WHITEPAPER eTITANIUM www.e-titanium.net Contents Background Technical framework Blockchain Features Scalable Interoperable Secure & Sovereign Scope in Different Departments Online Marketing Cross-Border Payments Connecting Chains Real Estate Why use cryptocurrency for promotion?............ References Background With the emergence and widespread adoption of Bitcoin in and beyond 2009, it was thought that a trustable and reliable cryptocurrency or e-cash had been defined and put into practice. However, as time passed, major loopholes in the system were observed that made the currency much less useful and convenient than otherwise possible. Not only that, but the most significant disadvantage was that the transactional framework allowed for little user privacy. The users could only try to protect their individual identities and dealings by the use of pseudonyms. Even the pseudonyms can be tracked using the same techniques that are used to locate stolen coins. Therefore, anonymity was a rising concern in the Bitcoin community, and efforts have been made to address the issue. Laundering services were contemporarily used to provide anonymity while ensuring transparency, trust, and safety in the transactions. That problem was solved by the emergence of an anonymous alternative to Bitcoin called Zerocoin that allowed user’s identities to remain protected while ensuring transparency in contracts. It was a system that could break the link in individual Bitcoin transactions to add anonymity — without the adding of any trusted parties at all, thus minimizing the risk of a breach or unnecessary exposure. Similarly, several new coins were introduced that made small changes to the standard Bitcoin framework to make different improvements and improve user experience. That is why the market is flooded with alternatives to Bitcoin today. However, one particular aspect has remained unexplored till date. Cryptocurrency is not nearly as commonly used as it could be. While games and different software use it in their loyalty tokens, crypto is yet to be introduced in the streets, available for everybody, and in the online marketing landscape. With the film and media industries being some of the most rapidly growing industries due to rising consumer interest, there is a lot of scope for cryptocurrency usage within their markets. E-titanium aims to explore that domain and bring cryptocurrency to the level where anyone and everyone can access and use it. We aim to remove the technical difficulties that an average user faces in using cryptocurrency and promoting it at a wider scale by helping artists and filmmakers use it for online marketing purposes. Blockchain Features The following features in the blockchain infrastructure of ETIT distinguish it from other cryptocurrencies in comparison. Scalable You can run parallel chains to meet the increasing needs of your growing user base. We can offer all the resources that you need to cover all of your marketing related needs to keep your userbase hooked. It provides you with the required flexibility to use it for various purposes. Interoperable It allows you to connect your tokens & their different value with other blockchains that work on to the same module. That makes it a highly valuable link between currencies that users can derive a lot of usability from. Secure & Sovereign You can perform secure and anonymous transactions with this decentralized cryptocurrency, for any purpose and within any setup without any worry. It is designed to provide the most security and privacy to all of its users and guarantee convenience as well as accessibility. Scope in Different Departments Due to its unique properties and implementation, ETIT has substantial scope for use in the following fields. Online Marketing Marketing is one of the most important fields in which the scope of cryptocurrency has not been explored yet. Within the social landscape, artists and filmmakers could use ETIT to incentivize fans and gain more ground. We will help them through the process and make it streamlined for them. Open Finance Centralized exchanges are subject to the whims of their jurisdictions. They lack most of the freedom and autonomy provided by decentralized dealings and exchanges. With the help of ETIT, users can establish a decentralized economy which can let our users trade across connected token economies. Gaming Gaming is one of the most obvious platforms for digital currency usage. ETIT can be used to build an engaging game with digital goods that can be purchased by using the cryptocurrency, much like many different games are doing right now, tradable directly on the platform. Lifestyle Related Usage With the introduction of eTitanium in the landscape of crypto, users will be free of most of the restrictions that limit their usage of cryptocurrency for lifestyle-related purchases that are a part of their everyday routine. Our aim is to improve the accessibility of crypto and make it available for more people who have all kinds of needs that can be fulfilled by it. Healthcare ETIT can help you establish and maintain control of your confidential, sensitive, healthcare related data with a fine grain permissions system. Only healthcare providers you approve can access your data. The encryption and privacy offered by crypto is one of its most notable and valuable aspects. Cross-Border Payments Crypto has revolutionized traditional banking by reducing the friction and cost of cross-border transactions and payments. With this flexibility being the most important advantage of cryptocurrency itself, ETIT makes it much easier for users to derive profits from it. Connecting Chains Through ETIT, users can make a link between different blockchain cryptocurrencies and transfer payments from one currency into another to make things much easier and more convenient for them. Real Estate Store and transfer ownership of property rights and other licensing documents. Blockchains act as notaries in which you can use to verify ownership or revocation of property. Why use cryptocurrency for promotion? The cryptocurrency and blockchain markets are growing at a tremendous rate. According to the predictions made by industry experts, the blockchain market alone will have $57 million by 2025. Considering the fact that the cryptocurrency market capital was around $210 billion in September 2018, the growth in the blockchain market means that cryptocurrency might just dominate financial markets in the coming years. The reason why cryptocurrency is gaining ground is that it has gained the trust of many users with everything that it promises - around 41800 people have invested at least a hundred dollars in some cryptocurrency. Every 3 seconds, there is a social media post talking about Bitcoins. As Bitcoin is the strongest contender in the market, it is a very hot topic of discussion among people across the globe who are connected in a close-knitted web of social media. New currencies are introduced every day, and the demand for cryptocurrency grows continuously. People are increasingly interested in “farming” tokens for long periods of time to exchange them when their value has increased a lot. The reason why they risk a fall in the price of a token that they have invested in is that the past few years have witnessed a historic rise in the value of popular coins like Bitcoin and Ethereum. 1The value of a single Bitcoin has increased several times over the course of the past few years. Calculating the profit in such an investment makes users increasingly inclined to investing in new currencies that are expected to grow in the coming years. However, when a user decides to purchase or sell cryptocurrency, there is a major tool involved in the process that can make a lot of difference. Since these are digital, decentralized assets that we are talking about, specific exchanges are required to complete their transactions. Cryptocurrency exchange platforms have a very high demand in the market, and exchanges like Binance and Venus continuously grow in popularity among cryptocurrency users. They are sustained by transaction fees that they charge from users that use them to trade coins. There are two types of exchanges, centralized and decentralized. Centralized exchanges are monitored and regulated by governing bodies which act as intermediaries in all transactions. However, the chances of hacking and market manipulation are higher in these exchanges. Decentralized cryptocurrency exchanges are very high in demand where users don’t want their transactions to be tracked by an intermediary. Anonymity, safety, and privacy are the three key features that cryptocurrency users look for; in each transaction they make. That is why centralized exchanges which function in the hands of a third-party are not preferred anymore. They do offer a bit of flexibility where something goes wrong, but that costs users a lot of privacy and anonymity as well. Fortunately, ETIT is a token that is available on all types of exchanges and gives users the flexibility to choose one that would suit their particular needs and priorities Technical Framework Algorithm = SHA-256 Proof of Work Coin Name = eTitanium Coin Abbreviation = ETIT Coin Unit = Titan RPC Port = 34707 P2P Port = 34708 Block Reward = 50 coins Block halving = 840.000 blocks Coin Supply = 105.000.000 coins Premine = 21.000.000 coins (Percentage: 20) 50% for Airdrop, Public Relations/ Marketing 50% for Development Mining Coinbase Maturity = 3 blocks Target Spacing = 1 minutes Target timespan = 60 minutes Transaction confirms = 2 blocks Last block with reward = 27720000 Time until last block = 52 years, 8 months, 14 days “Proof-of-Work “We define an electronic coin as a series of digital signatures. Each owner transfers the coin to the next by digitally signing a hash of the previous transaction and also the public key of the following owner and adding these to the end of the coin. A payee can verify the signatures to verify the chain of ownership. *Proof-of-Work — To implement a distributed timestamp server on a peer-to-peer basis. The proof-of- work involves scanning for a value that when hashed, with SHA-256, the hash begins with a number of zero bits. For our timestamp network, we implement the proof-of-work by incrementing a nonce within the block until a value is found that offers the block's hash the required zero bits. Once the CPU effort has been expended to create it satisfy the proof-of-work, the block cannot be changed without redoing the work. As later blocks are chained after it, the work to vary the block would include redoing all the blocks after it. *Network The steps to run the network are as follows: 1) New transactions are broadcast to all nodes. 2) Each node collects new transactions into a block. 3) Each node works on finding a difficult proof-of- work for its block. 4) When a node finds a proof-of-work, it broadcasts the block to all nodes. 5) Nodes accept the block only if all transactions in it are valid and not already spent. 6) Nodes express their acceptance of the block by working on creating the next block in the chain, using the hash of the accepted block as the previous hash. Conclusion eTitanium is a blockchain cryptocurrency coined to provide increased accessibility, privacy, flexibility, References and to serve a wider spectrum of industries including the online marketing industries. It aims to empower the masses by introducing cryptocurrency that can fulfill the needs of a layperson instead of serving as a tool primarily for a technical market. With 50% of its profits set aside for Airdrop and Marketing / Public Relations, it is the first cryptocurrency of its kind with a viable technical background that aims to revolutionize the financial landscape for blockchain across the globe. The Ultimate Cryptocurrency Glossary Disclaimer: This information is not financial advice or an endorsement of cryptocurrency or any specific provider, service or offering. Cryptocurrencies are highly volatile and high risk. Do your own research and seek financial advice before buying. Please check with providers if their services are available in your state. Term Description 51% Attack If more than half the computer power on a network is run by a single person or a single group of people, then a 51% attack is in operation. This means this entity has full control of the network and can negatively affect a cryptocurrency by halting mining, stopping or changing transactions, and reusing coins. Addresses Every cryptocurrency coin has a unique address that identifies where it sits on the blockchain. It’s this address, this location, at which the coin’s ownership data is stored and where any changes are registered when it is traded. These addresses differ in appearance between cryptocurrencies but are usually a string of more than 30 characters. Airdrop This is a marketing campaign that refers to the expedited distribution of a cryptocurrency through a population of people. It usually occurs when the creator of a cryptocurrency provides its coin to low-ranked traders or existing community members in order to build their use and popularity. They are usually given away for free or in exchange for simple tasks like sharing news of the coin with friends. Algorithm Mathematic instructions coded into and implemented by computer software in order to produce a desired outcome. All Time High The highest price ever achieved by a cryptocurrency. All Time Low The lowest price ever achieved by a cryptocurrency. Altcoins Bitcoin was the first and is the most successful of all the cryptocurrencies. All the other coins are grouped together under the category of altcoins. Ethereum, for example, is an altcoin, as is Ripple. AML Acronym for “Anti-Money Laundering” Anti-Money Laundering These are a set of international laws that hope to prevent criminal organizations or individuals from laundering money through cryptocurrencies into real-world cash. Application Specific Integrated Circuit A piece of computer hardware – similar to a graphics card or a CPU – that has been designed specifically to mine cryptocurrency. They are built specifically to solve hashing problems efficiently. Arbitrage There are multiple exchanges at any given time trading in the same cryptocurrency, and they can do so at different rates. Arbitrage is the act of buying from one exchange and then selling it to the next exchange if there is a margin between the two that is profitable. ASIC Acronym for “Application Specific Integrated Circuit” ATH Acronym for “All Time High” ATL Acronym for “All Time Low” Atomic Swap A way of letting people directly and cost-effectively exchange one type of cryptocurrency for another, at current rates, without needing to buy or sell. Bag If you have a large quantity of units in a certain cryptocurrency, you’d have a bag of them. Bear/Bearish If the price of a cryptocurrency has a negative price movement. Bear Trap This is a trick played by a group of traders aimed at manipulating the price of a cryptocurrency. The bear trap is set by this group all selling their cryptocurrency at the same time, which bluffs the market into thinking there is a drop incoming. As a result, other traders sell their assets, further driving the price down. Those who set the trap then release it, buying back their assets, which are now at a lower price. The overall price then rebounds, allowing them to make a profit. Bitcoin The very first cryptocurrency. It was created in 2008 by an individual or group of individuals operating under the name Satoshi Nakamoto. It was intended to be a peer-to-peer, decentralized electronic cash system. Block The blockchain is made up of blocks. Each block holds a historical database of all cryptocurrency transactions made until the block is full. It’s a permanent record, like a bag of data that can be opened and viewed at any time. Block Explorer An online tool for exploring the blockchain of a cryptocurrency, where you can watch and follow, live, all the transactions happening on the blockchain. Block explorers can serve as blockchain analysis and provide information such as total network hash rate, coin supply, transaction growth, etc. Block Height Refers to the number of blocks connected in the blockchain. For example, Height 0 would be the very first block, which is also called the genesis block. Block Reward A form of incentive for the miner who successfully calculates the hash (verification) in a block. Verification of transactions on the blockchain generates new coins in the process, and the miner is rewarded with a portion of these. Blockchain The blockchain is a digital ledger of all the transactions ever made in a particular cryptocurrency. It’s comprised of individual blocks (see definition above) that are chained to each other through a cryptographic signature. Each time a block’s capacity is reached, a new block is added to the chain. The blockchain is repeatedly copied and saved onto thousands of computers all around the world, and it must always match each copy. As there is no master copy stored in one location, it’s considered decentralized. BTFD Acronym for “Buy The F$%king Dip” Bull/Bullish If the price of a cryptocurrency has a positive price movement. Burned If a coin in any particular cryptocurrency has been made unspendable, it is said to be burned. Buy the F$%king Dip A less-than-savory phrase used when you’re (enthusiastically) telling someone a currency has dipped to a low value and should be bought. Buy Wall When a large limit order has been placed to buy when a cryptocurrency reaches a certain value, then that is a buy wall. This can prevent a cryptocurrency from falling below that value, as demand will likely outstrip supply when the order is executed. CAP Shorthand for market capitalization (see definition below) Central Ledger When a single entity has control of all financial records, it is considered to be a central ledger. This is how banks operate. Chain Linking Each cryptocurrency has its own blockchain – the digital ledger that stores all transaction records. Chain linking is the process that occurs if you transfer one cryptocurrency to another. This requires the transaction to be lodged in two separate blockchains, so they must link together to achieve the goal. Cipher The name given to the algorithm that encrypts and decrypts information. Circulating Supply The total number of coins in a cryptocurrency that are in the publicly tradable space is considered the circulating supply. Some coins can be locked, reserved or burned, therefore unavailable to public trading. Cold Storage Another term used for a paper wallet (see below). Confirmed When a transaction has been confirmed, it means it has been approved by the network and permanently appended to the blockchain. Consensus When a transaction is made, all nodes on the network verify that it is valid on the blockchain, and if so, they have a consensus. Consensus Process Refers to those nodes that are responsible for maintaining the blockchain ledger so that a consensus can be reached when a transaction is made. Consortium blockchain A privately owned and operated, yet publicly transparent, blockchain. Cryptocurrency A form of money that exists as encrypted, digital information. Operating independently of any banks, a cryptocurrency uses sophisticated mathematics to regulate the creation and transfer of funds between entities. Cryptographic Hash Function This process happens on a node and involves converting an input – such as a transaction – into a fixed, encrypted alphanumeric string that registers its place in the blockchain. This conversion is controlled by a hashing algorithm, which is different for each cryptocurrency. Cryptography The process of encrypting and decrypting information. DAO Acronym for “decentralized autonomous organization” dApp Shorthand for “decentralized application” Decentralized Application A computer program that utilizes a blockchain for data storage, runs autonomously, is not controlled or operated from a single entity, is open source and has its use incentivized by the reward of fees or tokens. Decentralized Autonomous Organization Refers to organizations that are run by an application (computer program) rather than direct human input. Control of this application is granted to everyone rather than a single central entity. Decryption Turning encrypted cipher text back into plain text. Deflation When the demand for a particular cryptocurrency decreases, bringing down the price of its economy. Depth Chart This graph plots the requests to buy (known as bids) and the requests to sell (known as asks) on a chart. Because you can put a limit order on your buy or sell transaction, the depth chart shows the crossover point at which the market is most likely to accept a transaction in a timely fashion. It also shows if there are any significant buy walls or sell walls in play. Deterministic Wallet This type of wallet is created by producing multiple keys from a seed. If you lose this wallet, your wallet key can be recovered from the seed. Plus, when you make transactions, instead of producing new keys each time, you use variations from the seed, which makes it more transferable and easier to store. Difficulty When someone refers to difficulty in the cryptocurrency space, they are referring to the cost of mining in that moment in time. The more transactions that are trying to be confirmed at any single moment in time, divided by the total power of the nodes on the network at that time, defines the difficulty. The higher the difficulty, the greater the transaction fee – this is a fluid measurement that moves over time. Digital Commodity An intangible, hard-to-get asset that is transferred electronically and has a certain value. Digital Currency Another term for digital commodity Digital Signature Used to confirm that a document being transmitted electronically is authentic. They generally appear as a code generated by a public key encryption. Distributed Ledger A ledger that is stored in multiple locations so that any entries can be accessed and checked by multiple parties. In cryptocurrency, this refers to the blockchain being held on multiple nodes on the network, all of which are checked simultaneously. Double Spend This occurs when someone tries to send a cryptocurrency to two different wallets or locations at the same time. Dump The term used to describe selling all (or a lot) of your cryptocurrency. Dumping When a lot of people dump at once, causing a sharp downward movement in a cryptocurrency’s price. Dust Transaction Sometimes people will look to slow the network by deliberately flooding it with minor transactions that are incredibly small. These minuscule amounts are referred to as a dust transaction. DYOR Acronym for “do your own research”. Encryption Converting plain text into unintelligible text with the use of a cipher. ERC Stands for “Ethereum request for comments” and is a summation of proposed improvements to the Ethereum system. ERC-20 The standard to which each Ethereum token complies. It defines the way that each token behaves so that transactions are predictable. Other cryptocurrencies also use the ERC-20 standard, piggybacking on the Ethereum network in the process. Escrow When an intermediary is used to hold funds during a transaction, those funds are being held in escrow. This is usually a third party between the entity sending and the one receiving. Ethereum One of the top three cryptocurrencies in the world based on its market capitalization. Despite being open source and based on blockchain technology, it differs from bitcoin in two key ways: it allows developers to create dApps and also write smart contracts. Ethereum Virtual Machine A virtual machine, effectively sitting in the cloud, that is Turing complete and is used by all nodes on the network during blockchain confirmations. It allows those on the node to execute random EVM Byte Code, which is part of the Ethereum Protocol. EVM Stands for Ethereum Virtual Machine. Exchange The platform through which cryptocurrencies are exchanged with each other, with fiat currencies and between entities. Exchanges can vary widely in the currency conversions they enable and their fee structures. FA Acronym for “fundamental analysis”. Faucet If you find a website that offers to give you free cryptocurrency for connecting with them, it is termed a faucet. The majority of these are scams. Fiat Refers to money recognized as legal tender by governments, such as the US dollar, British pound, Euro and Australian dollar. FOMO An acronym for “fear of missing out”. Fork When a new version of a blockchain is created, resulting in two versions of the blockchain running side-by-side, it is termed a fork. As a single blockchain forks into two, they will both run on the same network. Forks are categorized into two categories: soft or hard. Frictionless If there is no transaction cost and no restraints on trading, then the system is considered frictionless. FUD Acronym for “fear, uncertainty and doubt”. Full Node Some nodes download a blockchain’s entire history in order to enforce its rules completely. As they fully enforce the rules, they are considered a full node. Fundamental Analysis A method through which you can attach value to a coin by looking at similar economic and financial factors and researching the underlying motives of the creators and market opinion. Futures Contract This is a pre-approved contract between two entities to fulfill a transaction when the value of cryptocurrency hits a certain price. It’s different than a limit order in that the buyer and seller are already nominated and bound. A future contract becomes relevant when a buyer wants to go short and a seller wants to go long on the asset. Gas Gas a is measurement given to an operation in the Ethereum network that relates to the computational power required to complete it. That measurement relates to the fee offered to miners who process that transaction. Other operations have a small cost of 3 to 10 gas, but a full transaction costs 21,000 gas. Gas Limit When users make a transaction on the Ethereum network, they set their gas limit, which is the most they are willing to pay as a fee for that transaction. If the transaction is going to cost more gas than what is offered, the transaction will not go through. If it costs less, the difference will be refunded. Gas Price The amount you are willing to pay for a transaction on the Ethereum network. If you want miners to process your transaction fast, then you should offer a higher price. Gas prices are usually denominated in Gwei. Genesis Block The first or first few blocks of a blockchain. Group Mining Another term used to describe a mining pool (see below). Gwei The denomination used in defining the cost of gas. Set a gas price of 20,000 Gwei, for example. Halving Every time miners approve transactions on the bitcoin blockchain, they earn bitcoin. As each block on the blockchain fills up with transactions, a certain amount of bitcoin enter the marketplace. However, the number of bitcoin that will ever be created is finite, locked at 21 million. In order to ensure this cap is kept, the amount of bitcoin earned by miners for filling one block is halved at the completion of that block. This is called halving. For the record, by the year 2140, all 21 million bitcoin will be in circulation. Hard Cap During an ICO, the creator can set a hard cap. This is the maximum amount it planned to raise, and it will therefore stop offering coins at this figure. Hard Fork A fork in the blockchain that converts transactions previously labeled invalid to valid, and vice versa. For this fork to work, all nodes on the network must upgrade to the newest protocol. Hardware Wallet A physical device, similar to a USB stick, that stores cryptocurrency in its encrypted form. It’s considered the most secure way to hold cryptocurrency. Hash The shorthand for cryptographic hash function (see description above). Hash Rate Measurement of performance that reveals how many hashes per second your computer is capable of producing. Each hash is an attempt to find a block by creating a unique block candidate and testing it against the network. Hashing Power The hash rate of a computer, measured in kH/s, MH/s, GH/s, TH/s, PH/s or EH/s depending on the hashes per second being produced. 1,000 kH/s = 1 MH/s, 1,000 MH/s = 1 GH/s and so forth. HODL Acronym for “hold on for dear life”. ICO Acronym for “initial coin offering”. Initial Coin Offering In order to raise funds, the creator of a cryptocurrency will put an initial batch of its coins up for purchase. This is an initial coin offering. JOMO Acronym for “joy of missing out”. KYC Acronym for “know your customer”, which refers to a financial institution’s obligation to verify the identity of a customer in line with AML laws. LAMBO Shorthand for Lamborghini, which is how someone might refer to themselves if they are getting rich quickly. The idea being there is so much money coming in that they are going to go buy an exotic car. Ledger A record of financial transactions. A ledger cannot be changed, it can only be appended with new transactions. Leverage A loan of sorts offered by a broker on an exchange during margin trading (see below). Lightning Network A peer-to-peer system for cryptocurrency micropayments that is focused on low latency, instant payments. They’re typically low cost, scalable and can work across chains, and transactions can be public or private. Limit Order/Limit Buy/Limit Sell If you set a rule whereby a cryptocurrency is sold or bought when at a certain price, you are setting a limit order. When traders place an order for a buy or sell, the system looks for these limit orders. Liquidity The liquidity of a cryptocurrency is defined by how easily it can be bought and sold without impacting the overall market price. Locktime If a transaction request comes with a rule delaying when it can be processed to a certain time or certain block on the blockchain, that is referred to as the locktime. Long When you intend to take a large amount of cryptocurrency and stockpile it with the anticipation that it will grow in value, you are going long (or taking a long position). MACD Acronym for “Moving Average Convergence Divergence”. Margin Bear Position This is the position you are taking if you are going “short”. Margin Bull Position This is the position you are taking if you are going “long”. Market Capitalization This is defined as the total number of coins in supply multiplied by the price. Cap = supply x price. Margin Trading A risky strategy used by experienced traders where they risk their existing coins to magnify the intensity of their trades. This allows them to buy more than they can afford using leverage provided by an exchange. Market Order As opposed to a limit order, a market order does not wait until a certain price to buy or sell; it trades wherever the price is at the time the transaction order is made. MCAP Acronym for “market capitalization”. Mining The term, somewhat confusingly, given to the process of verifying transactions on a blockchain. In the process of solving the encryption challenges, the person donating the computer power is granted new fractions of the cryptocurrency. Mining Contract An investment in mining hardware whereby you rent out the hashing power of mining hardware for a certain amount of time. The renter does not pay for the hardware or the maintenance and electricity required to run it. Mining Pool If a number of miners combine their computing power together to try and help complete the transactions required to start a new block in the blockchain, they are in a mining pool. The rewards are spread proportionately between those in the mining pool based on the amount of power they contributed. The idea is that being in a mining pool allows for better chances of successful hashing and therefore getting enough cryptocurrency reward to produce an income. Money Services Business A legal term used to represent an entity that transfers or converts money. Moon A term used to describe a major price movement upwards. For example, Ripple is mooning. Moving Average Convergence Divergence A part of the technical analysis of a cryptocurrency’s value, this tracks the momentum of price change to try and forecast into the future. MSB Acronym for “money services business”. Multipool Mining If a miner moves from one cryptocurrency blockchain to another depending on the profitability provided by the network at that moment in time, they are engaging in multipool mining. Multi-Signature (Multi-Sig) Wallets If, in order for a transaction to go through, more than one user needs to provide their unique code, then it is multi-signature. This system is set up at the creation of the account and is considered less susceptible to theft. Network A network refers to all the nodes committed to helping the operation of a blockchain at any given moment in time. Node Any computer that is connected to a blockchain’s network is referred to as a node. Nonce When a miner hashes a transaction, a random number is generated, called a nonce. The parameters from which that number is chosen change based on the difficulty of the transaction. OCO Acronym for “one cancels the other order”. One Cancels the Other Order When two orders for cryptocurrency are placed simultaneously with a rule in place whereby if one is accepted, the other is cancelled. Oracles The smart contracts stored on a blockchain are stuck within the network. They can only be reached by the external world through a program called an oracle. The oracle sends the data to and from the smart contract and the outside world as required. Oracles are most commonly found on the Ethereum network. Overbought If a large number of purchases have been made on a cryptocurrency, its price will increase for an extended period of time. At this juncture, it is considered overbought and a period of selling is expected. Oversold If a cryptocurrency has spent significant time being sold without an upward movement, it is considered oversold. In this condition, there would be concerns about whether it will bounce back. Paper Wallet Storing your wallet code (your private key) on a physical document makes it a paper wallet. It’s also sometimes referred to as cold storage. P2P Acronym for “peer to peer”. Peer to Peer In a peer-to-peer connection, two or more computers network with each other without a centralized third party being used as an intermediary. PND Acronym for “pump and dump”. Pre-Sale A period before an ICO goes public when private investors or community members are able to buy the cryptocurrency. Private Key A string of numbers and letters that are used to access your wallet. While your wallet is represented by a public key, the private key is the password you should protect (with your life). You need your private key when selling or withdrawing cryptocurrencies, as it acts as your digital signature. Proof of Authority (PoA) A private key that gives the holder the right to create the blocks in a private blockchain. It can be held by a single entity or a set number of entities. This is an alternative to the proof-of-work model, as instead of getting multiple random nodes to approve a transaction, a group of specific nodes are given the authority to approve. This is a far faster method. Proof of Stake (PoS) Another alternative to proof of work, this caps the reward given to miners for providing their computational power to the network at that miner’s investment in the cryptocurrency. So if a miner holds three coins, they can only earn three coins. The system encourages miners to stick with a certain blockchain rather than converting their rewards to an alternate cryptocurrency. Proof of Work (PoW) In order to receive a reward for mining a cryptocurrency, miners must show that their computers contributed effort to approve a transaction. A variable is added to the process of hashing a transaction that demands that effort before a block can be successfully hashed. Having a hashed block proves the miner did work and deserves a reward – hence proof of work. Protocols The set of rules that defines how data is exchanged across a network. Public blockchain A blockchain that can be accessed by anyone through a full node on their computer. Public Key This is your unique wallet address, which appears as a long string of numbers and letters. It is used to receive cryptocurrencies. Pump This is a term used to refer to an upward price movement, usually driven by whales investing large sums of money in a cryptocurrency. Pump and Dump The frowned-upon practice of buying a lot of one cryptocurrency to drive up its price and encourage others to invest, then selling the lot when there is a suitable margin. REKT Shorthand slang for “wrecked” and a term used to describe a bad loss in a trade. Relative Strength Index A type of technical analysis whereby you determine the momentum of price change over time. It looks at recent changes in price exponentially, with the most recent changes given more weight than older ones. This produces an overall trend of movement for a cryptocurrency that can determine if the market is overbought (a reading higher than 70) or oversold (a reading lower than 30). Ring Signature A ring signature is a type of encryption process that retains anonymity for the user. The concept gives the network of nodes the power to approve a transaction on a blockchain without identifying which of the nodes requested the transaction. As a result, it cannot be traced. RSI Acronym for “Relative Strength Index”. Satoshi Nakamoto The individual, or group of individuals – it has never been confirmed – who created bitcoin. SATS This is the smallest unit of bitcoin, which is 0.00000001 BTC. The name SATS is shorthand for Satoshi Nakamoto, which is the fake name used by the creator of bitcoin. Scrypt An algorithm that encrypts a key in such a fashion that it takes a serious amount of RAM to hash it. The system makes it challenging to attack for hackers. Despite its spelling, Scrypt is pronounced “ess-crypt”. Seed The origin point from which you created your wallet ID. Usually, a seed is a phrase or a series of words that can be used to regenerate your wallet ID if you lose it. Something to keep very secret. Segregated Witness The processes of separating digital signature data from transaction data. This lets more transactions fit onto one block in the blockchain, improving transaction speeds. SEGWIT Acronym for “segregated witness”. Selfish Mining If a miner finds or creates a new block in the blockchain and then doesn’t share that information with the network, he or she is partaking in selfish mining. This is because other miners are now burning their computational power on an old block, allowing the selfish miner to get a head start on the new block. Sell Wall When a large limit order has been placed to sell when a cryptocurrency reaches a certain value, that is a sell wall. This can prevent a cryptocurrency from rising above that value, as supply will likely outstrip demand when the order is executed. SHA-256 The name of the cryptographic hash function (the hashing algorithm) used by bitcoin. It’s been subsequently used by a number of altcoins too. Sharding Sharding is a way of splitting up the full blockchain history so each full node doesn’t need the whole copy of it. It’s considered a scaling solution for blockchains because as they grow larger, it begins to slow the network performance if every node is required to carry the full blockchain. Shit Coin No points for guessing this one. It’s a term used to describe a cryptocurrency not expected to have a positive future. Short Also known as short selling, this is a concept whereby traders sell an asset they don’t have. The hope is that they can then buy the asset at a lower price than which they sold it to complete the deal. Thereby they earn a margin in the interim. Smart Contracts When a contract is written in computer code, as opposed to traditional legal language, it is deemed a smart contract. This programmed contract is set up to execute and carry itself out automatically under specified conditions. When a smart contract is on the blockchain, both parties can check its programming before agreeing to it, and then let it do its thing, confident that it cannot be tampered with or changed. It lets two parties agree to complex terms without needing to trust each other and without needing to involve any third parties. This functionality is the defining feature of the Ethereum blockchain. Soft Fork A fork in a blockchain protocol where previously valid transactions become invalid. A soft fork is backwards-compatible, as the old nodes running the old protocol will still consider new transactions valid, rather than disregarding them. For a soft fork to work, a majority of the miners powering the network will need to upgrade to the new protocol. Software Wallet A common form of wallet where the private key for an individual is stored within software files on a computer. This is the system you are likely to use if you sign up for a wallet online that is not associated with an exchange. Solidity A programming language similar to JavaScript but focused on developing smart contracts. It’s exported as bytecode, which is used by the Ethereum Virtual Machine that runs the Ethereum network. TA Acronym for “technical analysis”. Technical Analysis Using a trading tool to look at historical data on a cryptocurrency in the hope of forecasting its future. Test Net When a cryptocurrency creator is testing out a new version of a blockchain, it does so on a test net. This runs like a second version of the blockchain but doesn’t impact the value associated with the primary, active blockchain. Timestamp The moment in time when a transaction was encrypted and regarded as proof that the data compiled in that transaction existed. Token The “coin” of a cryptocurrency is a token. Effectively, it’s the digital code defining each fraction, which can be owned, bought and sold. Tokenless Ledger When a distributed ledger exists but doesn’t need a currency in which to operate. With these blockchains, the miners upholding the network typically don’t get a reward/payment. TOR Acronym for “terms of reference”. Transaction The value of cryptocurrency moved from one entity to another on a blockchain network. Transaction Fee Usually very small fees given to the miners involved in successfully approving a transaction on the blockchain. This fee can vary depending on the difficulty involved in a transaction and overall network capabilities at that moment in time. If an exchange is involved in facilitating that transaction, it could also take a cut of the overall transaction fee. Turing Completeness If a machine is capable of performing all conceivable programmable calculations, then it is Turing complete. This machine can process any computable function and includes most modern computers. Unconfirmed When a transaction is proposed, it is unconfirmed until the network has examined the blockchain to ensure that there are no other transactions pending involving that same coin. In the unconfirmed state, the transaction has not been appended to the blockchain. Unspent Transaction Output This refers to the amount of cryptocurrency sent to an entity but not sent on elsewhere. These amounts are considered unspent and are the data stored in the blockchain. UTXO Acronym for “unspent transaction output”. Volatility The fluctuation in an asset’s price is measured by its volatility. Cryptocurrency prices are notoriously volatile compared to other assets, as dramatic price shifts can happen quickly. Wallet A wallet is defined by a unique code that represents its “address” on the blockchain. The wallet address is public, but within it is a number of private keys determining ownership of the balance and the balance itself. It can exist in software, hardware, paper or other forms. Whale A term used to describe extremely wealthy investors or traders who have enough funds to manipulate the market. Whitelist Prior to an ICO, interested parties can sign up/register their involvement and intent to purchase or even purchase under pre-sale conditions. The list of these parties is referred to as the whitelist. White Paper A detailed explanation of a cryptocurrency, designed to offer satisfactory technical information, explain the purpose of the coin and set out a roadmap for how it plans to succeed. It’s designed to convince investors that it’s a good choice ahead of an ICO. Zero Confirmation Transaction Alternative phrasing for an unconfirmed transaction. Bitcointalk Bitcointalk is an Internet forum dedicated to the discussion of bitcoin, blockchain technology and cryptocurrency. The forum was initially created by Satoshi Nakamoto, the pseudonymous inventor of Bitcoin in November 2009 History The first user on the forum was named "admin", and has an account registration date of November 17th, 2009. Satoshi Nakamoto created the Bitcointalk forum and posted the first public message in 2009 under the pseudonym "satoshi", an account which was registered on November 19th, 2009.[citation needed] Originally, the forum was hosted at "bitcoin.org", a domain registered prior to the release of Bitcoin's whitepaper. The first bitcoin transaction took place at the forum, when software programmer Laszlo Hanyecz offered 10,000 bitcoins to purchase pizza, three days later a deal could be arranged to purchase two pizzas.[3][4] The commonly used cryptocurrency-trader meme "HODL" originated from a 2013 Bitcointalk forum post. Initial coin offerings are sometimes announced at the forum. A 2016 study by researchers from the University of New Mexico, and University of Tulsa, Oklahoma identified 1780 scams, based on forum reports.[7] There is a demand for more privileges for older user accounts. Traded accounts were reportedly used to scam people. Bitcoin Bitcoin (₿) is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries.[7] Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. The cryptocurrency was invented in 2008 by an unknown person or group of people using the name Satoshi Nakamoto.[8] The currency began use in 2009[9] when its implementation was released as open-source software.[6]:ch. 1 Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services,[10] but the real-world value of the coins is extremely volatile.[11] Research produced by the University of Cambridge estimated that in 2017, there were 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using bitcoin.[12] Users choose to participate in the digital currency for a number of reasons: ideologies such as commitment to anarchism, decentralization and libertarianism, convenience, using the currency as an investment and pseudonymity of transactions. Increased use has led to a desire among governments for regulation in order to tax, facilitate legal use in trade and for other reasons (such as investigations for money laundering and price manipulation). Bitcoin has been criticized for its use in illegal transactions, the large amount of electricity (and thus carbon footprint) used by mining, price volatility, and thefts from exchanges. Some economists and commentators have characterized it as a speculative bubble at various times. Bitcoin has also been used as an investment, although several regulatory agencies have issued investor alerts about bitcoin.[11][13][14] The word bitcoin was defined in a white paper published on 31 October 2008.[4][15] It is a compound of the words bit and coin.[16] No uniform convention for bitcoin capitalization exists; some sources use Bitcoin, capitalized, to refer to the technology and network and bitcoin, lowercase, for the unit of account.[17] The Wall Street Journal,[18] The Chronicle of Higher Education,[19] and the Oxford English Dictionary[16] advocate the use of lowercase bitcoin in all cases. Creation The domain name bitcoin.org was registered on 18 August 2008.[20] On 31 October 2008, a link to a paper authored by Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System[4] was posted to a cryptography mailing list.[21] Nakamoto implemented the bitcoin software as open-source code and released it in January 2009.[22][23][9] Nakamoto's identity remains unknown.[8] On 3 January 2009, the bitcoin network was created when Nakamoto mined the starting block of the chain, known as the genesis block.[24][25] Embedded in the coinbase of this block was the text "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks".[9] This note references a headline published by The Times and has been interpreted as both a timestamp and a comment on the instability caused by fractional-reserve banking.[26]:18 The receiver of the first bitcoin transaction was cypherpunk Hal Finney, who had created the first reusable proof-of-work system (RPoW) in 2004.[27] Finney downloaded the bitcoin software on its release date, and on 12 January 2009 received ten bitcoins from Nakamoto.[28][29] Other early cypherpunk supporters were creators of bitcoin predecessors: Wei Dai, creator of b-money, and Nick Szabo, creator of bit gold.[24] In 2010, the first known commercial transaction using bitcoin occurred when programmer Laszlo Hanyecz bought two Papa John's pizzas for ₿10,000.[30] Blockchain analysts estimate that Nakamoto had mined about one million bitcoins[31] before disappearing in 2010 when he handed the network alert key and control of the code repository over to Gavin Andresen. Andresen later became lead developer at the Bitcoin Foundation.[32][33] Andresen then sought to decentralize control. This left opportunity for controversy to develop over the future development path of bitcoin, in contrast to the perceived authority of Nakamoto's contributions.[34][33] 2011–2012 After early "proof-of-concept" transactions, the first major users of bitcoin were black markets, such as Silk Road. During its 30 months of existence, beginning in February 2011, Silk Road exclusively accepted bitcoins as payment, transacting 9.9 million in bitcoins, worth about $214 million.[35]:222 In 2011, the price started at $0.30 per bitcoin, growing to $5.27 for the year. The price rose to $31.50 on 8 June. Within a month, the price fell to $11.00. The next month it fell to $7.80, and in another month to $4.77.[36] In 2012, bitcoin prices started at $5.27, growing to $13.30 for the year.[36] By 9 January the price had risen to $7.38, but then crashed by 49% to $3.80 over the next 16 days. The price then rose to $16.41 on 17 August, but fell by 57% to $7.10 over the next three days.[37] The Bitcoin Foundation was founded in September 2012 to promote bitcoin's development and uptake.[38] On 1 November 2011, the reference implementation Bitcoin-Qt version 0.5.0 was released. It introduced a front end that used the Qt user interface toolkit.[39] The software previously used Berkeley DB for database management. Developers switched to LevelDB in release 0.8 in order to reduce blockchain synchronization time.[citation needed] The update to this release resulted in a minor blockchain fork on 11 March 2013. The fork was resolved shortly afterwards.[citation needed] Seeding nodes through IRC was discontinued in version 0.8.2. From version 0.9.0 the software was renamed to Bitcoin Core. Transaction fees were reduced again by a factor of ten as a means to encourage microtransactions.[citation needed] Although Bitcoin Core does not use OpenSSL for the operation of the network, the software did use OpenSSL for remote procedure calls. Version 0.9.1 was released to remove the network's vulnerability to the Heartbleed bug.[citation needed] 2013–2016 In 2013, prices started at $13.30 rising to $770 by 1 January 2014.[36] In March 2013 the blockchain temporarily split into two independent chains with different rules due to a bug in version 0.8 of the bitcoin software. The two blockchains operated simultaneously for six hours, each with its own version of the transaction history from the moment of the split. Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software, selecting the backwards-compatible version of the blockchain. As a result, this blockchain became the longest chain and could be accepted by all participants, regardless of their bitcoin software version.[40] During the split, the Mt. Gox exchange briefly halted bitcoin deposits and the price dropped by 23% to $37[40][41] before recovering to the previous level of approximately $48 in the following hours.[42] The US Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for "decentralized virtual currencies" such as bitcoin, classifying American bitcoin miners who sell their generated bitcoins as Money Service Businesses (MSBs), that are subject to registration or other legal obligations.[43][44][45] In April, exchanges BitInstant and Mt. Gox experienced processing delays due to insufficient capacity[46] resulting in the bitcoin price dropping from $266 to $76 before returning to $160 within six hours.[47] The bitcoin price rose to $259 on 10 April, but then crashed by 83% to $45 over the next three days.[37] On 15 May 2013, US authorities seized accounts associated with Mt. Gox after discovering it had not registered as a money transmitter with FinCEN in the US.[48][49] On 23 June 2013, the US Drug Enforcement Administration listed ₿11.02 as a seized asset in a United States Department of Justice seizure notice pursuant to 21 U.S.C. § 881. This marked the first time a government agency had seized bitcoin.[50] The FBI seized about ₿30,000[51] in October 2013 from the dark web website Silk Road, following the arrest of Ross William Ulbricht.[52][53][54] These bitcoins were sold at blind auction by the United States Marshals Service to venture capital investor Tim Draper.[51] Bitcoin's price rose to $755 on 19 November and crashed by 50% to $378 the same day. On 30 November 2013, the price reached $1,163 before starting a long-term crash, declining by 87% to $152 in January 2015.[37] On 5 December 2013, the People's Bank of China prohibited Chinese financial institutions from using bitcoins.[55] After the announcement, the value of bitcoins dropped,[56] and Baidu no longer accepted bitcoins for certain services.[57] Buying real-world goods with any virtual currency had been illegal in China since at least 2009.[58] In 2014, prices started at $770 and fell to $314 for the year.[36] On 30 July 2014, the Wikimedia Foundation started accepting donations of bitcoin.[59] In 2015, prices started at $314 and rose to $434 for the year. In 2016, prices rose and climbed up to $998 by 1 January 2017.[36] Release 0.10 of the software was made public on 16 February 2015. It introduced a consensus library which gave programmers easy access to the rules governing consensus on the network. In version 0.11.2 developers added a new feature which allowed transactions to be made unspendable until a specific time in the future.[60] Bitcoin Core 0.12.1 was released on 15 April 2016, and enabled multiple soft forks to occur concurrently.[61] Around 100 contributors worked on Bitcoin Core 0.13.0 which was released on 23 August 2016. In July 2016, the CheckSequenceVerify soft fork activated.[62] In October 2016, Bitcoin Core's 0.13.1 release featured the "Segwit" soft fork that included a scaling improvement aiming to optimize the bitcoin blocksize.[citation needed] The patch which was originally finalised in April, and 35 developers were engaged to deploy it.[citation needed] This release featured Segregated Witness (SegWit) which aimed to place downward pressure on transaction fees as well as increase the maximum transaction capacity of the network.[63][non-primary source needed] The 0.13.1 release endured extensive testing and research leading to some delays in its release date.[citation needed] SegWit prevents various forms of transaction malleability.[64][non-primary source needed] 2017–2019 On 15 July 2017, the controversial Segregated Witness [SegWit] software upgrade was approved ("locked-in"). Segwit was intended to support the Lightning Network as well as improve scalability.[65] SegWit was subsequently activated on the network on 24 August 2017. The bitcoin price rose almost 50% in the week following SegWit's approval.[65] On 21 July 2017, bitcoin was trading at $2,748, up 52% from 14 July 2017's $1,835.[65] Supporters of large blocks who were dissatisfied with the activation of SegWit forked the software on 1 August 2017 to create Bitcoin Cash, becoming one of many forks of bitcoin such as Bitcoin Gold.[66] Prices started at $998 in 2017 and rose to $13,412.44 on 1 January 2018,[36] after reaching its all-time high of $19,783.06 on 17 December 2017.[67] China banned trading in bitcoin, with first steps taken in September 2017, and a complete ban that started on 1 February 2018. Bitcoin prices then fell from $9,052 to $6,914 on 5 February 2018.[37] The percentage of bitcoin trading in the Chinese renminbi fell from over 90% in September 2017 to less than 1% in June 2018.[68] Throughout the rest of the first half of 2018, bitcoin's price fluctuated between $11,480 and $5,848. On 1 July 2018, bitcoin's price was $6,343.[69][70] The price on 1 January 2019 was $3,747, down 72% for 2018 and down 81% since the all-time high.[69][71] In September 2018, an anonymous party discovered and reported an invalid-block denial-of-server vulnerability to developers of Bitcoin Core, Bitcoin ABC and Bitcoin Unlimited. Further analysis by bitcoin developers showed the issue could also allow the creation of blocks violating the 21 million coin limit and CVE-2018-17144 was assigned and the issue resolved.[72][non-primary source needed] Bitcoin prices were negatively affected by several hacks or thefts from cryptocurrency exchanges, including thefts from Coincheck in January 2018, Bithumb in June, and Bancor in July. For the first six months of 2018, $761 million worth of cryptocurrencies was reported stolen from exchanges.[73] Bitcoin's price was affected even though other cryptocurrencies were stolen at Coinrail and Bancor as investors worried about the security of cryptocurrency exchanges.[74][75][76] In September 2019 the Intercontinental Exchange (the owner of the NYSE) began trading of bitcoin futures on its exchange called Bakkt.[77] Bakkt also announced that it would launch options on bitcoin in December 2019.[78] In December 2019, YouTube removed bitcoin and cryptocurrency videos, but later restored the content after judging they had "made the wrong call."[79] In February 2019, Canadian cryptocurrency exchange Quadriga Fintech Solutions failed with approximately $200 million missing.[80] By June 2019 the price had recovered to $13,000.[81] 2020–present On 13 March 2020, bitcoin fell below $4000 during a broad market selloff, after trading above $10,000 in February 2020.[82] On 11 March 2020, 281,000 bitcoins were sold, held by owners for only thirty days.[81] This compared to ₿4,131 that had laid dormant for a year or more, indicating that the vast majority of the bitcoin volatility on that day was from recent buyers. During the week of 11 March 2020, cryptocurrency exchange Kraken experienced an 83% increase in the number of account signups over the week of bitcoin's price collapse, a result of buyers looking to capitalize on the low price.[81] These events were attributed to the onset of the COVID-19 pandemic. In August 2020, MicroStrategy invested $250 million in bitcoin as a treasury reserve asset.[83] In October 2020, Square, Inc. placed approximately 1% of total assets ($50 million) in bitcoin.[84] In November 2020, PayPal announced that US users could buy, hold, or sell bitcoin.[85] On 30 November 2020, the bitcoin value reached a new all-time high of $19,860, topping the previous high of December 2017.[86] Alexander Vinnik, founder of BTC-e, was convicted and sentenced to five years in prison for money laundering in France while refusing to testify during his trial.[87] In December 2020 Massachusetts Mutual Life Insurance Company announced a bitcoin purchase of USD $100 million, or roughly 0.04% of its general investment account.[88] On 19 January 2021, Elon Musk placed the handle #Bitcoin in his Twitter profile, tweeting "In retrospect, it was inevitable", which caused the price to briefly rise about $5000 in an hour to $37,299.[89] On 25 January 2021 Microstrategy announced that it continued to buy bitcoin and as of the same date it had holdings of ₿70,784 worth $2.38 billion.[90] On 8 February 2021 Tesla's announcement of a bitcoin purchase of USD $1.5 billion and the plan to start accepting bitcoin as payment for vehicles, pushed the bitcoin price to $44,141.[91] On 18 February 2021, Elon Musk stated that "owning bitcoin was only a little better than holding conventional cash, but that the slight difference made it a better asset to hold".[92] In September 2020, the Canton of Zug, Switzerland, announced to start to accepting tax payments in bitcoin by February 2021.[93][94] In June 2021, the Legislative Assembly of El Salvador voted legislation to make Bitcoin legal tender in El Salvador.[a][101][98][102] In the same month, a bitcoin network software upgrade called "Taproot", which adds support for Schnorr signatures, and improved functionality of Smart contracts and Lightning Network, was approved with the actual change to the network scheduled for November 2021.[103] Design Graph of the elliptic curve named secp256k1 in real coordinate space Bitcoin is based on an elliptic curve called "secp256k1" and encrypted with the ECDSA algorithm. The equation for the Bitcoin secp256k1 curve is y {\displaystyle y} y2= x {\displaystyle x} x3+7.[104] Bitcoin has a proposed Bitcoin Improvement Proposal (BIP) that would add support for Schnorr signatures.[105]:101 Units and divisibility The unit of account of the bitcoin system is a bitcoin. Ticker symbols used to represent bitcoin are BTC[b] and XBT.[c][109]:2 Its Unicode character is ₿.[1] Small amounts of bitcoin used as alternative units are millibitcoin (mBTC), and satoshi (sat). Named in homage to bitcoin's creator, a satoshi is the smallest amount within bitcoin representing 1⁄100000000 bitcoins, one hundred millionth of a bitcoin.[2] A millibitcoin equals 1⁄1000 bitcoins; one thousandth of a bitcoin or 100,000 satoshis.[110] Blockchain Data structure of blocks in the ledger. Number of bitcoin transactions per month, semilogarithmic plot[111] Number of unspent transaction outputs[112] For broader coverage of this topic, see Blockchain. The bitcoin blockchain is a public ledger that records bitcoin transactions.[113] It is implemented as a chain of blocks, each block containing a hash of the previous block up to the genesis block[d] of the chain. A network of communicating nodes running bitcoin software maintains the blockchain.[35]:215–219 Transactions of the form payer X sends Y bitcoins to payee Z are broadcast to this network using readily available software applications. Network nodes can validate transactions, add them to their copy of the ledger, and then broadcast these ledger additions to other nodes. To achieve independent verification of the chain of ownership each network node stores its own copy of the blockchain.[114] At varying intervals of time averaging to every 10 minutes, a new group of accepted transactions, called a block, is created, added to the blockchain, and quickly published to all nodes, without requiring central oversight. This allows bitcoin software to determine when a particular bitcoin was spent, which is needed to prevent double-spending. A conventional ledger records the transfers of actual bills or promissory notes that exist apart from it, but the blockchain is the only place that bitcoins can be said to exist in the form of unspent outputs of transactions.[6]:ch. 5 Individual blocks, public addresses and transactions within blocks can be examined using a blockchain explorer.[citation needed] Supply Total bitcoins in circulation.[112] The successful miner finding the new block is allowed by the rest of the network to reward themselves with newly created bitcoins and transaction fees.[115] As of 11 May 2020, the reward amounted to 6.25 newly created bitcoins per block added to the blockchain, plus any transaction fees from payments processed by the block.[116] To mine half of the supply of bitcoins took four years but the remainder will take another 120 years, because of an artificial process called "bitcoin halving" according to which miners are compensated by fewer BTC as time goes on.[116] To claim the reward, a special transaction called a coinbase is included with the processed payments.[6]:ch. 8 All bitcoins in existence have been created in such coinbase transactions. The bitcoin protocol specifies that the reward for adding a block will be halved every 210,000 blocks (approximately every four years). Eventually, the reward will decrease to zero, and the limit of 21 million bitcoins[e] will be reached c. 2140; the record keeping will then be rewarded solely by transaction fees.[117] In other words, Nakamoto set a monetary policy based on artificial scarcity at bitcoin's inception that the total number of bitcoins could never exceed 21 million. New bitcoins are created roughly every ten minutes and the rate at which they are generated drops by half about every four years until all will be in circulation.[118] Transactions See also: Bitcoin network Transactions are defined using a Forth-like scripting language.[6]:ch. 5 Transactions consist of one or more inputs and one or more outputs. When a user sends bitcoins, the user designates each address and the amount of bitcoin being sent to that address in an output. To prevent double spending, each input must refer to a previous unspent output in the blockchain.[119] The use of multiple inputs corresponds to the use of multiple coins in a cash transaction. Since transactions can have multiple outputs, users can send bitcoins to multiple recipients in one transaction. As in a cash transaction, the sum of inputs (coins used to pay) can exceed the intended sum of payments. In such a case, an additional output is used, returning the change back to the payer.[119] Any input satoshis not accounted for in the transaction outputs become the transaction fee.[119] Though transaction fees are optional, miners can choose which transactions to process and prioritize those that pay higher fees.[119] Miners may choose transactions based on the fee paid relative to their storage size, not the absolute amount of money paid as a fee. These fees are generally measured in satoshis per byte (sat/b). The size of transactions is dependent on the number of inputs used to create the transaction, and the number of outputs.[6]:ch. 8 The blocks in the blockchain were originally limited to 32 megabytes in size. The block size limit of one megabyte was introduced by Satoshi Nakamoto in 2010. Eventually the block size limit of one megabyte created problems for transaction processing, such as increasing transaction fees and delayed processing of transactions.[120] Andreas Antonopoulos has stated Lightning Network is a potential scaling solution and referred to lightning as a second layer routing network.[6]:ch. 8 Ownership Simplified chain of ownership as illustrated in the bitcoin whitepaper.[4] In practice, a transaction can have more than one input and more than one output.[119] In the blockchain, bitcoins are registered to bitcoin addresses. Creating a bitcoin address requires nothing more than picking a random valid private key and computing the corresponding bitcoin address. This computation can be done in a split second. But the reverse, computing the private key of a given bitcoin address, is practically unfeasible.[6]:ch. 4 Users can tell others or make public a bitcoin address without compromising its corresponding private key. Moreover, the number of valid private keys is so vast that it is extremely unlikely someone will compute a key-pair that is already in use and has funds. The vast number of valid private keys makes it unfeasible that brute force could be used to compromise a private key. To be able to spend their bitcoins, the owner must know the corresponding private key and digitally sign the transaction. The network verifies the signature using the public key; the private key is never revealed.[6]:ch. 5 If the private key is lost, the bitcoin network will not recognize any other evidence of ownership;[35] the coins are then unusable, and effectively lost. For example, in 2013 one user claimed to have lost 7,500 bitcoins, worth $7.5 million at the time, when he accidentally discarded a hard drive containing his private key.[121] About 20% of all bitcoins are believed to be lost -they would have had a market value of about $20 billion at July 2018 prices.[122] To ensure the security of bitcoins, the private key must be kept secret.[6]:ch. 10 If the private key is revealed to a third party, e.g. through a data breach, the third party can use it to steal any associated bitcoins.[123] As of December 2017, around 980,000 bitcoins have been stolen from cryptocurrency exchanges.[124] Regarding ownership distribution, as of 16 March 2018, 0.5% of bitcoin wallets own 87% of all bitcoins ever mined.[125] Mining See also: Bitcoin network § Mining Early bitcoin miners used GPUs for mining, as they were better suited to the proof-of-work algorithm than CPUs.[126] Later amateurs mined bitcoins with specialized FPGA and ASIC chips. The chips pictured have become obsolete due to increasing difficulty. Today, bitcoin mining companies dedicate facilities to housing and operating large amounts of high-performance mining hardware.[127] Semi-log plot of relative mining difficulty[f][112] Mining is a record-keeping service done through the use of computer processing power.[g] Miners keep the blockchain consistent, complete, and unalterable by repeatedly grouping newly broadcast transactions into a block, which is then broadcast to the network and verified by recipient nodes.[113] Each block contains a SHA-256 cryptographic hash of the previous block,[113] thus linking it to the previous block and giving the blockchain its name.[6]:ch. 7[113] To be accepted by the rest of the network, a new block must contain a proof-of-work (PoW).[113] The system used is based on Adam Back's 1997 anti-spam scheme, Hashcash.[129][failed verification][4] The PoW requires miners to find a number called a nonce, such that when the block content is hashed along with the nonce, the result is numerically smaller than the network's difficulty target.[6]:ch. 8 This proof is easy for any node in the network to verify, but extremely time-consuming to generate, as for a secure cryptographic hash, miners must try many different nonce values (usually the sequence of tested values is the ascending natural numbers: 0, 1, 2, 3, ...[6]:ch. 8) before meeting the difficulty target. Every 2,016 blocks (approximately 14 days at roughly 10 min per block), the difficulty target is adjusted based on the network's recent performance, with the aim of keeping the average time between new blocks at ten minutes. In this way the system automatically adapts to the total amount of mining power on the network.[6]:ch. 8 Between 1 March 2014 and 1 March 2015, the average number of nonces miners had to try before creating a new block increased from 16.4 quintillion to 200.5 quintillion.[130] The proof-of-work system, alongside the chaining of blocks, makes modifications of the blockchain extremely hard, as an attacker must modify all subsequent blocks in order for the modifications of one block to be accepted.[131] As new blocks are mined all the time, the difficulty of modifying a block increases as time passes and the number of subsequent blocks (also called confirmations of the given block) increases.[113] Computing power is often bundled together by a Mining pool to reduce variance in miner income. Individual mining rigs often have to wait for long periods to confirm a block of transactions and receive payment. In a pool, all participating miners get paid every time a participating server solves a block. This payment depends on the amount of work an individual miner contributed to help find that block.[132] Wallets For broader coverage of this topic, see Cryptocurrency wallet. Bitcoin Core, a full client Electrum, a lightweight client The first wallet program, simply named Bitcoin, and sometimes referred to as the Satoshi client, was released in 2009 by Satoshi Nakamoto as open-source software.[9] In version 0.5 the client moved from the wxWidgets user interface toolkit to Qt, and the whole bundle was referred to as Bitcoin-Qt.[133] After the release of version 0.9, the software bundle was renamed Bitcoin Core to distinguish itself from the underlying network.[134][135] Bitcoin Core is, perhaps, the best known implementation or client. Alternative clients (forks of Bitcoin Core) exist, such as Bitcoin XT, Bitcoin Unlimited,[34] and Parity Bitcoin.[136] A wallet stores the information necessary to transact bitcoins. While wallets are often described as a place to hold[137] or store bitcoins, due to the nature of the system, bitcoins are inseparable from the blockchain transaction ledger. A wallet is more correctly defined as something that "stores the digital credentials for your bitcoin holdings" and allows one to access (and spend) them.[6]:ch. 1, glossary Bitcoin uses public-key cryptography, in which two cryptographic keys, one public and one private, are generated.[138] At its most basic, a wallet is a collection of these keys. There are several modes which wallets can operate in. They have an inverse relationship with regards to trustlessness and computational requirements. Full clients verify transactions directly by downloading a full copy of the blockchain (over 150 GB as of January 2018).[139] They are the most secure and reliable way of using the network, as trust in external parties is not required. Full clients check the validity of mined blocks, preventing them from transacting on a chain that breaks or alters network rules.[6]:ch. 1 Because of its size and complexity, downloading and verifying the entire blockchain is not suitable for all computing devices. Lightweight clients consult full nodes to send and receive transactions without requiring a local copy of the entire blockchain (see simplified payment verification – SPV). This makes lightweight clients much faster to set up and allows them to be used on low-power, low-bandwidth devices such as smartphones. When using a lightweight wallet, however, the user must trust full nodes, as it can report faulty values back to the user. Lightweight clients follow the longest blockchain and do not ensure it is valid, requiring trust in full nodes.[140] Third-party internet services called online wallets offer similar functionality but may be easier to use. In this case, credentials to access funds are stored with the online wallet provider rather than on the user's hardware.[141] As a result, the user must have complete trust in the online wallet provider. A malicious provider or a breach in server security may cause entrusted bitcoins to be stolen. An example of such a security breach occurred with Mt. Gox in 2011.[142] A paper wallet with a banknote-like design. Both the private key and the address are visible in text form and as 2D barcodes. A paper wallet with the address visible for adding or checking stored funds. The part of the page containing the private key is folded over and sealed. A brass token with a private key hidden beneath a tamper-evident security hologram. A part of the address is visible through a transparent part of the hologram. A hardware wallet peripheral which processes bitcoin payments without exposing any credentials to the computer. Physical wallets store the credentials necessary to spend bitcoins offline and can be as simple as a paper printout of the private key:[6]:ch. 10 a paper wallet or more advanced such as a hardware wallet. A paper wallet is created with a keypair generated on a computer with no internet connection; the private key is written or printed onto the paper[h] and then erased from the computer. The paper wallet can then be stored in a safe physical location for later retrieval. Bitcoins stored using a paper wallet are said to be in cold storage.[143]:39 Cameron and Tyler Winklevoss, the founders of the Gemini Trust Co. exchange, reported that they had cut their paper wallets into pieces and stored them in envelopes distributed to safe deposit boxes across the United States.[144] Through this system, the theft of one envelope would neither allow the thief to steal any bitcoins nor deprive the rightful owners of their access to them.[145] Physical wallets can also take the form of metal token coins[146] with a private key accessible under a security hologram in a recess struck on the reverse side.[147]:38 The security hologram self-destructs when removed from the token, showing that the private key has been accessed.[148] Originally, these tokens were struck in brass and other base metals, but later used precious metals as bitcoin grew in value and popularity.[147]:80 Coins with stored face value as high as ₿1000 have been struck in gold.[147]:102–104 The British Museum's coin collection includes four specimens from the earliest series[147]:83 of funded bitcoin tokens; one is currently on display in the museum's money gallery.[149] In 2013, a Utahn manufacturer of these tokens was ordered by the Financial Crimes Enforcement Network (FinCEN) to register as a money services business before producing any more funded bitcoin tokens.[146][147]:80 Another type of physical wallet called a hardware wallet keeps credentials offline while facilitating transactions.[150] The hardware wallet acts as a computer peripheral and signs transactions as requested by the user, who must press a button on the wallet to confirm that they intended to make the transaction. Hardware wallets never expose their private keys, keeping bitcoins in cold storage even when used with computers that may be compromised by malware.[143]:42–45 Decentralization Bitcoin is decentralized thus:[7] Bitcoin does not have a central authority.[7] There is no central server; the bitcoin network is peer-to-peer.[9] There is no central storage; the bitcoin ledger is distributed.[151] The ledger is public; anybody can store it on their computer.[6]:ch. 1 There is no single administrator;[7] the ledger is maintained by a network of equally privileged miners.[6]:ch. 1 Anybody can become a miner.[6]:ch. 1 The additions to the ledger are maintained through competition. Until a new block is added to the ledger, it is not known which miner will create the block.[6]:ch. 1 The issuance of bitcoins is decentralized. They are issued as a reward for the creation of a new block.[115] Anybody can create a new bitcoin address (a bitcoin counterpart of a bank account) without needing any approval.[6]:ch. 1 Anybody can send a transaction to the network without needing any approval; the network merely confirms that the transaction is legitimate.[152]:32 Conversely, researchers have pointed out at a "trend towards centralization". Although bitcoin can be sent directly from user to user, in practice intermediaries are widely used.[35]:220–222 Bitcoin miners join large mining pools to minimize the variance of their income.[35]:215, 219–222[153]:3[154] Because transactions on the network are confirmed by miners, decentralization of the network requires that no single miner or mining pool obtains 51% of the hashing power, which would allow them to double-spend coins, prevent certain transactions from being verified and prevent other miners from earning income.[155] As of 2013 just six mining pools controlled 75% of overall bitcoin hashing power.[155] In 2014 mining pool Ghash.io obtained 51% hashing power which raised significant controversies about the safety of the network. The pool has voluntarily capped their hashing power at 39.99% and requested other pools to act responsibly for the benefit of the whole network.[156] Around the year 2017, over 70% of the hashing power and 90% of transactions were operating from China.[157] According to researchers, other parts of the ecosystem are also "controlled by a small set of entities", notably the maintenance of the client software, online wallets and simplified payment verification (SPV) clients.[155] Privacy & Fungibility Bitcoin is pseudonymous, meaning that funds are not tied to real-world entities but rather bitcoin addresses. Owners of bitcoin addresses are not explicitly identified, but all transactions on the blockchain are public. In addition, transactions can be linked to individuals and companies through "idioms of use" (e.g., transactions that spend coins from multiple inputs indicate that the inputs may have a common owner) and corroborating public transaction data with known information on owners of certain addresses.[158] Additionally, bitcoin exchanges, where bitcoins are traded for traditional currencies, may be required by law to collect personal information.[159] To heighten financial privacy, a new bitcoin address can be generated for each transaction.[160] Wallets and similar software technically handle all bitcoins as equivalent, establishing the basic level of fungibility. Researchers have pointed out that the history of each bitcoin is registered and publicly available in the blockchain ledger, and that some users may refuse to accept bitcoins coming from controversial transactions, which would harm bitcoin's fungibility.[161] For example, in 2012, Mt. Gox froze accounts of users who deposited bitcoins that were known to have just been stolen.[162] Ideology Satoshi Nakamoto stated in his white paper that: "The root problem with conventional currencies is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust."[163] Austrian economics roots According to the European Central Bank, the decentralization of money offered by bitcoin has its theoretical roots in the Austrian school of economics, especially with Friedrich von Hayek in his book Denationalisation of Money: The Argument Refined,[164] in which Hayek advocates a complete free market in the production, distribution and management of money to end the monopoly of central banks.[165]:22 Anarchism and libertarianism Further information: Crypto-anarchism According to The New York Times, libertarians and anarchists were attracted to the philosophical idea behind bitcoin. Early bitcoin supporter Roger Ver said: "At first, almost everyone who got involved did so for philosophical reasons. We saw bitcoin as a great idea, as a way to separate money from the state."[163] The Economist describes bitcoin as "a techno-anarchist project to create an online version of cash, a way for people to transact without the possibility of interference from malicious governments or banks".[166] Economist Paul Krugman argues that cryptocurrencies like bitcoin are "something of a cult" based in "paranoid fantasies" of government power.[167] External video video icon The Declaration Of Bitcoin's Independence, BraveTheWorld, 4:38[168] Nigel Dodd argues in The Social Life of Bitcoin that the essence of the bitcoin ideology is to remove money from social, as well as governmental, control.[169] Dodd quotes a YouTube video, with Roger Ver, Jeff Berwick, Charlie Shrem, Andreas Antonopoulos, Gavin Wood, Trace Meyer and other proponents of bitcoin reading The Declaration of Bitcoin's Independence. The declaration includes a message of crypto-anarchism with the words: "Bitcoin is inherently anti-establishment, anti-system, and anti-state. Bitcoin undermines governments and disrupts institutions because bitcoin is fundamentally humanitarian."[169][168] David Golumbia says that the ideas influencing bitcoin advocates emerge from right-wing extremist movements such as the Liberty Lobby and the John Birch Society and their anti-Central Bank rhetoric, or, more recently, Ron Paul and Tea Party-style libertarianism.[170] Steve Bannon, who owns a "good stake" in bitcoin, considers it to be "disruptive populism. It takes control back from central authorities. It's revolutionary."[171] A 2014 study of Google Trends data found correlations between bitcoin-related searches and ones related to computer programming and illegal activity, but not libertarianism or investment topics.[172] Economics Main article: Economics of bitcoin Liquidity,[i] semilogarithmic plot.[112] Bitcoin is a digital asset designed to work in peer-to-peer transactions as a currency.[4][173] Bitcoins have three qualities useful in a currency, according to The Economist in January 2015: they are "hard to earn, limited in supply and easy to verify."[174] Per some researchers, as of 2015, bitcoin functions more as a payment system than as a currency.[35] Economists define money as serving the following three purposes: a store of value, a medium of exchange, and a unit of account.[175] According to The Economist in 2014, bitcoin functions best as a medium of exchange.[175] However, this is debated, and a 2018 assessment by The Economist stated that cryptocurrencies met none of these three criteria.[166] Yale economist Robert J. Shiller writes that bitcoin has potential as a unit of account for measuring the relative value of goods, as with Chile's Unidad de Fomento, but that "Bitcoin in its present form [...] doesn't really solve any sensible economic problem".[176] According to research by Cambridge University, between 2.9 million and 5.8 million unique users used a cryptocurrency wallet in 2017, most of them for bitcoin. The number of users has grown significantly since 2013, when there were 300,000–1.3 million users.[12] Acceptance by merchants The overwhelming majority of bitcoin transactions take place on a cryptocurrency exchange, rather than being used in transactions with merchants.[177] Delays processing payments through the blockchain of about ten minutes make bitcoin use very difficult in a retail setting. Prices are not usually quoted in units of bitcoin and many trades involve one, or sometimes two, conversions into conventional currencies.[35] Merchants that do accept bitcoin payments may use payment service providers to perform the conversions.[178] In 2017 and 2018 bitcoin's acceptance among major online retailers included only three of the top 500 U.S. online merchants, down from five in 2016.[177] Reasons for this decline include high transaction fees due to bitcoin's scalability issues and long transaction times.[179] Bloomberg reported that the largest 17 crypto merchant-processing services handled $69 million in June 2018, down from $411 million in September 2017. Bitcoin is "not actually usable" for retail transactions because of high costs and the inability to process chargebacks, according to Nicholas Weaver, a researcher quoted by Bloomberg. High price volatility and transaction fees make paying for small retail purchases with bitcoin impractical, according to economist Kim Grauer. However, bitcoin continues to be used for large-item purchases on sites such as Overstock.com, and for cross-border payments to freelancers and other vendors.[180] Financial institutions Bitcoins can be bought on digital currency exchanges. Per researchers, "there is little sign of bitcoin use" in international remittances despite high fees charged by banks and Western Union who compete in this market.[35] The South China Morning Post, however, mentions the use of bitcoin by Hong Kong workers to transfer money home.[181] In 2014, the National Australia Bank closed accounts of businesses with ties to bitcoin,[182] and HSBC refused to serve a hedge fund with links to bitcoin.[183] Australian banks in general have been reported as closing down bank accounts of operators of businesses involving the currency.[184] On 10 December 2017, the Chicago Board Options Exchange started trading bitcoin futures,[185] followed by the Chicago Mercantile Exchange, which started trading bitcoin futures on 17 December 2017.[186] In September 2019 the Central Bank of Venezuela, at the request of PDVSA, ran tests to determine if bitcoin and ether could be held in central bank's reserves. The request was motivated by oil company's goal to pay its suppliers.[187] As an investment The Winklevoss twins have purchased bitcoin. In 2013, The Washington Post reported a claim that they owned 1% of all the bitcoins in existence at the time.[188] Other methods of investment are bitcoin funds. The first regulated bitcoin fund was established in Jersey in July 2014 and approved by the Jersey Financial Services Commission.[189] Forbes named bitcoin the best investment of 2013.[190] In 2014, Bloomberg named bitcoin one of its worst investments of the year.[191] In 2015, bitcoin topped Bloomberg's currency tables.[192] According to bitinfocharts.com, in 2017 there are 9,272 bitcoin wallets with more than $1 million worth of bitcoins.[193] The exact number of bitcoin millionaires is uncertain as a single person can have more than one bitcoin wallet. In August 2020, MicroStrategy invested in Bitcoin.[194][195] In May 2021, the Bitcoin's market share on exchanges dropped from 70% to 45% as investors pursued altcoins.[196] Venture capital Peter Thiel's Founders Fund invested US$3 million in BitPay.[197] In 2012, an incubator for bitcoin-focused start-ups was founded by Adam Draper, with financing help from his father, venture capitalist Tim Draper, one of the largest bitcoin holders after winning an auction of 30,000 bitcoins,[198] at the time called "mystery buyer".[199] The company's goal is to fund 100 bitcoin businesses within 2–3 years with $10,000 to $20,000 for a 6% stake.[198] Investors also invest in bitcoin mining.[200] According to a 2015 study by Paolo Tasca, bitcoin startups raised almost $1 billion in three years (Q1 2012 – Q1 2015).[201] Price and volatility Price in US$, semilogarithmic plot.[112] Annual volatility[111] The price of bitcoins has gone through cycles of appreciation and depreciation referred to by some as bubbles and busts.[202] In 2011, the value of one bitcoin rapidly rose from about US$0.30 to US$32 before returning to US$2.[203] In the latter half of 2012 and during the 2012–13 Cypriot financial crisis, the bitcoin price began to rise,[204] reaching a high of US$266 on 10 April 2013, before crashing to around US$50. On 29 November 2013, the cost of one bitcoin rose to a peak of US$1,242.[205] In 2014, the price fell sharply, and as of April remained depressed at little more than half 2013 prices. As of August 2014 it was under US$600.[206] According to Mark T. Williams, as of 30 September 2014, bitcoin has volatility seven times greater than gold, eight times greater than the S&P 500, and 18 times greater than the US dollar.[207] Hodl is a meme created in reference to holding (as opposed to selling) during periods of volatility. Unusual for an asset, bitcoin weekend trading during December 2020 was higher than for weekdays.[208] Hedge funds (using high leverage and derivates)[209] have attempted to use the volatility to profit from downward price movements. At the end of January 2021, such positions were over $1 billion, their highest of all time.[210][211] As of 8 February 2021, the closing price of bitcoin equals US$44,797.[212] Legal status, tax and regulation Further information: Legality of bitcoin by country or territory Because of bitcoin's decentralized nature and its trading on online exchanges located in many countries, regulation of bitcoin has been difficult. However, the use of bitcoin can be criminalized, and shutting down exchanges and the peer-to-peer economy in a given country would constitute a de facto ban.[213] The legal status of bitcoin varies substantially from country to country and is still undefined or changing in many of them. Regulations and bans that apply to bitcoin probably extend to similar cryptocurrency systems.[201] According to the Library of Congress, an "absolute ban" on trading or using cryptocurrencies applies in nine countries: Algeria, Bolivia, Egypt, Iraq, Morocco, Nepal, Pakistan, Vietnam, and the United Arab Emirates. An "implicit ban" applies in another 15 countries, which include Bahrain, Bangladesh, China, Colombia, the Dominican Republic, Indonesia, Kuwait, Lesotho, Lithuania, Macau, Oman, Qatar, Saudi Arabia and Taiwan.[214] In October 2020, the Islamic Republic News Agency announced pending regulations that would require bitcoin miners in Iran to sell bitcoin to the Central Bank of Iran, and the central bank would use it for imports.[215] Iran, as of October 2020, had issued over 1,000 bitcoin mining licenses.[215] The Iranian government initially took a stance against cryptocurrency, but later changed it after seeing that digital currency could be used to circumvent sanctions.[216] The US Office of Foreign Assets Control listed two Iranians and their bitcoin addresses as part of its Specially Designated Nationals and Blocked Persons List for their role in the 2018 Atlanta cyberattack whose ransom was paid in bitcoin.[217] Regulatory warnings The U.S. Commodity Futures Trading Commission has issued four "Customer Advisories" for bitcoin and related investments.[13] A July 2018 warning emphasized that trading in any cryptocurrency is often speculative, and there is a risk of theft from hacking, and fraud.[218] In May 2014 the U.S. Securities and Exchange Commission warned that investments involving bitcoin might have high rates of fraud, and that investors might be solicited on social media sites.[219] An earlier "Investor Alert" warned about the use of bitcoin in Ponzi schemes.[220] The European Banking Authority issued a warning in 2013 focusing on the lack of regulation of bitcoin, the chance that exchanges would be hacked, the volatility of bitcoin's price, and general fraud.[221] FINRA and the North American Securities Administrators Association have both issued investor alerts about bitcoin.[222][223] Price manipulation investigation An official investigation into bitcoin traders was reported in May 2018.[224] The U.S. Justice Department launched an investigation into possible price manipulation, including the techniques of spoofing and wash trades.[225][226][227] The U.S. federal investigation was prompted by concerns of possible manipulation during futures settlement dates. The final settlement price of CME bitcoin futures is determined by prices on four exchanges, Bitstamp, Coinbase, itBit and Kraken. Following the first delivery date in January 2018, the CME requested extensive detailed trading information but several of the exchanges refused to provide it and later provided only limited data. The Commodity Futures Trading Commission then subpoenaed the data from the exchanges.[228][229] State and provincial securities regulators, coordinated through the North American Securities Administrators Association, are investigating "bitcoin scams" and ICOs in 40 jurisdictions.[230] Academic research published in the Journal of Monetary Economics concluded that price manipulation occurred during the Mt Gox bitcoin theft and that the market remains vulnerable to manipulation.[231] The history of hacks, fraud and theft involving bitcoin dates back to at least 2011.[232] Research by John M. Griffin and Amin Shams in 2018 suggests that trading associated with increases in the amount of the Tether cryptocurrency and associated trading at the Bitfinex exchange account for about half of the price increase in bitcoin in late 2017.[233][234] J.L. van der Velde, CEO of both Bitfinex and Tether, denied the claims of price manipulation: "Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation. Tether issuances cannot be used to prop up the price of bitcoin or any other coin/token on Bitfinex."[235] Analysis External video video icon Cryptocurrencies: looking beyond the hype, Hyun Song Shin, Bank for International Settlements, 2:48[236] The Bank for International Settlements summarized several criticisms of bitcoin in Chapter V of their 2018 annual report. The criticisms include the lack of stability in bitcoin's price, the high energy consumption, high and variable transactions costs, the poor security and fraud at cryptocurrency exchanges, vulnerability to debasement (from forking), and the influence of miners.[236][237][238] François R. Velde, Senior Economist at the Chicago Fed, described bitcoin as "an elegant solution to the problem of creating a digital currency".[239] David Andolfatto, Vice President at the Federal Reserve Bank of St. Louis, stated that bitcoin is a threat to the establishment, which he argues is a good thing for the Federal Reserve System and other central banks, because it prompts these institutions to operate sound policies.[128]:33[240][241] Economic concerns Further information: Cryptocurrency bubble and Economics of bitcoin Bitcoin price bubbles in 2011, 2013 and 2017 Bitcoin, along with other cryptocurrencies, has been described as an economic bubble by at least eight Nobel Memorial Prize in Economic Sciences laureates at various times, including Robert Shiller on 1 March 2014,[176] Joseph Stiglitz on 29 November 2017,[242] and Richard Thaler on 21 December 2017.[243][244] On 29 January 2018, a noted Keynesian economist Paul Krugman has described bitcoin as "a bubble wrapped in techno-mysticism inside a cocoon of libertarian ideology",[167] on 2 February 2018, professor Nouriel Roubini of New York University has called bitcoin the "mother of all bubbles",[245] and on 27 April 2018, a University of Chicago economist James Heckman has compared it to the 17th-century tulip mania.[244] Journalists, economists, investors, and the central bank of Estonia have voiced concerns that bitcoin is a Ponzi scheme.[246][247][248][249] In April 2013, Eric Posner, a law professor at the University of Chicago, stated that "a real Ponzi scheme takes fraud; bitcoin, by contrast, seems more like a collective delusion."[250] A July 2014 report by the World Bank concluded that bitcoin was not a deliberate Ponzi scheme.[251]:7 In June 2014, the Swiss Federal Council examined concerns that bitcoin might be a pyramid scheme, and concluded that "since in the case of bitcoin the typical promises of profits are lacking, it cannot be assumed that bitcoin is a pyramid scheme."[252]:21 Energy consumption and carbon footprint Bitcoin electricity consumption Electricity consumption of the bitcoin network since 2016 (annualized) and comparison with the electricity consumption of various countries in 2019. The upper and lower bounds (grey traces) are based on worst-case and best-case scenario assumptions, respectively. The red trace indicates an intermediate best-guess estimate. (data sources: Cambridge Bitcoin Electricity Consumption Index, US Energy Information Administration; for details, see methodology) Bitcoin has been criticized for the amount of electricity consumed by mining. As of 2015, estimated combined electricity consumption attributed to mining was 166.7 megawatts and by 2017, was estimated to be between one and four gigawatts of electricity.[253][174] In 2018, bitcoin was estimated by to use 2.55 to 3.572 GW, or around 6% of the total power consumed by the global banking sector.[254][255][256] In July 2019 BBC reported bitcoin consumes about 7 gigawatts, 0.2% of the global total, or equivalent to that of Switzerland.[257] A 2021 estimate from the University of Cambridge suggests bitcoin consumes more than 178 (TWh) annually, ranking it in the top 30 energy consumers if it were a country.[258] Bitcoin is mined in places like Iceland where geothermal energy is cheap and cooling Arctic air is free.[259] Bitcoin miners are known to use hydroelectric power in Tibet, Quebec, Washington (state), and Austria to reduce electricity costs.[254][260] Miners are attracted to suppliers such as Hydro Quebec that have energy surpluses.[261] According to a University of Cambridge study, much of bitcoin mining is done in China, where electricity is subsidized by the government.[262][263] A significant part of Bitcoin mining is powered by cheap electricity in Xinjiang, which mostly comes from coal power.[264][265] In April 2021 a coal mine explosion in the province coincided with a 35% drop in hashing power and a flash crash in price.[266][264] In other provinces, such as Hunan and Sichuan, mining farms use more hydropower, however these account for at most 4% of hash power. According to Alex de Vries, renewable energy is not a good match for Bitcoin mining as 24/7 operations are best for ROI on mining devices.[266] In 2021, a US company purchased the Greenidge coal power plant and converted it to burn natural gas for the sole purpose of mining bitcoin, which has proven to be highly profitable, in spite of protests of local residents against air pollution and thermal pollution.[267] Concerns about bitcoin's environmental impact relate bitcoin's energy consumption to carbon emissions.[268][269] The difficulty of translating the energy consumption into carbon emissions lies in the decentralized nature of bitcoin impeding the localization of miners to examine the electricity mix used. The results of recent studies analyzing bitcoin's carbon footprint vary.[270][271][272][273] A study published in Nature Climate Change in 2018 claims that bitcoin "could alone produce enough CO 2 emissions to push warming above 2 °C within less than three decades."[272] However, other researchers criticized this analysis, arguing the underlying scenarios were inadequate, leading to overestimations.[274][275][276] According to studies published in Joule and American Chemical Society in 2019, bitcoin's annual energy consumption results in annual carbon emission ranging from 17[256] to 22.9 MtCO 2 which is comparable to the level of emissions of countries as Jordan and Sri Lanka or Kansas City.[273] George Kamiya, writing for the International Energy Agency, says that "predictions about bitcoin consuming the entire world's electricity" are sensational, but that the area "requires careful monitoring and rigorous analysis".[277] Use in illegal transactions Further information: Cryptocurrency and crime and Bitcoin network § Alleged criminal activity Bitcoin held at exchanges are vulnerable to theft through phishing, scamming, and hacking. As of December 2017, around 980,000 bitcoins have been stolen from cryptocurrency exchanges.[124] The use of bitcoin by criminals has attracted the attention of financial regulators, legislative bodies, law enforcement, and the media.[278] Bitcoin gained early notoriety for its use on the Silk Road. The U.S. Senate held a hearing on virtual currencies in November 2013.[279] The U.S. government claimed that bitcoin was used to facilitate payments related to Russian interference in the 2016 United States elections.[280] However, a 2021 study led by former CIA director Michael Morell showed that broad generalizations about the use of bitcoin in illicit finance are significantly overstated and that blockchain analysis is an effective crime fighting and intelligence gathering tool.[281] Several news outlets have asserted that the popularity of bitcoins hinges on the ability to use them to purchase illegal goods.[173][282] Nobel-prize winning economist Joseph Stiglitz says that bitcoin's anonymity encourages money laundering and other crimes.[283][284] In 2014, researchers at the University of Kentucky found "robust evidence that computer programming enthusiasts and illegal activity drive interest in bitcoin, and find limited or no support for political and investment motives".[172] Australian researchers have estimated that 25% of all bitcoin users and 44% of all bitcoin transactions are associated with illegal activity as of April 2017. There were an estimated 24 million bitcoin users primarily using bitcoin for illegal activity. They held $8 billion worth of bitcoin, and made 36 million transactions valued at $72 billion.[285][286] Software implementation Bitcoin CoreBitcoin-core-v0.10.0.png The start screen under Fedora Original author(s) Satoshi Nakamoto Initial release 2009 Stable release 0.20.1 (2 August 2020; 10 months ago) [±] Repository github.com/bitcoin/bitcoin Written in C++ Operating system Linux, Windows, macOS Type Cryptocurrency License MIT License Website bitcoincore.org Bitcoin Core is free and open-source software that serves as a bitcoin node (the set of which form the bitcoin network) and provides a bitcoin wallet which fully verifies payments. It is considered to be bitcoin's reference implementation.[287] Initially, the software was published by Satoshi Nakamoto under the name "Bitcoin", and later renamed to "Bitcoin Core" to distinguish it from the network.[288] It is also known as the Satoshi client.[289] The MIT Digital Currency Initiative funds some of the development of Bitcoin Core.[290] The project also maintains the cryptography library libsecp256k1.[291] Bitcoin Core includes a transaction verification engine and connects to the bitcoin network as a full node.[289] Moreover, a cryptocurrency wallet, which can be used to transfer funds, is included by default.[291] The wallet allows for the sending and receiving of bitcoins. It does not facilitate the buying or selling of bitcoin. It allows users to generate QR codes to receive payment. The software validates the entire blockchain, which includes all bitcoin transactions ever. This distributed ledger which has reached more than 235 gigabytes in size as of Jan 2019, must be downloaded or synchronized before full participation of the client may occur.[289] Although the complete blockchain is not needed all at once since it is possible to run in pruning mode. A command line-based daemon with a JSON-RPC interface, bitcoind, is bundled with Bitcoin Core. It also provides access to testnet, a global testing environment that imitates the bitcoin main network using an alternative blockchain where valueless "test bitcoins" are used. Regtest or Regression Test Mode creates a private blockchain which is used as a local testing environment.[292] Finally, bitcoin-cli, a simple program which allows users to send RPC commands to bitcoind, is also included. Checkpoints which have been hard coded into the client are used only to prevent Denial of Service attacks against nodes which are initially syncing the chain. For this reason the checkpoints included are only as of several years ago.[293][294][failed verification] A one megabyte block size limit was added in 2010 by Satoshi Nakamoto. This limited the maximum network capacity to about three transactions per second.[295] Since then, network capacity has been improved incrementally both through block size increases and improved wallet behavior. A network alert system was included by Satoshi Nakamoto as a way of informing users of important news regarding bitcoin.[296] In November 2016 it was retired. It had become obsolete as news on bitcoin is now widely disseminated. Bitcoin Core includes a scripting language inspired by Forth that can define transactions and specify parameters.[297] ScriptPubKey is used to "lock" transactions based on a set of future conditions. scriptSig is used to meet these conditions or "unlock" a transaction. Operations on the data are performed by various OP_Codes. Two stacks are used - main and alt. Looping is forbidden. Bitcoin Core uses OpenTimestamps to timestamp merge commits.[298] The original creator of the bitcoin client has described their approach to the software's authorship as it being written first to prove to themselves that the concept of purely peer-to-peer electronic cash was valid and that a paper with solutions could be written. The lead developer is Wladimir J. van der Laan, who took over the role on 8 April 2014.[299] Gavin Andresen was the former lead maintainer for the software client. Andresen left the role of lead developer for bitcoin to work on the strategic development of its technology.[299] Bitcoin Core in 2015 was central to a dispute with Bitcoin XT, a competing client that sought to increase the blocksize.[300] Over a dozen different companies and industry groups fund the development of Bitcoin Core. In popular culture Term "HODL" Hodl (/ˈhɒdəl/ HOD-əl; often written HODL) is slang in the cryptocurrency community for holding a cryptocurrency rather than selling it.[301] A person who does this is known as a Hodler. It originated in a December 2013 post on the Bitcoin Forum message board by an apparently inebriated user who posted with a typo in the subject, "I AM HODLING."[302] It is often humorously suggested to be a backronym to "hold on for dear life".[303] In 2017, Quartz listed it as one of the essential slang terms in Bitcoin culture, and described it as a stance, "to stay invested in bitcoin and not to capitulate in the face of plunging prices."[304] TheStreet.com referred to it as the "favorite mantra" of Bitcoin holders.[305] Bloomberg News referred to it as a "mantra" for holders during market routs.[306] Literature In Charles Stross' 2013 science fiction novel, Neptune's Brood, the universal interstellar payment system is known as "bitcoin" and operates using cryptography.[307] Stross later blogged that the reference was intentional, saying "I wrote Neptune's Brood in 2011. Bitcoin was obscure back then, and I figured had just enough name recognition to be a useful term for an interstellar currency: it'd clue people in that it was a networked digital currency."[308] Film The 2014 documentary The Rise and Rise of Bitcoin portrays the diversity of motives behind the use of bitcoin by interviewing people who use it. These include a computer programmer and a drug dealer.[309] The 2016 documentary Banking on Bitcoin is an introduction to the beginnings of bitcoin and the ideas behind cryptocurrency today.[310] Academia In September 2015, the establishment of the peer-reviewed academic journal Ledger (ISSN 2379-5980) was announced. It covers studies of cryptocurrencies and related technologies, and is published by the University of Pittsburgh.[311] The journal encourages authors to digitally sign a file hash of submitted papers, which will then be timestamped into the bitcoin blockchain. Authors are also asked to include a personal bitcoin address in the first page of their papers Ethereum Ethereum is a decentralized, open-source blockchain with smart contract functionality. Ether (ETH or Ξ) is the native cryptocurrency of the platform. After Bitcoin, it is the second-largest cryptocurrency by market capitalization.[1] Ethereum is the most actively used blockchain.[2][3] Ethereum was proposed in 2013 by programmer Vitalik Buterin. In 2014, development was crowdfunded, and the network went live with an initial supply of 72 million coins on 30 July 2015.[4][5][6][7][8] The platform allows developers to build and operate decentralized applications that users can interact with.[9][10] Decentralized finance (DeFi) applications provide a broad array of financial services without the need for typical financial intermediaries, such as brokerages, exchanges, or banks, allowing cryptocurrency users to borrow against their holdings or lend them out for interest.[11][12] Ethereum also allows for the creation and exchange of NFTs, which are non-interchangeable tokens connected to digital works of art or other real-world items and sold as unique digital property. Additionally, many other cryptocurrencies operate as ERC-20 tokens on top of the Ethereum blockchain and have utilized the platform for initial coin offerings. In 2016, a hacker exploited a flaw in a third-party project called The DAO and stole $50 million of Ether.[13] As a result, the Ethereum community voted to hard fork the blockchain to reverse the theft[14] and Ethereum Classic (ETC) continued as the original chain.[15] Ethereum has started implementing a series of upgrades called Ethereum 2.0, which includes a transition to proof of stake and aims to increase transaction throughput using sharding.[16][17] Contents 1 History 1.1 Etymology 1.2 Launch and milestones 1.3 The DAO event 1.4 Enterprise Ethereum Alliance and Corporate Adoption 1.5 Ethereum 2.0 2 Design 2.1 Ether 2.2 Accounts 2.2.1 Addresses 2.3 Virtual machine 2.4 Gas 2.5 Governance 2.6 Difficulty bomb 2.7 Comparison to Bitcoin 3 Applications 3.1 Contract source code 3.2 ERC-20 Tokens 3.3 Non-fungible Tokens (NFTs) 3.4 Decentralized finance 3.5 Enterprise software 3.6 Permissioned ledgers 3.7 Performance 4 References 5 External links History Ethereum founder Vitalik Buterin in 2015 Ethereum was initially described in a white paper by Vitalik Buterin,[18] a programmer and co-founder of Bitcoin Magazine, in late 2013 with a goal of building decentralized applications.[19][20] Buterin argued that Bitcoin and blockchain technology could benefit from other applications besides money and needed a scripting language for application development that could lead to attaching real-world assets, such as stocks and property, to the blockchain.[21] In 2013, Buterin briefly worked with eToro CEO Yoni Assia on the Colored Coins project and drafted its white paper outlining additional use cases for blockchain technology.[22] However, after failing to gain agreement on how the project should proceed, he proposed the development of a new platform with a more general scripting language that would eventually become Ethereum.[4] Ethereum was announced at the North American Bitcoin Conference in Miami, in January 2014.[23] During the conference, Gavin Wood, Charles Hoskinson, and Anthony Di Iorio (who financed the project) rented a house in Miami with Buterin to develop a fuller sense of what Ethereum might become.[23] Di Iorio invited friend Joseph Lubin, who invited reporter Morgen Peck, to bear witness.[23] Peck subsequently wrote about the experience in Wired.[24] Six months later the founders met again in a house in Zug, Switzerland, where Buterin told the founders that the project would proceed as a non-profit. Hoskinson left the project at that time.[23] Ethereum has an unusually long list of founders. Anthony Di Iorio wrote: "Ethereum was founded by Vitalik Buterin, Myself, Charles Hoskinson, Mihai Alisie & Amir Chetrit (the initial 5) in December 2013. Joseph Lubin, Gavin Wood, & Jeffrey Wilcke were added in early 2014 as founders." Formal development of the software began in early 2014 through a Swiss company, Ethereum Switzerland GmbH (EthSuisse).[25] The basic idea of putting executable smart contracts in the blockchain needed to be specified before the software could be implemented. This work was done by Gavin Wood, then the chief technology officer, in the Ethereum Yellow Paper that specified the Ethereum Virtual Machine.[26] Subsequently, a Swiss non-profit foundation, the Ethereum Foundation (Stiftung Ethereum), was created as well. Development was funded by an online public crowdsale from July to August 2014, with the participants buying the Ethereum value token (Ether) with another digital currency, Bitcoin. While there was early praise for the technical innovations of Ethereum, questions were also raised about its security and scalability.[19] In 2019, Ethereum Foundation employee Virgil Griffith was arrested by the US government for presenting at a blockchain conference in North Korea.[27] Etymology Buterin chose the name Ethereum after browsing a list of elements from science fiction on Wikipedia. He stated, "I immediately realized that I liked it better than all of the other alternatives that I had seen; I suppose it was the fact that [it] sounded nice and it had the word 'ether', referring to the hypothetical invisible medium that permeates the universe and allows light to travel."[23] Buterin wanted his platform to be the underlying and imperceptible medium for the applications running on top of it.[28] Launch and milestones Ethereum protocol upgrades Code name Release date Release block Frontier 30 July 2015 0 Ice Age 8 September 2015 200,000 Homestead 15 March 2016 1,150,000 DAO Fork (unplanned) 20 July 2016 1,920,000 Tangerine Whistle (unplanned) 18 October 2016 2,463,000 Spurious Dragon 23 November 2016 2,675,000 Byzantium 16 October 2017 4,370,000 Constantinople 28 February 2019 7,280,000 Petersburg (unplanned) 28 February 2019 7,280,000 Istanbul 8 December 2019 9,069,000 Muir Glacier 1 January 2020 9,200,000 Berlin 15 April 2021 12,244,000 London TBD TBD Several codenamed prototypes of Ethereum were developed by the Ethereum Foundation as part of their proof-of-concept series. "Olympic" was the last prototype and public beta pre-release. The Olympic network provided users with a bug bounty of 25,000 Ether for stress testing the limits of the Ethereum blockchain. In July 2015, "Frontier" marked the tentative experimental release of the Ethereum platform.[29] Since the initial launch, Ethereum has undergone several planned protocol upgrades, which are important changes affecting the underlying functionality and/or incentive structures of the platform.[30][31] Protocol upgrades are accomplished by means of a hard fork. The latest upgrade to Ethereum was "Berlin", implemented on April 14, 2021.[32] The next upgrade, "London", is slated to be launched in July. London will include Ethereum Improvement Proposal ("EIP") 1559, which will destroy Ether that is used for transaction fees as opposed to providing them to miners, potentially decreasing the overall supply.[33] The DAO event In 2016, a decentralized autonomous organization called The DAO, a set of smart contracts developed on the platform, raised a record US$150 million in a crowdsale to fund the project.[34] The DAO was exploited in June 2016 when US$50 million of DAO tokens were stolen by an unknown hacker.[35][36] The event sparked a debate in the crypto-community about whether Ethereum should perform a contentious "hard fork" to reappropriate the affected funds.[37] It resulted in the network splitting into two blockchains: Ethereum with the theft reversed and Ethereum Classic which continued on the original chain.[38] The hard fork created a rivalry between the two networks. After the hard fork, Ethereum subsequently forked twice in the fourth quarter of 2016 to deal with other attacks. Enterprise Ethereum Alliance and Corporate Adoption In March 2017, various blockchain startups, research groups, and Fortune 500 companies announced the creation of the Enterprise Ethereum Alliance (EEA) with 30 founding members.[39] By May 2017, the nonprofit organization had 116 enterprise members – including ConsenSys, CME Group, Cornell University's research group, Toyota Research Institute, Samsung SDS, Microsoft, Intel, J. P. Morgan, Cooley LLP, Merck KGaA, DTCC, Deloitte, Accenture, Banco Santander, BNY Mellon, ING, and National Bank of Canada.[40][41] By July 2017, there were over 150 members in the alliance, including MasterCard, Cisco Systems, Sberbank, and Scotiabank.[42][43] In March 2021, Visa Inc. announced that it began settling stablecoin transactions using Ethereum.[44] In April 2021, JP Morgan Chase, UBS, and MasterCard announced that they were investing $65 million into ConsenSys, a software development firm that builds Ethereum-related infrastructure.[45] Ethereum 2.0 Ethereum 2.0 releases Code name Release date Release block ETH 2.0 Phase 0 (Beacon Chain) 2020-12-01 0 ETH 2.0 Phase 1 (planned) TBD TBD ETH 2.0 Phase 2 (planned) TBD TBD Open-source development is currently underway for a major upgrade to Ethereum known as Ethereum 2.0 or Eth2.[46] The main purpose of the upgrade is to increase transaction throughput for the network from the current of about 15 transactions per second to up to tens of thousands of transactions per second.[47] The stated goal is to increase throughput by splitting up the workload into many blockchains running in parallel (referred to as sharding) and then having them all share a common consensus proof-of-stake blockchain, so that to maliciously tamper with any singular chain would require one to tamper with the common consensus, which would cost the attacker far more than they could ever gain from an attack. Ethereum 2.0 (also known as Serenity) is designed to be launched in three phases: "Phase 0" was launched on 1 December 2020 and created the Beacon Chain, a proof-of-stake (PoS) blockchain that will act as the central coordination and consensus hub of Ethereum 2.0.[48][3][49] "Phase 1" will create shard chains and connect them to the Beacon Chain. "Phase 2" will implement state execution in the shard chains[17] with the current Ethereum 1.0 chain expected to become one of the shards of Ethereum 2.0. Design Ethereum is a permissionless, non-hierarchical network of computers (nodes) which build and come to consensus on an ever-growing series of "blocks", or batches of transactions, known as the blockchain. Each block contains an identifier of the block that it must immediately follow in the chain if it is to be considered valid. Whenever a node adds a block to its chain, it executes the transactions therein in their order, thereby altering the ETH balances and other storage values of Ethereum accounts. These balances and values, collectively known as the state, are maintained on the node's computer separately from the blockchain, in a Merkle tree. Each node communicates with a relatively small subset of the network, known as its peers. Whenever a node wishes to include a new transaction in the blockchain, it sends the transaction to its peers, who then send it to their peers, and so on. In this way, it propagates throughout the network. Certain nodes, called miners, maintain a list of all of these new transactions and use them to create new blocks, which they then send to the rest of the network. Whenever a node receives a block, it checks the validity of the block and of all of the transactions therein and, if valid, adds it to its blockchain and executes all of said transactions. As the network is non-hierarchical, a node may receive competing blocks, which may form competing chains. The network comes to consensus on the blockchain by following the "longest-chain rule", which states that the chain with the most blocks at any given time is the canonical chain. This rule achieves consensus because miners do not want to expend their computational work trying to add blocks to a chain that will be abandoned by the network. Ether The number of daily confirmed Ethereum transactions as of April 2021 Ether (ETH) is the cryptocurrency generated by the Ethereum protocol as a reward to miners in a proof-of-work system for adding blocks to the blockchain. It is the only currency accepted in the payment of transaction fees, which also go to miners. The block reward together with the transaction fees provide the incentive to miners to keep the blockchain growing (i.e. to keep processing new transactions). Therefore, ETH is fundamental to the operation of the network. Each Ethereum account has an ETH balance and may send ETH to any other account. The smallest subunit of ETH is known as a Wei and is equal to 10−18 ETH.[50] Ether is often erroneously referred to as "Ethereum".[51] Ether is listed on exchanges under the ticker symbol ETH. The Greek uppercase Xi character (Ξ) is sometimes used for its currency symbol.[citation needed] The shift to Ethereum 2.0 may reduce the issuance rate of Ether.[52] There is currently no implemented hard cap on the total supply of Ether.[53] Accounts There are two types of accounts on Ethereum: user accounts (also known as externally-owned accounts) and contracts. Both types have an ETH balance, may send ETH to any account, may call any public function of a contract or create a new contract, and are identified on the blockchain and in the state by their address.[52][54] User accounts are the only type which may create transactions. For a transaction to be valid, it must be signed using the sending account's private key, a 64-character hexadecimal string that should only be known to the account's owner. The signature algorithm used is ECDSA. Importantly, this algorithm allows one to derive the signer's address from the signature without knowing the private key. Contracts are the only type of account which has associated code (a set of functions and variable declarations) and contract storage (the values of the variables at any given time). Contracts are passive entities, only able to do anything as a result of an account calling one of its functions. During the execution of its code, a contract may: send ETH, read from and write to its storage, create temporary storage (memory) that dies at the end of the function, call any of its own functions, call any public function of a different contract, create a new contract, and query information about the current transaction or the blockchain.[55] Addresses Ethereum addresses are composed of the prefix "0x", a common identifier for hexadecimal, concatenated with the rightmost 20 bytes of the Keccak-256 hash of the ECDSA public key (the curve used is the so-called secp256k1). In hexadecimal, 2 digits represent a byte, meaning addresses contain 40 hexadecimal digits, e.g. 0xb794f5ea0ba39494ce839613fffba74279579268. Contract addresses are in the same format, however, they are determined by sender and creation transaction nonce.[56] Virtual machine The Ethereum Virtual Machine (EVM) is the runtime environment for smart contracts in Ethereum. It is a 256-bit register stack designed to run the same code exactly as intended. The formal definition of the EVM is specified in the Ethereum Yellow Paper.[56][57] EVMs have been implemented in C++, C#, Go, Haskell, Java, JavaScript, Python, Ruby, Rust, Elixir, Erlang, and soon WebAssembly. Gas Gas is a unit of account within the EVM used in the calculation of a transaction fee, which is the amount of ETH a transaction's sender must pay to the miner who includes the transaction in the blockchain. Each type of operation which may be performed by the EVM is hardcoded with a certain gas cost, which is intended to be roughly proportional to the amount of resources (computation and storage) a node must expend to perform that operation. When creating a transaction, the sender must specify a gas limit and gas price. The gas limit is the maximum amount of gas the sender is willing to use in the transaction, and the gas price is the amount of ETH the sender wishes to pay to the miner per unit of gas used. The higher the gas price, the more incentive a miner has to include the transaction in their block, and thus the quicker the transaction will be included in the blockchain. The sender buys the full amount of gas (i.e. the gas limit) up-front, at the start of the execution of the transaction, and is refunded at the end for any gas not used. If at any point the transaction does not have enough gas to perform the next operation, the transaction is reverted but the sender still pays for the gas used. Gas prices are typically denominated in Gwei, a subunit of ETH equal to 10−9 ETH.[58] This fee mechanism is designed to mitigate transaction spam, prevent infinite loops during contract execution, and provide for a market-based allocation of network resources. Governance On social governance Our governance is inherently social, people who are more connected in the community have more power, a kind of soft power. Vlad Zamfir, Ethereum core developer, The New Yorker[23] In October 2015,[59] a development governance was proposed as the Ethereum Improvement Proposal (EIP), standardized on EIP-1.[60] The core development group and community were to gain consensus by a process regulated EIP.[61][62] Difficulty bomb The difficulty bomb is an Ethereum protocol feature that causes the difficulty of mining a block to increase exponentially over time after a certain block is reached, with the intended purpose being to incentivize upgrades to the protocol and prevent miners from having too much control over upgrades. As the protocol is upgraded, the difficulty bomb is typically pushed further out in time. The protocol has included a difficulty bomb from the beginning, and the bomb has been pushed back several times.[63] It was originally placed there primarily to ensure a successful upgrade from proof of work to proof of stake, an upgrade which removes miners entirely from the design of the network.[citation needed] The period during which the mining difficulty is increasing is known as the "Ice Age". Comparison to Bitcoin Bitcoin's primary use case is that it is a store of value and a digital currency. Ether can also be used as a digital currency and store of value, but the Ethereum network makes it also possible to create and run decentralized applications and smart contracts. Ethereum blocks are validated approximately every 12 seconds on Ethereum as opposed to approximately every 10 minutes on Bitcoin. Additionally, Bitcoin has a fixed supply of 21,000,000 coins, whereas Ethereum has no supply cap.[64] Ethereum and Bitcoin are both mined through proof-of-work and can be purchased on cryptocurrency exchanges.[65] Applications The EVM's instruction set is Turing-complete, meaning Ethereum contracts can do anything that computer programs in general can do. Popular uses of Ethereum have included the creation of fungible (ERC20) and non-fungible (ERC721) tokens with a variety of properties, crowdfunding (e.g. initial coin offerings), decentralized finance, decentralized exchanges, decentralized autonomous organizations (DAOs), games, prediction markets, and gambling. Contract source code Ethereum's smart contracts are written in high-level programming languages and then compiled down to EVM bytecode and deployed to the Ethereum blockchain. They can be written in Solidity (a language library with similarities to C and JavaScript), Serpent (similar to Python, but deprecated), Yul (an intermediate language that can compile to various different backends – EVM 1.0, EVM 1.5 and eWASM are planned), LLL (a low-level Lisp-like language), and Mutan (Go-based, but deprecated). There was also[when?] a research-oriented language under development called Vyper (a strongly-typed Python-derived decidable language).[citation needed] Source code and compiler information are usually published along with the launch of the contract so that users can see the code and verify that it compiles to the bytecode that is on-chain. One issue related to using smart contracts on a public blockchain is that bugs, including security holes, are visible to all but cannot be fixed quickly.[66] One example of this is the 2016 attack on The DAO, which could not be quickly stopped or reversed.[35] There is ongoing research on how to use formal verification to express and prove non-trivial properties. A Microsoft Research report noted that writing solid smart contracts can be extremely difficult in practice, using The DAO hack to illustrate this problem. The report discussed tools that Microsoft had developed for verifying contracts, and noted that a large-scale analysis of published contracts is likely to uncover widespread vulnerabilities. The report also stated that it is possible to verify the equivalence of a Solidity program and the EVM code.[67] ERC-20 Tokens The ERC-20 (Ethereum Request for Comments 20) Token Standard allows for fungible tokens on the Ethereum blockchain. The standard, proposed by Fabian Vogelsteller in November 2015, implements an API for tokens within smart contracts.[68] The standard provides functions including the transfer of tokens from one account to another, getting the current token balance of an account and getting the total supply of the token available on the network. Smart contracts that correctly implement ERC-20 processes are called ERC-20 Token Contracts, and help keep track of the created tokens on Ethereum.[68] Numerous cryptocurrencies have launched as ERC-20 tokens and have been distributed through initial coin offerings.[69] Fees to send ERC-20 tokens must be paid with Ether. Non-fungible Tokens (NFTs) Main article: Non-fungible token Ethereum also allows for the creation of unique and indivisible tokens, called non-fungible tokens (NFTs).[70] Since tokens of this type are unique, they have been used to represent such things as digital art, sports memorabilia, virtual real estate, and items within games.[71] NFTs generally sell on the Ethereum blockchain through various digital auction websites. Christie's sold a piece of NFT artwork by Beeple for $69.3 million, making him the third-most valuable living artist in terms of auction prices at the time.[72][73] Unique land, buildings and avatars in blockchain-based virtual worlds can also be bought and sold as NFTs, sometimes for hundreds of thousands of dollars.[74] Decentralized finance The web interface to Compound Finance's decentralized application where users can lend and borrow cryptocurrencies for interest. Main article: Decentralized finance Decentralized finance (DeFi) is a use case of Ethereum.[75] It offers traditional financial instruments in a decentralized architecture, outside of companies' and governments' control, such as money market funds which let users earn interest.[76] Decentralized finance applications are typically accessed through a Web3-enabled browser extension or application, such as MetaMask, which allows users to directly interact with the Ethereum blockchain through a website.[77][78] Many of these DApps can connect and work together to create complex financial services.[79] Examples of DeFi platforms include MakerDAO and Compound.[80] Uniswap, a decentralized exchange for tokens on Ethereum grew from $20 million in liquidity to $2.9 billion in 2020.[81] As of October 2020, over $11 billion was invested in various DeFi protocols.[82] Additionally, through a process called "wrapping", certain DeFi protocols allow synthetic versions of various assets (such as Bitcoin, gold and oil) to become available and tradeable on Ethereum and also compatible with all of Ethereum's major wallets and applications.[82] Enterprise software Ethereum-based software and networks, independent from the public Ethereum chain, are being tested by enterprise software companies.[83] Interested parties include Microsoft, IBM, JPMorgan Chase,[50] Deloitte, R3, and Innovate UK (cross-border payments prototype).[84] Barclays, UBS, Credit Suisse, Amazon, Visa, and other companies are also experimenting with Ethereum.[85][86][87] Permissioned ledgers Ethereum-based permissioned blockchain variants are used and being investigated for various projects. In 2017, JPMorgan Chase proposed developing JPM Coin on a permissioned-variant of Ethereum blockchain dubbed "Quorum".[88] It is "designed to toe the line between private and public in the realm of shuffling derivatives and payments. The idea is to satisfy regulators who need seamless access to financial goings-on while protecting the privacy of parties that don't wish to reveal their identities nor the details of their transactions to the general public."[89] The Royal Bank of Scotland has announced that it has built a Clearing and Settlement Mechanism (CSM) based on the Ethereum distributed ledger and smart contract platform. Performance In Ethereum, all smart contracts are stored publicly on every node of the blockchain, which has costs. Being a blockchain means it is secure by design[clarification needed] and is an example of a distributed computing system with high Byzantine fault tolerance. The downside is that performance issues arise in that every node is calculating all the smart contracts in real-time, resulting in lower speeds. As of January 2016, the Ethereum protocol could process about 25 transactions per second. In comparison, the Visa payment platform processes 45,000 payments per second leading some to question the scalability of Ethereum.[90] On 19 December 2016, Ethereum exceeded one million transactions in a single day for the first time.[91] Ethereum engineers have been working on sharding the calculations, and the next step (Ethereum 2) was presented at Ethereum's Devcon 3 in November 2017.[92] Ethereum's blockchain uses Merkle trees, for security reasons, to improve scalability, and to optimize transaction hashing.[93] As with any Merkle tree implementation, it allows for storage savings, set membership proofs (called "Merkle proofs"), and light client synchronization. The network has faced congestion problems, such as in 2017 in relation to Cryptokitties.[94] Blockchain From Wikipedia, the free encyclopedia Jump to navigation Jump to search For other uses, see Block chain (disambiguation). Bitcoin blockchain structure A blockchain is a growing list of records, called blocks, that are linked together using cryptography.[1][2][3][4] Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data (generally represented as a Merkle tree). The timestamp proves that the transaction data existed when the block was published in order to get into its hash. As blocks each contain information about the block previous to it, they form a chain, with each additional block reinforcing the ones before it. Therefore, blockchains are resistant to modification of their data because once recorded, the data in any given block cannot be altered retroactively without altering all subsequent blocks. Blockchains are typically managed by a peer-to-peer network for use as a publicly distributed ledger, where nodes collectively adhere to a protocol to communicate and validate new blocks. Although blockchain records are not unalterable as forks are possible, blockchains may be considered secure by design and exemplify a distributed computing system with high Byzantine fault tolerance.[5] The blockchain was invented by a person (or group of people) using the name Satoshi Nakamoto in 2008 to serve as the public transaction ledger of the cryptocurrency bitcoin.[3] The identity of Satoshi Nakamoto remains unknown to date. The invention of the blockchain for bitcoin made it the first digital currency to solve the double-spending problem without the need of a trusted authority or central server. The bitcoin design has inspired other applications[3][2] and blockchains that are readable by the public and are widely used by cryptocurrencies. The blockchain is considered a type of payment rail.[6] Private blockchains have been proposed for business use but Computerworld called the marketing of such privatized blockchains without a proper security model "snake oil".[7] However, others have argued that permissioned blockchains, if carefully designed, may be more decentralized and therefore more secure in practice than permissionless ones.[4][8] Contents 1 History 2 Structure 2.1 Blocks 2.2 Decentralization 2.3 Openness 3 Uses 3.1 Cryptocurrencies 3.2 Smart contracts 3.3 Financial services 3.4 Video games 3.5 Energy trading 3.6 Supply chain 3.7 Anti-counterfeiting 3.8 Healthcare 3.9 Domain names 3.10 Other uses 4 Types 4.1 Public blockchains 4.2 Private blockchains 4.3 Hybrid blockchains 4.4 Sidechains 5 Interoperability 6 High energy consumption 7 Academic research 7.1 Adoption decision 7.2 Collaboration 7.3 Blockchain and internal audit 7.4 Journals 8 See also 9 References 10 Further reading 11 External links History Bitcoin, Ethereum and Litecoin transactions per day (January 2011 – January 2021) Cryptographer David Chaum first proposed a blockchain-like protocol in his 1982 dissertation "Computer Systems Established, Maintained, and Trusted by Mutually Suspicious Groups."[9] Further work on a cryptographically secured chain of blocks was described in 1991 by Stuart Haber and W. Scott Stornetta.[4][10] They wanted to implement a system wherein document timestamps could not be tampered with. In 1992, Haber, Stornetta, and Dave Bayer incorporated Merkle trees to the design, which improved its efficiency by allowing several document certificates to be collected into one block.[4][11] The first blockchain was conceptualized by a person (or group of people) known as Satoshi Nakamoto in 2008. Nakamoto improved the design in an important way using a Hashcash-like method to timestamp blocks without requiring them to be signed by a trusted party and introducing a difficulty parameter to stabilize rate with which blocks are added to the chain.[4] The design was implemented the following year by Nakamoto as a core component of the cryptocurrency bitcoin, where it serves as the public ledger for all transactions on the network.[3] In August 2014, the bitcoin blockchain file size, containing records of all transactions that have occurred on the network, reached 20 GB (gigabytes).[12] In January 2015, the size had grown to almost 30 GB, and from January 2016 to January 2017, the bitcoin blockchain grew from 50 GB to 100 GB in size. The ledger size had exceeded 200 GiB by early 2020.[13] The words block and chain were used separately in Satoshi Nakamoto's original paper, but were eventually popularized as a single word, blockchain, by 2016. According to Accenture, an application of the diffusion of innovations theory suggests that blockchains attained a 13.5% adoption rate within financial services in 2016, therefore reaching the early adopters phase.[14] Industry trade groups joined to create the Global Blockchain Forum in 2016, an initiative of the Chamber of Digital Commerce. In May 2018, Gartner found that only 1% of CIOs indicated any kind of blockchain adoption within their organisations, and only 8% of CIOs were in the short-term "planning or [looking at] active experimentation with blockchain".[15] For the year 2019 Gartner reported 5% of CIOs believed blockchain technology was a 'game-changer' for their business.[16] Structure Blockchain formation. The main chain (black) consists of the longest series of blocks from the genesis block (green) to the current block. Orphan blocks (purple) exist outside of the main chain. A blockchain is a decentralized, distributed, and oftentimes public, digital ledger consisting of records called blocks that is used to record transactions across many computers so that any involved block cannot be altered retroactively, without the alteration of all subsequent blocks.[3][17] This allows the participants to verify and audit transactions independently and relatively inexpensively.[18] A blockchain database is managed autonomously using a peer-to-peer network and a distributed timestamping server. They are authenticated by mass collaboration powered by collective self-interests.[19] Such a design facilitates robust workflow where participants' uncertainty regarding data security is marginal. The use of a blockchain removes the characteristic of infinite reproducibility from a digital asset. It confirms that each unit of value was transferred only once, solving the long-standing problem of double spending. A blockchain has been described as a value-exchange protocol.[20] A blockchain can maintain title rights because, when properly set up to detail the exchange agreement, it provides a record that compels offer and acceptance. Logically, a blockchain can be seen as consisting of several layers:[21] infrastructure (hardware) networking (node discovery, information propagation and verification) consensus (proof of work, proof of stake) data (blocks, transactions) application (smart contracts/decentralized applications, if applicable) Blocks Blocks hold batches of valid transactions that are hashed and encoded into a Merkle tree.[3] Each block includes the cryptographic hash of the prior block in the blockchain, linking the two. The linked blocks form a chain.[3] This iterative process confirms the integrity of the previous block, all the way back to the initial block, which is known as the genesis block.[22] Sometimes separate blocks can be produced concurrently, creating a temporary fork. In addition to a secure hash-based history, any blockchain has a specified algorithm for scoring different versions of the history so that one with a higher score can be selected over others. Blocks not selected for inclusion in the chain are called orphan blocks.[22] Peers supporting the database have different versions of the history from time to time. They keep only the highest-scoring version of the database known to them. Whenever a peer receives a higher-scoring version (usually the old version with a single new block added) they extend or overwrite their own database and retransmit the improvement to their peers. There is never an absolute guarantee that any particular entry will remain in the best version of the history forever. Blockchains are typically built to add the score of new blocks onto old blocks and are given incentives to extend with new blocks rather than overwrite old blocks. Therefore, the probability of an entry becoming superseded decreases exponentially[23] as more blocks are built on top of it, eventually becoming very low.[3][24]:ch. 08[25] For example, bitcoin uses a proof-of-work system, where the chain with the most cumulative proof-of-work is considered the valid one by the network. There are a number of methods that can be used to demonstrate a sufficient level of computation. Within a blockchain the computation is carried out redundantly rather than in the traditional segregated and parallel manner.[26] Block time The block time is the average time it takes for the network to generate one extra block in the blockchain. Some blockchains create a new block as frequently as every five seconds.[27] By the time of block completion, the included data becomes verifiable. In cryptocurrency, this is practically when the transaction takes place, so a shorter block time means faster transactions. The block time for Ethereum is set to between 14 and 15 seconds, while for bitcoin it is on average 10 minutes.[28] Hard forks This section is an excerpt from Fork (blockchain) § Hard fork[edit] A hard fork is a rule change such that the software validating according to the old rules will see the blocks produced according to the new rules as invalid. In case of a hard fork, all nodes meant to work in accordance with the new rules need to upgrade their software. If one group of nodes continues to use the old software while the other nodes use the new software, a permanent split can occur. For example, Ethereum has hard-forked to "make whole" the investors in The DAO, which had been hacked by exploiting a vulnerability in its code. In this case, the fork resulted in a split creating Ethereum and Ethereum Classic chains. In 2014 the Nxt community was asked to consider a hard fork that would have led to a rollback of the blockchain records to mitigate the effects of a theft of 50 million NXT from a major cryptocurrency exchange. The hard fork proposal was rejected, and some of the funds were recovered after negotiations and ransom payment. Alternatively, to prevent a permanent split, a majority of nodes using the new software may return to the old rules, as was the case of bitcoin split on 12 March 2013.[29] A more recent hard-fork example is of Bitcoin in 2017, which resulted in a split creating Bitcoin Cash.[30] The network split was mainly due to a disagreement in how to increase the transactions per second to accommodate for demand.[31] Decentralization By storing data across its peer-to-peer network, the blockchain eliminates a number of risks that come with data being held centrally.[3] The decentralized blockchain may use ad hoc message passing and distributed networking. One risk of a lack of a decentralization is a so-called "51% attack" where a central entity can gain control of more than half of a network and can manipulate that specific blockchain record at-will, allowing double-spending.[32] Peer-to-peer blockchain networks lack centralized points of vulnerability that computer crackers can exploit; likewise, it has no central point of failure. Blockchain security methods include the use of public-key cryptography.[33]:5 A public key (a long, random-looking string of numbers) is an address on the blockchain. Value tokens sent across the network are recorded as belonging to that address. A private key is like a password that gives its owner access to their digital assets or the means to otherwise interact with the various capabilities that blockchains now support. Data stored on the blockchain is generally considered incorruptible.[3] Every node in a decentralized system has a copy of the blockchain. Data quality is maintained by massive database replication[34] and computational trust. No centralized "official" copy exists and no user is "trusted" more than any other.[33] Transactions are broadcast to the network using software. Messages are delivered on a best-effort basis. Mining nodes validate transactions,[22] add them to the block they are building, and then broadcast the completed block to other nodes.[24]:ch. 08 Blockchains use various time-stamping schemes, such as proof-of-work, to serialize changes.[35] Alternative consensus methods include proof-of-stake.[22] Growth of a decentralized blockchain is accompanied by the risk of centralization because the computer resources required to process larger amounts of data become more expensive.[36] Openness Open blockchains are more user-friendly than some traditional ownership records, which, while open to the public, still require physical access to view. Because all early blockchains were permissionless, controversy has arisen over the blockchain definition. An issue in this ongoing debate is whether a private system with verifiers tasked and authorized (permissioned) by a central authority should be considered a blockchain.[37][38][39][40][41] Proponents of permissioned or private chains argue that the term "blockchain" may be applied to any data structure that batches data into time-stamped blocks. These blockchains serve as a distributed version of multiversion concurrency control (MVCC) in databases.[42] Just as MVCC prevents two transactions from concurrently modifying a single object in a database, blockchains prevent two transactions from spending the same single output in a blockchain.[43]:30–31 Opponents say that permissioned systems resemble traditional corporate databases, not supporting decentralized data verification, and that such systems are not hardened against operator tampering and revision.[37][39] Nikolai Hampton of Computerworld said that "many in-house blockchain solutions will be nothing more than cumbersome databases," and "without a clear security model, proprietary blockchains should be eyed with suspicion."[7][44] Permissionless An advantage to an open, permissionless, or public, blockchain network is that guarding against bad actors is not required and no access control is needed.[23] This means that applications can be added to the network without the approval or trust of others, using the blockchain as a transport layer.[23] Bitcoin and other cryptocurrencies currently secure their blockchain by requiring new entries to include a proof of work. To prolong the blockchain, bitcoin uses Hashcash puzzles. While Hashcash was designed in 1997 by Adam Back, the original idea was first proposed by Cynthia Dwork and Moni Naor and Eli Ponyatovski in their 1992 paper "Pricing via Processing or Combatting Junk Mail". In 2016, venture capital investment for blockchain-related projects was weakening in the USA but increasing in China.[45] Bitcoin and many other cryptocurrencies use open (public) blockchains. As of April 2018, bitcoin has the highest market capitalization. Permissioned (private) blockchain See also: Distributed ledger Permissioned blockchains use an access control layer to govern who has access to the network.[46] In contrast to public blockchain networks, validators on private blockchain networks are vetted by the network owner. They do not rely on anonymous nodes to validate transactions nor do they benefit from the network effect.[citation needed] Permissioned blockchains can also go by the name of 'consortium' blockchains.[citation needed] It has been argued that permissioned blockchains can guarantee a certain level of decentralization, if carefully designed, as opposed to permissionless blockchains, which are often centralized in practice.[8] Disadvantages of private blockchain Nikolai Hampton pointed out in Computerworld that "There is also no need for a '51 percent' attack on a private blockchain, as the private blockchain (most likely) already controls 100 percent of all block creation resources. If you could attack or damage the blockchain creation tools on a private corporate server, you could effectively control 100 percent of their network and alter transactions however you wished."[7] This has a set of particularly profound adverse implications during a financial crisis or debt crisis like the financial crisis of 2007–08, where politically powerful actors may make decisions that favor some groups at the expense of others,[47][48] and "the bitcoin blockchain is protected by the massive group mining effort. It's unlikely that any private blockchain will try to protect records using gigawatts of computing power — it's time consuming and expensive."[7] He also said, "Within a private blockchain there is also no 'race'; there's no incentive to use more power or discover blocks faster than competitors. This means that many in-house blockchain solutions will be nothing more than cumbersome databases."[7] Blockchain analysis The analysis of public blockchains has become increasingly important with the popularity of bitcoin, Ethereum, litecoin and other cryptocurrencies.[49] A blockchain, if it is public, provides anyone who wants access to observe and analyse the chain data, given one has the know-how. The process of understanding and accessing the flow of crypto has been an issue for many cryptocurrencies, crypto-exchanges and banks.[50][51] The reason for this is accusations of blockchain enabled cryptocurrencies enabling illicit dark market trade of drugs, weapons, money laundering etc.[52] A common belief has been that cryptocurrency is private and untraceable, thus leading many actors to use it for illegal purposes. This is changing and now specialised tech-companies provide blockchain tracking services, making crypto exchanges, law-enforcement and banks more aware of what is happening with crypto funds and fiat crypto exchanges. The development, some argue, has led criminals to prioritise use of new cryptos such as Monero.[53][54][55] The question is about public accessibility of blockchain data and the personal privacy of the very same data. It is a key debate in cryptocurrency and ultimately in blockchain.[56] Uses Bitcoin's transactions are recorded on a publicly viewable blockchain. Blockchain technology can be integrated into multiple areas. The primary use of blockchains today is as a distributed ledger for cryptocurrencies, most notably bitcoin; there were also a few other operational products which had matured from proof of concept by late 2016.[45] Many businesses, having seen the potential for placing blockchain at the core of their back office, [57] have begun testing the technology and are conducting low-level implementation to gauge its effects on organizational efficiency. In 2019, it was estimated that around $2.9 billion were invested in blockchain technology, which represents an 89% increase from the year prior. Additionally, the International Data Corp has estimated that corporate investment into blockchain technology will reach $12.4 billion by 2022.[58] Furthermore, According to PricewaterhouseCoopers (PwC), the second-largest professional services network in the world, blockchain technology has the potential to generate an annual business value of more than $3 trillion by 2030. PwC's estimate is further augmented by a 2018 study that they have conducted, in which PwC surveyed 600 business executives and determined that 84% have at least some exposure to utilizing blockchain technology, which indicts a significant demand and interest in blockchain technology.[59] Individual use of blockchain technology has also greatly increased since 2016. According to statistics in 2020, there were more than 40 million blockchain wallets in 2020 in comparison to around 10 million blockchain wallets in 2016.[60] Cryptocurrencies Main article: Cryptocurrency Most cryptocurrencies use blockchain technology to record transactions. For example, the bitcoin network and Ethereum network are both based on blockchain. On 8 May 2018 Facebook confirmed that it would open a new blockchain group[61] which would be headed by David Marcus, who previously was in charge of Messenger. Facebook's planned cryptocurrency platform, Libra (now known as Diem), was formally announced on June 18, 2019.[62][63] The criminal enterprise Silk Road, which operated on Tor, utilized cryptocurrency for payments, some of which the US federal government has seized through research on the blockchain and forfeiture.[64] Governments have mixed policies on the legality of their citizens or banks owning cryptocurrencies. China implements blockchain technology in several industries including a national digital currency which launched in 2020.[65][66] In order to strengthen their respective currencies, Western governments including the European Union and the United States have initiated similar projects.[67] Smart contracts Main article: Smart contract Blockchain-based smart contracts are proposed contracts that can be partially or fully executed or enforced without human interaction.[68] One of the main objectives of a smart contract is automated escrow. A key feature of smart contracts is that they do not need a trusted third party (such as a trustee) to act as an intermediary between contracting entities -the blockchain network executes the contract on its own. This may reduce friction between entities when transferring value and could subsequently open the door to a higher level of transaction automation.[69] An IMF staff discussion reported that smart contracts based on blockchain technology might reduce moral hazards and optimize the use of contracts in general. But "no viable smart contract systems have yet emerged." Due to the lack of widespread use their legal status is as yet unclear.[70][71] Financial services According to Reason, many banks have expressed interest in implementing distributed ledgers for use in banking and are cooperating with companies creating private blockchains,[72][73][74] and according to a September 2016 IBM study, this is occurring faster than expected.[75] Banks are interested in this technology because it has potential to speed up back office settlement systems.[76] Banks such as UBS are opening new research labs dedicated to blockchain technology in order to explore how blockchain can be used in financial services to increase efficiency and reduce costs.[77][78] Berenberg, a German bank, believes that blockchain is an "overhyped technology" that has had a large number of "proofs of concept", but still has major challenges, and very few success stories.[79] In December 2018, Bitwala launched Europe's first regulated blockchain banking solution that enables users to manage both their bitcoin and euro deposits in one place with the safety and convenience of a German bank account. The bank account is hosted by the Berlin-based solarisBank.[80] Mojaloop is designed to deliver financial support to people living in areas underserved by banks. It of use to migrants sending remittances[81] Tokenization of stocks is also occurring[82] and some cryptocurrency exchanges are already offering so-called "stock tokens".[83] The blockchain has also given rise to Initial coin offerings (ICOs) as well as a new category of digital asset called Security Token Offerings (STOs), also sometimes referred to as Digital Security Offerings (DSOs).[84] STO/DSOs may be conducted privately or on a public, regulated stock exchange and are used to tokenize traditional assets such as company shares as well as more innovative ones like intellectual property, real estate, art, or individual products. A number of companies are active in this space providing services for compliant tokenization, private STOs, and public STOs. Video games A blockchain game CryptoKitties, launched in November 2017.[85] The game made headlines in December 2017 when a cryptokitty character -a virtual pet- was sold for more than US$100,000.[86] CryptoKitties also illustrated scalability problems for games on Ethereum when it created significant congestion on the Ethereum network with approximiately 30% of all Ethereum transactions being for the game.[87] Positively, CryptoKitties demonstrated how blockchains can be used to catalog game assets (digital assets).[88] Energy trading Blockchain is also being used in peer-to-peer energy trading.[89][90][91] Supply chain There have been several different efforts to employ blockchains in supply chain management. Precious commodities mining — Blockchain technology has been used for tracking the origins of gemstones and other precious commodities. In 2016, The Wall Street Journal reported that the blockchain technology company, Everledger was partnering with IBM's blockchain-based tracking service to trace the origin of diamonds to ensure that they were ethically mined.[92] As of 2019, the Diamond Trading Company (DTC) has been involved in building a diamond trading supply chain product called Tracr.[93] Food supply — Blockchain technology has been used to allow retailers and consumers to track the provenance of meat and other food products from their origins to stores and restaurants.[94] As of 2018, Walmart and IBM were running a trial to use a blockchain-backed system for supply chain monitoring for lettuce and spinach — all nodes of the blockchain were administered by Walmart and were located on the IBM cloud.[95] One cited benefit is that the system could enable rapid tracing of contaminated produce. Some analysts are less convinced that most consumers will be that interested in this capability.[93] Software development — The Linux Foundation's blockchain initiative, Hyperledger Grid was started in 2015 to develop open components for blockchain supply chain services.[96][97] Anti-counterfeiting Blockchain could be used in detecting counterfeits by associating unique identifiers to products, documents and shipments, and storing records associated to transactions that cannot be forged or altered.[98][99] It is however argued that blockchain technology needs to be supplemented with technologies that provide a strong binding between physical objects and blockchain systems.[100] The EUIPO established an Anti-Counterfeiting Blockathon Forum, with the objective of "defining, piloting and implementing" an anti-counterfeiting infrastructure at the European level.[101][102] The Dutch Standardisation organisation NEN uses blockchain together with QR Codes to authenticate certificates.[103] Healthcare In response to the 2020 COVID-19 pandemic, The Wall Street Journal reported that Ernst & Young was working on a blockchain to help employers, governments, airlines and others keep track of people who have had antibody tests and could be immune to the virus. Hospitals and vendors also utilized a blockchain for needed medical equipment. Additionally, blockchain technology was being used in China to speed up the time it takes for health insurance payments to be paid to health-care providers and patients.[104] Domain names There are several different efforts to offer domain name services via blockchain. These domain names can be controlled by the use of a private key, which purport to allow for uncensorable websites. This would also bypass a registrar's ability to suppress domains used for fraud, abuse, or illegal content.[105] Namecoin is a cryptocurrency that supports the ".bit" top-level domain (TLD). Namecoin was forked from bitcoin in 2011. The .bit TLD is not sanctioned by ICANN, instead requiring an alternative DNS root.[105] As of 2015, it was used by 28 websites, out of 120,000 registered names.[106] Namecoin was dropped by OpenNIC in 2019, due to malware and potential other legal issues.[107] Other blockchain alternatives to ICANN include The Handshake Network,[106] EmerDNS, and Unstoppable Domains.[105] Specific TLDs include ".eth", ".luxe", and ".kred", which are associated with the Ethereum blockchain through the Ethereum Name Service (ENS). The .kred TLD also acts an alternative to conventional cryptocurrency wallet addresses, as a convenience for transferring cryptocurrency.[108] Other uses Blockchain technology can be used to create a permanent, public, transparent ledger system for compiling data on sales, tracking digital use and payments to content creators, such as wireless users[109] or musicians.[110] The Gartner 2019 CIO Survey reported 2% of higher education respondents had launched blockchain projects and another 18% were planning academic projects in the next 24 months.[111] In 2017, IBM partnered with ASCAP and PRS for Music to adopt blockchain technology in music distribution.[112] Imogen Heap's Mycelia service has also been proposed as blockchain-based alternative "that gives artists more control over how their songs and associated data circulate among fans and other musicians."[113][114] New distribution methods are available for the insurance industry such as peer-to-peer insurance, parametric insurance and microinsurance following the adoption of blockchain.[115][116] The sharing economy and IoT are also set to benefit from blockchains because they involve many collaborating peers.[117] The use of blockchain in libraries is being studied with a grant from the U.S. Institute of Museum and Library Services.[118] Other designs include: Hyperledger is a cross-industry collaborative effort from the Linux Foundation to support blockchain-based distributed ledgers, with projects under this initiative including Hyperledger Burrow (by Monax) and Hyperledger Fabric (spearheaded by IBM).[119] Quorum – a permissionable private blockchain by JPMorgan Chase with private storage, used for contract applications.[120] Tezos, decentralized voting.[43]:94 Proof of Existence is an online service that verifies the existence of computer files as of a specific time.[121] Types Currently, there are at least four types of blockchain networks — public blockchains, private blockchains, consortium blockchains and hybrid blockchains. Public blockchains A public blockchain has absolutely no access restrictions. Anyone with an Internet connection can send transactions to it as well as become a validator (i.e., participate in the execution of a consensus protocol).[122][self-published source?] Usually, such networks offer economic incentives for those who secure them and utilize some type of a Proof of Stake or Proof of Work algorithm. Some of the largest, most known public blockchains are the bitcoin blockchain and the Ethereum blockchain. Private blockchains A private blockchain is permissioned.[46] One cannot join it unless invited by the network administrators. Participant and validator access is restricted. To distinguish between open blockchains and other peer-to-peer decentralized database applications that are not open ad-hoc compute clusters, the terminology Distributed Ledger (DLT) is normally used for private blockchains. Hybrid blockchains A hybrid blockchain has a combination of centralized and decentralized features.[123] The exact workings of the chain can vary based on which portions of centralization decentralization are used. Sidechains A sidechain is a designation for a blockchain ledger that runs in parallel to a primary blockchain.[124][125] Entries from the primary blockchain (where said entries typically represent digital assets) can be linked to and from the sidechain; this allows the sidechain to otherwise operate independently of the primary blockchain (e.g., by using an alternate means of record keeping, alternate consensus algorithm, etc.).[126] