What is “Proof of Work” and “Proof of Stake”?

What is “Proof of Work” and “Proof of Stake”?

Bitcoin and Etherium are the two most renowned cryptocurrencies and the hottest examples of blockchain technology in use.

Both use the ‘proof of work’ (POW) consensus algorithm. Information currently available indicates that Bitcoin will still continue to utilize POW, but the Ethereum project group is working in their projected transition into the’evidence of bet’ (PoS) algorithm.

What is the Proof of Work?

The Proof of Work theory existed before bitcoin, however, Satoshi Nakamoto implemented this method to the digital money revolutionizing the way traditional transactions are set.

Actually, PoW idea was initially published by Cynthia Dwork and Moni Naor back in 1993, but the expression”proof of work” was commissioned by Markus Jakobsson and Ari Juels at a document published in 1999.

The Proof of work theory existed even before bitcoin, but Satoshi Nakamoto applied this technique to the digital money revolutionizing how traditional transactions are put.

Proof of work is maybe the largest idea behind the Nakamoto’s Bitcoin white newspaper — printed back in 2008 — since it allows trustless and distributed consensus.

Proof of work and mining

Going deeper, proof of work is a requirement to define an expensive computer calculation, also called mining, that needs to be performed in order to create a new group of trustless transactions (the so-called block) on a distributed ledger called blockchain.

Mining serves as two purposes:

  1. To verify the legitimacy of a transaction, or avoiding the so-called double-spending;

  2. To create new digital currencies by rewarding miners for performing the previous task.

When you want to set a transaction this is what happens behind the scenes:

  • Transactions are bundled together into what we call a block;

  • Miners verify that transactions within each block are legitimate;

  • To do so, miners should solve a mathematical puzzle known as proof-of-work problem;

  • A reward is given to the first miner who solves each blocks problem;

  • Verified transactions are stored in the public blockchain

This “mathematical puzzle” has a key feature: asymmetry. The work, in fact, must be moderately hard on the requester side but easy to check for the network. This idea is also known as a CPU cost function, client puzzle, computational puzzle or CPU pricing function.

All the network miners compete to be the first to find a solution for the mathematical problem that concerns the candidate block, a problem that cannot be solved in other ways than through brute force so that essentially requires a huge number of attempts.

When a miner finally finds the right solution, he announces it to the whole network at the same time, receiving a cryptocurrency prize (the reward) provided by the protocol.

From a technical point of view, mining process is an operation of inverse hashing: it determines a number (nonce), so the cryptographic hash algorithm of block data results in less than a given threshold.

This threshold, called difficulty, is what determines the competitive nature of mining: more computing power is added to the network, the higher this parameter increases, increasing also the average number of calculations needed to create a new block. This method also increases the cost of the block creation, pushing miners to improve the efficiency of their mining systems to maintain a positive economic balance. This parameter update should occur approximately every 14 days, and a new block is generated every 10 minutes.

Proof of work is not only used by the Bitcoin blockchain but also by Ethereum and many other blockchains.

Some functions of the proof of work system are different because created specifically for each blockchain, but now I don’t want to confuse your ideas with too technical data.

The important thing you need to understand is that now Ethereum developers want to turn the tables, using a new consensus system called proof of stake.

What is Proof of stake?

Proof of stake is a different way to validate transactions based and achieve the distributed consensus.

It is still an algorithm, and the purpose is the same as the proof of work, but the process to reach the goal is quite different.

proof of work vs proof of stake

Proof of stake first idea was suggested on the bitcointalk forum back in 2011, but the first digital currency to use this method was Peercoin in 2012, together with ShadowCash, Nxt, BlackCoin, NuShares/NuBits, Qora and Nav Coin.

Unlike the proof-of-Work, where the algorithm rewards miners who solve mathematical problems with the goal of validating transactions and creating new blocks, with the proof of stake, the creator of a new block is chosen in a deterministic way, depending on its wealth, also defined as stake.

No block reward.

Also, all the digital currencies are previously created in the beginning, and their number never changes.

This means that in the PoS system there is no block reward, so, the miners take the transaction fees.

This is why, in fact, in this PoS system miners are called forgers, instead.

Why Ethereum wants to use PoS?

The Ethereum community and its creator, Vitalik Buterin, are planning to do a hard fork to make a transition from proof of work to proof of stake.

In a distributed consensus-based on the proof of Work, miners need a lot of energy. One Bitcoin transaction required the same amount of electricity as powering 1.57 American households for one day (data from 2015).

And these energy costs are paid with fiat currencies, leading to a constant downward pressure on the digital currency value.

In a recent research, experts argued that bitcoin transactions may consume as much electricity as Denmark by 2020.

Developers are pretty worried about this problem, and the Ethereum community wants to exploit the proof of stake method for a more greener and cheaper distributed form of consensus.

Also, rewards for the creation of a new block are different: with Proof-of-Work, the miner may potentially own none of the digital currency he/she is mining.

In Proof-of-Stake, forgers are always those who own the coins minted.

How are forgers selected?

If Casper (the new proof of stake consensus protocol) will be implemented, there will exist a validator pool. Users can join this pool to be selected as the forger. This process will be available through a function of calling the Casper contract and sending Ether – or the coin who powers the Ethereum network – together with it.

What is Blockchain Technology? A step-by-step guide than anyone can understand

“You automatically get inducted after some time,” explained Vitalik Buterin himself on a post shared on Reddit.

“There is no priority scheme for getting inducted into the validator pool itself; anyone can join in any round they want, irrespective of the number of other joiners,” he continued.

The reward of each validator will be “somewhere around 2-15%, ” but he is not sure yet.

Also, Buterin argued that there will be no imposed limit on the number of active validators (or forgers), but it will be regulated economically by cutting the interest rate if there are too many validators and increasing the reward if there are too few.

Is Proof of Stake safer than Proof of Work?

Using a Proof-of-Work system, bad actors are cut out thanks to technological and economic disincentives.

In fact, programming an attack to a PoW network is very expensive, and you would need more money than you can be able to steal.

Instead, the underlying PoS algorithm must be as bulletproof as possible because, without especially penalties, a proof of stake-based network could be cheaper to attack.

To solve this issue, Buterin created the Casper protocol, designing an algorithm that can use the set some circumstances under which a bad validator might lose their deposit.

