GROUP 5 

: BANKING SYSTEM AND CRYPTO CURRENCIES

GROUP MEMBERS: NOTUE KWAM CANDICE
TATSIGUIA MAEVA
ETOUMAN MBONGO
ETAPE ERIC PRIESTLY
NGIMBIS HERMANE A.
POUTCHEU FREDDY

Cryptocurrencies, or virtual currencies, are digital means of exchange created and used by private
individuals or groups. Because most cryptocurrencies aren’t regulated by national governments,
they’re considered alternative currencies – mediums of financial exchange that exist outside the
bounds of state monetary policy.

Bitcoin is the preeminent cryptocurrency and first to be used widely. However, hundreds of

cryptocurrencies exist, and more spring into being every month.

What Is Cryptocurrency?

Cryptocurrencies use cryptographic protocols, or extremely complex code systems that encrypt

sensitive data transfers, to secure their units of exchange.

Cryptocurrency developers build these protocols on advanced mathematics and computer

engineering principles that render them virtually impossible to break, and thus to duplicate or
counterfeit the protected currencies. These protocols also mask the identities of cryptocurrency
users, making transactions and fund flows difficult to attribute to specific individuals or groups. This
article from Benzinga Money has more on the basic principles of cryptography.

In other words, crypto currency is a digital currency in which transactions are verified and records are
maintained by a decentralised system using cryptography, rather than by a centralized authority.
Crytography is a method of using encryption and decryption to secure communication in the presence
of third parties with ill intentions. As any other currency cryptocurrencies is use as a medium of
exchange .Cryptocurrencies can be consider as a limit entries in the database and as any currency has a
monitory values.

Decentralized Control
Cryptocurrencies are also marked by decentralized control. Cryptocurrencies’ supply and value
are controlled by the activities of their users and highly complex protocols built into their governing
codes, not the conscious decisions of central banks or other regulatory authorities. In particular, the
activities of miners – cryptocurrency users who leverage vast amounts of computing power to record
transactions, receiving newly created cryptocurrency units and transaction fees paid by other users in
return – are critical to currencies’ stability and smooth function.
Exchange With Fiat Currencies
Importantly, cryptocurrencies can be exchanged for fiat currencies in special online markets,
meaning each has a variable exchange rate with major world currencies (such as the U.S. dollar,
British pound, European euro, and Japanese yen). Cryptocurrency exchanges are somewhat
vulnerable to hacking and represent the most common venue for digital currency theft by hackers
and cybercriminals.

Finite Supply
Most, but not all, cryptocurrencies are characterized by finite supply. Their source codes contain
instructions outlining the precise number of units that can and will ever exist. Over time, it becomes
more difficult for miners to produce cryptocurrency units, until the upper limit is reached and new
currency ceases to be minted altogether. Cryptocurrencies’ finite supply makes them inherently
deflationary, more akin to gold and other precious metals – of which there are finite supplies – than
fiat currencies, which central banks can, in theory, produce unlimited supplies of.

Benefits and Drawbacks

Due to their political independence and essentially impenetrable data security, cryptocurrency users
enjoy benefits not available to users of traditional fiat currencies, such as the U.S. dollar, and the
financial systems that those currencies support. For instance, whereas a government can easily
freeze or even seize a bank account located in its jurisdiction, it’s very difficult for it to do the same
with funds held in cryptocurrency – even if the holder is a citizen or legal resident.

On the other hand, cryptocurrencies come with a host of risks and drawbacks, such as illiquidity and
value volatility, that don’t affect many fiat currencies. Additionally, cryptocurrencies are frequently
used to facilitate gray and black market transactions, so many countries view them with distrust or
outright animosity. And while some proponents tout cryptocurrencies as potentially lucrative
alternative investments, few (if any) serious financial professionals view them as suitable for anything
other than pure speculation.

How Cryptocurrencies Work

The source codes and technical controls that support and secure cryptocurrencies are highly
complex. However, laypeople are more than capable of understanding the basic concepts and
becoming informed cryptocurrency users.

Functionally, most cryptocurrencies are variations on Bitcoin, the first widely used cryptocurrency.
Like traditional currencies, cryptocurrencies’ express value in units – for instance, you can say “I have
2.5 Bitcoin,” just as you’d say, “I have $2.50.”

Several concepts govern cryptocurrencies’ values, security, and integrity.

Blockchain

A cryptocurrency’s blockchain (sometimes written “block chain”) is the master ledger that records
and stores all prior transactions and activity, validating ownership of all units of the currency at any
given point in time. As the record of a cryptocurrency’s entire transaction history to date,
a blockchain has a finite length – containing a finite number of transactions – that increases over
time.

Identical copies of the blockchain are stored in every node of the cryptocurrency’s software network
– the network of decentralized server farms, run by computer-savvy individuals or groups of
individuals known as miners, that continually record and authenticate cryptocurrency transactions.
A cryptocurrency transaction technically isn’t finalized until it’s added to the blockchain, which
usually occurs within minutes. Once the transaction is finalized, it’s usually irreversible. Unlike
traditional payment processors, such as PayPal and credit cards, most cryptocurrencies have no built-
in refund or chargeback functions, though some newer cryptocurrencies have rudimentary refund
features.

During the lag time between the transaction’s initiation and finalization, the units aren’t available for
use by either party. Instead, they’re held in a sort of escrow – limbo, for all intents and purposes. The
blockchain thus prevents double-spending, or the manipulation of cryptocurrency code to allow the
same currency units to be duplicated and sent to multiple recipients.

Private Keys

Every cryptocurrency holder has a private key that authenticates their identity and allows them to
exchange units. Users can make up their own private keys, which are formatted as whole numbers
between 1 and 78 digits long, or use a random number generator to create one. Once they have a
key, they can obtain and spend cryptocurrency. Without the key, the holder can’t spend or
convert their cryptocurrency – rendering their holdings worthless unless and until the key is
recovered.

While this is a critical security feature that reduces theft and unauthorized use, it’s also draconian.
Losing your private key is the digital equivalent of throwing a wad of cash into a trash incinerator.
While you can create another private key and start accumulating cryptocurrency again, you can’t
recover the holdings protected by your old, lost key. Savvy cryptocurrency users are therefore
maniacally protective of their private keys, typically storing them in multiple digital (though generally
not Internet-connected, for security purposes) and analog (i.e., paper) locations.

Wallets

Cryptocurrency users have “wallets” with unique information that confirms them as the temporary
owners of their units. Whereas private keys confirm the authenticity of a cryptocurrency transaction,
wallets lessen the risk of theft for units that aren’t being used. Wallets used by cryptocurrency
exchanges are somewhat vulnerable to hacking. For instance, Japan-based Bitcoin exchange Mt. Gox
shut down and declared bankruptcy a few years back after hackers systematically relieved it of more
than $450 million in Bitcoin exchanged over its servers.

Wallets can be stored on the cloud, an internal hard drive, or an external storage device. Regardless
of how a wallet is stored, at least one backup is strongly recommended. Note that backing up a
wallet doesn’t duplicate the actual cryptocurrency units, merely the record of their existence and
current ownership.

Miners

Miners serve as record-keepers for cryptocurrency communities, and indirect arbiters of the

currencies’ value. Using vast amounts of computing power, often manifested in private server farms
owned by mining collectives comprised of dozens of individuals, miners use highly technical methods
to verify the completeness, accuracy, and security of currencies’ block chains. The scope of the
operation is not unlike the search for new prime numbers, which also requires tremendous amounts
of computing power.

Miners’ work periodically creates new copies of the blockchain, adding recent, previously unverified
transactions that aren’t included in any previous blockchain copy – effectively completing those
transactions. Each addition is known as a block. Blocks consist of all transactions executed since the
last new copy of the blockchain was created.

The term “miners” relates to the fact that miners’ work literally creates wealth in the form of brand-
new cryptocurrency units. In fact, every newly created blockchain copy comes with a two-part
monetary reward: a fixed number of newly minted (“mined”) cryptocurrency units, and a variable
number of existing units collected from optional transaction fees (typically less than 1% of the
transaction value) paid by buyers.

Worth noting: Once upon a time, cryptocurrency mining was a potentially lucrative side business for
those with the resources to invest in power- and hardware-intensive  mining operations. Today, it’s
impractical for hobbyists without thousands of dollars to invest in professional-grade mining
equipment. If your aim is simply to supplement your regular income, plenty of freelance gigs offer
better returns.

Though transaction fees don’t accrue to sellers, miners are permitted to prioritize fee-
loaded transactions ahead of fee-free transactions when creating new blockchains, even if the fee-
free transactions came first in time. This gives sellers an incentive to charge transaction fees, since
they get paid faster by doing so, and so it’s fairly common for transactions to come with fees. While
it’s theoretically possible for a new blockchain copy’s previously unverified transactions to be entirely
fee-free, this almost never happens in practice.

Through instructions in their source codes, cryptocurrencies automatically adjust to the amount of
mining power working to create new blockchain copies – copies become more difficult to create as
mining power increases, and easier to create as mining power decreases. The goal is to keep the
average interval between new blockchain creations steady at a predetermined level. Bitcoin’s is 10
minutes, for instance.

Finite Supply
Although mining periodically produces new cryptocurrency units, most cryptocurrencies are designed
to have a finite supply – a key guarantor of value. Generally, this means that miners receive fewer
new units per new blockchain as time goes on. Eventually, miners will only receive transaction fees
for their work, though this has yet to happen in practice and may not for some time. If current trends
continue, observers predict that the last Bitcoin unit will be mined sometime in the mid-22nd
century, for instance – not exactly around the corner.

Finite-supply cryptocurrencies are thus more similar to precious metals, like gold, than to fiat
currencies – of which, theoretically, unlimited supplies exist.

Cryptocurrency Exchanges

Many lesser-used cryptocurrencies can only be exchanged through private, peer-to-peer transfers,
meaning they’re not very liquid and are hard to value relative to other currencies – both crypto- and
fiat.

More popular cryptocurrencies, such as Bitcoin and Ripple, trade on special secondary exchanges
similar to forex exchanges for fiat currencies. (The now-defunct Mt. Gox is one example.) These
platforms allow holders to exchange their cryptocurrency holdings for major fiat currencies, such as
the U.S. dollar and euro, and other cryptocurrencies (including less-popular currencies). In return for
their services, they take a small cut of each transaction’s value – usually less than 1%.

Cryptocurrency exchanges play a valuable role in creating liquid markets for popular cryptocurrencies
and setting their value relative to traditional currencies. However, exchange pricing can still be
extremely volatile. Bitcoin’s U.S. dollar exchange rate fell by more than 50% in the wake of Mt. Gox’s
collapse, then increased roughly tenfold during 2017 as cryptocurrency demand exploded. You can
even trade cryptocurrency derivatives on certain crypto exchanges or track broad-based
cryptocurrency portfolios in crypto indexes. This testimonial from a BBOD trader has more detail on
cryptocurrency trading.

History of Cryptocurrency

Cryptocurrency existed as a theoretical construct long before the first digital alternative currencies
debuted. Early cryptocurrency proponents shared the goal of applying cutting-edge mathematical
and computer science principles to solve what they perceived as practical and political shortcomings
of “traditional” fiat currencies.

Technical Foundations

Cryptocurrency’s technical foundations date back to the early 1980s, when an American
cryptographer named David Chaum invented a “blinding” algorithm that remains central to modern
web-based encryption. The algorithm allowed for secure, unalterable information exchanges
between parties, laying the groundwork for future electronic currency transfers. This was known as
“blinded money.”

By the late 1980s, Chaum enlisted a handful of other cryptocurrency enthusiasts in an attempt to
commercialize the concept of blinded money. After relocating to the Netherlands, he founded
DigiCash, a for-profit company that produced units of currency based on the blinding algorithm.
Unlike Bitcoin and most other modern cryptocurrenncies, DigiCash’s control wasn’t decentralized.
Chaum’s company had a monopoly on supply control, similar to central banks’ monopoly on fiat
currencies.
DigiCash initially dealt directly with individuals, but the Netherlands’ central bank cried foul and
quashed this idea. Faced with an ultimatum, DigiCash agreed to sell only to licensed banks, seriously
curtailing its market potential. Microsoft later approached DigiCash about a potentially lucrative
partnership that would have permitted early Windows users to make purchases in its currency, but
the two companies couldn’t agree on terms, and DigiCash went belly-up in the late 1990s.

Around the same time, an accomplished software engineer named Wei Dai published a white paper
on b-money, a virtual currency architecture that included many of the basic components of modern
cryptocurrencies, such as complex anonymity protections and decentralization. However, b-money
was never deployed as a means of exchange.

Shortly thereafter, a Chaum associate named Nick Szabo developed and released a cryptocurrency
called Bit Gold, which was notable for using the blockchain system that underpins most modern
cryptocurrencies. Like DigiCash, Bit Gold never gained popular traction and is no longer used as a
means of exchange.

