Where to start if you want to invest in crypto? Start right now!

Where to start if you want to invest in crypto? Start right now!

by | May 27, 2019 | Blockchain, Cryptocurrency, News

If you would like to understand how to get involved in the world of cryptocurrency, then search no more. We will assist you with whatever you want to know to get you started. Surprisingly, it’s not quite as difficult as it might appear to invest in such digital assets that are popular. Here are a few important steps on how to invest in crypto.

Why? Always start with why are you willing to invest in cryptocurrency

The first and most crucial stage of the procedure is to determine whether investing in crypto is a good match for you. If the only response to this is “Because I have read of some successful crypto stories”, then there is a whole lot more research you have to do.

The cryptocurrency area is volatile and needs to be entered with care. But, cryptocurrencies are creating waves in virtually every business and are expected to grow exponentially during the upcoming few decades.

Another aspect to look for is the technology used. The blockchain technology is what stands behind digital assets and it’s said to revolutionize the world. Knowing more about the technology and the way it works will help you decide what’s worth your time (and money).

When buying crypto, it’s very important to keep in mind that the marketplace will always have its ups and downs. That is typical of almost any monetary marketplace, and you have to be certain that you aren’t entering it unprepared. Even so, the top cryptocurrency seems to be keeping their place over long periods of time. That should give you something to think about.

The best way to use in cryptocurrency

As soon as you realize the reasons that you would like to put money into cryptocurrency, then another step would be learning how to make investments. The very first step you’ll have to do is set up an account within a market. This will let you purchase cryptocurrencies with fiat currencies.

If you’re interested in developing and diversifying your portfolio, then you might choose to add more than only one crypto. To try it, you either purchase again with fiat or put up an account on another market where you are able to exchange Bitcoin for different cryptos.

Check out some cryptocurrency exchanges with friendly interfaces to begin trading or if you know exactly what coin or token you want, you should go to coinmarketcap.com and click ‘Trade’ to see on what exchanges that particular asset is being traded.

After purchasing the digital assets, it’s very important to have a safe crypto wallet to store your assets, like the Ledger or even Trezor wallet. Both of these pockets are called the safest regions to affix your crypto from hackers. This is a result of the fact they’re offline. This permits you not to leave your money on a market where they’re exposed to hacks.

Hopefully, by now you’ve got some notion of how to put money into cryptocurrency and you are feeling confident to begin developing your portfolio. This season may offer a wonderful chance for you to move in the cryptocurrency space since you might have the ability to produce massive returns on comparatively lower rates.

Don’t forget to always be certain to just spend an amount you can afford and feel comfy with. Cryptocurrencies won’t be disappearing anytime soon, and as society begins to take them, they’ll just get more attention and become mainstream. As a hind, we can say the blockchain and gaming industry as planning something big for us.

Ensure that you have a look in all the most recent crypto and blockchain information.

Digital Tokens 101: What is a digital token?

Digital Tokens 101: What is a digital token?

by | Apr 5, 2019 | Blockchain, Crypto wiki, Cryptocurrency

Digital tokens are a relatively new addition to our everyday vocabulary, and it’s closely related to cryptocurrencies like bitcoin, but also with electronic tokens which are used to symbolize various resources on a blockchain. What is a digital token? How can you use a digital token? Read this short guide to understand the different types of digital tokens and to be able to join a conversation nest time someone mentions digital tokens.

 

Digital Tokens 101: What Does it All Mean?

The term ‘token’ can lead you to think about the plastic casino chips, or that thing used to swap to get a beer under a particular platform or within a particular market such as a festival.

Let’s explore the origin of this term ‘digital token’, and then have a look to the area of cryptocurrency tokens, differentiating between blockchain-native tokens like BTC on Bitcoin or even ETH on Ethereum, along with asset-backed tokens like IOUs on Ripple.

How Digital Tokens appeared

 

Chances are that we’ve all seen a digital token before, even though we didn’t realize it. Let’s think about when subscribing to an online service or newsletter.

After you enter an email address into a site to join a mailing list, you are often asked to look at your email and click a hyperlink. The link you get to confirm your subscription may look something like this:

https://www.website.com/confirm_email? token=4bdebebc-135b-4748-b7ab-25b31a285df8

In cases like this, the ‘token’ is that this series of characters that was delivered to you. This number or string of characters is unique, so the company who sent you the confirmation email will know it’s your email address if you click on it.

So, the site sent you a token, and you shipped it back, demonstrating you had control of the email address.

But the term ‘token’ is presently being utilized in a totally different manner to identify different items in the cryptocurrency world.

 

Cryptocurrency Tokens

 

Cryptocurrency tokens do not exist as a number like the one in the example above (they’d be simple to replicate ), but instead, they exist as entrances on a ledger (a blockchain). You have those ‘tokens’ since you’ve got a secret which allows you to make a new entrance on the ledger, re-assigning the possession to another person. You do not store tokens in your own pc, you save the keys that allow you to access or reassign the amount.

Those ‘tokens’ could be considered as electronic resources that you can have control of, and you may reassign control to somebody else.

“Cryptocurrency” can refer to both tokens and coins, but differences exist between the two labels.

We’ll cover two kinds of token:

  1. “intrinsic”, “native” or “built-in” tokens of blockchains
  2. “asset-backed” tokens issued on the blockchain by a third party onto a blockchain, which can be redeemed at a later time

1. Intrinsic tokens (also called ‘native or ‘built-in’ tokens)
Intrinsic tokens are conceived for their usefulness.

Here are some famous examples of intrinsic tokens are:

  • BTC (Bitcoin blockchain)
  • XRP (Ripple network)
  • NXT (NXT platform)
  • ETH (Ethereum)

Check out the top 100 cryptocurrency tokens, and the entire list on Coin Market Cap.

All these ‘coins’ or ‘digital tokens’ stand at the core of their projects and blockchain. Without them, the blockchain wouldn’t work. It’s not rare to find digital tokens as part of a reward system, which encourages users to create blocks by validating transactions on the blockchain. Each blockchain has its own digital tokens system, although some can look alike.

How are intrinsic tokens created?

These tokens are created by computers and are not backed up by anything. It’s like writing down on a piece of paper “I have 1 billion coins”.

In reality, if you did this, then kept a fantastic record of those friends you gave them to, and in the event that you could record forward trades as your buddies gave them to other friends, you’d do pretty much exactly what these digital ledgers do.

Let’s take the most famous digital tokens for instance:

Bitcoins are ‘mined’ according to a schedule. The recently created coins are made to reward to the block-maker. The entire amount of bitcoins increases with time. They can be then traded.