He explained: “Economic finality is accomplished in Casper by requiring validators to submit deposits to participate, and taking away their deposits if the protocol determines that they acted in some way that violates some set of rules (‘slashing conditions’).”

Slashing conditions refer to the circumstances above or laws that a user is not supposed to break.

Proof of Work vs Proof of Stake: Conclusion

Thanks to a PoS system validators do not have to use their computing power because the only factors that influence their chances are the total number of their own coins and current complexity of the network.

So this possible future switch from PoW to PoS may provide the following benefits:

  1. Energy savings.

  2. A safer network as attacks become more expensive: if a hacker would like to buy 51% of the total number of coins, the market reacts by fast price appreciation.

This way, CASPER will be a security deposit protocol that relies on an economic consensus system. Nodes (or the validators) must pay a security deposit in order to be part of the consensus thanks to the creation of the new block.

Casper protocol will determine the specific amount of rewards received by the validators thanks to its control over security deposits.

If one validator creates an “invalid” block, his security deposit will be deleted, as well as his privilege to be part of the network consensus.

In other words, the Casper security system is based on something like bets. In a PoS-based system, bets are the transactions that, according to the consensus rules, will reward their validator with a money prize together with each chain that the validator has bet on.

So, Casper is based on the idea that validators will bet according to the others’ bets and leave positive feedbacks that are able accelerates consensus.

What is a distributed ledger technology (DLT)?

What is a distributed ledger technology (DLT)?

What is a distributed ledger technology? 

(also called a shared ledger, or Distributed Ledger Technology, DLT)

Ledgers, the basis of bookkeeping, are as historical as money and writing.

distrubuted ledger technology

Source lca-net.com

These ancient digital ledgers mimicked the cataloguing and bookkeeping of this paper-based planet, and it might be stated that digitization was implemented more into the logistics of paper files instead of their own creation. Paper-based associations remain the backbone of the society: cash, seals, written signatures, invoices, certificates and using double-entry accounting.

In its simplest form, a dispersed ledger is a database stored and upgraded independently by each user (or node) in a huge community.

The supply is exceptional: documents aren’t communicated to several nodes with a central authority but are rather independently assembled and held by each node. In other words, each and every node on the system procedures every trade, coming into its conclusions and then voting on these decisions to make sure the majority concur with all the decisions.

Distributed Ledgers are a lively kind of media and also have qualities and capacities that go far beyond inactive paper-based ledgers.

A peer-reviewed network is necessary for addition to consensus algorithms to guarantee replication across nodes is undertaken. 1 form of dispersed ledger layout is your blockchain system, which is either private or public.

How does the Distributed Ledger work?

The distributed ledger database is dispersed across multiple nodes (devices) on a peer-reviewed system, where every copy and retains an identical replica of the ledger and upgrades itself independently.

The main benefit is the absence of central power. When a ledger update occurs, every node constructs the new trade, then the nodes vote from consensus algorithm where copy is accurate.

After a consensus has been decided, each of the other nodes upgrades themselves with all the new, correct replica of the ledger. Safety is accomplished via cryptographic signatures and keys.

In 2016, a few banks examined dispersed ledgers for payments to determine if investing in dispersed ledgers is encouraged by their own usefulness.

Distributed ledgers might be permissioned or even permissionless seeing if anybody or only approved individuals can conduct a node to confirm transactions. (Proof of Function, Proof of Stake, or Voting programs ). They might also be mineable (it’s possible to claim ownership of fresh coins leading using a node) or not mineable (the inventor of the cryptocurrency possesses all in the start ).

distrubuted ledger technology

Why do we need Distributed Ledger Technology (DLT)?

The creation of distributed ledgers signifies a revolution in how data is accumulated and hauled.

Distributed ledgers make it possible for users to move past the straightforward custodianship of a database and also divert energy to the way people utilize, control and extract significance from databases – not as about keeping up a database, even more about handling a system of document.

What Is the Basic Attention Token (BAT)?

What Is the Basic Attention Token (BAT)?

With an ever-increasing struggle for internet users’ attention, more groups are considering innovative ways of using marketing for the benefit of the consumer. BAT (Basic Attention Token) hopes to position itself as the token of the world of digital advertising.

How does BAT work and what problems does it try to solve?

BAT promises to create a transparent network, where those interested in receiving or selling advertising services, are free to do so without the involvement of intermediaries, in a healthy, competitive environment.

what is BAT?

The BAT token is meant to be used to power the Brave network, set up by the developers using the ERC20 technical standard. Brave is a browser service that can also act as a marketplace to be used by those selling or buying advertising.

How does BAT hope to meet its objectives?

The project’s biggest calling card is the involvement of Brendan Eich, BAT’s founder. Eich is best known for his participation in the developing of Mozilla and Firefox, projects he helped co-found. Eich’s reputation alone was enough to garner a lot of attention for BAT.

The other members of the BAT team share an impressive background in the world of services and internet services, having worked for the likes of Yahoo, Evernote, or AOL.

There is another element that works in favour of BAT. It’s the general anti-ad attitude of the vast majority of internet users. BAT promises to offer a revenue system for those targeted by ads. As the name suggests, BAT’s objective is to convince users to provide them with their attention in exchange for BATs. And similarly, advertisers will receive BATs in proportion with the level of attention users provide them.

Competitors and possible drawbacks

BAT was conceived with the ERC20 system in mind. At the time of writing, Ethereum blockchain technology continues to be highly popular in the crypto world. BAT will to remain dependent on Ethereum and subject to be influenced by the possibility of its popularity fluctuating.

The Brave network will also need to fight against several high profile competitors, among them CDX (a representative of alt-media), Bitclave, or AdEx (a company with a similar vision to BAT).

Distribution and roadmap

BAT set an ambitious roadmap, with confidence helped by the company able to raise a large sum of money in the ICO stage ( $35M). Initially, 1 billion tokens, of the total amount of 1.5 billion, were put on sale.

The developers held a further giveaway at the start of 2018. The number of users on the Brave network also increased, with an estimated 5 million downloads at the time of writing. The company also claims to have over 18,000 verified Brave publishers.

