The Basics of February 2021

© 2021 What Is Cryptocurrency? The Basics of Cryptocurrency Key Players www.onepagethinking.net Overview Fiat Currency Cryptocurrency Uses of Crypto Digital Wallet Cryptocurrency Network Investors Cryptocurrency (crypto) is a digital currency A way to understand cryptocurrency and its Crypto uses encryption technology to quickly Two common transactions Each crypto transaction is communicated to all participating peer-to-peer (P2P) computers Crypto is stored in that can be used to buy goods and services. It vocabulary is to compare it to the U.S. dollar. process, secure, and verify transactions. involve crypto: (1) the use of (nodes) in the crypto network. Each P2P node verifies the transaction according to network a digital wallet, Computer Network Storage Role: Safekeeping of Market Operators Influencers and Investors uses an online and encryption to U.S currency is issued by the Federal Reserve Each transaction conducted in crypto is crypto to buy and sell goods and rules. A group of verified transactions form a block (like a link in a chain) which is added to secured by a 24- of Miners Role: Facilitate Efficient Role: Promote Investment Role: Mine and Validate Blocks, Add Digital Wallet and Private Key secure transactions. was released in System (a central bank), and as such is called published in a ledger (the “blockchain”) that is services, and (2) the acquisition the blockchain by the miner who wins a “guessing game” built into the system. Miners are word private key. Exchange of Cryptocurrency In, and Adoption of, Cryptocurrency (i.e., Owner’s Password) 2009 as open-source software, developed by “fiat” currency. It is accepted worldwide as a widely and transparently distributed, while of crypto as an investment. the P2P nodes that use a device with vast computational power (a Antminer) to There are three Block to Blockchain the pseudonymous person(s) called Satoshi valuable medium of exchange. Because fiat preserving the privacy of the participants. No Transactions are validated by participate in the guessing game for any block. Miners are rewarded with crypto for winning. types of digital Mining Pools Hot Storage (Crypto Stored Online) Market Notable Investors Nakamoto, thus launching crypto into the currency has physical form, the owner must central authority (like a central bank in fiat F2Pool Online Wallet Digital Currency Exchange Based In New York participating computers in a A new block is added to the blockchain when a majority of the nodes on the network validate wallets: software, and Regulated by the New York State Tesla Barry Silbert China-Based Via Blockchain.info world. Other cryptos have been created, but store it in a wallet or bank to protect it from currency) has authority over crypto, process that modifies an online the information contained in the block (the correct ID tag (a hash) of the previous block, etc.). hardware, and Department of Financial Services. Gemini was Tesla Recently Announced it Willl Founder of the Digital Currency Invest $1.5 Billion in Bitcoin Group (DCG) Bitcoin remains the largest and best known. theft or loss. Fiat currency is easy to use. determines the supply, or influences its value. ledger (the blockchain). Once the new block is added to the blockchain, it is frozen in place and cannot be altered. online. Poolin the First Exchange to Launch Bitcoin Futures Contracts, and the Chicago Board Options China-Based Mining Pool Provides Digital Wallet for Exchange (CBOE) Uses Gemini as the Basis Ark Invest Garvin Andresen and Users on Its Platform .pool for Daily Settlement of Bitcoin Futures Popular Technology Exchange Ben Horowitz BUYING AND Transactional Uses of Cryptocurrency Illustration: Traded Fund (ETF) with a Bitcoin Features Fiat Currency Cryptocurrency China-Based Mining Pool BitcoinQT Client Cofounders of the Andresen- Record of a Bitcoin Transaction Coinbase Price Target of $400,000 Horowitz Venture Capital Fund SELLING GOODS Software to Access Private ViaBTC Largest in the United Key on a Personal Electronic Centralization, Centralized; Control. Governments (usually via a central bank) issue Decentralized; No Control. While governments can regulate China-Based Company with States by Trading Volume; Headquartered In Founders, Early Adopters and/or Influencers 1 Crypto + Transaction Fee Transmitted to Vendor Former Tencent Leadership Device Regulation and tangible, fiat currencies. Fiat currency is solely regulated at the crypto, there is no central server where crypto transactions are San Francisco; Serves the US Market as Both Vendor from Digital Wallet (Vendor Will Process Jack Dorsey Vitalik Buterin AntPool Cold Storage (Crypto Stored Offline) an Exchange