The digital tokens XRP, were ‘pre-mined’ (created all the beginning) and shared among key participants. Each trade has a small XRP fee. These XRPs are destroyed over time. The entire amount of XRPs circulating goes down with time.

  • NXT, NXT

The NXT tokens were pre-mined. Each trade on the NXT system includes a commission in NXT. The fee goes into the block-maker (in NXT that is known as a ‘forger’ as opposed to a ‘miner’). The entire amount of NXT stays constant with time.

Ethereum has been pre-mined. Transactions and smart contracts require an ETH fee to be created and to operate, and the block-maker is rewarded with ETH. The block-maker also receives a block reward.

coin_issuance bitcoin ethereum ripple what is digital token

What is the purpose of intrinsic digital tokens?

The primary purposes of intrinsic digital tokens appear to be:

  1. Block validation incentives (‘miner rewards’)
  2. Transaction spam avoidance (if all trades cost a token, it restricts the capacity to create spam transaction and jam the network)

Even though these coins have worth (you can purchase and sell some of them on a cryptocurrency exchange for some other cryptocurrencies or fiat), they are not supposed to represent anything. They just exist as a digital token.

2. Asset-backed tokens

If we take a look at the history of money, we can observe an antique practice people had. In the old times, you could deposit gold at your goldsmith’s shop, and get a receipt or “I Owe You” (IOU) note from them. These notes could be moved from person to person, and anyone holding these notes could go back to the goldsmith and get into the possession of the actual gold.

Asset-backed tokens would be the electronic equivalent. They’re claims within an underlying asset (such as the golden), that you have to maintain from a particular issuer (the goldsmith). The trades are listed on the blockchains, as tokens become passed between individuals, and also to maintain the underlying asset, you ship your token into the issuer, and the issuer sends you that the underlying asset.

Asset-backed tokens are claims on an underlying asset, by a particular issuer.

Popular assets for all these schemes are currencies (USD, EUR, etc) and precious metals (Cryptocurrencies seem to attract the same crowd as silver and gold). People monitoring these assets on ledgers by producing a digital token to represents each of them.

How do asset-backed tokens work?

Let us take the case of Coins-R-Us, a false Bitcoin exchange, issuing Euro-backed digital tokens.

You send fiat money to Coins-R-Us by logging into your internet banking. It’s like a normal bank payment you sent Eur to the Coins-R-Us’ bank accounts. Let’s say you sent 100 Eur. Then you log into your account and see 100 electronic asset-backed tokens known as Coins-R-Us-EUR.

The production of the tokens is listed on a blockchain. This could be on the Bitcoin Blockchain, or as a resource on Ripple or NXT, or even a smart contract on Ethereum. Now you can send these digital tokens to your friends (possibly in return for some thing or as a present), and also the tokens continue to be monitored on the exact same blockchain.

At some point, one of your friends will want to exchange this asset-backed token to get something real. He would have to go back to Coins-R-Us, set up an account on their platform, tell them his bank account number, and send them the Coins-R-Us-EUR he got out of you. They would then sent him Eur to his bank account from their bank account.

token_workflow
The advantages of using asset-backed tokens are that they are a good way to keep records of transactions and are easy to transfer, but the users still need to go back to the issuer if they ever want to transform it into liquidity.

cryptocurrency vs digital tokens what are digital tokens

What are Cryptocurrencies?

What is the definition of cryptocurrency?

A cryptocurrency is a virtual or digital currency which is encrypted (secured) using cryptography. Cryptography refers to the usage of encryption methods to secure and check the transport of trades. Bitcoin represents the very first decentralized cryptocurrency, which can be powered with a general public ledger that lists and validates all trades chronologically, known as the blockchain.

A Cryptocurrency is a math-based, decentralized digital money that’s protected by cryptography

Cryptocurrency is a short expression for “cryptographic” money. Cryptocurrency integrates the principles of cryptography to execute a distributed, decentralized, protected information market.

Cryptocurrency is a kind of “virtual money” compared to fiat money that’s used more commonly, like the dollar or the euro. Virtual currencies are supposed to be utilized as money; they are mainly meant to be utilized as a medium of trade. Though some persons speculate about the value of one currency versus different money, the aim of these currencies is to be used as a medium of trade rather than as an investment.

In 2015, the Commodity Futures Trading Commission (CFTC) from the United States, declared that “Bitcoin and other virtual currencies are encompassed in the definition and properly defined as commodities.” However, because virtual currencies aren’t securities, they aren’t regulated by the Securities and Exchange Commission (SEC).

Briefly, this is how a blockchain functions:

digital tokens

(Source: The Bernie Group)

Cryptocurrencies have been around before Bitcoin was created, but its creation marks a significant milestone in the domain of digital currencies, mainly because of its decentralized blockchain and user adoption.

The development of Bitcoin precipitated the growth of a verdant and much more varied ecosystem of different coins and tokens, which are frequently regarded as cryptocurrencies generally, even if a lot of them don’t fall under the definition of “money”.

Digital tokens vs Cryptocurrency

 

The cryptocurrency discussion is always changing, and it can be confusing and mysterious, especially when we start talking about digital tokens.

Ever noticed tokens being known as coins, and coins as slogans? Or what about cryptocurrency together with tags like “safety” and “usefulness”?

It’s important to understand the concept of cryptocurrency because digital tokens do fall under it.

Cryptocurrency is encrypted and decentralized with cryptography and is a form of digital money made and saved on the blockchain. There are many cryptocurrencies, all of which are utilized to control the production of financial units and also to check the transfer of capital. The expression “cryptocurrency” identifies all coins and tokens.

Therefore, what’s the difference between a digital coin and a digital token?

Coins (Bitcoin and altcoins) have their own independent blockchain and their objective is to replace cash and to be used as a unit of account, store of value and medium of transfer.

Tokens, on the other hand, are usually an addition to a blockchain and reflect an asset or a utility. Digital tokens belong to a platform (e.g. the Ethereum network), to exist and function, and are created when a crypto project launches an Initial Coin Offering (ICO). Tokens, also known as crypto-tokens and digital tokens, are often given to early investors in exchange for cryptocurrencies such as Ether, Bitcoin, or even some other Altcoins, and can also be used as a kind of payment for utilizing a platform, or app.

Now, how do you tell exactly what token does what? There is a number token and they all exist independently. However, the main types of tokens are security tokens and utility tokens.

In the crypto space, people refer to digital tokens as crypto tokens.

Think of digital tokens the same as you would think of the tokens that we utilized in actual life actions. The most important intention of the tokens would be to provide clients with an equivalent priority for maintaining an item or something that the tokens belong to.

For example, in banking, they utilize tokens to facilitate the customers’ access to their account.

Digital tokens work in a similar manner, but they’re primarily utilized at the idea of ICO.

 

Coins vs Tokens: Categorization of Cryptocurrencies

 

It’s essential to be aware that all coins or tokens are considered as cryptocurrencies, even though the majority of the coins don’t be a currency or medium of exchange.

The expression cryptocurrency is a misnomer because money technically signifies a unit of account, a store of value and a medium of trade.

These features are inherent inside Bitcoin, also since the cryptocurrency area was kick-started by Bitcoin’s production, some other coins conceived following Bitcoin is normally believed to be a cryptocurrency, although most don’t meet the aforementioned qualities of genuine currency.

The most frequent categorization of all cryptocurrencies are:

  • Choice Cryptocurrency Coins (Altcoins)
  • Tokens

 crydigital tokens ptocurrency altcoin tokens

Altcoins

Cryptocurrency which is not Bitcoin is also known as altcoin or just “coins”. They are frequently used interchangeably. Altcoins only refers to coins which are an option to Bitcoin. Nearly all altcoins are a version (fork) of Bitcoin, constructed using Bitcoin’s open-sourced, first protocol with modifications to its inherent codes, thereby simplifying a totally new coin with another set of attributes. A fundamental notion of changing open source codes to make new coins is known as hardforks. To understand better what a hardfork means, you can study Bitcoin Cash which is a hard fork from Bitcoin.

This normally results in the introduction of a new coin. There are various sorts of forks like hard fork, soft fork or casual fork.

You will find different altcoins which are not derived from Bitcoin’s open source protocol. Instead, they’ve established their very own blockchain and protocol which affirms their native currency.

Interesting fact: The very first Altcoin has been Namecoin, that was made in April 2011. It’s a decentralized open source data registration and transport system.

Tokens

Tokens are a representation of a specific utility or asset, that generally resides on a blockchain. Tokens can signify essentially any resources which are fungible and tradeable, from commodities to loyalty factors to other cryptocurrencies!

Creating tokens is a far simpler process since you don’t need to change the codes from a specific protocol or design a blockchain from scratch. All you need to do is follow a standard template around your blockchain (e.g. Ethereum, Waves system), which permits you to produce your own tokens. This performance of producing your personal tokens is made possible via the usage of smart contracts.

What is a smart contract? A smart contract is a self-executing programmed computer codes which don’t require some third-parties to function.

This is how the process works:

digital tokens how smart contract work
Tokens are made and distributed to the general public via an Initial Coin Offering (ICO), which is a method of crowdfunding, through the launch of a newly created cryptocurrency or token to finance o project development. It’s very similar to an Initial Public Offering (IPO) for shares, but there are some crucial distinctions. Many eagerly participate in ICOs, and see it as a fantastic method to invest in projects which may offer excellent returns of investment.

Interesting fact: A template for token creation is fantastic since it provides a standard interface for interoperability between tokens. This makes it much easier for you to save different sort of coins inside one wallet. An illustration is that the ERC-20 standard on the Ethereum blockchain, which is utilized by over 40 tokens.

What is a Security Token?

Security tokens are synonymous with an investment contract. Security tokens could represent shares in a business, earnings flows, an entitlement to dividends or interest obligations. From a financial view, they’re similar to stocks, bonds or derivatives.

The national laws apply to ICOs, and they are different from country to country. This means that securities, asset tokens fall under these laws. That’s why it’s important to know the country in which the ICO is launched, to know the regulations which apply to a token.

How to know if a token is a security token?

Usually, If the answer to the question “Is the token increasing in value over time, and is that increase connected to the company’s performance?” is Yes, then that is a security token.

A Security Token is an electronic token that represents debt, equity, an investment contract, or other security in an enterprise.

It isn’t a coin nor is it meant to be money. The four conditions that have to be fulfilled in order for the tool to be considered a security are:

  • It’s an investment of cash;
  • There’s an expectation of gains from the investment;
  • The expense of cash is in a frequent venture; and
  • Any gain comes from promoters or third party.

This is called the Howey test, which was a Supreme Court case, between the Securities and Exchange Commission (SEC) and Howey. They determined that if a digital token fulfils the four requirements of this test  (such as other securities) it’ll be controlled by the SEC. So these digital tokens are securities, not commodities or currencies, and therefore they’re not governed by the Commodity Futures Trading Commission (CFTC).

Summary

  • Regulatory framework, depending on the country
  • Expectation of return
  • Similar to a stock

What is a Utility Token?

Utility tokens are much like the tokens you would purchase at an arcade, and grant you access to an organization’s services or products. They are not regulated, and therefore utility tokens are not investments.

From time to time, the lines between a security and a utility token may become confusing, especially once you add in unclear regulations, which are added in the absence of a globally-accepted frame. But when a utility token is correctly structured and functions as a “voucher” for the organization’s services, it stays a utility and usually exempt from rigorous regulatory oversight.

A Utility Token is an electronic token created for utilization only, not for investment.

It’s not a coin.

If a person is buying a utility token for investment purposes, it’s very likely to be regarded as a security token, ( the SEC stands by this view). A utility token is a token which can only be utilized on the 1 platform or network (where it is issued) and can’t be converted into fiat or electronic money.

It’s somehow similar to loyalty points and gift cards. Gift cards or loyalty points can only be used on a single platform or community and are often representative of a prepayment for services.

In discussing the gap between utility tokens and security tokens, SEC chairman Jay Clayton said: “A token that represents a participation interest in a book-of-the-month club” shouldn’t be a security token.

On the flip side, tokens in “a yet-to-be-built publishing house with the authors, books and distribution networks all to come” will probably be a security token since “prospective purchasers are being sold on the potential for tokens to increase in value — with the ability to lock in those increases by reselling the tokens on a secondary market — or to otherwise profit from the tokens based on the efforts of others.”

Summary

  • Not, or less, regulated
  • Aren’t investments
  • Give Accessibility to a product/service

Security Tokens vs Utility Tokens: Why It Matters

Knowing the distinction between a utility token along with a security token is an essential aspect.

Whether you are holding tokens or are arranging a crowdsale, then you want to be aware of the difference.

To begin with, you do not wish to purchase something without understanding exactly what it is, and secondly, you have to understand what legislation the token should be compliant with pre-launch of a token crowdsale.

Prior to picking what coin to start your own ICO with, you will need to ask yourself a question: “Which are the requirements of my ICO?”. And make sure you don’t fall into these common traps:

Avoiding Security Tokens

Even if you intend to avoid regulations and call you token a utility token because that doesn’t make it a utility token. By calling a token a “utility” token or structuring it to supply a utility doesn’t stop the token out of being a safety.

In case a security token gets the features that your ICO needs, then pick a security. When there’s absolutely no demand for a security token, then do not make one unnecessarily.