Basic Attention Token (BAT)


Yes, there is undoubtedly a real market need for advertisers and their customers to connect without additional interference. There also exists a real need for the consumers to feel they are genuinely rewarded for the amount of attention they decide to invest in various marketing campaigns.

The Brave browser and the accompanying BAT token aim to offer a solution to these issues. Indeed, the hurdles they will need to overcome will be high, and the competitors they face will present a challenge. However, how the project has developed, the level of interest it has garnered from users, promises to make it an exciting prospect for the future.

What is Cryptography?

What is Cryptography?

Cryptography is a system of protecting data and communications through the use of codes that only individuals for whom the data is meant can read and procedure. The pre-fix “crypt” means “hidden” or “vault” and the suffix “graphy” stands for “writing.”

Information security employs cryptography on several degrees. Cryptography also assists in non-repudiation.

Cryptography can also be referred to as cryptology.

An early illustration of cryptography was that the Caesar cypher, used by Julius Caesar to shield Roman army secrets. Every letter in a message has been substituted using the letter 3 spaces to the left from the bible, this understanding has been basically the key that encrypted the message. Caesar’s generals understood this to decode the letters that they just had to change each into the right, whilst the data stayed secure if intercepted by Caesar’s enemies.

Modern cryptography functions on precisely the exact same degree, albeit with much greater levels of sophistication.

In computer engineering, cryptography describes protected communication and information techniques based on mathematical theories and a pair of rule-based calculations known as calculations to change messages in a way that are tough to decode. These deterministic algorithms are utilized for cryptographic key generation and electronic signing and verification to protect data privacy, internet browsing online and confidential communications like credit card transactions and also email.

Cryptography techniques

Cryptography is closely linked to the areas of cryptology and cryptanalysis. It includes methods like microdots, merging words using pictures, and other strategies to hide data in transit or storage. Nonetheless, in the modern computer-centric planet, cryptography is most frequently connected with scrambling plaintext (standard text, sometimes known as cleartext) into ciphertext (a process called encryption), then again (called decryption). People who practice this area are called cryptographers.

  1. Confidentiality: the data Can’t Be realized by anybody for whom it had been accidental
  2. Integrity: the data Can’t be changed in storage or transit between sender and intended recipient with no alteration being discovered
  3. Non-repudiation: the creator/sender of this data Cannot deny at a later point Their intentions in the production or transmission of this data
  4. Authentication: the sender and recipient may verify each other’s identity and the origin/destination of this data

Procedures and protocols which fulfil some or all the above-mentioned criteria are called cryptosystems. Cryptosystems are often considered to refer solely to mathematical processes and computer applications nonetheless, they also contain the regulation of individual behaviours, like picking hard-to-guess passwords, logging away systems that are artificial, rather than talking sensitive processes with outsiders.

Cryptographic algorithms

Cryptosystems utilize a set of processes called cryptographic algorithms, or cyphers, to encrypt and decrypt messages to procure communications among computer programs, devices like telephones, and software. A cypher package utilizes one particular algorithm for security, yet another algorithm for message authentication and another for key trade.

This procedure, embedded in protocols and composed in applications that run on operating systems and networked computer programs, involves private and public key generation for information encryption/decryption, digital signing and verification for information authentication, and key exchange.

Types of cryptography

Single-key or symmetric-key encryption algorithms produce a predetermined length of pieces called a block cypher using a secret key the creator/sender utilizes to encipher information (encryption) and the recipient uses to decode it. The standard is mandated by the U.S. government and broadly utilized in the private industry.

In June 2003, AES was accepted by the U.S. government for classified information. It is a royalty-free specification employed in hardware and software worldwide. AES is the successor to the Data Encryption Standard (DES) and DES3. It uses more key lengths (128-bit, 192-bit, 256-bit) to prevent brute force and other attacks.

Public-key or asymmetric-key encryption algorithms utilize a set of keys, a public key associated with the creator/sender for encrypting messages and a private key that only the originator knows (unless it is exposed or they opt to discuss it) for decrypting that information.

The kinds of public-key cryptography include RSA, used extensively on the internet; Elliptic Curve Digital Signature Algorithm (ECDSA) used by Bitcoin; Digital Signature Algorithm (DSA) adopted as a Federal Information Processing Standard for digital signatures by NIST in FIPS 186-4, and Diffie-Hellman key trade.

To preserve data integrity in cryptography, hash functions, which yield a deterministic output signal from an input value, are utilized to map information to predetermined data size.

In a blockchain, cryptography is primarily utilized for two functions:

  1. Securing the identity of the sender of trades.
  2. Ensuring the previous records can’t be corrected with.

Blockchain technologies use cryptography as a method of shielding the identities of consumers, ensuring transactions are done securely and procuring all data and storages of significance. Consequently, anyone using blockchain may have absolute confidence that once a thing is listed on a blockchain, it’s done so legally and in a fashion that keeps safety.

Read more about the Blockchain tech.

Despite being based upon a similar frame, the sort of cryptography employed in blockchain, specifically public-key cryptography, is much better suited to the purposes linked to the technologies compared to symmetric-key cryptography.

What is Public-Key Cryptography?

Public-key cryptography, also called asymmetric cryptography, signifies an improvement on conventional symmetric-key cryptography since it allows data to be moved via a public key which could be shared with anybody.

Rather than using a single key for encryption and decryption, as is the case with symmetric key cryptography, separate keys (a public key and a private key) are used.

A combination of a user’s public key and personal encrypt the data, whereas the recipients private key and sender’s public key decrypt it. It’s not possible to figure out exactly what the private key is based on the public key. Thus, a user may send their public key to anyone without worrying that somebody will access their own private key. The sender may encrypt files they may be convinced will simply be decrypted by the intended party.

Additional via public-key cryptography, a digital signature is generated, procuring the integrity of this information which has been exhibited. This is accomplished by mixing a consumer’s’ private key together with the information they want to signal, via a mathematical algorithm.

Considering that the actual data itself is a part of the electronic signature, the system won’t recognize it as legitimate if any portion of it’s tampered with. Editing the smallest aspect of this information reshapes the entire signature, which makes it obsolete and false. By these means, blockchain technologies are capable of ensuring any information being recorded onto it’s correct, accurate and untampered with. Digital signatures are what provide the information listed on a blockchain its own immutability.

Cryptography concerns

Attackers can bypass cryptography, hack computers which are accountable for data encryption and decryption, and exploit weak implementations, like the use of default keys. But, cryptography makes it more difficult for attackers to get data and messages protected by encryption algorithms.

What is cryptocurrency and why do we need it?

What is cryptocurrency and why do we need it?

cryptocurrency is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets.

Cryptocurrencies are a kind of alternative currency and digital currency (of which virtual currency is a subset).

Cryptocurrencies use decentralized control as opposed to centralized digital currency and central banking systems.

The decentralized control of each cryptocurrency works through distributed ledger technology, typically a blockchain, that serves as a public financial transaction database.

Bitcoin, first released as open-source software in 2009, is generally considered the first decentralized cryptocurrency. Since the release of bitcoin, over 4,000 altcoins (alternative variants of bitcoin, or other cryptocurrencies) have been created.

The first cryptocurrencies

The first decentralized cryptocurrency, bitcoin, was created in 2009 by pseudonymous developer Satoshi Nakamoto. It used SHA-256, a cryptographic hash function, as its proof-of-work scheme. In 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. It was the first successful cryptocurrency to use scrypt as its hash function instead of SHA-256. Another notable cryptocurrency, Peercoin was the first to use a proof-of-work/proof-of-stake hybrid. IOTA was the first cryptocurrency not based on a blockchain, using the Tangle instead.

On 6 August 2014, the UK announced its Treasury had been commissioned to do a study of cryptocurrencies, and what role, if any, they can play in the UK economy. The study was also to report on whether regulation should be considered.

How is a cryptocurrency defined?

According to Jan Lansky, a cryptocurrency is a system that meets six conditions:

  1. The system does not require a central authority, its state is maintained through distributed consensus.
  2. The system keeps an overview of cryptocurrency units and their ownership.
  3. The system defines whether new cryptocurrency units can be created. If new cryptocurrency units can be created, the system defines the circumstances of their origin and how to determine the ownership of these new units.
  4. Ownership of cryptocurrency units can be proved exclusively cryptographically.
  5. The system allows transactions to be performed in which ownership of the cryptographic units is changed. A transaction statement can only be issued by an entity proving the current ownership of these units.
  6. If two different instructions for changing the ownership of the same cryptographic units are simultaneously entered, the system performs at most one of them.

In March 2018, the word ‘cryptocurrency’ was added to the Merriam-Webster Dictionary.

What are an altcoin and a crypto token?

Stephanie Yang of The Wall Street Journal defined altcoins as “alternative digital currencies,” while Paul Vigna, also of The Wall Street Journal, described altcoins as alternative versions of bitcoin. Aaron Hankins of the MarketWatch refers to any cryptocurrencies other than bitcoin as altcoins.

A blockchain account can provide functions other than making payments, for example in decentralized applications or smart contracts. In this case, the units or coins are sometimes referred to as crypto tokens.

Cryptocurrency coin altcoins

How are cryptocurrencies designed?

Decentralized cryptocurrency is produced by the entire cryptocurrency system collectively, at a rate which is defined when the system is created and which is publicly known.

In centralized banking and economic systems such as the Federal Reserve System, corporate boards or governments control the supply of currency by printing units of fiat money or demanding additions to digital banking ledgers.

In the case of decentralized cryptocurrency, companies or governments cannot produce new units and have not so far provided backing for other firms, banks or corporate entities which hold asset value measured in it.

The underlying technical system upon which decentralized cryptocurrencies are based was created by the group or individual known as Satoshi Nakamoto.

As of May 2018, over 1,800 cryptocurrency specifications existed.

Within a cryptocurrency system, the safety, integrity and balance of ledgers are maintained by a community of mutually distrustful parties referred to as miners: who use their computers to help validate and timestamp transactions, adding them to the ledger in accordance with a particular timestamping scheme.

Read more about the Distributed Ledger Technology(DLT)

Most cryptocurrencies are designed to gradually decrease the production of that currency, placing a cap on the total amount of that currency that will ever be in circulation. Compared with ordinary currencies held by financial institutions or kept as cash on hand, cryptocurrencies can be more difficult for seizure by law enforcement. This difficulty is derived from leveraging cryptographic technologies.

what is the future of blockchain?

Blockchain and cryptocurrency

The validity of each cryptocurrency’s coins is provided by a blockchain. A blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography. 

Each block typically contains a hash pointer as a link to a previous block, a timestamp and transaction data. By design, blockchains are inherently resistant to modification of the data. It is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”.

For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires collusion of the network majority.

Blockchains are secure by design and are an example of a distributed computing system with high Byzantine fault tolerance. Decentralized consensus has therefore been achieved with a blockchain. Blockchains solve the double-spending problem without the need of a trusted authority or central server, assuming no 51% attack (that has worked against several cryptocurrencies).

Read more on What is Bitcoin and how does Bitcoin work?

Blockchain and Timestamping

Cryptocurrencies use various timestamping schemes to “prove” the validity of transactions added to the blockchain ledger without the need for a trusted third party.

The first timestamping scheme invented was the proof-of-work scheme. The most widely used proof-of-work schemes are based on SHA-256 and scrypt.

Some other hashing algorithms that are used for proof-of-work include CryptoNightBlakeSHA-3, and X11.

The proof-of-stake is a method of securing a cryptocurrency network and achieving distributed consensus by requesting users to show ownership of a certain amount of currency. It is different from proof-of-work systems that run difficult hashing algorithms to validate electronic transactions.

The scheme is largely dependent on the coin, and there’s currently no standard form of it. Some cryptocurrencies use a combined proof-of-work/proof-of-stake scheme.

Cryptocurrency Mining

In cryptocurrency networks, mining is a validation of transactions. For this effort, successful miners obtain new cryptocurrency as a reward.

The reward decreases transaction fees by creating a complementary incentive to contribute to the processing power of the network.

The rate of generating hashes, which validate any transaction, has been increased by the use of specialized machines such as FPGAs and ASICs running complex hashing algorithms like SHA-256 and Scrypt. This arms race for cheaper-yet-efficient machines has been on since the day the first cryptocurrency, bitcoin, was introduced in 2009.

With more people venturing into the world of virtual currency, generating hashes for this validation has become far more complex over the years, with miners having to invest large sums of money on employing multiple high-performance ASICs. Thus the value of the currency obtained for finding a hash often does not justify the amount of money spent on setting up the machines, the cooling facilities to overcome the enormous amount of heat they produce, and the electricity required to run them.

Some miners pool resources, sharing their processing power over a network to split the reward equally, according to the amount of work they contributed to the probability of finding a block. A “share” is awarded to members of the mining pool who present a valid partial proof-of-work.

As of February 2018, the Chinese Government halted trading of virtual currency, banned initial coin offerings and shut down mining. Some Chinese miners have since relocated to Canada. One company is operating data centres for mining operations at Canadian oil and gas field sites, due to low gas prices.

In June 2018, Hydro Quebec proposed to the provincial government to allocate 500 MW to crypto companies for mining. According to a February 2018 report from Fortune, Iceland has become a haven for cryptocurrency miners in part because of its cheap electricity. Prices are contained because nearly all of the country’s energy comes from renewable sources, prompting more mining companies to consider opening operations in Iceland. The region’s energy company says bitcoin mining is becoming so popular that the country will likely use more electricity to mine coins than power homes in 2018.

In October 2018 Russia becomes home to one of the largest legal mining operations in the world, located in Siberia.

In March 2018, a town in Upstate New York put an 18-month moratorium on all cryptocurrency mining in an effort to preserve natural resources and the “character and direction” of the city.

GPU demand is high for mining cryptocurrency: GPU price rise

GPU demand is high for mining cryptocurrency: GPU price rise

An increase in cryptocurrency mining increased the demand for graphics cards (GPU) in 2017. Popular favourites of cryptocurrency miners such as Nvidia’s GTX 1060 and GTX 1070 graphics cards, as well as AMD’s RX 570 and RX 580 GPUs, doubled or tripled in price – or were out of stock.

 A GTX 1070 Ti which was released at a price of $450 sold for as much as $1100. Another popular card GTX 1060’s 6 GB model was released at an MSRP of $250, sold for almost $500. RX 570 and RX 580 cards from AMD were out of stock for almost a year. Miners regularly buy up the entire stock of new GPU’s as soon as they are available.

Nvidia has asked retailers to do what they can when it comes to selling GPUs to gamers instead of miners. “Gamers come first for Nvidia,” said Boris Böhles, PR manager for Nvidia in the German region.

Cryptocurrency Wallets

An example paper printable bitcoin wallet consisting of one bitcoin address for receiving and the corresponding private key for spending

A cryptocurrency wallet stores the public and private “keys” or “addresses” which can be used to receive or spend the cryptocurrency. With the private key, it is possible to write in the public ledger, effectively spending the associated cryptocurrency. With the public key, it is possible for others to send currency to the wallet.

Blockchain Anonymity

Bitcoin is pseudonymous rather than anonymous in that the cryptocurrency within a wallet is not tied to people, but rather to one or more specific keys (or “addresses”). 

Thereby, bitcoin owners are not identifiable, but all transactions are publicly available in the blockchain. Still, cryptocurrency exchanges are often required by law to collect the personal information of their users.

Additions such as Zerocoin have been suggested, which would allow for true anonymity.

In recent years, anonymizing technologies like zero-knowledge proofs and ring signatures have been employed in the cryptocurrencies Zcash and Monero, respectively. Cryptocurrency anonymizing implementations such as Cloakcoin, Dash, and PIVX use built-in mixing services, also known as tumblers.

The Fungibility of Cryptocurrency 

Most cryptocurrency tokens are fungible and interchangeable. However, unique non-fungible tokens also exist. Such tokens can serve as assets in games like CryptoKitties.

The Economy of cryptocurrencies

Cryptocurrencies are used primarily outside existing banking and governmental institutions and are exchanged over the Internet.

Cryptocurrency Transaction fees

Transaction fees for cryptocurrency depend mainly on the supply of network capacity at the time, versus the demand from the currency holder for a faster transaction.

The currency holder can choose a specific transaction fee, while network entities process transactions in order of highest offered fee to lowest. Cryptocurrency exchanges can simplify the process for currency holders by offering priority alternatives and thereby determine which fee will likely cause the transaction to be processed in the requested time.

For ether, transaction fees differ by computational complexity, bandwidth use, and storage needs, while bitcoin transaction fees differ by transaction size and whether the transaction uses SegWit. In September 2018, the median transaction fee for ether corresponded to $0.017, while for bitcoin it corresponded to $0.55.

Cryptocurrency Exchanges

Cryptocurrency exchanges allow customers to trade cryptocurrencies for other assets, such as conventional fiat money, or to trade between different digital currencies.

Cryptocurrency Atomic swaps

Atomic swaps are a mechanism where one cryptocurrency can be exchanged directly for another cryptocurrency, without the need for a trusted third party such as an exchange.

Cryptocurrency ATMs

Jordan Kelley, the founder of Robocoin, launched the first bitcoin ATM in the United States on 20 February 2014. The kiosk installed in Austin, Texas is similar to bank ATMs but has scanners to read government-issued identification such as a driver’s license or a passport to confirm users’ identities.


Cryptocurrency Initial coin offerings (ICO)

Cryptocurrency Initial coin offerings (ICO)

An initial coin offering (ICO) is a controversial means of raising funds for a new cryptocurrency venture. An ICO may be used by startups with the intention of avoiding regulation.

However, securities regulators in many jurisdictions, including in the U.S., and Canada have indicated that if a coin or token is an “investment contract” (e.g., under the Howey test, i.e., an investment of money with a reasonable expectation of profit based significantly on the entrepreneurial or managerial efforts of others), it is a security and is subject to securities regulation.

In an ICO campaign, a percentage of the cryptocurrency (usually in the form of “tokens”) is sold to early backers of the project in exchange for legal tender or other cryptocurrencies, often bitcoin or ether.

According to PricewaterhouseCoopers, four of the 10 biggest proposed initial coin offerings have used Switzerland as a base, where they are frequently registered as non-profit foundations.

The Swiss regulatory agency FINMA stated that it would take a “balanced approach“ to ICO projects and would allow “legitimate innovators to navigate the regulatory landscape and so launch their projects in a way consistent with national laws protecting investors and the integrity of the financial system.”

