knowing about it.

They couldn't track, control, and tax currency, it would freely flow in or out of the country.

They couldn't pry into your bank accounts when they want to.

And it would be very difficult to enforce tax laws regarding payments among private parties. (Think of paying your plumber 20 or 30% less for paying in bitcoin.) The world of financial slavery would come to an end.

Just consider the latest example when Coinbase was ordered to report 14,355 of its users to the IRS. The crime: moving more than $20,000 through Coinbase. Nothing else.

A federal court in California has ordered Coinbase to turn over its records for all users who have bought, sold, sent, or received more than $20,000 through their accounts in a single year between 2013 and 2015. According to Coinbase, it has estimated that 14,355 of its users fits the government's demands.

For each account, the company has been ordered to furnish the IRS with the user's name, date of birth, address, and taxpayer ID, together with records of all their account activity and any associated account statements. The outcome is absolute user's identification and a complete record of everything they've done with their Coinbase account, including all other accounts to which they transferred or received any money.

On the one hand, the government didn't claim any suspicion against any specific individual user, nevertheless but rather made an argument that the order was warranted based on the disparity among Coinbase users and the U.S. citizens reporting Bitcoin income to the IRS. The government claims that Coinbase brags about having close to 6 million customers, but according to a government paper, less than 1,000 U.S. citizens have shown cryptocurrency as part of their holdings on their taxes.

As in the example above, I really can't see government officials surrendering any, let alone all, of these instruments. What are they going to do? Get a job in the real economy? No way. They are better than that.

And yet, as nearly all human beings, it's what I would genuinely like to have.

I hold out hope that I can keep my private life as private and I don't want the government or anyone else for that matter knowing what I do with my property. It's mine. I earned the money, and now I should be free to do what I want.

While its features will put a government as its aim, there's one feature that could be embraced by all governments around the world.

It's the technique by which bitcoin follows transactions, by means of the blockchain.

It's similar to a lot of folks possessing the same copy of the document, where anybody can add an entry to it. Every time an entry is added, everyone's copy of the document is updated. And all the copies can be seen by anybody, including all the previous changes right from the blank page at the beginning.

The block is the active part of the transaction where changes are made to the document and the combined series of blocks where all the changes made to the document is the chain.

The most important point is that because many different entities confirm transactions, it's not possible to record a fictitious transaction or an error.

Wouldn't that be nice in daily life? If we used blockchain, for example, for car titles, or in many other areas, then none of the mistakes that many people have to resolve because of "computer error" would ever happen.

Let's look at land titles as an example.

When land titles become open records on the blockchain, ownership would be opened and available for anyone to see it. It means that we wouldn't need the title insurance anymore, and that would save new homebuyers' millions of dollars.

Private businesses like financial institutions are looking into how to use blockchain for transactional records. Possibly, a banking association can set up a system of administrators to broadcast information that would make it essentially impossible for any records later to be modified.

Naturally, it all depends on the assumption that all the records are encrypted and disguises the party that actually owns the car, purchase the house, or takes out $100 from his or her bank account.

Are we really that naive to trust the government or a private company to protect our data and not to spread it? If your identity is connected with open records, then you should really be opened for the whole world to see.

#  Chapter VII

ADVANTAGES OF CRYPTOCURRENCIES

Bitcoins and other cryptocurrencies have a way to go before becoming a serious alternative to existing electronic transaction systems, but they do provide real advantages to users:

1. Protection from Payment Fraud

Cryptocurrency cannot be counterfeited, and payment with cryptocurrency can't be reversed arbitrarily by the sender, as can be the case with the credit card charge-backs.

2. Reduced Possibility of Identity Theft

When you provide your credit card number to a seller, you grant him access to your full credit line, although the transaction may be for a very small sum. That is because credit cards work on a "pull" basis, where the merchant initiates the payment and pulls the authorized amount from your account. Cryptocurrencies use a "push" mechanism that lets the cryptocurrency holder send precisely what he or she wants to the seller without any additional information. Additionally, cryptocurrency does not even need names just account number.

3. Direct P2P Transfer for Immediate Settlement

Buying real property usually comprises a number of third parties, drags, and a number of fees. In some ways, the cryptocurrency blockchain is similar to a big property rights database. Cryptocurrency contracts can be arranged and executed to remove or add third-party consents, connection to external facts, or be accomplished at a future date or time for a small fraction of the cost and time it is necessary to complete conventional asset transfer.

4. Entry to Previously Unreachable Markets

There are around 2.2 billion people with a connection to the Internet or mobile phones who don't, at this point, have access to common markets. These people are ready for the bitcoin market. Kenya's M-PESA system, a mobile phone-based money transfer and microfinancing service lately reported a bitcoin device, with one in three Kenyans now having a bitcoin wallet.

5. Lower Fees

There are small transaction fees for most cryptocurrency transfers; however, Bitcoin transfers, sometimes, may carry a higher fee because of the number of transactions and limits on how many transactions can fit in the single block.

# Chapter VIII

WHAT IS A FORK IN CRYPTOCURRENCIES?

Let's examine what the different reasons for a fork to appear and various possible effects of such an occurrence are.

Let's get back to the basics, as we remember cryptocurrency is using the computer program in order to create a form of digital cash.

The advantage of cryptocurrency is that it is a decentralized payment network that does away with most of the expense associated with banking and credit.

Even the name cryptocurrency evolved from the coins that are themselves encrypted part of the public ledger generally known as the "blockchain." That ledger has all the transactions associated with that specific cryptocurrency so that each person can check and verify the legitimacy of every transaction by using his computer. Each transaction must have the signatures of the sender in order for the transfer to be judged as genuine.

As with any other computer program, the program associated with any given particular coin, be that Bitcoin, Ethereum, NXT, or any other, sometimes needs to be upgraded or changed in order to help that coin to prosper. These modifications have to be made very cautiously in order to keep the new version of coins compatible with the older version of coins. Applications that are accessing and modifying blockchain must be able to read and write all the data correctly and uniformly.

What can cause a fork?

Forks can happen because of two various occurrences.

An unexpected fork happens if program changes are not absolutely compatible. Users employing different versions of the program generate two different ledgers. One by people using the older version, and second by users utilizing the newer version. In this situation, programmers must quickly remove the bug provoking the inconsistencies and determine how to merge separate blockchains.

A hard fork is created when developers of the cryptocurrency make a determination that modifications need to be made to the code of the coin, but that will establish incompatibilities between the new and old version. When modifications are made, all users of that cryptocurrency have to be willing to update all applications in order for them to proceed using that coin.

If that sounds confusing, let's use Microsoft Excel as an example. Microsoft regularly releases new versions of Excel. Each new version tries to be compatible with the previous version and maintain the capability to read and edit older documents. Nevertheless, sometimes, previous versions of Excel have some problem reading documents generated by one of the newer versions. So if you produce a document in Excel 2007 and your partner revises it and saves in Excel 2013, you, after that may have troubles reading it. In spite of the expectation that it's going to be the identical document. What we now have is both of you have generated a fork in your document.

Why some forks are bad

Frequently, forks are related to extreme fear and panic within a specific cryptocurrency. Аnytime two unique blockchains occur, only one can, in the end, be true. Тherefore, coin transactions created on the "wrong" blockchain could eventually vanish. For this reason, throughout the fork incident, users will be advised not to make any transfers until that fork will be resolved.

Fork is very agonizing for anyone who, in any way, relies on that cryptocurrency. While transfers could vanish amid the fork, people using that cryptocurrency are tied. Moreover, fork causes an enormous amount of work all over cryptocurrencies' community because all the connected programs need to be updated to the latest version. People, businesses, exchanges, miners, and the rest of the community now have to update to avoid the possible loss of any coins.

Any possibility of losing coins can frighten potential users away from utilizing any specific cryptocurrency. Constant program updates and extra work can make people, businesses, and exchanges, eventually to change to a more stable cryptocurrency type. The lower the popularity of the cryptocurrency, the lower value it has. In the extraordinarily competitive cryptocurrency market, the community would not stand for this.

Overall, a fork is a demanding occasion to any cryptocurrency community that often expands the risks related to that specific cryptocurrency. As cryptocurrency holders evaluate these risks, some may decide to sell. Ordinarily, amid a fork incident, the cryptocurrencies' price will drop. In case the fork places the cryptocurrencies' long-term life at risk, this fall in price is proper. On the other hand, if the fork, in the end, enhances the cryptocurrencies' stability and structure during program adjustments, a fork could be a superb acquisition opportunity.

Hard Forks in Cryptocurrency

In simple terms, Explanation of what is the Hard Forks in Bitcoin, Ethereum, and any Other Cryptocurrency hard fork is Creating New Cryptocurrency.

A hard fork is whenever one cryptocurrency divides into two. It takes place when a cryptocurrencies' current program is modified, producing in two coins an old and new version.

At the same time, a soft fork is substantially identical, but the plan is that just one blockchain (and hence one coin) will stay true and legitimate. Thus, both forks produce a split, but a hard fork is intended to generate two cryptocurrencies, and a soft fork is intended to create only one. Example, Segwit was a soft fork, on the other hand, Segwit2x, Bitcoin Cash, and Bitcoin Gold are entirely hard forks.