Underutilizing Utility Tokens

Utility tokens are of numerous types and with different attributes and can cover the needs of an ICO. Utility tokens are dynamic. Many overlook their features, however, it is crucial that you do your homework before ignoring the choice completely. By exploring all the features, one can get a better understanding of the capabilities of a token, have a better chance to successfully launch their own token or invest in a profitable project.

Altcoins vs Tokens

The most important difference between altcoins and tokens lies within their construction. While altcoins are different currencies using their ow blockchain, tokens function within a blockchain that eases the introduction of decentralized software. Nearly all coins in  (near to 80%) are tokens because they are much simpler to make.

Cryptocurrency vs Digital Tokens

Can you answer the question “What are the common for a dollar bill, the stocks of a company and a prepaid gift card?”

They don’t have a lot of things in common. Now let’s take this analogy to cryptocurrency (or virtual currency), security tokens and utility tokens. Again, they don’t have that many things in common.

But if you comply with that the world of digital translators from the media and popular media, you’d believe virtual currencies, security tokens, and utility tokens are very similar as they’re often simultaneously and discussed under the subject of “cryptocurrency.”

Many online publications and even investment guides use the term “cryptocurrency” to describe virtual currencies, security tokens, and utility tokens. But these three terms describe extremely different concepts, each of which can be subject to various legal frameworks and regulations.

While every one of the items is made on distributed ledgers using the blockchain technology, from both a legal and a practical standpoint, the similarity ends there. We should rethink using the term”cryptocurrency,” and instead use the phrases that are particular to the classes that have grown: virtual currency, security tokens, and utility tokens. Within our descriptions below we supply more details about the significance of each one of those classes.

digital token and icos what is a digital tokens

Initial Coin Offerings (ICOs) and Digital Tokens

ICO is the abbreviation for Initial Coin Offering. This is similar to crowdfunding or IPO. The essence of this process is that cryptocurrency projects are inviting anyone to become an investor in their project. The majority of these crypto projects launch a new cryptocurrency.

Let us clarify the usage and term of “ICO”

ICO stands for First Coin Offering. The normal ICO denotes the offering of electronic tokens that are generally either safety tokens or utility tokens. Furthermore, an ICO is generally not the first offering of the issuer. While ICO rhymes with IPO and is still a tricky term, it shouldn’t be confused with the public offering of securities.

As the marketplace rises, the terminology used in the field of cryptocurrency will hopefully get a wider spread and be understood properly. The differences between the different kinds of tokens are important. By understand their purposes, we can better apply the laws on their sale, use and the way they are created.

By ‘participating’ in an ICO, an investor is actually funding the project developers with more famous cryptocurrency, such as Bitcoin or Ethereum. With these funds, the project owners will be able to develop the project, and the investors are holding the digital tokens similar to stocks.

If a trader holds an electronic token, he then owns those shares from the project.

Digital Tokens Plays Important role in ICO:

The importance of digital tokens is revealed when we started learning about the fundraising which many startups need and acquire through ICOs. The creation of a crypto token requires some particular features and need to fulfil a certain task, while registered on the blockchain. Nowadays, there are websites willing to help with any part of the creation of a blockchain project.

Cryptocurrencies can be hard to understand, particularly because of their inherent blockchain technologies, which it’s all about complex math calculations and terminology you haven’t heard before. But we have you covered. Here are some resources to help you get started in the crypto world:

The concept of Tokenization

Tokenless Blockchain

As in Tim Swanson’s excellent report on permissioned ledgers, there is the concept of tokenless blockchains. This might imply a blockchain or decentralized distributed ledger that lacks an intrinsic token (eg Ripple with no XRP), nevertheless, asset-backed tokens are most likely to still be utilized. ‘Tokenless’ doesn’t refer to the lack of the asset-backed token, but to the lack of intrinsic token.

We do not always require a token. Based on the blockchain system, you might or might not require an inherent token.

Generally, permissionless ledgers where anybody may add a block, want some type of incentivisation scheme for block validators to perform their job. But in distributed ledger systems in which you control both the validators and block-creators, they then might do their task for a number of motives (perhaps the task is part of a contract). , such as since they’re contractually bound to do so. There is a bit more about it here.

Dematerialization and Tokenising legal constructs

Presently there’s a great deal of buzz in the blockchain circles and all sorts of things are tied to a blockchain: stocks, gold, debt, businesses, IPOs, diamonds, artwork, decentralized organisations, wine, music, countries and so forth.

Sometimes the objective is to have the ability to transfer resources (or IOUs) fast and easily while maintaining the physical thing secure (in a warehouse).

Other times, it is to get a digital token whose electronic possession matches the physical travel thing. For instance, once I offer you an actual diamond, I send you the electronic diamond-token, so you can control it now, and thus that the blockchain recordings the provenance of this diamond, such as a supercharged certificate-of-origin that contains a complete listing of possession.

Seeing legal constructs, notably stocks and companies, I think there’s a gap between monitoring claims to inherent objects onto a ledger, and really lawfully dematerialising the thing.

Dematerialising

Dematerialising something is the process in which we replace a material item with an electronic one. For instance, paper share certificates have mostly been replaced by possession entries in databases. Some paper contracts are replaced with pdf documents.

Even though you’re able to declare “this digital token represents a share of a company”, and you’ll be able to send this to somebody else, this does not have any legal position. The token is not the share, even in the event that you possess the share in actual life, and you issue the token on the rear of it. The token is something beyond the law that you’ve created.

Sure, since the owner of stocks, you might devote to others that should they own that token, you then are going to pass the privileges (such as if you have this token, I’ll pass any dividends I purchase (from actually possessing the shares ) to you.

But if the shares are registered on your name in the shares registry, the authentic and legal shares registry, not the blockchain ledger that you’re using to monitor the electronic token you’ve created, then you own them.

That is why it’s untruthful when people say they’re generating *insert legal construct here* on the/a/some blockchain. They are not, It’s just as someone would create a business by writing “I create a business with 100 stocks” on a napkin, without doing all of the actual work of lawful firm creation and registering the business to a national authority of the country he lives in.

Sure, even if the legislation changed and a particular blockchain becomes part of the system or has been deemed equal to the country’s register of organizations, then yes, on this statutory blockchain, you might create a business. This is something all blockchain enthusiasts are looking forward to seeing: how legislation will gradually adapt to the blockchain technology.

Crypto Resources To Get You Started

If you are beginning your journey into the world of cryptocurrencies, then here is a list of useful guides and resources which can get you started:

Trading & Exchange

Online multiplayer games are shifting towards blockchain

Online multiplayer games are shifting towards blockchain

by | Mar 7, 2019 | Blockchain, Blockchain Games

As complex and beautifully designed games are, the only part of the entire experience which is truly owned by the gamer is the feeling of achievement. That is as close as gamers ever get to really “owning” anything in the computerized world.