Pre-Bitcoin Virtual Currencies

After DigiCash, much of the research and investment in electronic financial transactions shifted to
more conventional, though digital, intermediaries, such as PayPal (itself a harbinger of mobile
payment technologies that have exploded in popularity over the past 10 years). A handful of DigiCash
imitators, such as Russia’s WebMoney, sprang up in other parts of the world.

In the United States, the most notable virtual currency of the late 1990s and 2000s was known as e-
gold. e-gold was created and controlled by a Florida-based company of the same name. e-gold, the
company, basically functioned as a digital gold buyer. Its customers, or users, sent their old jewelry,
trinkets, and coins to e-gold’s warehouse, receiving digital “e-gold” – units of currency denominated
in ounces of gold. e-gold users could then trade their holdings with other users, cash out for physical
gold, or exchange their e-gold for U.S. dollars.

At its peak in the mid-2000s, e-gold had millions of active accounts and processed billions of dollars
in transactions annually. Unfortunately, e-gold’s relatively lax security protocols made it a popular
target for hackers and phishing scammers, leaving its users vulnerable to financial loss. And by the
mid-2000s, much of e-gold’s transaction activity was legally dubious – its laid-back legal compliance
policies made it attractive to money laundering operations and small-scale Ponzi schemes. The
platform faced growing legal pressure during the mid- and late-2000s, and finally ceased to operate
in 2009.
Bitcoin and the Modern Cryptocurrency Boom

Bitcoin is widely regarded as the first modern cryptocurrency – the first publicly used means of
exchange to combine decentralized control, user anonymity, record-keeping via a blockchain, and
built-in scarcity. It was first outlined in a 2008 white paper published by Satoshi Nakamoto, a
pseudonymous person or group.

In early 2009, Nakamoto released Bitcoin to the public, and a group of enthusiastic supporters began
exchanging and mining the currency. By late 2010, the first of what would eventually be dozens of
similar cryptocurrencies – including popular alternatives like Litecoin – began appearing. The first
public Bitcoin exchanges appeared around this time as well.

In late 2012, WordPress became the first major merchant to accept payment in Bitcoin.
Others, including Newegg.com (an online electronics retailer), Expedia, and Microsoft, followed.
Dozens of merchants now view the world’s most popular cryptocurrency as a legitimate payment
method. And new cryptocurrency applications take root with impressive frequency – Cryptomaniaks
has a great look at the fast-growing world of cryptocurrency sports betting sites here, to take just one
example.

Though few cryptocurrencies other than Bitcoin are widely accepted for merchant payments,
increasingly active exchanges allow holders to exchange them for Bitcoin or fiat currencies –
providing critical liquidity and flexibility. Since the late 2010s, big business and institutional investors
have closely watched what they call the “crypto space,” too. Facebook’s closely guarded Libra project
could be the first true cryptocurrency alternative to fiat currencies, although its growing pains
(described nicely in this article from SavingAdvice.com) suggest that true parity remains well in the
future.

Advantages of Cryptocurrency

1. Built-in Scarcity May Support Value

Most cryptocurrencies are hardwired for scarcity – the source code specifies how many units can
ever exist. In this way, cryptocurrencies are more like precious metals than fiat currencies. Like
precious metals, they may offer inflation protection unavailable to fiat currency users.

2. Loosening of Government Currency Monopolies

Cryptocurrencies offer a reliable means of exchange outside the direct control of national banks,
such as the U.S. Federal Reserve and European Central Bank. This is particularly attractive to people
who worry that quantitative easing (central banks’ “printing money” by purchasing government
bonds) and other forms of loose monetary policy, such as near-zero inter-bank lending rates, will
lead to long-term economic instability.

In the long run, many economists and political scientists expect world governments to co-opt
cryptocurrency, or at least to incorporate aspects of cryptocurrency (such as built-in scarcity and
authentication protocols) into fiat currencies. This could potentially satisfy some cryptocurrency
proponents’ worries about the inflationary nature of fiat currencies and the inherent insecurity of
physical cash.

3. Self-Interested, Self-Policing Communities

Mining is a built-in quality control and policing mechanism for cryptocurrencies. Because they’re paid
for their efforts, miners have a financial stake in keeping accurate, up-to-date transaction records –
thereby securing the integrity of the system and the value of the currency.