When a user-created soft fork is produced, two outcomes are possible:

One outcome is normally for one or the other type of fork to grow in predominance, ensuing in the other blockchain possessing low community acceptance and price.

The second outcome is sometimes possible when both blockchains are accepted and co-existing and functioning separately of one another with approximately equal community embracement and value.

Commonly, the first one is likely to happen to both hard and soft forks.

More technical information: A hard fork is a phrase that defines a significant change to blockchain protocol that will cause formerly invalid transactions valid (or another way around). This can be used to preserve the same coin with significant modifications to the blockchain, or to establish a new cryptocurrency. This demands that all nodes (all computers that had joined the coin's network) get the latest version of the program if they wish to use the new cryptocurrency or to keep the current version if they wish to utilize the former cryptocurrency.

The final result of a cryptocurrency "forking off" is to form its own blockchain and, therefore, its own currency. There are now two of each. Two separate coins, with two different blockchains (starting from X block on), with two distinct software, both starting from the same code and ledger. In cases similar to Segwit, everyone preferably upgrades to the new program and uses the upgraded ledger. In cases analogous to Bitcoin Cash, two different cryptocurrencies and blockchains from x block onward run beginning at a specific block.

Segwit, Segwit2x, Bitcoin Cash, and Bitcoin Gold are all unique hard forks of Bitcoin cryptocurrency that happened in 2017. The Segwits does alter the blockchain, however, retained the Bitcoin name. In the meantime, Cash and Gold generated new coins.

IMPORTANT!!! When a cryptocurrency forks, you must be holding that coin in a digital wallet, not on an exchange. The explanation for this is simple, and that's because, basically, you get X amount of the new coins for possessing the old coin at the time the fork happens (and this can only happen if you are keeping your coins in a wallet or on an exchange that permits it).

How Hard Forks are made?

Usually, producing a fork calls for support (AKA consensus) from the best part of coin holders attached to the cryptocurrencies' network.

Hence, an individual coin with a sole blockchain (like Bitcoin) will have a "hard fork" when sufficient amount of people holding the coin will consent to form a new cryptocurrency with its own blockchain on-top of the current coin beginning at a specific block.

For example, this is how Bitcoin Cash was invented, or even the present version of Ethereum.

A fork such as this can happen for many reasons, like innovation such as, for example, in the case of Bitcoin Cash or to fix the hack as, for example, in the case of Ethereum.

Not every fork will bring its owners of a cryptocurrency free coins, nevertheless when the proper hard fork develops that produces a new coin, this is the case. For instance, Bitcoin holders acquired one "free" BCH (Bitcoin Cash) for each BTC (Bitcoin) they had. That is plainly a ludicrously great deal even though one could risk the original coin's price falling in such events.

There are many different kinds of forks, such as forks in general, soft forks, software forks, git forks, etc. Simply remember that any deviation in the blockchain is a fork, the modifying term simply defines the details of the deviation.

# Part IX

WHAT IS AN ICO (INITIAL COIN OFFERING)?

Initial coin offer or ICO is an unregulated method of crowdfunding by using cryptocurrency that can bring the capital for a startup company. During an ICO, a portion of the freshly issued coins is sold to backers in exchange for Bitcoin, Ethereum, other cryptocurrencies, and sometimes for fiat.

The term may be similar to a 'token sale' or crowdsale, which applies to a way of selling partnership in an economy, by granting sponsors access to the features of a specific venture at some future date. ICO can sell rights of ownership or royalties to the venture, as opposed to an initial public offer that sells a share in the ownership of the company itself.

First coin sales were done by the Mastercoin in July of 2013 and later by Ethereum and Karmacoin in 2014. ICO started gaining popularity in late 2016, and by November 2017, there were more than 50 coin offers per month. Currently, there are more than 20 websites that track ICOs. By October 2017, there were $2.3 billion worth of coin sales that had been conducted during the year, which is more than ten times as much as in all of 2016.

Currently, Ethereum is the leading blockchain platform for most ICOs with more than 50% of the market share. Lately, there was a change in the ICO release platform to the new "utility" coin that will displace the usual coin. Utility tokens are opening the new era of ICO-based tokens, delivering useable value on a blockchain-enabled network and changing the present business standard.

An ICO is similar to an initial public offer (IPO), but bent with cryptocurrency. In the easiest way to understand it, an ICO is a fundraising event that gives new venture the means by which it can invite sponsors searching for the next big crypto win by issuing its own coin in exchange for Bitcoin.

As an illustration, back in 2014, the Ethereum ICO raised $18 million in Bitcoin, that is about 40 cents per ether. Some ICO startups raise tens, even hundreds of millions in just hours and more than $2.3 billion has been raised broadly so far this year.

## What's is the downside?

While it's been excellent for ethereum, but Charles Hoskinson, ethereum network co-founder, says it's just a matter of time before it all blows up.

"It's a ticking time-bomb," he told Bloomberg. "There's an over-tokenization of things as companies are issuing tokens when the same tasks can be achieved with existing blockchains. People are blinded by fast and easy money."

ICOs touches that basic human desire of quick and easy money and tries to raise money quickly by skipping traditional fundraising routings, including procedures generally used by banks and venture capitalists. Certainly, that sounds exceedingly risky for new participants. By using that as an excuse, Securities and Exchange Commission entered the scene.

The SEC's stated that "tokens offered and sold by a 'virtual' organization known as 'The DAO' were securities and, therefore, subject to the federal securities laws." The DAO had collected more than $100 million last year prior to a hacker attack that was able to steal tens of millions of dollars' worth of cryptocurrency, causing the fall of the DAO.

"The innovative technology behind these virtual transactions does not exempt securities offerings and trading platforms from the regulatory framework designed to protect investors and the integrity of the markets," said Stephanie Avakian, co-director of the SEC's enforcement division.

But without the SEC, let's learn what the red flags are. What are the warning signals?

"Guaranteed" high investment returns: There is no such thing as guaranteed high investment returns. Be wary of anyone who promises that you will receive a high rate of return on your investment, with little or no risk.

Unsolicited offers: An unsolicited sales pitch may be part of a fraudulent investment scheme. Exercise extreme caution if you receive an unsolicited communication—meaning you didn't ask for it and didn't know the sender—about an investment opportunity.

Sounds too good to be true: If the investment sounds too good to be true, it probably is. Remember that investments providing higher returns typically involve more risk.

Pressure to buy RIGHT NOW: Fraudsters may try to create a false sense of urgency to get in on the investment. Take your time researching an investment opportunity before handing over your money.

Some fear that the SEC involvement could kill the ICO boom, but there is a different point of view. In fact, cleared up understanding that most of the startups should move their offers to different and friendlier jurisdictions. Take, for example, U.S. businessman Bharath Rao. After looking around for the best place to raise money for his cryptocurrency, he learned that the United States is not a friendly jurisdiction. After looking a little more, he chose the nation Seychelles for his base.

And Rao, a technology veteran with experience working for major Wall Street banks, is not alone.

Faced with increasing scrutiny of cryptocurrency fundraising efforts by different regulators, many entrepreneurs are deciding to relocate their business ventures to more welcoming jurisdictions.

Many ventures went to Singapore or Switzerland, and some went to the Caribbean.

According to data that was compiled by cryptocurrency research firm Smith + Crown, efforts to control ICO by regulators had shifted businesses to friendlier skies.

As a matter of fact, as was reported by Reuters out of 15 start-ups that were interviewed by them, just one, Airfox, sold coins in the United States, raising $15 million. Others have either carried out or were planning an ICO in another jurisdiction.

Still interested?

You should get going, but not without studying first.

Investors should treat ICOs carefully, the whole market of ICOs is still very much experimental. Sometimes, it's very difficult to separate the good from the bad.

But if you're still interested and can't resist the potential, there are a number of websites that will help you get started. Though you shouldn't assume that the sites listing the ICOs aren't being paid for doing so:

  * ICO Countdown

  * TokenMarket

  * Smith and Crown

  * CoinSchedule

  * ICO Timeline

  * ICO Tracker

Any of those sites will provide you with links to the company doing the ICO. But from that point on, it's crucial to do your own research before even considering investing any money in it.

Initially, any investors should learn as much as possible about the venture itself across all the platforms like forums, social media, etc. It's also imperative to be skeptical about what the team itself claims about the potential and vitality of what they're trying to create.

During the Initial Coin Offering (ICO), entrepreneurs are raising funds by selling crypto coins in exchange for bitcoin and, sometimes, other cryptocurrencies. In some way, it is similar to an Initial Public Offering (IPO) in which entrepreneurs sell shares of a company in exchange for USD.

Even though ICOs are a relatively new phenomenon, they rapidly become a leading subject of conversation within the cryptocurrency group and moved beyond it. Many people see ICO ventures as unregulated securities that let founders raise capital, and on the other hand, others state that it is an innovation to the usual venture capital raising model.