In response to numerous requests by industry representatives, a legislative ICO working group began to issue legal guidelines in 2018, which are intended to remove uncertainty from cryptocurrency offerings and to establish sustainable business practices.

Cryptocurrency Legality

Cryptocurrency Legality

The legal status of cryptocurrencies varies substantially from country to country and is still undefined or changing in many of them.

While some countries have explicitly allowed their use and trade, others have banned or restricted it. According to the Library of Congress, an “absolute ban” on trading or using cryptocurrencies applies in eight countries: Algeria, Bolivia, Egypt, Iraq, Morocco, Nepal, Pakistan, and the United Arab Emirates. An “implicit ban” applies in another 15 countries, which include Bahrain, Bangladesh, China, Colombia, the Dominican Republic, Indonesia, Iran, Kuwait, Lesotho, Lithuania, Macau, Oman, Qatar, Saudi Arabia and Taiwan. In the United States and Canada, state and provincial securities regulators, coordinated through the North American Securities Administrators Association, are investigating “bitcoin scams” and ICOs in 40 jurisdictions.

Various government agencies, departments, and courts have classified bitcoin differently. China Central Bank banned the handling of bitcoins by financial institutions in China in early 2014.

In Russia, though cryptocurrencies are legal, it is illegal to actually purchase goods with any currency other than the Russian ruble. Regulations and bans that apply to bitcoin probably extend to similar cryptocurrency systems.

Cryptocurrencies are a potential tool to evade economic sanctions for example against Russia, Iran, or Venezuela.

In April 2018, Russian and Iranian economic representatives met to discuss how to bypass the global SWIFT system through decentralized blockchain technology. Russia also secretly supported Venezuela with the creation of the petro (El Petro), a national cryptocurrency initiated by the Maduro government to obtain valuable oil revenues by circumventing US sanctions.

In August 2018, the Bank of Thailand announced its plans to create its own cryptocurrency, the Central Bank Digital Currency (CBDC).

Cryptocurrency Advertising bans

Cryptocurrency Advertising bans

Bitcoin and other cryptocurrency advertisements were temporarily banned on Facebook, Google, Twitter, Bing, Snapchat, LinkedIn and MailChimp. Chinese internet platforms Baidu, Tencent, and Weibo have also prohibited bitcoin advertisements. The Japanese platform Line and the Russian platform Yandex have similar prohibitions.

Cryptocurrency U.S. tax status

On 25 March 2014, the United States Internal Revenue Service (IRS) ruled that bitcoin will be treated as property for tax purposes. This means bitcoin will be subject to capital gains tax. In a paper published by researchers from Oxford and Warwick, it was shown that bitcoin has some characteristics more like the precious metals market than traditional currencies, hence in agreement with the IRS decision even if based on different reasons.

The legal concern of an unregulated global economy

As the popularity of and demand for online currencies has increased since the inception of bitcoin in 2009, so have concerns that such an unregulated person to person global economy that cryptocurrencies offer may become a threat to society. Concerns abound that altcoins may become tools for anonymous web criminals.

Cryptocurrency networks display a lack of regulation that has been criticized as enabling criminals who seek to evade taxes and launder money.

Transactions that occur through the use and exchange of these altcoins are independent of formal banking systems and therefore can make tax evasion simpler for individuals. Since charting taxable income is based upon what a recipient reports to the revenue service, it becomes extremely difficult to account for transactions made using existing cryptocurrencies, a mode of exchange that is complex and difficult to track.

Systems of anonymity that most cryptocurrencies offer can also serve as a simpler means to launder money. Rather than laundering money through an intricate net of financial actors and offshore bank accounts, laundering money through altcoins can be achieved through anonymous transactions.

Cryptocurrency: Loss, theft, and fraud

In February 2014 the world’s largest bitcoin exchange, Mt. Gox, declared bankruptcy. The company stated that it had lost nearly $473 million of their customers’ bitcoins likely due to theft. This was equivalent to approximately 750,000 bitcoins, or about 7% of all the bitcoins in existence. The price of a bitcoin fell from a high of about $1,160 in December to under $400 in February.

Two members of the Silk Road Task Force—a multi-agency federal task force that carried out the U.S. investigation of Silk Road—seized bitcoins for their own use in the course of the investigation. DEA agent Carl Mark Force IV, who attempted to extort Silk Road founder Ross Ulbricht (“Dread Pirate Roberts”), pleaded guilty to money laundering, obstruction of justice, and extortion under colour of official right, and was sentenced to 6.5 years in federal prison. U.S. Secret Service agent Shaun Bridges pleaded guilty to crimes relating to his diversion of $800,000 worth of bitcoins to his personal account during the investigation, and also separately pleaded guilty to money laundering in connection with another cryptocurrency theft; he was sentenced to nearly eight years in federal prison.

Homero Josh Garza, who founded the cryptocurrency startups GAW Miners and ZenMiner in 2014, acknowledged in a plea agreement that the companies were part of a pyramid scheme, and pleaded guilty to wire fraud in 2015.

The U.S. Securities and Exchange Commission separately brought a civil enforcement action against Garza, who was eventually ordered to pay a judgment of $9.1 million plus $700,000 in interest. The SEC’s complaint stated that Garza, through his companies, had fraudulently sold “investment contracts representing shares in the profits they claimed would be generated” from mining.

On 21 November 2017, the Tether cryptocurrency announced they were hacked, losing $31 million in USDT from their primary wallet. The company has ‘tagged’ the stolen currency, hoping to ‘lock’ them in the hacker’s wallet (making them unspendable). Tether indicates that it is building a new core for its primary wallet in response to the attack in order to prevent the stolen coins from being used.

In May 2018, Bitcoin Gold (and two other cryptocurrencies) were hit by a successful 51% hashing attack by an unknown actor, in which exchanges lost estimated $18m. In June 2018, Korean exchange Coinrail was hacked, losing US$37 million worth of altcoin. The fear surrounding the hack was blamed for a $42 billion cryptocurrency market selloff. On 9 July 2018, the exchange Bancor had $23.5 million in cryptocurrency stolen.

The French regulator Autorité des marchés financiers (AMF) lists 15 websites of companies that solicit investment in cryptocurrency without being authorised to do so in France.

Cryptocurrency Darknet markets

Cryptocurrency is also used in controversial settings in the form of online black markets, such as Silk Road. The original Silk Road was shut down in October 2013 and there have been two more versions in use since then.

In the year following the initial shutdown of Silk Road, the number of prominent dark markets increased from four to twelve, while the number of drug listings increased from 18,000 to 32,000.

Darknet markets present challenges in regard to legality. Bitcoins and other forms of cryptocurrency used in dark markets are not clearly or legally classified in almost all parts of the world. In the U.S., bitcoins are labelled as “virtual assets”.

This type of ambiguous classification puts pressure on law enforcement agencies around the world to adapt to the shifting drug trade of dark markets.

top 20 cryptopcurrency

How are cryptocurrencies regarded as?

Cryptocurrencies have been compared to Ponzi schemes, pyramid schemes and economic bubbles, such as housing market bubbles. Howard Marks of Oaktree Capital Management stated in 2017 that digital currencies were “nothing but an unfounded fad (or perhaps even a pyramid scheme), based on a willingness to ascribe value to something that has little or none beyond what people will pay for it”, and compared them to the tulip mania (1637), South Sea Bubble (1720), and dot-com bubble (1999).

While cryptocurrencies are digital currencies that are managed through advanced encryption techniques, many governments have taken a cautious approach toward them, fearing their lack of central control and the effects they could have on financial security.

Regulators in several countries have warned against cryptocurrency and some have taken concrete regulatory measures to dissuade users. Additionally, many banks do not offer services for cryptocurrencies and can refuse to offer services to virtual-currency companies.

 Gareth Murphy, a senior central banking officer has stated: “widespread use [of cryptocurrency] would also make it more difficult for statistical agencies to gather data on economic activity, which are used by governments to steer the economy”. He cautioned that virtual currencies pose a new challenge to central banks’ control over the important functions of monetary and exchange rate policy.

While traditional financial products have strong consumer protections in place, there is no intermediary with the power to limit consumer losses if bitcoins are lost or stolen.

 One of the features cryptocurrency lacks in comparison to credit cards, for example, is consumer protection against fraud, such as chargebacks.

An enormous amount of energy goes into proof-of-work cryptocurrency mining, although cryptocurrency proponents claim it is important to compare it to the consumption of the traditional financial system.

There are also purely technical elements to consider. For example, technological advancement in cryptocurrencies such as bitcoin results in high up-front costs to miners in the form of specialized hardware and software.

Cryptocurrency transactions are normally irreversible after a number of blocks confirm the transaction. Additionally, cryptocurrency can be permanently lost from local storage due to malware or data loss. This can also happen through the destruction of the physical media, effectively removing lost cryptocurrencies forever from their markets.

The cryptocurrency community refers to pre-mining, hidden launches, ICO or extreme rewards for the altcoin founders as a deceptive practice. It can also be used as an inherent part of a cryptocurrency’s design. Pre-mining means the currency is generated by the currency’s founders prior to being released to the public.

Paul Krugman, Nobel Memorial Prize in Economic Sciences winner does not like bitcoin, has repeated numerous times that it is a bubble that will not last and links it to Tulip mania. American business magnate Warren Buffett thinks that cryptocurrency will come to a bad ending.

In October 2017, BlackRock CEO Laurence D. Fink called bitcoin an ‘index of money laundering’. “Bitcoin just shows you how much demand for money laundering there is in the world,” he said.

Source wikipedia.org

What is VeChain?

What is VeChain?

What is VeChain?

According to their official website:

VeChain aims to connect blockchain technology to the real world by providing a comprehensive governance structure, a robust economic model as well as advanced IoT integration, and pioneers in real world applications.

The vision is stated in the Vechain whitepaper:

Building a trust-free and distributed business ecosystem platform to enable
transparent information flow, efficient collaboration, and high-speed value

VeChain is a blockchain firm focused on goods and data. In its own words, VeChain “strives to build a trust-free and distributed business ecosystem, which is self-circulating and scalable”.

The VeChain product

It entails assigning a product that a special ID and fitting it with a VeChain smart chip tracker, like an NFC chip or RFID tracker so the particulars of any item could be gathered, stored and readily reviewed. This permits companies and individuals to track things through a distribution chain, confirm the validity of products and combat counterfeiting.

VeChain’s technologies are currently being used in regions like cold-chain logistics, luxury goods, health care, fashion and lots of different businesses.

But, with the impending launch of its blockchain, VeChain can be put to evolve into a stage for enterprise-grade dapps. This will definitely see it compete with other dapp platforms like Ethereum and EOS.

How Does VeChain Work?

VeChain started primarily as a blockchain distribution chain business but has since evolved into a full-scale DApp.

Supply Chain Trust

VeChain utilizes a mixture of blockchain technology and their in-house constructed smart processor to track things during their lifecycle. The chip could be implemented in various IoT things like NFC chips, RFID trackers, or QR codes.

Even though this might not seem like very fascinating technologies, it serves an essential function in ensuring product quality across sectors.

The luxury goods sector is wrought with imitation things — around $450 billion value. Having a product such as a Louis Vuitton handbag changing hands many times through distribution and production, you will need to trust the person before you’re passing along something true.

Traditional Supply Chain

VeChain, such as other blockchain providers, eliminates the requirement for this confidence. At each step along with the procedure, you are able to scan the wise chip on every item to ensure you are receiving everything you need to be. Since the blockchain is an immutable ledger, you can expect that you are receiving accurate advice.

Although still not accessible, it is not crazy to suppose that this tech will probably be in the hands of customers soon. Shortly, you will have the ability to confirm the authenticity of these sketchy flea market rack sunglasses using a quick scan in the cell phone.

Supply Chain Logistics

Beyond bogus protection, VeChain additionally enhances logistics systems through simplified merchandise monitoring. Logistics is complicated and frequently includes several different systems that change across companies. As a result of this, monitoring goods in the distribution chain may be a massive pain. This is particularly true when information needs to be entered manually or if changing between procedures.

Utilizing VeChain, you simply scan the item’s clever processor to find all its related data. This provides companies with advice that is always present and a precise account of every product.

Integrating with IoT apparatus, VeChain also helps with quality control. This is particularly beneficial in the agriculture and food sector where something such as a temperature change of a few degrees could ruin a whole product batch.