Online games offer avatars for sale, which gamers purchase from a computerized store as a symbol of their entity within the game and then spend hours on end to customize it, to enhance the feeling that it belongs to you, and yet it doesn’t. It can disappear in an instant. An instant in which the entertainment platform and its servers can be shut down. No warning and no explanations.

But good news strike on the horizon of online gaming. The innovation of blockchain technology can change all of that. Using decentralized systems and non-fungible tokens, or NFTs—like the ERC-721-consistent tokens previously made by Aphorism Zen’s CryptoKitties—players can make characters, vehicles, weapons, and other advanced signs that they claim forever, not simply the timeframe of realistic usability of a diversion.

The innovation can be the entryway for a player’s individualized and tokenized manifestations to move consistently on multiple online blockchains.

The potential is huge, and it’s the reason many trust the expanding blockchain gaming industry could deliver the slippery “killer app” that at last conveys this innovation to the majority.

But is the market prepared for such an extreme move in digitized gaming resources? A consortium of eight of the leading enterprises in this space, including Ubisoft,  considers so. Also, their vision for the eventual fate of gaming and the $140 billion computer game industry has the help of a developing number of gamers and diversion engineers alike.

Ubisoft’s Blockchain Initiative Manager Nicolas Pouard believes the goal of this alliance is to rally stakeholders from both the blockchain and gaming industries and work together to develop solutions for the challenges that await these converging fields, according to Ubisoft’s Blockchain Initiative Manager Nicolas Pouard.

And it’s that last piece of the puzzle—the potential for a breakthrough smash hit on the level of an “Assassin’s Creed” franchise—that fuels the vision for gaming as blockchain’s bridge to the mainstream.

“Gaming will allow people to familiarize themselves with blockchain in an interactive environment, which is the first step to mass adoption,”

Nicolas Gilot, a founding member of the Alliance and co-CEO of Ultra—a blockchain-based “next-generation games distribution platform.”

True Ownership

The ownership in the digital world has its complexities. Let’s take iTunes for example. You can buy a song on iTunes, for example, but it isn’t really yours. There are limits to what you can do with that digital file—and you certainly can’t resell it.

Nowadays, in most cases, players that are done with a game in which they invested a lot are not able to pull any value out of the items or achievements they collected with much efforts.

Blockchain’s value proposition for gaming strongly relies on what we call ‘true ownership,’

Ubisoft’s Blockchain Initiative Manager Nicolas Pouard

This also applies to game platforms. Gaming assets are similarly restricted. In conventional games, servers store all the things that players buy.

“If you stop playing, lose your account, or experience technical issues, you lose those digital goods,”

Manon Burgel, B2Expand CEO

As explained in the blockchain games vs crypto games article, the in-game items are tied to the server of the platform, not to the real-life user of the account. Some even specify in the EULA (End User Licence Agreement that players are not allowed to sell or gift items to others.

The perceived unfairness of this among gamers is what’s driving the desire for blockchain to flip it on its head.

“A game that runs completely on the blockchain is an example of a decentralized platform that could be owned by everyone.”

Dan Biton, founder of Gimli

Worldwide Asset eXchange (WAX), a blockchain e-commerce platform for digital assets, released a survey of 1,000 gamers and 500 game developers in the U.S. that shows solid support for the “true ownership” of in-game assets.

The survey states that 68% of the gamers trust they have the right to “truly own” the things they purchase. In addition, 62% would be bound to spend fiat on virtual assets if they could transfer those assets in between games, and near 75% of gamers said they would enjoy to sell or exchange in-game assets regardless of the type of the game.

What’s more, 86% of the game developers believe that in-game assets are on their way to becoming strategic components of future games, and more than 66% agree that the publisher of the game suppresses the advantages of these assets.

By tokenizing these assets, players can choose for themselves how to manage them: give them away, exchange them, or even offer them. It empowers a “digital second-hand market,” Burgel clarifies, and “its decentralized nature ensures that games and items are not held by one company but by the network.”

Of course, this sounds extraordinary for gamers, but publishers must figure out how to profit from this game model.

Nowadays, blockchain’s involvement in gaming is limited to the tokenization of digital assets. Furthermore, given the administrative atmosphere in the Unified States with respect to tokenized resources, this convolutes matters for an expansive, traded on an open market organization like Ubisoft.

Ultra’s CEO demands, in any case, that he sees “no issues with tokenized assets” from a lawful point of view, while organizations cling to set appropriate administrative rules. “The goal of regulatory bodies such as the SEC is to protect the public from being subject to scams,” he says. “The blockchain and crypto industry is continuously evolving, therefore it is important to keep up-to-date with the latest regulatory decisions to avoid slowing down innovation.”

Gilot additionally takes note of that the tokenized assets that will be exchanged on Ultra and all through the blockchain-gaming space. NFTs do not fall under the same rules as tokens sold during an ICO or STO (Security Token Offering), which may incorporate investment contracts and are subject to securities laws and guidelines. In the meantime, an advanced gaming asset, Gilot says, essentially “guarantees ownership, as well as proves the scarcity of an item is created through a publicly available smart contract.”

NFTs, as it were, are computerized portrayals of unique items, which are different from the collectable exchangeable cards of yesteryear. Those collectables work as a tokenized “proof of purchase” for the proprietor. They are the reason for most by far of blockchain-put together computer games at present with respect to the market, for example, Everdreamsoft’s “Spells of Genesis”— a game of collectable card, arcade-fight style game that makes a case for being the first blockchain-based mobile game.

“Spells of Genesis” was launched in April 2017, seven months before CryptoKittis were released on Ethereum. CryptoKitties and its non-fungible cats broadly smashed the Ethereum network in December 2017. CryptoKitties stay in charge of the absolute most costly NFT-based, gaming collectables ever sold—some surpassing the six-figure mark.

When will a major publisher release its first blockchain-based title?

In July 2018, the upstart blockchain gaming protocol MagnaChain announced its partnership with Epic Games, the maker of “Fortnite,” spurring rumours of an inescapable “Fortnite on the blockchain.”  However, MagnaChain hasn’t commented on any details regarding the process.

For Ubisoft, Pouard from Ubisoft is still at a “test-and-learn” stage regarding the blockchain technology, mainly because of their financial obligation to its investors. “True ownership” is an extremely new business model and many tests are still needed to conclude if this is “something publishers can handle long term.”