ICOs are relatively easy to structure; thanks to the technologies like the ERC20 Token Standard, it abstracts the big part of the development process required to produce a new crypto coin. The predominant part of ICOs operates by having backers send money in the form of bitcoin or ether to a smart contract, which stores it and then distributes an equivalent value in the new coins at a later time.

There are practically no restraints on who can take part in an ICO. And because you're attracting funds from a global audience, the sums collected in an ICO can, sometimes, be staggering. An essential matter with ICOs is the fact that the best part of them raise funds pre-production, which makes the investment exceedingly risky. On the other hand, this type of fundraising method is especially beneficial, and some may argue even necessary in order to encourage protocol development.

Before we go any further, it would be helpful to have some historical context about how this trend had started.

## History of ICOs

Initially, several projects used a crowdfunding model to try and fund their development work in 2013. Ripple pre-mined 1 billion XRP tokens and sold them to willing backers in exchange for fiat currencies or bitcoin. Ethereum raised just over $18 million in early 2014, which was the largest ICO ever accomplished at that time.

The first ever venture at raising money for a new color coin (token) on Ethereum was DAO. The promise was to build a decentralized organization that would fund other projects on blockchain; however, its unique feature was that management decisions would be made by the token holders themselves. Though the DAO was a real triumph in terms of raising funds at more than $150 million. However, an unknown attacker was able to steal millions from the organization due to a technical problem. The Ethereum Foundation determined the best way to solve, which was to proceed with a hard fork, letting them catch back the stolen funds.

Despite the fact that the first effort to raise money through the token securely on the Ethereum platform had failed, blockchain developers saw that using Ethereum to launch a token was still much simpler and easier than going through the usual venture capital model. Particularly, the ERC20 standard makes it effortless for developers to produce their own cryptocurrency on the Ethereum blockchain.

Many contend that crowdfunding projects are the Ethereum's "killer application" presented with the immensity and frequency of all its ICOs. At no time previously have pre-product ventures been able to raise so many funds in so little time. For example, Aragon was able to raise approximately $25 million in just 15 minutes, Basic Attention Token collected $35 million in only 30 seconds, and Status.im was able to collect $270 million in just a few hours. With laissez-faire atmosphere and such ease of use, this ICO environment has come under review from many regulatory agencies around the world.

## Are ICOs Legal?

The short answer is, it could be.

From the Legal standpoint, ICOs have existed in an extremely gray area because arguments can be made both for and against the fact that tokens issued during the ICO are just new, unregulated financial asset. In certain instances, the token is just a utility token, meaning it only gives access to some program or system; hence, it cannot be classified as a financial security. On the other side, if the coin is an equity coin, implying that its only goal is to gain in value, then it appears more like a security.

Even though many people may buy coins to access the platform in the future, it's true that predominant purchases are for investment purposes. This is easy to determine by looking at the valuation numbers for many projects that have not yet even released a commercial product.

For now, that is what we have: An initial coin offering (ICO), is a method of raising money based on a cryptocurrency.

An ICO can create a brand new cryptocurrency, or it can be used to create "tokens" that can also be used to fund a new business.

For example, an ICO can let a new data storage company to pre-sell tokens to be used as a digital form of payment for distributed file storage.

Fundamentally, that is the tale following the Filecoin; they raised hundreds of millions of dollars in a pre-sale ICO with many of the largest investors in the Silicon Valley. The technology that would be able to address the use of surplus storage capacity on many different computers is being created with funds from the token sale.

However, nothing around ICOs is easy. Along with its own language, own rules and atmosphere, a gold-rush environment and hundreds of millions of dollars in the process for some of the largest projects, it has turned in its own financial culture.

Actually, blockchain-based businesses were able to raise, so far, this year more than $1.5 billion in capital via ICOs, which is more than through traditional venture capital channels.

The actual story is the fundamental innovation of crowdfunding by a sale of tokens, confirmed by a different use of blockchain technology. It is pleasingly free of our current banking and funding methods.

ICOs are such a new idea that the markets are way ahead of the government's. On the one hand, China flat-out banned them, no exceptions, sending cryptocurrency values into a tailspin. But on the other hand, Estonian officials were contemplating an ICO for their own nation's cryptocurrency before the EU got scared and ordered them to stop.

Technically, ICOs should be very simple: An entrepreneur declares and advertises his new idea. Potential customers who like his idea, and wish to use his product, purchase their tokens. After that, the entrepreneur takes the money and uses them to build the product using a token that has a value only in that system.

But if the entrepreneurs succeed and there was great demand for that product, then those pre-sold tokens become much more valuable. And so investors have stepped in. And, as even bigger money comes in, just like in conventional IPO, individual investors can be at a clear disadvantage.

Largest global crypto investors, usually called "whales," are sought for every ICO. New crypto investment groups (kind of institutional investors), and even would be hedge funds, get in early to buy tokens in bulk at a discount, so they can later sell them to the community at a premium.

Throughout the gold rush era of the 1800s, the only people who were assured to make money were those selling instruments, food, maps, etc., to the gold rushers. In this contemporary gold rush era, we see the children of those old timers: cottage industries of specialist crypto-investor relations and marketing companies growing up on the sidelines, looking to charge well over a hundred thousand dollars for a successful ICO launch.

New sites were created to charge companies for rating their ICOs, and others literally charge thousands of dollars in cryptocurrency to put them on their list of the upcoming sales.

There are even real registered broker-dealers offering new services. Finding the reputable one is very difficult, as many are still wary. Most of them are very questionable shops with the minimal or even questionable reputation.

It's becoming very crucial to generate excitement and demand for the product, that's why a bounty program usually is also created around ICO. The tokens for sale in the ICO are planned for a community that will use the product itself, but nothing can stop investors from buying them up. Actually, that energy is the part of what pushes a successful ICO.

Around each ICO, we can see people who offer their help in exchange for tokens. In this situation, those tokens are called a "bounty," and that makes them the bounty hunters. Their help may come in many different forms. Starting with creating of the white paper that will be given to investors in the offering of translations into Mandarin and Russian, Turkish and Korean, etc.

In order for the company to manage all that, it must be higher than the bounty manager; someone who by necessity is a rigorous taskmaster. He rejects questionable bounty hunters, checks their work, and controls the wallet.

The future is unknown, and ICOs may simply enhance venture capital, or they may even replace them. On the other hand, regulatory attacks could even slow them down, but not stop them. So far, ICOs continue to move forward.

The point is that this is an essentially new crowdfunding model, so there is no roadmap for future progress. The road that is being created is producing its own subculture, and that could be a fascinating thing because it is commonly a tough and shady world of money.

# Chapter X

WHAT ARE DECENTRALIZED APPLICATION AND DAO?

Decentralized applications (DApps) are going to make cryptocurrencies popular and acceptable by the mainstream

Cryptocurrencies are getting more and more news coverage. Usually, it's more about Bitcoin hitting an all-time high or having a huge fall down. But, sometimes, they do talk about the revolutionary potential of the blockchain technology, even if, sometimes, it's about CryptoKitties taking over the internet. However, the main feature was left out of the cryptocurrency news that Cryptokitties is the part of one of the new and revolutionary decentralized applications (DApps) and its promising future not only within the cryptocurrency ecosystem, but even within the society as a whole. Even if for now, it's somewhat underappreciated by the subject matter like CryptoKitties. DApps will become increasingly important in taking the cryptocurrencies to the mainstream market.

What is a Decentralized Application (DApps)?

Today, most services that you receive come from centralized sources; services like Gmail, Facebook, eBay, PayPal, Uber, banking, voting, your records (house, car, etc.). All these services could be provided in a decentralized manner using decentralized applications (DApps), like Ethereum.

Actually, we can use Bitcoin as an example of one of the DApps. The Bitcoin is a DApp that provides its users with a P2P monetary system that offers online payments. The significant feature of the DApp application is that it's not controlled by any central authority.

Also, today, most internet users don't have control over the data they shared on different websites.

Dapps like Ethereum, NXT, and other similar cryptocurrencies are unique in their effort to use the blockchain as a way to rectify the problem of initial internet architecture.

The importance of DApps can easily be understood when you can recognize issues they are attempting to solve; those issues are the control over one's data. When someone is using Facebook, you are interacting with other users on the platform, be it liking, commenting, or anything else. So, when you do anything on Facebook, you are providing data to Facebook.

When Facebook receives it, it stores that data and then sells that data to advertisers, release your data to governments, politicians, or anything else they can think of. Many people are not comfortable with their data being treated this way. It would be better if people kept control over their own data. DApps provide control over user's own data, by providing that none is in charge of any user's data.

So, in a nutshell, it would be a "decentralized app store." Then anybody would be able to distribute their own unrestrainable apps. The difference between today's apps like Gmail and DApps is that DApps don't require a go-between to work or to manage any personal information. It will connect users with providers directly. We can use CryptoKitties as one of the examples of those unrestrainable DApps.

Essentially, DApps are programs that combine the power of smart contracts with blockchain technology to produce decentralization, which means that after the application is launched, no single entity can exercise control over any DApp. For example, if we launch decentralized Facebook-like platform, once a post is made, it would be resistant to any censorship, same as blockchain itself is unchangeable.

Smart contracts are self-executing contracts. They are devised to enforce an agreement established between two parties. They are formed to expedite the exchange of money, or anything else of value. As a result of that, they can be used to build the whole ecosystems within a DApp.

In one example, we can use this concept to design a decentralized Twitter similar to EtherTweet. It would be resistant to censorship because once you publish a message to the blockchain, it can't be erased by anyone, even the company that created the system itself.

## DApps on the Ethereum Blockchain

Today, the Ethereum blockchain is the most advanced network for the creation of DApps. It even has its very own programming language, Solidity. Developers can build DApps on just about anything. The DApps that have been produced so far provide us with a lot of thoughts about where in the future it can take us.

Some examples of Ethereum DApps are:

Golem: Golem is an open source and decentralized supercomputer that anyone can access. The Golem's computational power comes from the combined power of all users' machines, from personal computers to whole data centers. It's a decentralized sharing economy of computing power. When using Golem, users are able to rent out their computing power to those who need it. So, if someone has extra computing power, he could make some money by renting it out.

EtherTweet: Ethertweet is a decentralized blogging platform. It has features that are similar to Twitter. However, because it's a DApp, EtherTweet offers additional benefits of immutable blockchain and provides an uncensored social network.

There are several characteristics of the DApps; the main being that they're open source and don't have a central point of failure.

For an application to be truly decentralized, it usually must meet the following requirements:

Open Source: The application's code base must be widely available so as to allow for public scrutiny.

Decentralized: The application's data must be cryptographically stored on a public and decentralized blockchain.

Incentive: The application must utilize tokens/digital assets to reward its network supporters.

Protocol: The application must produce tokens, utilizing cryptography with the consensus algorithm to show proof of value; e.g., proof of work or proof of stake.

There are three main types of DApps

For example, the Ethereum white paper splits DApps into three types:

apps that manage money,

  * In this type of DApp, a user may need to transfer token in order to settle a contract with another user by utilizing the network's nodes in order to enable the distribution of this data.

apps where money is involved (but also requires another piece),

  * In this type of DApp, the app mixes money with information from outside the blockchain.

apps included in the "other" category would include different administrative, government and voting systems.

  * If bitcoin can do away with financial authorities, is it possible to do the same for companies and other types of organizations?

Even though I only mentioned several DApps, many other DApps have the potential to take the cryptocurrency mainstream. Here are just some of them: TenX and Augur are some of the interesting DApps to follow. Currently, cryptocurrencies have considerable media coverage, which is mainly related to Bitcoin's huge market growth and falls. However, I believe that media coverage will shift from Bitcoin to DApps because many DApps are still in their developmental stages, including some that may be only on drawing boards, which is likely to change very soon. As some truly amazing concepts will hit the market.

Decentralized autonomous organizations are one particularly ambitious breed of DApp (this is explained further in 'What is a DAO?').

The main goal of the DAO is to form a leaderless organization, formalize rules into the program code such as how to distribute funds, how to vote, and then release the code to the wild.

## What is a DAO?

A DAO is a fully decentralized organization. It has no single leader of the organization. It is run by programming code and collection of smart contracts written to its blockchain.

Instead of the centralized control of some fearless leader, and even some other people in the organization, we have the programming code that eliminates the need for them because it replaces the structure and rules found in the conventional organizations.

Here is an example, a driverless car is searching for passengers, takes them to their destination and after dropping them off, it uses its profits for a trip to a charging station. Except for initial programming, the car doesn't require any help from outside to discover how to accomplish its business. This is how DAO could power decentralized, leaderless organizations in the near future. The idea is that if cryptocurrency can do away with financial institutions, then why not companies and other organizations can one day function without hierarchical management.

In short, DAO's goal is to hard-code certain rules that a company would agree to from the start, and maybe to determining a process by which such a rule could be changed. This is similar to how a normal company works even now, but the big difference is that those rules of a conventional company are not imposed on digitally.

The most famous experiment at creating such an organization was launched in 2016 and was called "The DAO." However, even though the project had failed in a matter of months, it provided a good example of what people have in mind when they speak about the DAO. Their plan was for participants to receive DAO tokens, and then vote for which projects to fund.

In order for the company to choose projects to invest in, it was relying on the "wisdom of the crowd."

Also, the DAO made improvements to the governance of organizations:

  * Anyone with internet access could buy and hold DAO tokens

  * Creators could set any rules they voted on.

Conceptually, DAOs operate similarly. They depend on smart contracts or pre-programmed rules that specify what can and can't happen in the system.

Smart contracts can be made to accomplish many different functions, like fund distribution after a specific date or a particular percentage of voters were to agree to it.

Many enthusiasts say it will work for any company that needs any kind of decision to be made.

Basically, they see it as a cryptographical way to build and guarantee democracy. Some examples could be for stakeholders to vote on adding or removing new rules, changing old rules, or removing a member.

Problem

It's not difficult to see why "unrestrainable program" could create certain problems.

It's not easy to make changes to a DAO, or to smart contracts running on it after it's deployed to the blockchain. Even though this is the main goal so that one person or entity can't change the rules, however, it also has one potential problem. If anybody were to find a bug in an already running DAO, developers might not be able to make changes to the program.

That is what happened to The DAO. Onlookers observed how the attacker was casually draining money, but couldn't do anything to stop him. From the technical point of view, the attacker was following rules as they were set up.

Even though programmers later reversed those transactions and returned money to their original owners, it created the controversy and brought the split to the community.

At the present time, the is no answer to the best way on how to handle a similar situation in the future.

# Chapter XI

SMART CONTRACTS

Smart Contracts: The Blockchain Technology That Will Replace Lawyers

A smart contract is a computer program that was created to facilitate, confirm, or enforce the fulfillment of a contract. Smart contracts support the fulfillment of transactions without any third party, including lawyers. These transactions are traceable and irreversible. Smart contracts initially were announced by Nick Szabo. In 1994, Nick Szabo, a legal scholar and cryptographer, concluded that the decentralized ledger could be used for smart contracts.

This way, contracts could be changed to computer code, stored, replicated, and supervised by the network of computers that run the code. This would also result in the ledgers giving feedback to the system, which would activate such transactions as the transfer of funds, receiving an order or service, etc.

One of the best things about the blockchain is that, because it is a decentralized system that exists between all permitted parties, there's no need to pay the middlemen and it saves you time and money. Of course, even blockchains have their problems, but they are undeniably faster, cheaper, and more secure than conventional systems. That is why even banks and governments are turning to them.

What are Smart Contracts?

Smart contracts are designed to help in exchanging something of value (like money or property) in the easy and non-conflicting manner, while at the same time doing it without the involvement of any third party.

One way to describe what smart contracts are is to compare them to a vending machine. Normally, you have to go to the lawyer or maybe a notary, pay them, and wait for the document. But with smart contracts, all you do is simply deposit cryptocurrency into the vending machine, your escrow deposit, driver's license, or anything else required for your transaction. Not only that, but smart contracts also specify all the rules and penalties identically to the conventional contract, and it also automatically enforces those obligations.

Let's look at some examples; first, let's imagine that you want to rent an apartment. You rent it by going through smart contract by paying in cryptocurrency. After you make your deposit, you would get a receipt, which will be held by that contract; Landlord will provide you with the digital entry key that you will have access to from the specific date.

If for any unspecified reason the key doesn't come, the contract will release a refund. The system works on the If and Then basis. If the landlord provides you with the key, he can be sure to be paid. If you send a payment, you are assured to receive the key. The contract is automatically canceled after a pre-specified time, and the program cannot be interfered by anyone without the other party knowing because all parties to the contract are going to be notified at the same time.

Smart contracts can be used in many different cases that can range from financial and insurance premiums, property records and credit, legal processes, and crowdfunding campaigns.

## Examples and ideas of how smart contract can be used

Government

Even though government bureaucrats had affirmed that it is very difficult to tamper with our voting system, but nonetheless many doubts remain about that. Smart contracts, in this case, would alleviate those concerns by arranging more secure system. Blockchain secured votes would require huge computational power to break it.

Because no-one has that much power, the system would be secure! Also, smart contracts could increase the voter turnout. Because a lot of indifference and laziness towards voting comes from a messed-up system of lines, IDs, and filling up forms, Smart contracts can move voting online, and even millennials will turn up to vote for their fearless leader.

Management

Blockchain implements not only a trusted ledger, but also removes possible confusion in communications and workflow because of its transparency and automation, yet blockchain workflow streamlines business processes and logic. It also eliminates disparities that often can happen with extra processes, which can also cause costly delays or even lawsuits.

For examples, supply chain, smart contracts perform on the If and Then logic. Based on that logic, Jeff Garzik's proposed the following:

"UPS can execute contracts that say, 'If I receive cash on delivery at this location in a developing, emerging market, then this other [product], many, many links up the supply chain, will trigger a supplier creating a new item since the existing item was just delivered in that developing market.'"

Blockchain, in this case, would remove all the common problems of the current paper-based system and provide a secure, easily accessible digital version for all concerned parties of the supply chain that would automate all the tasks.

Here's what smart contracts can provide you with:

Safety – The encryption of your documents keeps your records safe.

Savings – Smart contracts save you money because they eliminate middleman from transactions.

Trust – All documents are on the blockchain. They can't be lost, destroyed, or manipulated in any way.

Accuracy – Smart contracts are not only automating and making cheaper transactions, but also preventing the appearance of errors from manual forms.

Autonomy – You're the boss and one who is making the decision; you don't need any lawyers or other middlemen to execute the transaction.

Backup – Your account and balance can't be lost or mishandled. Each and every record is duplicated many times over by the blockchain.

Speed – With conventional paperwork, you have to spend a lot of time to process your documents. Smart contracts automate your tasks and save you many hours with different business steps.

So, taking it all together, what can we get? Many societies changing developments. Here is just one such revolutionary idea that promises world peace freedom and prosperity.

World peace, freedom, and rich-growing economy through honest leadership.

" _Smart contracts... guarantee a very, very specific set of outcomes. There's never any confusion, and there's never any need for litigation."_

\- Jeff Garzik

I know it sounds too good to be true, but that's what was proposed by proponents of all places... the assassination marketplace.

In a nutshell, it will actually make and actually enforce the fact that everybody is equal as was once declared many years ago by the declaration of independence. Remember what it said?

"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness."

So, the idea is to actually try to make everyone equal in its power OVER everyone else. To equate the power of the weak and strong members of society, one over another. For example, it will make mothers of the conscripts called and sent to the war equal to the dictator who sent them there. Just imagine if people had a choice to change the leadership of Hitler or Stalin instead of going to war for them? What if mothers of all those 260,000,000 people murdered by different states during the 20th century had any voice to change the leadership of an aggressor country? Would the war ever have happened?

The solution to this problem goes back in history to the old west.

Vigilance committees

Despite how it's portrayed by the Hollywood studios, actual historical records show that there were very little crime and bank robberies in the old west. Many towns had no government representatives at all, and even larger towns may have had one sheriff at best. With NO government and total anarchy in towns, why was there no crime or very little of it?

There was a little thing called vigilance committees. Those committees were formed by locals, and if needed, they took some actions. Even though mistakes could have happened, but because people acted under the common law, they had to take responsibility for their wrongful actions. It was an awesome system that did a great job and did a better job than police does it today.

Jackals

On the other hand, in 1989, there was an article published by Nick Roberts titled, "IN PRAISE OF JACKALS: ASSASSINATION AND MORAL DEFENCE POLICY." The main argument that he made was that assassins and the practice of assassinations as an instrument of war are more desirable than conventional war run by governments with troops on the ground in terms of lessening the losses to lives and property. His rationale for the practice of assassinations was in his own words;

"This is why I propose, as the mainstay and front-line of the defense of a free society, a policy of selective assassination of government leaders.

Morally, this proposal is sound. Top-level assassination hurts only volunteers - the willing tyrants. It leaves the innocent alive. If rulers choose to rule and to go to war, their lives become forfeit because they are acting coercively towards their subjects and intended conquests.

As a "natural rights" libertarian, I do not consider that the Hitlers, the Kennedys, the Gadaffis, or the Attilas have any right to mercy. Those who plan and order the deaths of millions deserve to die. After all, who else is there to blame?"

He made his argument that instead of having large armies, you can have the so-called jackals who would instead be hired to commit those assassinations.

He also states,

"CONSIDER THE ALTERNATIVE . . .

Now, you may recall, sickened by my brutality in suggesting such a scheme. Consider this: a governmental soldier is one among millions. He is extensively trained, using a stolen money, to operate on a continental, or even global, battlefield. His weapons are so deadly and have such a great range that he cannot fail to kill many non-violent, non-volunteer civilians. During statist war, millions of innocents die.

Not so with the assassin. He is one among a hundred or so colleagues. His weapons are small, and capable of a minimum of bloodshed and destruction. He is trained to kill the guilty - despots and their murderous hirelings. He is indoctrinated to leave innocent foreigners unharmed. This is because his employers do not want foreign outrage to force the democracies to invade the Free Shires and confiscate their businesses. Only the guilty die."

## Assassination politics

So, in 1995, an MIT-trained engineer, Jim Bell, published his essay titled, "Assassination Politics." In it, he proposed that in assassinations market, different individuals would try to predict the time of the death of some politician or other government officials and place a bet. Whoever wins the bet would receive all the money in the pool. He envisioned that everyone would stay anonymous, neither people who placed bets nor the assassin would know each other.

The only problem was that, at that time, there was no digital cash to make a safe and anonymous payout to the winner. But now, with cryptocurrencies and especially coins like Monero (XMR) that are specifically designed for anonymous transactions, everything is set in place.

Potentially, we already have everything we need for the following simple arrangement, which is all we may need. Someone pays a fee to add the name to the list. Then everyone makes a prediction and also pays the fee for the privilege to place the bet. All this money, together with any contributions from the general public, goes to the public fund that is published for anyone to see as the total amount, but not the predictions. When an event happens, the winner will have to provide the key to his message, so everyone can see and verify that he actually won. After verification was done, the system transfers funds to the winner.

Actually, this is the only way to get the peace all over the world and to create the limited government. That is because, with assassination markets in existence, politicians would actually listen to voters, because no matter how much lobbying money someone offers to the politician, if voters would decide to expedite your departure from the office and vote you out through that marketplace, it wouldn't make any difference how much you stole or what powerful people you know because you'd be dead.

Even the U.S. government got in on the idea

Those who doubt its effectiveness can study the Pentagon's failed "Terrorism Futures Market." Pentagon's Defense Advanced Research Projects Agency (DARPA), which created the program that would have had investors betting on the likelihood of terrorist attacks and assassinations. It basically was a copy of Jim Bell's proposal.

The program, called the Futures Markets Applied to Prediction (FutureMAP), would have involved investors betting small amounts of money that a particular event - a terrorist attack or assassination - would happen. The reason it was killed was exactly because senators were afraid that it will actually work.

It would be difficult if not impossible to start a war

Let's take an example, what would Polish mothers do if the system, as proposed by Jim Bell and later adopted by the DARPA, was in effect on September 1, 1939, when Hitler invaded their homeland and their sons were sent to fight him? How much would be the bounty on his head even at the end of the first day in today's money? How much would an average mother be willing to contribute to such a fund? I'm sure we would be talking about a VERY PERVASIVE AMOUNT OF MONEY that not many people would be able to resist especially, please remember with TOTAL ANONYMITY.

Most likely, he wouldn't have lived long enough to later invade France. What about his generals? Most likely, the same scenario is here too. With such a possible rapid change of leadership in Nazi Germany, what are the chances of Hitler even invading Poland?

Just imagine, new Hitler had decided to send his troops somewhere or sign an order that would endanger you or your loved ones. Soon after you and other potential victims create a betting position for him, and soon HIS death wish is fulfilled. So, in the short time frame, all those who want to be führers will disappear forever.

What are the benefits? In addition to saving a lot of valuable infrastructures, it would save hundreds of millions of people; like in the 20th century, about 260,000,000 innocent people were murdered in the name of different states.

I believe that this system, one way or another, will soon be implemented.

## Smart contract problems

Even though smart contracts are an amazing invention, they are not flawless. Logic or program can have a mistake, or some unexpected problem can come up.

For example, what if in an apartment rental situation where you received your keys (contract fulfilled), but the apartment actually was taken over by the government even without owner's consent. Unlike with conventional contract, with blockchain, it's a different ball game that contract would execute regardless of that problem.

Experts are trying to solve this and other problems that may come up during the execution of the smart contract; however, these and other issues do stop some potential adopters from using them.

Actually, the future of Smart contracts depends on solving these problems. For example, some lawyers that foresee Smart contracts to enter our lives, are already trying to research and solve these issues. Many of them see this as a coming change to their profession where, instead of writing traditional contracts, they will start writing templates for smart contracts that are similar to those standardized conventional contracts you can find on LegalShield, LegalZoom, or Rocket Lawyer.

Other professions, like accountants, will also use smart contracts for different tasks, like real-time auditing. As a matter of fact, the potential of Smart contracts has no end in sight. Its reach will encompass so many different professions and industries that, today, are even difficult to predict or even imagining it. It will affect everything from real estate and law to healthcare and manufacturing; the list goes on and on. It will also bring a lot of changes to different aspects of society, which would force some significant social changes for the better.

## Blockchains with the power to process smart contracts

Bitcoin: Even though Bitcoin is a great innovator and the most popular cryptocurrency, however, it doesn't have much ability for processing Smart contracts.

Ethereum: Ethereum is the second most popular blockchain platform. It's a current leader in programming and executing Smart contracts. You can program anything you want, but you have to be prepared to pay for running your program with ETH coins.

NXT: NXT is another popular blockchain platform that has a selection of templates for smart contracts.

Side Chains: This is one more blockchain that runs close to Bitcoin and offers some possibilities to execute contracts.

# Chapter XII

WHY IS CRYPTOCURRENCY VALUABLE?

Contrary to other assets, most cryptocurrencies are not backed by gold or promises of any institution or government. In order to understand if any specific cryptocurrency is worth buying, one first needs to understand the underlying value of any cryptocurrency first.

Mathematics and scarcity

Any cryptocurrencies' blockchain is a protocol that functions based on the laws of mathematics. Distinct from any central bank that can swiftly, suddenly and, without warning, change the money supply, cryptocurrencies' coin distribution is written into the permanent program code that is openly accessible and was agreed to by consensus. Contrary to gold or government's promises, cryptocurrency is backed by uncompromising encryption and truth of mathematics.

Cryptocurrency can have inflationary tendencies; for example, both Bitcoin and Ethereum generate new coins with each new block. Nevertheless, with most cryptocurrencies, the rate of inflation usually goes down over time because the amount of new coins becomes a smaller percentage of the total amount of the coin supply, and besides, all the network improvements and additional market adaption would place downward pressure to any inflation rate that exists.

Sovereignty

Cryptocurrency transactions are valid based on a several elements, one and the most apparent of which is that the payer's balance must be larger than the amount he is sending. His intention of why he is sending or receiving coins is immaterial. Anyone can become the cryptocurrency user – regardless of his location – is able to determine how to spend his coins without anyone's approval, as he sees fit.

Holding sovereignty over one's fortune may not look essential to some people, but when the time comes, and your country experiences hyperinflation and money controls, then you stand to take advantage by unconnecting from their fiat currency system.

Distinct from the conventional fiat system, cryptocurrency offers its users full sovereignty over their wealth. Certainly, people can decide to trust some 3rd party, but thankfully, that is not a necessity anymore, as it is in the conventional banking.

Efficiency

Transactions with cryptocurrencies are of low cost and fast. Some protocols are capable of handling up to 1000+. Just so it would make it clearer, VISA handles about 2,000 transactions per second.

Liquidity

Not all cryptocurrencies are created equal. Like, not all fiat currencies or stock are created equal either. Blue chips like Bitcoin or Ethereum have a real-world value that is in demand. It's possible to go through major exchanges and complete million dollar sell order within seconds without even moving the price.

It's not to say that liquidity shouldn't be even higher, and brief "flash crashes" have happened in the past, but for most of the users and investors, Bitcoin, Ethereum, and similar blue chip currencies' liquidity allows for quick and easy exchange to or from fiat currency.

Smart contracts

Cryptocurrencies like Ethereum serve well as a currency, but it is the capacity to run "smart contracts" like an Ethereum Virtual Machine (EVM), which further increases its value. Smart contracts are still at the beginning of their development, but already, a number of markets are on the point of major disruption because of this technology:

  * Prediction markets

  * Gambling

  * Insurance

  * Trading

Same as gold, cryptocurrencies are being used as a hedge against economic anxiety. But contrary to gold, with cryptocurrencies, anyone can transfer any amount anywhere in the world quickly, cheaply, and easily. The supply of any cryptocurrency is also transparent and can be predicted with its open source code.

Why would one buy cryptocurrency?

There are many reasons why many people can choose to buy or invest in cryptocurrency, some examples are:

  * Buying it as an investment

  * Hedging against the fiat system

  * Diversifying a conventional investment portfolio

  * Using it

  * Interacting with blockchain-based IoT devices

  * Using smart contracts

  * Paying wages internationally

# Chapter XIII

HOW TO BUY CRYPTOCURRENCY?

Cryptocurrency exchanges are websites where people come to buy or sell cryptocurrencies for other cryptocurrencies or fiat currencies like USD or Euro. Professional traders most likely will need to use an exchange that will demand to verify their ID in order to open an account. If all you want is to make some simple, infrequent trade, there are other platforms that you can use without the need to open an account.

You can also use sites such as local bitcoins https://localbitcoins.com and local ethereum https://localethereum.com to do a private exchange between two private people.

Types of exchanges (trading platforms)

Direct Trading – These sites provide a direct person to person exchange with people from different countries. On the exchanges, each seller sets his own price or buyer may put his own offer.

Brokers – These sites can be visited by anyone. Prices on such websites are fixed by the broker. Cryptocurrency brokers work comparably to the foreign exchange places.

What to do prior to registering an account on an exchange

It's crucial to do some homework prior to trading. Here are some things you must investigate before making your first deposit.

Reputation – One of the excellent and easiest ways to find most of the information about an exchange is to search reviews from people and popular industry websites. You can also ask practically about anything on forums like BitcoinTalk or Reddit.

Fees – Predominantly, exchanges have relevant fee information on their sites. Even prior to joining, make sure that you know their deposit, transaction, and withdrawal fees. Fees can vary considerably from one exchange to the other.

Deposits and Withdrawals – Which deposits and withdrawal methods exchange supported by the exchange? Wire transfers? Credit cards? Maybe even PayPal? Just remember that if you are buying cryptocurrencies with a credit card, then it will always require the identity verification process and it comes with an extra price tag because there is a higher risk of fraud and involves more transaction and processing fees. Buying cryptocurrency via wire transfer will take considerably more time as it takes additional time for bank processing.

ID Verification Requirements – Most of the trading platforms in the U.S. and the U.K. will demand some kind of ID verification from you in order for you to make deposit or withdrawal. That way, if some government agency wants to go on the fishing expedition or any other reason, they can supply them with the list of their customers as it already happened with the Coinbase. However, some exchanges do understand your need for privacy and will protect it by allowing you to stay anonymous.

Geographical Restrictions – Certain particular features offered by the exchanges, sometimes, may not be available from every country. Make sure that all the features you may need are available in the country you are in before you join the exchange.

Exchange Rate – You'd be surprised how much rates can fluctuate from one exchanges to the next. You can save a lot of money if you shop around. It's not unusual for prices to vary up to 10% or even more in some cases.

Even though all cryptocurrency exchanges do basically the same thing (assist in an exchange process of cryptocurrencies), they may function differently. To make it simpler to understand, here, you will find 3 distinct classes of exchanges:

The first class are exchanges that permit people to exchange fiat currencies (USD, EUR, etc.) and cryptocurrencies on the open market similarly to conventional stock or forex exchanges.

Generally, these websites have very limited deposit and withdrawal options, for fiat currencies, such as bank wire transfers.

Though these websites can be difficult to navigate for new users, they usually have the lowest charges of any other class. Exchanges in the first class comprise of Kraken, CEX.IO, Gemini, and GDAX.

Class 2 – the second class of exchange functions similar to currency exchange bureau. Instead of letting their users make trades directly, they buy and sell cryptocurrency to their customers. That makes an easier purchase experience, especially for the beginners. Also, this type of exchanges normally allows their customers to buy cryptocurrency not only with bank wire transfer, but also with a credit card.

Please remember that even though class 2 exchanges are usually easier to use for beginners, they charge higher fees than class 1 exchanges.

Exchanges in class 2 include such sites as Coinbase, CEX.IO, and Coinmama.

Class 3 – the third class of exchanges operate like class 1 exchanges; however, they only provide cryptocurrency trading. It means that on this type of exchanges, their customers can only trade one cryptocurrency against another. This class does not provide the capacity to purchase or sell cryptocurrency for fiat currency.

Exchanges in third class include Bittrex and Poloniex.

Please keep in mind that if you are looking to buy anything other than Bitcoin and Ethereum, then chances are that it would be simpler to first purchase Bitcoin or Ethereum and then use many existing exchanges like Bittrex, Livecoin, Poloniex, or Yobit, or even use one of the automatic exchanges like ShapeShift to trade it for one of your chosen coins. You can transfer Bitcoin or Ethereum to these platforms from Coinbase (or any other initial exchange) and then exchange it for any other cryptocurrency that you want.

Initial platforms to purchase Bitcoin and Ethereum cryptocurrency.

Coinbase - https://www.coinbase.com/ can be paid for by credit card or bank transfer.

Cex - https://cex.io can be paid for by credit card or bank transfer.

Coinmama - https://www.coinmama.com can be paid for by credit card.

Coinhouse - https://www.coinhouse.io can be paid for by credit card.

Bitpanda - https://www.bitpanda.com can be paid for by credit card, skrill, SEPA, Neteller, Amazon, and other options.

Bitstamp - https://www.bitstamp.net can be paid for by credit card, SEPA, bank transfer, and Ripple IOU.

Gemini - https://gemini.com can be paid by bank transfer.

Kraken - https://www.kraken.com be paid by bank transfer.

Some may prefer a "peer to peer" route to purchasing Bitcoin or Ethereum, avoiding any KYC and AML and in many cases, purchasing larger quantities. Even though this activity may be discouraged by government regulators, it can be done through an online peer to peer exchanges like LocalBitcoins.com or LocalEthereum.com

Local bitcoins \- by using https://localbitcoins.com, you can find many different options from local cash for bitcoin exchange to local deposit to bank account or PayPal and other options. Many services are offered by local individuals, so be careful.

Local Ethereum - https://localethereum.com option similar to localbitcoins. Local individuals offer different options from cash to bank account deposit to PayPal. Just be careful and watch out for feedback reputation.

Secondary platforms where you can purchase hundreds of different cryptocurrencies

https://www.shapeshift.io \- automatic exchange between many different cryptocurrencies.

https://www.livecoin.net

https://bittrex.com

<https://yobit.net/en/>

https://poloniex.com

<https://novaexchange.com/>

https://www.coinexchange.io

https://hitbtc.com

# Part XIV

WHERE TO STORE YOUR COINS?

Once you own Bitcoins (or any other cryptocurrency), you then need to store them in a personal wallet where you control the private keys or wallet seed.

You can save your coins in "hot wallets" (wallets that are somehow linked to the internet); it would be advisable at first to use either official wallets or very well recognized and widely used wallets.

You can start from here: https://bitcoin.org/en/choose-your-wallet

Cold storage merely means storing your coins offline. Cold storage can be accomplished by employing either physical wallet (aka hardware wallet) or even a paper wallet.

A paper wallet is just a document that comprises your seed, public address, and private address. Paper wallets are great for long-term storage and each wallet ought to be only spent once. For safety reasons, you must also keep a backup of your paper wallet saved in a different spot or maybe stored on an external hard drive.

As you generate your paper wallet, it would be safer to use official paper wallet generators for your particular coin.

Physical Wallets

A physical wallet is a particular kind of secure hardware device that saves and stores user's private keys.

Physical Wallets have some significant benefits above regular software wallets:

  * Private keys are saved in a secured place of a microcontroller, and they cannot be removed from the device in plain text

  * Resistant to computer viruses that can penetrate the software wallets

  * Can be utilized safely and interactively, in preference to a paper wallet that first must be imported to a software wallet.

Some of the Physical wallets are:

Ledger wallet

At the moment, the Ledger Nano S is the best well-known hardware wallet; together with the Ledger Blue, it supports the biggest quantities of cryptocurrencies and is constantly adding new coins.

<https://www.ledgerwallet.com/>

Trezor

Trezor is also an excellent physical wallet that supports many cryptocurrencies.

https://shop.trezor.io

KeepKey

KeepKey is another great hardware wallet. It supports a number of cryptocurrencies.

https://www.keepkey.com

But First thing First, Sign Up for a Bitcoin Wallet

Before you buy any cryptocurrency, you first have to download a wallet. In case of Bitcoin, you can go to a site like Blockchain.info, bitpay.com, or to a mobile app such as Bitcoin Wallet for Android or Blockchain Bitcoin Wallet for iOS. Then you just fill out some simple online form.

When you have a wallet, you can use any common method of payment like credit card or bank transfer to purchase Bitcoins or Etherium. Purchased coins are then transferred to your wallet. Just remember that the presence of any payment method is dependent on the area of your jurisdiction and your chosen exchange. However, as you can see, it's basically as simple as clicking on the "Buy" when you decided that you want to buy, and "Sell" when you decided to sell. You just choose the currency you are buying/selling and method of payment you want to use.

One more note, "Bitcoin exchange" and "Bitcoin wallet" don't have to be the same. Cryptocurrency exchanges are similar to forex exchanges, places where you can exchange Bitcoin for a fiat currency, for example, Bitcoin for USD. Although exchanges do provide wallets to their customers, it's not their principal business. Therefore, it is better to move your Bitcoins to a secure wallet. Safety should be your main prerogative when choosing your wallet; try choosing one with multi-signature ability.

A Bitcoin Wallet stores Your Private Key, Not your Bitcoin

The conventional presumption that Bitcoins are kept in a wallet is technically wrong. Bitcoins are not kept anywhere. However, Bitcoin balances are stored utilizing public and private "keys," which is called cryptography. The public key similar to a bank account number works as an address publicly announced, to which others can send their coins. The private key similar to an ATM PIN is intended to be kept as a secret, and just used to approve a transfer. Hence, it's called the "private key," and that's what is helpful in the wallet.

As any other cryptocurrency user, you are free to use any of those coins using your "private key" to buy something, or pay for anything, or send it to anyone. These coins are transferred using the "address" of the beneficiary.

Despite the fact that Bitcoin is identical (homogeneous) all over the world, however, its price differs from one country to the other and even from one exchange to the next, which gave the surge to arbitrage opportunities. It's possible that the price of Bitcoin in one country can be trading at a 30% above the other country. The difference in supply and demand of the marketplace can result in the consequences of its price difference.

# Chapter XV

INVESTMENT STRATEGY

There are different investment strategies, and what can be acceptable for one person may not be acceptable to the next.

Buy and hold

One of the most common investment strategies is to buy and hold. When cryptocurrencies will replace only a small part of the fiat currency system, its worth will far exceed what it is today. Equally also can be said that if cryptocurrency turns out to be the currency of choice, the "machine payable web" will make billions of gadgets to transact easily with one another.

However, presented with the current volatility of cryptocurrencies, if one wants to purchase, they should contemplate the strategy of "dollar cost averaging." It means investing the whole amount in several parts over X period of time to purchase coins at an average cost.

Buy and diversify

It is safe to say that predicting the future of cryptocurrency is similar to predicting when a slot machine will land on winning numbers. It is unlikely that any specific cryptocurrency will disappear, but as in the case of Ethereum, it showed Bitcoin that it is possible for some recently unknown cryptocurrency to become a major force very quickly.

Purchasing several cryptocurrencies and later exchanging them for alternative coins is a good way to hedge against the unexpected changes of any specific coin. Though any one specific coin can collapse, many investors and technology experts agree that cryptocurrencies in one form or another will become pervasive in the near future.

Cryptocurrency trading

A number of investors had elected to day-trade cryptocurrencies on exchanges like Kraken and Poloniex. This type of trading can actually increase the risk for an inexperienced trader, so it should be handled with caution.

Is it too late to invest in X cryptocurrency?

Even Bitcoin is not yet a common payment method, so it is rather clear it's not too late to buy even Bitcoin. The price of other cryptocurrencies in 5 years time can be either $0.00 or any wildly imagined amount you can think of. Personally, I believe that some cryptocurrency will increase million times in the next several years and will reach the goal of being a globally decentralized platform with many gadgets and people communicating with it. Naturally, the price of that cryptocurrency will have its ups and downs as some investors join and some leave, but when the technology does flourish, then the value will be much higher than it is today.

As you can clearly see from the content of this book, it should become very obvious about how difficult it can be to even buy cryptocurrency, and that is the reason in and of itself why it is improbable that it's too late.

# Part XVI

HOW ONE CAN PROFIT FROM CRYPTOCURRENCIES

1. Mining

  * Traditional like in Bitcoin

  * Forging (similar to mining) (supporting network like in NXT)

  * Providing services or resources like in SteemIt (writing or reviewing) or storage like in Filecoin or Storj

  * Loaning funds to the system like in NuBits, SteemIt

2. Investing

  * In existing cryptocurrencies, either "Blue Chip" cryptocurrencies like Bitcoin, Ethereum, Ripple, Litecoin, NEM, Dash, Ethereum Classic or in a broader market for a list you can start from coinmarketcap.com

  * New startup ICO.

3. Trading

  * Like with other assets, you can try to buy low and sell high

  * Arbitrage between different exchanges

4. Using

  * Offer services to crypto community

  * Accept payments in cryptocurrencies

  * Offer services using cryptocurrencies

  * Start your own business with ICO

Basic advice:

Only invest what you can afford to lose and invest according to your risk tolerance and always do your own additional research.

Also, remember that the best time to buy bitcoin was almost 10 years ago, and the second best time is today.

One more thing, please always remember to keep your coins safe https://www.ledgerwallet.com/

First, you might want to start with "Blue Chip" cryptocurrencies; these are the cryptocurrencies with a market cap of over $1 Billion. At the time of me writing this, some of them were: Bitcoin, Bitcoin Cash, Ethereum, Ripple, Bitcoin Gold, Litecoin, NEM, Dash, Ethereum Classic, Monero, NEO, and IOTA.

Also, it's good to follow two rules regarding this.

Rule 1: Get your foot in the door now

No one can tell you what will be the price of the coin tomorrow. Therefore, if you did find a coin that you feel confident about, then purchase some of it now. If you made the right choice, then it is better and cheaper to buy it now and hold it then to try to time the market. If you try to time the market, then you risk buying it at a much higher price.

Rule 2: "Be Fearful When Others Are Greedy and Greedy When Others Are Fearful"

If you wish to get the best price, you have to buy a coin at a time of the dump. It's the time when other investors are selling that drives the price down. However, if you chose the right coin, then you have nothing to worry about and the price will rise back up and not only that, but it could even go above the previous all-time high.

The best is to buy as early as possible at the time when it is still cheap, and then you can sell it after the price went up dramatically. However, if you were not an early adopter and didn't purchase the coin at the rock-bottom price, you can still buy at the occasional dips by going back to Rule 2: "Be Fearful When Others Are Greedy and Greedy When Others Are Fearful." This brings us to waiting when everyone else is buying, and buying when everyone else is selling.