VeChain Thor

In February 2018, VeChain rebranded to VeChain Thor. The rebrand moved the company beyond the supply chain into more general enterprise dapp solutions similar to Ethereum. The new platform utilizes two different components: VeChain Tokens (VET) and VeThor Tokens (VTHO).

VeChain’s Two Tokens

VeChain Tokens (VET)

Prior to the execution of this VeChain mainnet, the sole tokens on the system were VEN, an ERC20 substitute. When the group moved from Ethereum on for their blockchain, they swapped VEN tokens for VET in a 1:100 exchange.

VET is utilized by firms as the wise payment money to conduct company activities on the blockchain. Firms who maintain more VET are given greater priority and more faith to the blockchain.

VeThor Tokens (VTHO)

As a VET holder, you get VTHO which you could utilize to carry out wise contracts and operate programs on the blockchain. This mechanism resembles the manner NEO generates GAS because of its holders.

The bottom generation rate of VTHO for VET holders would be:

0.000432 VTHO per VET per day

This amount is the minimum the speed is going to be, and also the VeChain Foundation will commence votes to re-adjust it according to system use.

Proof of Authority

The VeChain team is not shooting a totally decentralized system.. Rather, they have implemented Proof of Authority (PoA) consensus where 101 known validators create cubes. The system depends on further nodes to keep up the blockchain ecosystem. All nodes get VTHO for a reward for keeping the network. There are four Kinds of nodes which are distinguished by their maturity and the Quantity of VET they hold:

  1. Strength Nodes – 10 day maturity period (minimum 1,000,000 VET)
  2. Thunder Nodes – 20 day maturity period (minimum 5,000,000 VET)
  3. Mjolnir Masternodes – 30 day maturity period (minimum 15,000,000 VET)
  4. Thrudheim (Authority) Masternodes – 12/21/17 maturity start date (minimum 25,000,000 VET)

The 3 varieties of financial nodes (Power, Thunder, and Mjolnir) receive benefits in your VeChain Foundation VTHO pool along with the ordinary benefit for holding VET.

The 101 jurisdiction nodes (Thrudheim) receive the very same benefits as economical nodes and 30% of VTHO absorbed by blockchain trades. The remaining 70% of VTHO is going to be burnt. Besides this maturity data and minimal VET demand, authority nodes need to pass KYC processes, create their identity people, and pass on further requirements determined by the VeChain Foundation. All these validators are assessed and picked by the VeChain Foundation and neighbourhood.

If you held a specific number of VET from March 20, 2018, then you’d be categorized as an X Node. For example an X Node, you get another benefit in the Bonus Pool in addition to exclusive early access to VeChain ICOs. The program was developed to reward early adopters.

Do not be intimidated by the quantity of VET required to turn into a node. It’s still true that you will get the daily THOR reward whatever the volume you hold.

Governance Model

The supply of VET tokens not just determines consensus but compels the VeChain governance version too. These stakeholders vote on the Board of Steering Committee. Subsequently, this committee makes decisions about the technologies, operations, as well as public relations amongst other facets.


vechain Governance Model

Governance Model

VeChain Team & Progress

VeChain began as a subsidiary of BitSe, among China’s biggest blockchain businesses. The Singapore-based staff is over 150 members strong and possess an assortment of talent in their top management.

VeChain 2018 Roadmap

In June 2018, the VeChain group reached a critical landmark in establishing the system’s mainnet. Together with the launch, the system moved from the Ethereum blockchain on its blockchain. And, the group started swapping VEN for VET. The following steps for the community would be to enlarge the ecosystem using more dapps and tactical venture partnerships.

The platform currently has a substantial number of dapps on it such as DNV GL’s My Story and BitOcean’s OceanEx.

The VeChain Team

Sunny Lu directs the group as CEO. For the vast majority of Lu’s livelihood, he has led IT and Information System jobs for many luxury brands. Most significantly, he had been the Chief Information Officer (CIO) to get Louis Vuitton China.

Other members of the management group comprise CFO Jie Zhang that has 17 years experience in IT confidence and Advisor Bo Shen, the creator of Fenbushi Capital.

VeChain Partnerships

The group was busy forming partnerships right together with the two most prominent being PwC and DNV GL. VeChain is a portion of this PwC incubator program providing them access to the company’s massive global network of customers.

DNV GL is a $20B firm that supplies solutions to oil & gas, electricity, maritime, and renewable businesses. The strategic partnership with DNV GL must open the doorway for VeChain to a huge number of possible customers.

Maybe above all, the Chinese government has selected VeChain to function as blockchain technology partner of the government of Gui’an. Having a government that is infamously hard on regulations, this can be an impressive accomplishment.

Short List of VeChain Partners

VeChain Competition

On the supply chain side, Waltonchain and Modum are using blockchain technologies in a similar approach to VeChain. But, logistics is a sizable business. Moreso, every one of those 3 firms is apparently focusing on distinct markets which help to avoid direct competitors.

In 2017, interest in business DApp platforms jumped with competitions such as Ethereum, Cardano, EOS, and NEO all climbing in cost. Though VeChain only recently published their mainnet, their absolute variety of ventures have helped to oppose them one of these greater market cap jobs.


VeChain started trading at the end of August 2017 at about $0.25 (~0.00005 BTC).

Starting in December 2017, the cost rose fast and recently struck all-time highs along with the remainder of the crypto marketplace. Apart from being in a bull market, the cost increase was driven by the information of more partnerships in addition to the statement of this VeChain Thor rebrand.

Regrettably, the change from VEN into VET and the shift in the distribution has made cost evaluation rather hard. However, it would not be surprising to find the cost increase as new spouses start utilizing the enterprise DApp platform.

Where to Buy VET

The recommended Location to Buy VET is to Binance in exchange for Bitcoin or even Ethereum. If you do not currently have, you can buy them utilizing USD on each GDAX or Gemini. From that point, move your Bitcoin or Ethereum into Binance and make the trade.

You may view a whole list of exchanges in which VET can be obtained on CoinMarketCap.

Where to Store VET

Now the VET tokens have substituted the ERC20 VEN tokens, the VeChainThor Wallet is the suggested place to store your own funds. The pocket can be found on iOS, Android, also together with Ledger wallets.