and Broker; Has Bitcoin Reserves Erik Voorhees Control discretion of the central bank. The central bank can even freeze or hosted. Instead, the issuance of crypto and every crypto Bitcoin Using QR- CEO and 27 Year Old Co- Customer Represents 12% of global mining Early Adopter of change fiat currency without prior notice. This occurred in India in 2016, transaction is governed by a decentralized network of peer-to-peer Scanners Bank Facilities/Vaults Founder of Twitter Cryptocurrency; CEO Founder of Bitcoin Owner of computational power (as of 2020). Magazine and causing millions of currency holders to go without the means to buy (P2P) computers. No individual or government agency has direct Method to Physically Store Bitcoin Exchange Primarily of Shapeshift Directly from Created the staple goods. control over crypto (i.e., the software or distributed ledger (the Crypto 2 Private Key Serving the European Market Vendor Sends Purchased Items Customer’s Digital SlushPool Elon Musk Crypto blockchain)). to Customer Wallet) Oldest Mining Pool formerly known Vocalized Support for Tyler and Platform as Bitcoin.cz Mining Other Cold Storage World’s Largest Cryptocurrency Exchange Cryptocurrency Cameron Providers Platform through Twitter Medium of Widely Accepted. Fiat currency is widely accepted as a medium of Limited Acceptance. Crypto is a digital currency that can be used Mining Device Manufacturers Internet Financial, Winklevoss Exchange exchange. as a medium of exchange, but it is not yet widely accepted. BitGo, , MyCelium, Other Market Operators Co-Founder of the Fred Ehrsam A Transaction Broadcast to CoreScientific Coinmotion, CoinCorner, UPHOLD, Kucoin, , NiceHash, Bittrex, Satoshi Gemini Market, a Co-Founder of Transparency Limited Visibility of Transactions and Currency Flow. The flow of fiat Widespread Visibility. Each transaction conducted in crypto is Network of Participating US Blockchain Infrastructure Bitcoin to You, LakeBTC, , Buybit, BitBay, Phemex, FTX, Nakamoto Leading Coinbase and Influential Strategist & currency (and the recording of credits and debits in the accounts of published in a ledger that is widely distributed for the world to see Nodes Provider; Produces the BitMain Coinfloor, Loyalbit, and Forex.com, Capital.com, Global Prime, and Pseudonym for the Cryptocurrency Antminer S19 Rig Coinsecure FXCM Founder(s) of Bitcoin Exchange Writer transacting parties) is routed through local banks to the Central Bank, (distributed ledger), so there is transparency into each transaction THE F Completion and and only these banks have visibility to the transactions. and flow of crypto. (Note: Some countries have banned crypto Behind the Scenes: Validation, Mining, and Blockchain Confirmation of due to concerns that some of them are being used to fuel illegal BLOCKCHAIN Transaction Commercial Financial activities such as terrorism and money laundering.) Bitcoin Mining Process Adding a New Block to the Blockchain Customers Vendor-Adopters Payments Platforms Transaction Verification Reward Completion Commercial Banks and Others Privacy Disclosure for Large Amounts. The Bank Secrecy Act requires a bank to Privacy. Each transaction file consists of senders’ and recipients’ Miners must first verify the Once the rewarded miner Role: Conduct Efficient and Role: Efficient Payment Role: Transmission of Crypto Broadcast The verified block is now in Under Role: Provide Suitable Investment Vehicles for Wealthy Clients report deposits and withdrawals of over $10,000 to the IRS. All other public keys but not their actual names or private keys (i.e., transaction by ensuring it has position to be added to the rules, the first miner to successfully verifies the Low-Cost Transactions Methods to Facilitate Commerce to Vendors as Payment After someone requests B been digitally signed with the C blockchain (a listing of all D verify 10-minutes worth E transaction and 51% of transactions are only seen by the banks and transacting parties. passwords consisting of 24 unique words). Therefore, crypto users a transaction, the pairing of a public and previous transactions of transactions and Insert miners verify the same list, Consumers Microsoft XBOX need not share their identity in order to complete transactions of transaction is broadcast Algorithm Square Fifth Third Bank JP Morgan Chase private key. The transaction grouped into their respective guess the correct 64- the miner adds the block to In-Game App and Games Launched its Own Digital Coin (JPM Coin) to a network of P2P Creation and Successfully Block New Uses Blockchain to Facilitate Digital Payments any amount. is then pooled with other blocks). The right to place digit hex number gets the blockchain. There