While everyone else is greedy and buying up a coin, and their prices keep rising. You run the risk of overpaying for the coin, particularly during the price correction that usually can come at a later time. However, if you see a pump without any reason behind it (no new developments, no partnerships, no important news or updates), then you would be better off waiting for the price correction before buying.

Holding

Holding investment for the long term without yielding to the push to sell it. If you plan to join the cryptocurrency holders, then you may want to learn some useful terms:

  * •Sats – Short for Satoshis, the smallest part of Bitcoin, 1 Satoshi = 0.00000001 Bitcoin.

  * Fiat – Fiat currency (legal tender), conventional (standard) currencies such as USD, EURO, GBP, etc.

  * ATH – All Time High, the peak of a coin's price.

  * Bull Market \- Rising market in which prices of most coins are rising.

  * Bear Market \- Falling market in which prices of most coins are falling.

  * Feeling Bullish – Positive feeling that an investment will grow in value.

  * Feeling Bearish – Negative feeling that an investment will lose its value.

  * Weak Hands – People who hold coins as an investment will sell it as soon as the price starts to go down.

  * Strong Hands – People who hold coins as an investment will not sell it no matter how low the price falls.

  * Bloodbath – When a lot of coins suddenly and quickly fall in value.

  * Go To The Moon – Quickly to rise in price.

  * Shakeout – When a price of the coin drops so low that many weak hands sell at a loss and coin goes to strong hands.

  * Whale – Major coin holder; he can potentially move or set (fix) the price of a coin through buy and sell walls or selling off a lot of coins quickly.

  * Buy walls – When whales try to encourage price growth of a coin through huge buying orders.

  * Sell walls – When whale tries to suppress the price of a coin (most likely so that they themselves can accumulate even more coins).

  * FUD – Fear, Uncertainty, Doubt. Sometimes, people spread bad news about some specific coin to cause others to doubt their investments and hopefully sell or to prevent other people from buying into a coin.

  * Pump & Dump – A scheme where groups first purchase into a coin, then spreads the good news about it, causing unsuspecting investors to buy in, which then causes the price to "pump" up. So then the new investors are "dumped" on by the early investors as they sell the coin and take their profits. Usually, after a dump, the price goes down and swindled investors lose their investment and known as "bag holders."

  * Bag Holder – An investor who lost his money in a possibly bad investment; it can be the victim scheme or simply bad coin.

  * DYOR – Do Your Own Research.

  * Premine \- A premine happens when a developer earmarks some specific amount of coins to a specific address before releasing the source code to the community. It usually happens when developer reserves some coins either for himself or for some other specific reason.

Most cryptocurrency investors state that they have made more money by holding an investment for long term instead of just trading in and out of the coin. It really is the best option for people without previous experience.

Cashing out

Even if you are a long-term holder, that doesn't mean you cannot take some profit.

You may decide that you need to take profit because you want to:

  * To secure your profits in a different form. (Example, gold, stocks, etc.).

  * To take profits in one cryptocurrency and use it to buy another cryptocurrency.

  * Short-term trade to take your coin that significantly went up in price like 3 to 10 times up and convert it to Bitcoin or even fiat and later buys even more of those coins when its price will inevitably fall.

If you decide to take out your profits, I would advise you to cash out not more than 50% provided that you believe that your coins will continue to increase in value.

Causes of a coin price increase?

  * High demand & Low supply

  * New announcements and developments

  * Achieving roadmap deadlines

  * Coins added to larger exchanges like Kraken, Poloniex, or Bittrex

  * News & hype

  * Groups of Pump & Dump

  * Real world application

Number one reason for a large price increase is the coin supply. Certainly, if with a limited supply on one hand and high demand on another, its value will rise.

Price of the coin = Marketcap/Circulating Supply

You can use the coins supply and market capitalization to calculate the price using this formula:

Price = Marketcap/Circulating Supply

For example, Bitcoins market cap is $250,000,000,000 and its supply is 16,800,000 BTC, so:

$250,000,000,000/16,800,000 = $14,880 is the price of each coin

Let's say on Bitcointalk you see someone who forecasts Bitcoin to have a market cap of 1 Trillion by 2019, you can calculate the price of Bitcoin this way:

1,000,000,000,000/16,800,000 = $59,524 price forecasted by 2019.

You can find a coin supply and market cap of most coins on coinmarketcap.com.

Remember, just because a coin has a low supply, it doesn't make it automatically a guaranteed growth. First, you need to read its white paper, search on Reddit and Bitcointalk for additional information regarding that coin.

Some essential information to think about first:

  * Can the coin be used in real life? What is its goal?

  * What coin stands for? Currency? Ownership? Other?

  * Does it have a premine? What was its purpose?

  * Does it have an active development? Try to contact the developers and find out.

  * What is the difference behind the circulating and total supply of coins?

  * Who is backing the coin?

## Exploring new opportunities

Lastly, let's talk about how to find new investment opportunities.

Bitcointalk.org

Bitcointalk is the primary online forum for cryptocurrency enthusiasts and investors. Where they get together to discuss all the questions related to cryptocurrencies, developers also use that forum to announce all coins that they want to introduce to the public. If you are looking for something new, then just simply type "ANN" in the search bar of the forum, or you can just type the following into your search browser: "site:bitcointalk.org ann."

Bitcointalk can also be used to find invite codes or links to telegram, discord channels, or slack that can also provide you with additional information and additional updates directly from developers.

Reddit.com

In order for you to find general discussions about Bitcoin and other cryptocurrencies, go to https://www.reddit.com/r/CryptoCurrency/. You can also discover broad cryptocurrency subreddits similar to CryptoMarkets. You'll be able to find a great deal of information and opinions here. However, please constantly remember to do your own research and don't forget to cross check it with other sites like bitcointalk. Many cryptocurrencies with stable followings maintain a subreddit where you can read, browse, post, and talk about the news, developments, prices, etc.

Twitter.com

Twitter can be a great place to find and follow different crypto traders, investors, or other enthusiasts. You can also find different tipsters; these are people who post their price forecasts for specific cryptocurrency and also may report on a chance to purchase some coins earlier before prices will rise. Some tipster accounts could be a good source of information; however, you need to make sure that you can trust those accounts because most often online tipsters accounts are anonymous.

So, be careful when taking advice and always remember, Do Your Own Research. If you do decide to find tipsters, you can use hashtags (#crypto, #bitcoin) or price tickers ($btc, $eth, $xvg, $xrp, etc.). If you need to find the latest news about your favorite coin, just enter the ticker symbol with the dollar sign at the beginning (i.e., $btc for Bitcoin). You can find the ticker symbol on Coin Market Cap.

Steemit

Many cryptocurrency related posts can be found on steemit. Not only that, but you can also support their platform, which has its own cryptocurrency called STEEM by either voting on other users' posts or creating your own.

# Chapter XVII

RESEARCH

It is very important to do the research when choosing an investment in cryptocurrency.

Coinmarketcap.com

Coin Market Cap https://coinmarketcap.com is a site that is listing practically every existing cryptocurrency. There, you can find most basic information about the coin, like the coins' rank, market capitalization, 24-hour trading volume, circulating supply, total supply, exchanges where they are traded, official websites, graphs, block explorers, etc.

Blogs

There are many news blogs dedicated to cryptocurrencies. Some of them are CoinTelegraph, CoinDesk, ETHNews, and Crypto Coins News.

Coin specific forums

Many cryptocurrencies have forums dedicated to that specific currency, for example, Litecointalk and Dash.org.

Telegram

Telegram is a free messaging app available for the mobile phones, desktops, and web browsers. Simply download and install the app and search for your coin.

# Chapter XVIII

THE WORLD OF CRYPTOCURRENCY

When Bitcoin only began its road and just started to establish its base, critics were assented and predicting its death. Naysayers misjudged the potential of cryptocurrencies in the economic world. Bitcoin already infiltrated into many businesses, and even big companies persuaded to join the movement of the progress of money.

Even such strong critics of Bitcoin such as Jamie Dimon, who is the head of JPMorgan Chase, which is one of the largest U.S. banks had to reconsider his hate of Bitcoin. He claimed that he hates Bitcoin so much that he thinks it's not only a bubble, but even a fraud. In addition to that, he even bullied to fire anyone who will even think of using Bitcoin. He emphasized that anyone using Bitcoin is a swindler and foolish, and could be working for North Korea. He was just merely a frightened bitcoin persecutor; he hates not only bitcoin, but also people who are using it.

Jamie was such an outspoken critic of Bitcoin, and there was a time when he talked about it every day and kept on saying that he didn't care about Bitcoin.

But in the latest news, JPMorgan Chase is now profoundly contemplating to provide its clients access to the CME Bitcoin futures market over their own futures platform basically advancing the reach of Bitcoin over conventional markets.

This will be a huge impact on Bitcoin and other cryptocurrencies when big names of business will use them. Of course, the price of bitcoin will soar to new heights that we have never seen before. That will incite even more businesses to join the crowd, making the Bitcoin as an important part of the global economy.