4. Robust Privacy Protections

Privacy and anonymity were chief concerns for early cryptocurrency proponents, and remain so
today. Many cryptocurrency users employ pseudonyms unconnected to any information, accounts,
or stored data that could identify them. Though it’s possible for sophisticated community members
to deduce users’ identities, newer cryptocurrencies (post-Bitcoin) have additional protections that
make it much more difficult.

5. Harder for Governments to Exact Financial Retribution

When citizens in repressive countries run afoul of their governments, said governments can easily
freeze or seize their domestic bank accounts, or reverse transactions made in local currency. This is
of particular concern in autocratic countries such as China and Russia, where wealthy individuals who
run afoul of the ruling party frequently find themselves facing serious financial and legal troubles of
dubious provenance.

Unlike central bank-backed fiat currencies, cryptocurrencies are virtually immune from authoritarian
caprice. Cryptocurrency funds and transaction records are stored in numerous locations around the
world, rendering state control – even assuming international cooperation – highly impractical. It’s a
bit of an oversimplification, but using cryptocurrency is a bit like having access to a theoretically
unlimited number of offshore bank accounts.

Decentralization is problematic for governments accustomed to employing financial leverage (or

outright bullying) to keep troublesome elites in check. In late 2017, CoinTelegraph reported on a
multinational cryptocurrency initiative spearheaded by the Russian government. If successful, the
initiative would have two salutary outcomes for those involved: weakening the U.S. dollar’s
dominance as the world’s de facto means of exchange, and affording participating governments
tighter control over increasingly voluminous and valuable cryptocurrency supplies.
6. Generally Cheaper Than Traditional Electronic Transactions

The concepts of blockchains, private keys, and wallets effectively solve the double-spending problem,
ensuring that new cryptocurrencies aren’t abused by tech-savvy crooks capable of duplicating digital
funds. Cryptocurrencies’ security features also eliminate the need for a third-party payment
processor – such as Visa or PayPal – to authenticate and verify every electronic financial transaction.

In turn, this eliminates the need for mandatory transaction fees to support those payment
processors’ work – since miners, the cryptocurrency equivalent of payment processors, earn new
currency units for their work in addition to optional transaction fees. Cryptocurrency transaction fees
are generally less than 1% of the transaction value, versus 1.5% to 3% for credit card payment
processors and PayPal.

7. Fewer Barriers and Costs to International Transactions

Cryptocurrencies don’t treat international transactions any differently than domestic transactions.
Transactions are either free or come with a nominal transaction fee, no matter where the sender and
recipient are located. This is a huge advantage relative to international transactions involving fiat
currency, which almost always have some special fees that don’t apply to domestic transactions –
such as international credit card or ATM fees. And direct international money transfers can be very
expensive, with fees sometimes exceeding 10% or 15% of the transferred amount.

You Might Also Like: Many popular credit cards come with foreign transaction fees, which can
significantly increase transaction costs in foreign countries. If you routinely travel abroad, scan our
list of the top travel rewards credit cards for up-to-date details about credit cards without such
surcharges.

Cons of Cryptocurrency

1. Lack of Regulation Facilitates Black Market Activity

Probably the biggest drawback and regulatory concern around cryptocurrency is its ability to
facilitate illicit activity. Many gray and black market online transactions are denominated in Bitcoin
and other cryptocurrencies. For instance, the infamous dark web marketplace Silk Road used Bitcoin
to facilitate illegal drug purchases and other illicit activities before being shut down in 2014.
Cryptocurrencies are also increasingly popular tools for money laundering – funneling illicitly
obtained money through a “clean” intermediary to conceal its source.

The same strengths that make cryptocurrencies difficult for governments to seize and track allow
criminals to operate with relative ease – though, it should be noted, the founder of Silk Road is now
behind bars, thanks to a years-long DEA investigation.

2. Potential for Tax Evasion in Some Jurisdictions

Since cryptocurrencies aren’t regulated by national governments and usually exist outside their
direct control, they naturally attract tax evaders. Many small employers pay employees in bitcoin and
other cryptocurrencies to avoid liability for payroll taxes and help their workers avoid income tax
liability, while online sellers often accept cryptocurrencies to avoid sales and income tax liability.