are Purchases to Conduct Global Payments Activity computers (nodes) that Verification Verified by Block transactions during a 10- Decoded the new block into the 6.25 Bitcoin. The millions of miners verifying Shopify are manned by miners. of a New Miners into Bitcoin Miners Expedia Signature Bank Stability Stable Value. Fiat currency is stable because users trust its value and Volatile. In recent years, crypto has been highly volatile, which has minute interval to create a By One blockchain is granted to the Bitcoin reward level is each block of transactions, Depending on the Online Travel Agency Uses Blockchain to Facilitate Digital Payments Mastercard Block of block. Miner/Mining miner who wins a “guessing through scheduled to be cut by Block- making cryptocurrency Overstock Has Taken Steps to Accept Bitcoin believe it will retain its value. This trust is bolstered by the promise that been its biggest disadvantage. The volatility and possibility of network’s parameters, via SigNet, the Bank’s Digital Payments Transactions game.” This process is called Consensus one-half every four chain extremely secure: 51% of the fiat currency (e.g., the U.S. dollar) is backed by the “full faith and extraordinarily high returns have fueled the popularity of crypto as the transaction is either Pool Home Depot, CVS, System A block includes the following “proof of work.” As it takes years as a way of these miners would need Individual Investors credit” of the government (e.g., the United States). This stability allows an investment. If acceptance and day-to-day use become verified automatically or CoinPayment PNC identification information: (1) a a significant amount of keeping Bitcoin as a to be “breached” to forge GameStop placed into a queue of Uses Blockchain to Facilitate Digital fiat currency to act as a store of value, facilitate commerce, and ensure a widespread, stability may improve. header, (2) a hash which is a computing power to scarce currency. bitcoin transactions. If a National Retailers; Gaming Store PayPal pending transactions Payments robust, stable economy. 256-bit number generated by successfully solve the game, Another measure taken malicious miner tries to Institutional Investors BitPay Has Taken Steps to Accept Bitcoin waiting to be verified by the crypto network’s algorithm, mining pools (a group of to manage an influx of submit a false block onto Tesla the network. (3) a reference to the previous the blockchain, the false Electric Vehicle Manufacturer CoinBase Commerce Bank of New York MellonCorp Supply Unlimited. The central bank can produce an unlimited amount of money Limited. typically have a cap on supply. There is bitcoin miners who miners onto the block’s hash, and (4) the collectively pool their blockchain, the difficulty block will be identified by CitiBank Holds, Manages, and Trades Large Corporations Dish Network Cryptocurrency On Behalf Of Asset- in theory in order to manage recessions or reduce the amount of money a finite amount of coins that will ever be in supply. For example, group of transactions. resources and share of the problem can be the majority of miners and Uses Blockchain to Facilitate Digital Payments Cable Provider CoinGate Management Clients in circulation to manage inflation. the total number of Bitcoin coins is capped at 21 million. rewards) make up the adjusted based on the rejected. (in Conjunction with JPMorgan Chase) majority of bitcoin mining number of miners Chili’s, Domino’s Pizza BlockChain.info currently present. Small Businesses Bank of America Storage Physical Storage Recommended. Fiat money is versatile and can be Digital Storage Necessary. As a digital asset, cryptocurrency can volume. Restaurant Franchises Silvergate Capital Applications of Cryptocurrency Will be for stored in various forms (a wallet or a bank). Through payment providers only exist online and must be stored in digital or cryptocurrency Spectrocoin Custodial Services and Commercial such as PayPal, fiat money can be stored in digital form. If money is wallets that can only be accessed (or decrypted) by the owner with Dell Technologies Operates Silvergate Exchange Network, a Payments BUYING AND Financial Institutions For Purchases of New Laptops Digital Payments Network That Instantly Clears kept outside of a bank, theft or loss can occur. a private key. While most digital wallets claim to offer secure A Transaction Buying and Selling Cryptocurrency F GoURL Transactions in USD 365 Days a Year, Which Completion and Wells Fargo storage, some have been hacked, causing significant losses. SELLING CRYPTO Wikipedia is Ideal for Cryptocurrency Traders, as Will Use Digital Cash Platform Blockchain to Broadcast to Confirmation