Burgel’s B2Expand started paying more attention to this use case, having discharged its first game Beyond the Void on Steam. Beyond the Void uses the Ethereum blockchain for its “economic backbone” enabling players to purchase, sell, and exchange “cosmetic in-game items” for the Multiplayer Online Battle Arena and Real-Time Strategy mashup utilizing B2Expand’s local Nexium (NXC) token. Burgel says Beyond the Void would have explored the blockchain technology within the core gameplay if it wasn’t for the early release of the project.

About “true ownership” and the trade made around the exchanging of NFTs, Burgel states that: “the gaming industry has yet to find the right business models fitting these opportunities.” Nevertheless, distributors could, at last, discover an incentive in tools that enable gaming networks to “organically grow and feel involved,” for example, by encouraging the creation and dissemination of user-generated content. That is just “one of many possibilities,” Burgel says, and “many companies are already exploring new ideas.”

Dan Biton, a co-founder of the Gimli platform and a Blockchain Game Alliance board member, says we have to think past the present video-game scene to imagine what these conceivable outcomes may lead to. “A game that runs completely on the blockchain is an example of a decentralized platform that could be owned by everyone, and we could think of something where every player has its share in a voting system to make the game rules evolve,” he says. The game’s logic “or even the game itself” could change as indicated by the wants of its players “in a completely decentralized way.”

It’s a new and unique gaming perspective and one which Ubisoft is now putting its assets and target industry into an investigation. Ubisoft’s Strategic Innovation Lab is an inner research organization gave to analyzing future industry patterns and they are already looking far ahead from the “crypto collectable” use case of the blockchain which is found today in the market.

In recent months, the lab has gone through the process of developing a Minecraft-inspired model, a treasure-chasing and island-investigation game called HashCraft. The game doesn’t utilize NFTs. Indeed, it doesn’t have much to do with tokens. But it joins blockchain and pushes the limits of what was recently thought conceivable in gaming, situating publishers like Ubisoft as basically the makers of the “fantasy”, which are the characters and storylines of the game, and the players as the developers of “experiences” they genuinely possess.

It takes courage to embrace this new trend and Ubisoft is still in its infancy in this journey. “There is still plenty that we need to discover, which can’t be done without continuing our exploration or collaboration within the ecosystem,” says Pouard. Furthermore, cooperation is decisively what the Blockchain Game Alliance looks for. The alliance of game publishers are in the procedure now of formalizing a formal administrative structure for their association. Says Pouard: “This is just the beginning of the adventure.”

Hurdles remain, but much of the promise that this technology brings rests in its ability to redefine antiquated notions of digital rights in a rapidly changing world. We take this as good news, thinking that crypto and decentralized technologies are still in their infancy.

Blockchain Games vs Crypto Games: What is the difference?

Blockchain Games vs Crypto Games: What is the difference?

by | Feb 8, 2019 | Blockchain, Blockchain Games

Blockchain games are surely the future. The main issue is that people today do not understand how this works, perhaps due to the lack of education. Most of the time they believe almost everything they hear or read online. But still, money is made this way, and many startups profit big time from this lack of knowledge.

Note that blockchain technology can be applied to a vast number of industries, not only used in the economic sector for currency transactions. Comparing Blockchain games vs crypto games will hopefully give you a better insight.

Unfortunately, there is a HUGE lack of information and confusion about the difference between blockchain games and crypto games.

Blockchain Games vs Crypto Games: What is a Crypto Game?

The most frequent use for blockchain tech in games so far has been to store your items on the blockchain, tying them to your (Ethereum) wallet and making them permanently your own. Another term for this process is tokenization.

In contrast, in “classic” games, any items that you supposedly own in-game are in fact stored on the game publisher’s servers, as is your whole account. There are many ways for you to lose possession of your assets in this case – server malfunction (failure or attack), halted game development, banned account, etc.

The first generation of blockchain games are actually crypto games or tokenized games. They were solely based on this principle and they focused on collecting unique assets and trading them, for fun, profit, or both. CryptoKitties was the game that started this trend and they’re still quite popular.

The main difference between the two is that a blockchain game has every process in the game recorded on the blockchain as a transaction. No one can change, delete or influence the result of a game, whereas a crypto game has only a token used within the game. 

Even more, crypto games don’t even use their own blockchain. Most, if not all of them, use the Ethereum platform, which requires you to buy another token just to trade the token of the game (Gas on Ethereum).

It’s needless to add that if only 10% of the games which use the Ethereum platform would start trading at once, the network would crash. Therefore, a blockchain game would ideally be a game which uses its own blockchain. Joseph Lubin, the co-founder of Ethereum, acknowledged onstage at Ethereal Tel Aviv 2019 that the network, in its original form, wasn’t built for mass adoption: “We knew it wasn’t going to be scalable for sure,”.

To add to the confusion of this type of games, some projects claim they are developing their blockchain so that others can use it to develop blockchain games. None that we know of, yet.

CryptoKitties has collectable and unique cat cards, which are in fact tokens you can exchange, but the entire game is based on Ethereum. Also, the game is not a blockchain game, only the tokens are on the blockchain. But yes, the tokens/collectable cards can be traded and the prices are in ETH, which can indeed be transferred to a cryptocurrency exchange and be traded for another crypto or fiat.

What is the essence of blockchain games?

Just ask yourself who controls or can check the back processes of those games, and how it is decided who scores more or who gets a better crypto kitty? A blockchain-powered game has all of these processes stored on the blockchain, easy to asses and transparent for all who want to verify it.

The many blockchain game names found on Google, have merely a whitepaper, for a future project, but none of them is functional. The market also exploded after the overnight success of CryptoKitties which was at its best a well-developed marketing plan. CryptoPuppies falls into this category as well as other not-so-famous variations of collectable crypto animals. The developers just stopped replying to their early enthusiasts. And this is not a singular case.

Let’s talk about crypto casinos.

Many believe that gambling and crypto put together in the same sentence give the blockchain technology a bad name. As you can see, there are many ways to utilize blockchain, but most developers seem to be in it for the short run, for the quick win. Ethereum platform has become their home and the network is invaded. Even the developers of Ethereum aren’t happy with this, as another short success of such a game would compromise the network.

Fortunately, crypto enthusiasts now know how to better research a project before investing in it. Just try to remember 2017, when ICOs weren’t regulated and nobody understood what they were, but people were just throwing money at anyone with a whitepaper.

Blockchain Games vs Crypto Games: What is a Blockchain game?

Blockchain games are any games that include blockchain technology in its backend or in its mechanics in general.

Blockchain, by definition, is a public and transparent distributed data ledger. It gives the developers and the users the chance to check and verify every transaction ever made, not leaving any place for interpretation or data manipulation. The blockchain is a growing list of records, called blocks, which are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data.