According to the IRS, the U.S. government applies the same taxation guidelines to all cryptocurrency
payments by and to U.S. persons and businesses. However, many countries don’t have such policies
in place. And the inherent anonymity of cryptocurrency makes some tax law violations, particularly
those involving pseudonymous online sellers (as opposed to an employer who puts an employee’s
real name on a W-2 indicating their bitcoin earnings for the tax year), difficult to track.

3. Potential for Financial Loss Due to Data Loss

Early cryptocurrency proponents believed that, if properly secured, digital alternative currencies
promised to support a decisive shift away from physical cash, which they viewed as imperfect and
inherently risky. Assuming a virtually uncrackable source code, impenetrable authentication
protocols (keys) and adequate hacking defenses (which Mt. Gox lacked), it’s safer to store money in
the cloud or even a physical data storage device than in a back pocket or purse.

However, this assumes that cryptocurrency users take proper precautions to avoid data loss. For
instance, users who store their private keys on single physical storage devices suffer
irreversible financial harm when the device is lost or stolen. Even users who store their data with a
single cloud service can face loss if the server is physically damaged or disconnected from the global
Internet (a possibility for servers located in countries with tight Internet controls, such as China).

4. Potential for High Price Volatility and Manipulation

Many cryptocurrencies have relatively few outstanding units concentrated in a handful of individuals’
(often the currencies’ creators and close associates) hands. These holders effectively control these
currencies’ supplies, making them susceptible to wild value swings and outright manipulation –
similar to thinly traded penny stocks. However, even widely traded cryptocurrencies are subject to
price volatility: Bitcoin’s value doubled several times in 2017, then halved during the first few weeks
of 2018.

5. Often Can’t Be Exchanged for Fiat Currency

Generally, only the most popular cryptocurrencies – those with the highest market capitalization, in
dollar terms – have dedicated online exchanges that permit direct exchange for fiat currency. The
rest don’t have dedicated online exchanges, and thus can’t be directly exchanged for fiat currencies.
Instead, users have to convert them into more commonly used cryptocurrencies, such as Bitcoin,
before fiat currency conversion. By increasing exchange transactions’ cost, this suppresses demand
for, and thus the value of, some lesser-used cryptocurrencies.
6. Limited to No Facility for Chargebacks or Refunds

Although cryptocurrency miners serve as quasi-intermediaries for cryptocurrency transactions,

they’re not responsible for arbitrating disputes between transacting parties. In fact, the concept of
such an arbitrator violates the decentralizing impulse at the heart of modern cryptocurrency
philosophy. This means that you have no one to appeal to if you’re cheated in a cryptocurrency
transaction – for instance, paying upfront for an item you never receive. Though some newer
cryptocurrencies attempt to address the chargeback/refund issue, solutions remain incomplete and
largely unproven.

By contrast, traditional payment processors and credit card networks such as Visa, MasterCard, and
PayPal often step in to resolve buyer-seller disputes. Their refund, or chargeback, policies are
specifically designed to prevent seller fraud.

7. Adverse Environmental Impacts of Cryptocurrency Mining

Cryptocurrency mining is very energy-intensive. The biggest culprit is Bitcoin, the world’s most
popular cryptocurrency. According to estimates cited by Ars Technica, Bitcoin mining consumes more
electricity than the entire country of Denmark – though, as some of the world’s largest Bitcoin mines
are located in coal-laden countries like China, without that progressive Scandinavian state’s
minute carbon footprint.

Though they’re quick to throw cold water on the most alarmist claims, cryptocurrency experts
acknowledge that mining presents a serious environmental threat at current rates of growth. Ars
Technica identifies three possible short- to medium-term solutions:

 Reducing the price of Bitcoin to render mining less lucrative, a move that would likely require
concerted interference into what’s thus far been a laissez-faire market

 Cutting the mining reward faster than the currently scheduled rate (halving every four years)

 Switching to a less power-hungry algorithm, a controversial prospect among mining

incumbents

Over the longer term, the best solution is to power cryptocurrency mines with low- or no-carbon
energy sources, perhaps with attendant incentives to relocate mines to low-carbon states like Costa
Rica and the Netherlands.

Cryptocurrency Examples

Cryptocurrency usage has exploded since Bitcoin’s release. Though exact active currency numbers
fluctuate and individual currencies’ values are highly volatile, the overall market value of all active
cryptocurrencies is generally trending upward. At any given time, hundreds of cryptocurrencies trade
actively.

The cryptocurrencies described here are marked by stable adoption, robust user activity, and
relatively high market capitalization (greater than $10 million, in most cases, though valuations are of
course subject to change):

1. Bitcoin

Bitcoin is the world’s most widely used cryptocurrency, and is generally credited with bringing the
movement into the mainstream. Its market cap and individual unit value consistently dwarf (by a
factor of 10 or more) that of the next most popular cryptocurrency. Bitcoin has a programmed supply
limit of 21 million Bitcoin. Bitcoin is increasingly viewed as a legitimate means of exchange. Many
well-known companies accept Bitcoin payments, though most partner with an exchange to convert
Bitcoin into U.S. dollars before receiving their funds.

Bitcoin Cash and Bitcoin Forks: Bitcoin Cash is a spin-off of bitcoin, meant to have faster transactions,
voted on and implemented by the Bitcoin community. Bitcoin Cash was probably the most successful
Bitcoin fork in history, but there are always new forks popping up. Maybe Bitcoin Gold, Bitcoin
Diamond, Bitcoin SV, or another will catch on.. although history says this is a rare occurrence. Keep
your eye on the forks, but don’t expect them to be guaranteed the staying power of Bitcoin. Bitcoin
forks are interesting altcoins, but it’s unlikely either will ever truly challenge Bitcoin for the top spot.
The concept here is that Bitcoin is so relevant that it is important to keep an eye on its forks,
especially the one that has really weathered the storm so far, Bitcoin Cash.

2. Litecoin

Released in 2011, Litecoin uses the same basic structure as Bitcoin. Key differences include a higher
programmed supply limit (84 million units) and a shorter target blockchain creation time (two-and-a-
half minutes). The encryption algorithm is slightly different as well. Litecoin is often the second- or
third-most popular cryptocurrency by market capitalization.

3. Ripple

Released in 2012, Ripple is noted for a “consensus ledger” system that dramatically speeds up
transaction confirmation and blockchain creation times – there’s no formal target time, but the
average is every few seconds. Ripple is also more easily converted than other cryptocurrencies, with
an in-house currency exchange that can convert Ripple units into U.S. dollars, yen, euros, and other
common currencies.

However, critics have noted that Ripple’s network and code are more susceptible to manipulation by
sophisticated hackers and may not offer the same anonymity protections as Bitcoin-derived
cryptocurrencies.

4. Ethereum

Launched in 2015, Ethereum makes some noteworthy improvements on Bitcoin’s basic architecture.

In particular, it utilizes “smart contracts” that enforce the performance of a given transaction, compel
parties not to renege on their agreements, and contain mechanisms for refunds should one party
violate the agreement. Though “smart contracts” represent an important move toward addressing
the lack of chargebacks and refunds in cryptocurrencies, it remains to be seen whether they’re
enough to solve the problem completely.

5. Coinye

Coinye, a semi-defunct cryptocurrency, is worth mentioning solely for its bizarre backstory.

Coinye was developed under the original moniker “Coinye West” in 2013, and identified by an
unmistakable likeness of hip-hop superstar Kanye West. Shortly before Coinye’s release, in early
2014, West’s legal team caught wind of the currency’s existence and sent its creators a cease-and-
desist letter.

To avoid legal action, the creators dropped “West” from the name, changed the logo to a “half man,
half fish hybrid” that resembles West (a biting reference to a “South Park” episode that pokes fun at
West’s massive ego), and released Coinye as planned. Given the hype and ironic humor around its
release, the currency attracted a cult following among cryptocurrency enthusiasts. Undaunted,
West’s legal team filed suit, compelling the creators to sell their holdings and shut down Coinye’s
website.Though Coinye’s peer-to-peer network remains active and it’s still technically possible to
mine the currency, person-to-person transfers and mining activity have collapsed to the point that
Coinye is basically worthless.

6. Darkcoin (Dash): Darkcoin, known as Dash as of March 25, 2015 (dash=digital cash), but
previously known as XCoin, has unique functionality. XCoin was developed by Evan Duffield who
wanted to improve on Bitcoin but didn’t have the pull to do so. Thus, he developed his own coin. It
takes less power to mine Dash than most coins. Using less energy to mine is important because
mining coins is one of the most wasteful processes you can imagine. The wasteful mining process is
key to security and stability of all coins that use a “proof-of-work” system. It prevents people from
mining too fast. However, environmentally, it’s a nightmare. In 2015 we had said, “People know what
a Darkcoin is. Hopefully, this familiarity rolls over to Dash” (today few remember XCoin and Darkcoin,
and Dash is a well-known crypto). Back in 2015, Dash was one of the higher valued coins. Today that
is still true, and Dash has performed almost as well competitors like Ethereum.

7. Peercoin: Like Nxt, Peercoin (abbreviated PPC) uses a proof-of-stake system; in fact, it was the first
proof-of-stake coin. It’s worth about $0.40 on the USD and has a market cap of almost ten million.
This coin has everything going for it and might be a smart bet as far as cryptocurrency goes. As an
bonus to the confidence and quality of the coin, Peercoin was developed by Sunny King. Sunny
King is, or might be, the person who created Bitcoin or another coin, or maybe Bruce Wayne or Clark
Kent. It’s hard to tell as the culture of cryptocurrency puts importance on peer-to-peer, code, and
coin over developers. Still, he is important, and like-it-or-not little things like this could be the
deciding factor in whether a coin sinks or swims in the new market. Peercoin has a story like Nxt and
Namecoin where they are long-running coins.

8. IOTA: IOTA is a popular coin with a large supply (meaning there are many MIOTAs out there). It
has one of the highest market caps today due to the tech behind it being embraced by some big-
name companies like Cisco Systems Inc, Volkswagen AG, and Samsung Group. Any coin in the top 10
by market cap is worth watching. IOTA is no exception.

9. Dogecoin: Dogecoin (like the “Doge” internet meme about a dog and misspelling) had the 7th
highest Market cap as of June 2015. In 2017 it was still a contender although it was more of one early
in 2017. Individual coins aren’t worth as much as other coins on the list, but it’s value and popularity
have remained relatively steady despite notable highs and lows. Dogecoin uses the same essential
technology as Bitcoin with a few important technical distinctions. Like the failed Coinye West,
Dogecoin was just in it for the lolz (i.e., it was created as a joke), but unlike Coinye, Dogecoin
became inexplicably popular. Why do we suggest a joke coin? Because it’s a popular coin and today
the only funny part about it is the name (and it’s mascot and backstory). It’s a lot like Litecoin — a
fairly priced coin with some degree consumer confidence. Dogecoin has, one might argue, turned
their comedic origins into an excuse to make their coin “fun and friendly,” which was a smart long-
term move. It’s also one of the only major cryptocurrencies with a .com Top-Level Domain name and
is one of the few that attempts to reach an audience outside of techies and cryptography nerds. As of
September 2017, Dogecoin had taken a beating in value. One could argue that its roots as a joke coin
weren’t as great a long-term strategy as it had once seemed (although one could argue the volatility
it has seen is just business as usual in the cryptocurrency space.)

10. Namecoin: In 2015 Namecoin looked promising, here in 2017 there is a little less hype. Still,
Namecoin is notable. Namecoin is almost the same as Bitcoin. It was the first “fork” of the Bitcoin
software. It’s based on Bitcoin and has the same unit cap, but has a few tweaks in its data storage.
Namecoin was originally just going to be an upgrade to Bitcoin, but people were nervous that it
would pose issues. So Namecoin is similar to Bitcoin, but like all the currencies that are not-Bitcoin, it
is worth a fraction of Bitcoin. Its solid background and reasonable price point make it a relatively
good coin to invest in. Of all the coins noted so far, Namecoin has performed the most poorly so
far. It is still priced very low in USD.

11. Tether and other stable coins: Tether is meant to reflect the price of the US dollar. There are
some criticisms to consider. But if you want a stable coin for temporary use, Tether tends to be a
good choice. It isn’t an investment; it is a place to park your value in crypto when you are in-between
coins. With that in mind, one should dismiss TUSD, PAX, USDC, or DAI.

12. Nxt: Not only does this nifty coin sport a name similar to Steve Job’s other company; it uses a cool
and different algorithm for producing coins. This algorithm – an implementation of a proof-of-stake
scheme rather than proof-of-work – may be less burdensome on the environment and has long-term
potential. It may be worth a tad less than the other coins we recommend; it is worth about a penny
on the dollar on a good day. However, less cost per coin means you have less to lose if the coin value
deflates. Nxt is like Namecoin. It had a super cool code but didn’t though perform at the same level
as other cryptos (until late 2017 where it saw a notable price hike). It is still priced very low in USD