of Unlike traditional investments or cash, there is no “default” way of Day Traders Donations for Online Encyclopedia eGifter.com Tool Cryptocurrencies are Always Trading Facilitate Transactions Network of Transaction passing cryptocurrency to heirs if the owner’s private key is not Participating Nodes shared with them. A private key cannot be restored. Governments Detractors Ease of Moderately Easy, High Fees, and Slow. For purchases that require Getting Easier, Low Fees, and Fast. Cryptocurrency is available at Buyers Sales Channel Sellers Transaction, small amounts of fiat currency, transactions are easy. For large a click of a button at any time of day or night all over the world, but Peer-to-Peer (P2P) Platforms U.S. and Foreign Regulators Respected Businessmen and Women Transaction purchases, arrangements may need to be made through a bank to make it can seem complicated. It will get easier over time to transact and 1 Role: Ensure Integrity and Stability of the Banking System Role: Express Skepticism to the Normalization of Cryptocurrency Costs, and payment. The payment system has become more efficient in recent own crypto. At this time crypto transactions have fast settlement Institutional Buyer Pays Current P2P exchange companies allow buyers and sellers to have limited ID Crypto Investors Market Price of Crypto to verification and trade cryptocurrencies directly with little or no fees Miners Settlement years, with the proliferation of credit cards, wire transfers, and online times and relatively low transaction fees, making them a preferred U.S. Regulators Private Investors Government Official Sales Channel Seller Transmits Commodity Futures Trading platforms like PayPal. Many of these systems include transaction fees, means of sending money across borders. (Plus Transaction Fees, if the Local 2 Paxful Hodl Hodl Crypto to Sales some of which can be significant. In addition, wire transfers can only be Sales Channel is an Exchange) Institutional U.S. Congress Commission (CFTC) Warren Buffet Janet Yellen conducted during banking hours, may take days to settle, and require Channel Regulates Bitcoin as a Commodity Chairman of Berkshire Hathaway Individual Investors Oversees Integrity and Effective U.S. Secretary of Treasury additional steps to be sent to a party in a foreign country. Functioning of the US Banking System; under Commodity Exchange Act “Cryptocurrencies basically have no value and don't “I fear [Bitcoin is] often for illicit finance. It’s an Investors Other P2P Bills Under Consideration Focus on produce anything…and what you hope is that extremely inefficient way of conducting transactions. BitQuick Binance P2P Sales Channel Empowering Bank Examiners and somebody else comes along and pays you more And the amount of energy that’s consumed in Potential for Corruption, Double-Spending and Mismanagement Possible. When the No Double-Spending, But Irreversible. Once a crypto transaction is Platforms 3 Individual money for them later on, but then that person's got the Transmits Sales Regulatory Agencies to Use Securities and Exchange processing those transactions is staggering. But it is a Corruption, flow of information is limited to larger banking systems and consumers completed, it cannot be reversed, even if there was a mistake. Investors problem.” Proceeds to Seller Blockchain and Digital Technologies to Commission (SEC) highly speculative asset, and I think people should Waste, are reliant on working with these institutions, the imbalance of power Without hacking the crypto system, it is not possible to introduce Sales Channel Centralized Digital Currency Exchanges Detect Criminal Activities Involving “I get in enough trouble with things I think I know beware. It can be extremely volatile, and I do worry 4 (Minus Transaction Fees, Does Not Regulate Bitcoin Because it Mismanagement, creates an environment ripe for corruption. For example, in 2016, Wells counterfeit digital coins into a cryptocurrency network. Corporations Transmits Crypto Enterprise transactions occur primarily via cryptocurrency exchanges Cryptocurrencies something about. Why in the world should I take a long about potential losses that investors in it could suffer.” if the Sales Channel is an is a Commodity (Not a Security), But or short position in something I don't know anything and Double Fargo created millions of fake accounts, car loans, and credit card to Buyers Gemini Trust Exchange) Corporations Does Regulate Capital Raisings in Bitstamp Kraken about? We don't have to know what cocoa beans are Spending accounts for unwitting consumers. When paper bills are counterfeited, Company U.S. Treasury Department Cryptocurrencies and Registered gonna do, or