Nowadays, the blockchain stores not just cryptocurrency and tokens, but also in-game assets and progress. But most processes of the games, remain as they were: clueless of the blockchain technology and nowhere near it.

However, there is hope, as the market is barely starting to understand and embrace this new technology. At the moment there is exactly one cryptocurrency project with the blockchain technology to build a blockchain game, not just for the cryptocurrency inside the game, but for everything that the game implies.

This project which stands out, as a true blockchain game, is one in which not only the cryptocurrency used to develop its in-game economy is stored on the blockchain, but the entire game uses the blockchain technology. FootballCoin is a fantasy football blockchain game. It will probably become known at least for being the first project of its kind.

FootballCoin is the first and so far, the only blockchain game on the market. The rest of them just spend money they don’t have on marketing.

Gaming is evolving and as in any other field, gaming can and probably will adopt the blockchain technology the right way, not just for tokens.

Mining Cryptocurrency: Crypto Mining Business Model Used Worldwide

Mining Cryptocurrency: Crypto Mining Business Model Used Worldwide

by | Jan 21, 2019 | Blockchain, Cryptocurrency, News

The most popular way to get into crypto is to start mining crypto. There are a few other ways in which you can earn crypto without spending any fiat money, but serious money is made by mining cryptocurrency.

Mining cryptocurrency like Bitcoin is an automatic process, a decentralized mechanism that creates Bitcoin out of thin air to provide rewards to miners for processing transactions. The result: a booming business in mining.

All you need to get into the business of mining cryptocurrency is a rack of high-speed computers and access to electricity anywhere in the world and you can essentially create cryptocurrency, simply by running free software.

Crypto Mining Business Model #1: Legal, Competitive Mining

In the early days of crypto, mining was a business for small-time entrepreneurs. The business soon became increasingly competitive, as miners purchased massively powerful computers while scaling up their operations to remain profitable.

Risks seemed low, as the original Bitcoin software was supposed to account for falling prices, making it easier to mine as the number of miners remaining in the game dropped, thus ensuring that there would always be enough miners to process all the transactions.

Then the Bitcoin crash came, severely limiting the ability for miners to churn out crypto while still making a profit. As it turns out, inefficiencies in the mining algorithm, combined with market pressure on the transaction fees that were supposed to partially compensate miners, has led to a squeeze on the ability for anyone to mine at a profit.

Legal crypto mining using electricity at market rates is now becoming increasingly unfeasible, even in places like Iceland, which have exceptionally low electricity rates combined with temperatures conducive for data centres filled with heat-generating computers.

Crypto Mining Business Model #2: Subsidized Electricity Mining

In Washington State, hydroelectric power generates far more juice than locals can consume, thus attracting a booming business in crypto mining.

“The region’s five huge hydroelectric dams, all owned by public utility districts, generate nearly six times as much power as the region’s residents and businesses can use,”

Explains Politico journalist Paul Roberts. “Most of the surplus is exported, at high prices, to markets like Seattle or Los Angeles, which allows the utilities to sell power locally at well below its cost of production.”

By 2015, however, the Washington Bitcoin mining craze had run its course. “Margins grew so thin—and, in fact, occasionally went negative—that miners had to spend their coins as soon as they mined them to pay their power bills,” Roberts adds.

If not Washington, then, what about Iran? “I come across some very interesting cases,” notes Mohsen Rajabi, an Iranian blockchain entrepreneur. “I recently set up a rig for a middle-aged customer who was not tech-savvy at all and had simply heard of mining and its potential profits. He wanted to start with ten devices installed at his factory because it can legally use extremely cheap industrial electricity.”

Crypto Mining Business Model #3: Steal Electricity

The electricity is the greatest cost of the mining business. If you can manage to cut that out, that chances of making a profit increase at once. In the early days of Bitcoin, college kids would use the university electricity to power their rigs from their dorm.

Today, in contrast, stealing electricity is serious business. “A Shanxi Datong [China] man named Xu Xinghua stole power from the poles near the West Second Plant of the Kouquan Railway, which was borrowed from November to December 2017,” reports Liu Yulin, writing in Chinese for The Paper.

“The coin ‘mining machine’ and three electric fans were operated for 24 hours,” she continues. “Xu Xinghua mined a total of 3.2 bitcoins, earning 120,000 yuan [$17,700], and the electricity generated by the stolen electricity was 104,000 [$15,340] yuan.”

What happened to the thief? “Xu Xinghua was sentenced to three years and six months in prison for committing theft and was fined 100,000 yuan [$14,750],” she reports. He also had to reimburse the electric company for the stolen power and forfeit his equipment.

This story is one of many, notable merely for the fact that the perpetrator was caught and the story appeared in the local paper. Many more instances are sure to be out there, as yet unreported.

Another popular, if potentially unintentional, way to steal electricity: set up a mining operation, take the profits, and then go out of business.

This is the story of one of the Washington State mining companies. “U.S.-based bitcoin mining firm Giga Watt has declared bankruptcy with millions still owed to creditors,” writes Yogita Khatri for Coindesk. “Creditors include the utilities provider in its Douglas County [Washington] base, having a claim of over $310,000, and electricity provider Neppel Electric, which is owed almost half a million dollars.”

One silver lining: there may be a possibility these stiffed utilities will eventually get some of their money back, as Giga Watt raised about $22 million in its ICO – and it’s possible the scammers were unable to spend or secret away all of the proceeds before the bankruptcy shut them down.

Crypto Mining Business Model #4: Cryptojacking

Illicit cryptocurrency mining (known as cryptojacking), has surpassed ransomware as the most popular form of cybercrime targeting enterprises.

Cryptojacking means introducing crypto mining software onto a target victim’s computer without their knowledge. The software starts generating crypto for the hacker while stealing processing power and electricity from the victim.

The cryptojacking problem, in fact, is much worse than it was when I wrote my article Top Cyberthreat Of 2018: Illicit Cryptomining in March 2018.

“Despite the volatility in the value of various cryptocurrencies, the trend of illicit cryptocurrency mining activity among cybercriminals shows no signs of abating,” according to David Liebenberg, senior threat analyst at Cisco Talos.

One of the reasons why the cryptojacking problem is getting worse is because the malware is getting better. One such package: Rocke. “Talos assesses with high confidence that Rocke will continue to leverage Git repositories to download and execute illicit mining onto victim machines,” continues Liebenberg.

Git repositories are where most of today’s enterprise software developers store and manage their source code – but such repositories are not Rocke’s creators’ only target. “It is interesting to note that they are expanding their toolset to include browser-based miners, difficult-to-detect trojans, and the Cobalt Strike malware [malware that leverages Cobalt Strike penetration testing software].”

Crypto Mining Business Model #5: Evading Sanctions

Another cryptocurrency mining business model is to evade sanctions.

For example, a pair of Iranian Bitcoin miners tried to take advantage of their local USD exchange rate: “At the time we bought the mining device, the rate of the US dollar in Iran was still quite high, so we figured we would make about $90 to $100 a month,” explains Ali Hosseini, an Iranian miner. “The cost of electricity is relatively low in Iran, so the math seemed viable.”

Hosseini’s cousin also spoke up. “Foreign exchange rates and Bitcoin prices have fallen and our profits have been slashed, but we’re not seeing losses yet,” says Pedram Ghasemi, another Iranian miner. “According to my calculations, the US dollar must drop below 110,000 Rials [about $2.60] and Bitcoin must be down to $2,000 for us to really lose.”

Another example is North Korea. Priscilla Moriuchi, a former top National Security Agency official and now director of strategic threat development at Recorded Future, estimates that North Korea may have earned up to $200 million in 2017 mining crypto.

How, then, would North Korea turn that crypto into hard currency? “North Korea has such extensive criminal networks that have been well-established for decades to facilitate illegal activities,” Moriuchi says. “If Pyongyang were able to cash out into physical currency, it would be relatively easy for them to move that currency back into North Korea and to buy things with the physical currency. I would bet that these coins are being turned into something — currency or physical goods — that are supporting North Korea’s nuclear and ballistic missile program.”

Crypto Mining Business Model #6: Mining at a Loss

This doesn’t come out as a rational business model, unless ensuring that crypto transactions can be completed is your primary motivation.

We know that crypto is (or at least use to be) essential to the operation of the Darknet. Many illegal businesses and organized crime syndicates depend on the successful exchange of crypto to move their contraband.

Should the value of Bitcoin or any other crypto drop to the point that no one could make money mining it, then such syndicates would likely step in to fill the void – mining at a loss to keep the crypto running.

For all the crypto fanatics out there, therefore, there is a reason to take heart – there’s no way crypto values will ever drop far enough for mining to cease. Organized crime wouldn’t let that happen.

Blockchain: How A 51% Attack Works (double spend attack)

Blockchain: How A 51% Attack Works (double spend attack)

by | Jan 16, 2019 | Blockchain

Let’s give a simple example to illustrate how a 51% attack works (double spend attack):

You spend 10 Bitcoin on a luxurious car. The car gets delivered a few days later, and the Bitcoins are transferred from you to the car company. By performing a 51% attack on the Bitcoin blockchain, you can now try to reverse this Bitcoin transfer. If you succeed, you will possess both the luxurious car and the Bitcoins, allowing you to spend those Bitcoins again.

Before explaining how this can happen, you should be acquainted with the blockchain mining process and technology.

51% Blockchain Attack (double spend attack) Definition

The ability of someone controlling a majority of network hash rate to revise transaction history and prevent new transactions from confirming.

What does this mean?

A 51% attack or double-spend attack is a miner or group of miners on a blockchain trying to spend their crypto’s on that blockchain twice. They try to ‘double spend’ them, hence the name. The goal of this isn’t always to double spend crypto’s, but more often to cast discredit over a certain crypto or blockchain by affecting its integrity.

Why can a 51% blockchain attack theoretically work?

As we have banks and the states central institution, the blockchain governs using a distributed ledger, where it can store all kind of information, like transactional data, in the case of cryptocurrency. That is why we call blockchains to be decentralised.

The protocol of the Bitcoin blockchain is based on democracy, meaning that the majority of the participants (miners) on the network will get to decide what version of the blockchain represents the truth.

How does a 51% PoW attack work?

Each transaction sent by a bitcoin owner is put into a pool of unconfirmed transactions. The miners select the transactions which will be part of the block. The miners need to find the solution to a very difficult mathematical problem (using computational power) to be able to add this block to the blockchain. This is the process of hashing.

Of course, the bigger the computational power of a miner, the better the chances are for him to be the first to find a solution. When a miner finds a solution, it will be broadcasted (along with their block) to the other miners and they will only verify it if all transactions inside the block are valid according to the existing record of transactions on the blockchain.

Note that even a corrupted miner can never create a transaction for someone else because they would need the digital signature of that person in order to do that (their private key). Sending Bitcoin from someone else’s account is therefore simply impossible without access to the corresponding private key.

How does a 51% blockchain attack start? With a corrupt miner!

A corrupt miner will try to reverse transactions. Why is a miner called malicious? Because when a miner finds a solution, it is supposed to be broadcasted to all other miners so that they can verify it whereafter the block is added to the blockchain (the miners reach consensus). a corrupt miner can create his own version of the blockchain by not broadcasting the solutions of his blocks to the rest of the network. There are now two versions of the blockchain.

The corrupted miner is now working on his own version of that blockchain and is not broadcasting it to the rest of the network. The rest of the network doesn’t pick up on this chain, because it hasn’t been broadcasted. It is isolated of the rest of the network.

The corrupted miner can now spend all his Bitcoins on the truthful version of the blockchain, the one that all the other miners are working on. On the truthful blockchain, his Bitcoins are now spent. Meanwhile, he does not include these transactions on his isolated version of the blockchain. On his isolated version of the blockchain, he still has those Bitcoins.

Meanwhile, he is still picking up blocks and he verifies them all by himself on his isolated version of the blockchain. This is where all trouble starts… The blockchain is programmed to follow a model of democratic governance (the majority).

The blockchain does this by always following the longest chain, after all, the majority of the miners add blocks to their version of the blockchain faster than the rest of the network (longest chain = majority). This is how the blockchain determines which version of its chain is the truth, and in turn what all balances of wallets are based on. A race has now started. Whoever has the most hashing power will add blocks to their version of the chain faster.

The corrupted miner will now try to add blocks to his isolated blockchain faster than the other miners add blocks to their blockchain (the truthful one). As soon as the corrupted miner creates a longer blockchain, he suddenly broadcasts this version of the blockchain to the rest of the network. The rest of the network will now detect that this (corrupt) version of the blockchain is actually longer than the one they were working on, and the protocol forces them to switch to this chain.
The corrupted blockchain is now considered the truthful blockchain, and all transactions that are not included on this chain will be reversed immediately. The attacker has spent his Bitcoins on a Lamborghini before, but this transaction was not included in his stealth chain, the chain that is now in control, and so he is now once again in control of those Bitcoins. He is able to spend them again.

This is a double-spend attack. It is commonly referred to as a 51% attack because the malicious miner will require more hashing power than the rest of the network combined (thus 51% of the hashing power) in order to add blocks to his version of the blockchain faster, eventually allowing him to build a longer chain.

And just for the fun of it, check the cost of the Proof-of-Work 51% Attack for some top cryptocurrencies.