cryptocurrencies, we just have to focus on the counterfeiter is able to spend more money than he or she actually Enforces Anti-Money Laundering Law Investment Companies That Deal in eight or 10 stocks.” (via FinCEN); Treasury Requires Cryptocurrencies Payments Industry owns. Without proper controls, a fiat currency system is at risk for abuse Financial Other Financial Institutions Coinbase Binance Institutions Cryptocurrency Brokers to Collect Bill Gates and mismanagement, which can lead to government bailouts with Exchanges “Know Your Customer” Information Pieter van der Does Foreign Regulators Founder of Microsoft and Chairman of the Bill and taxpayer dollars to ensure the stability of a nation’s economy. Melinda Gates Foundation CEO of Adyen, the European FinTech Giant Government of China Bill Gates is not a fan of Bitcoin partly because it uses Processing Payments Firm Cryptocurrency Stored on Internal Revenue Service “Bitcoin is more of an investment asset than a payment The Chinese Government Banned All a lot of energy. In addition, it can cause trouble for Owner’s Digital Wallet (IRS) method. ... That makes it less interesting for a Leading Cryptocurrencies Initial Digital Coin Offerings and investors with limited funds, given Bitcoin's volatility. 2020 Income Tax Return Requires merchant – to have potential as a means of payment, Platforms That Traded “Elon has tons of money and he’s very sophisticated, Top 6 Cryptocurrencies Filters to Disclose Whether They so I don’t worry that his Bitcoin sort of randomly go up you need a stable currency.” Bitcoin Price History Storage of Cryptocurrency – The Digital Wallet Received, Sold, Exchanged, Or Cryptocurrencies. Only Peer-to-Peer DIGITAL STORAGE Transactions Are Allowed. The and down. I do think people get bought into these There are a total of 6700+ Cryptocurrencies Acquired Any Financial Interests In manias, who may not have as much money to spare, Digiconomist Cryptocurrencies Chinese Central Bank Has Proposed On Energy Consumption Cryptocurrency exchanges publish trading prices and other transaction so I’m not bullish on Bitcoin, and my general thought Creating A New Cryptocurrency. “The continuous block mining cycle incentivizes people information 24/7 each day of the year Software Wallet Online Wallet Hardware Wallet would be that, if you have less money than Elon, you (Moderate Security) (High Security) (Highest Security) should probably watch out.” all over the world to mine Bitcoin. As mining can U.S. Federal Bureau of provide a solid stream of revenue, people are very Bitcoin (BTC) Ethereum (ETH) Owners Store Their Private Keys Via Browser-Based Wallet That Allows Private Keys are Stored in a Small Investigations (FBI) Government of India Proposes to Prohibit the Establishment willing to run power-hungry machines to get a piece of $925B Market Cap $177.3B Market Cap Apps That They Download To Their Owner to Interact with Storage Physical Device In 2013, Confiscated 144,000+ Bitcoins Mark Cuban of any System of Cryptocurrency it. Over the years this has caused the total energy In Shutting Down Dark Web Billionaire Investor; Dallas Mavericks Owner Mobile Device or Computers Provider via Website Examples: Ledger.com, Trezor.com Except by the Government of India; the consumption of the Bitcoin network to grow to epic Participants In “Operation Silk Road”; ”I’d rather have bananas than Bitcoin” Example: BitcoinCore (Formerly BitcoinQT Example: Bitcoin.info, Guarda Government is Contemplating the proportions, as the price of the currency reached new Sold Most BitcoinsTo Barry Silbert highs. The entire Bitcoin network now consumes more Client) Creation of a “Digital Rupee” Slow Mover XRP (XRP) energy than a number of countries” Tether (USDT) Federal Reserve Board (Fed) [Note: Bitcoin energy consumption is far more efficient $20B Market Cap (Suspended) $35B Market Cap Assessing the Pros and Cons of European Commission (EC) Amazon and greener than the traditional banking system] and Central Bank Digital In September 2020, the EC Proposed “Amazon would have to build processes…to accept, Currencies in The Fed’s Operations a Regulation of Crypto-Assets Called hold, and manage Bitcoin and thousands of other and Oversight of Financial Services ”Markets in Crypto Assets” (MiCA). cryptocurrencies. [We] would have to assume the MiCA Seeks to Set Global Standards Litecoin Stellar (XLM) and the Supervisory and Regulatory inherent market volatility risks associated with holding for the Oversight and Regulation of crypto onto [our] balance sheet and selling crypto…in $11.8B Market Cap $8.8B Market Cap Framework of Emerging Payments Platforms Digital, Blockchain-Based Assets exchange for fiat currency.”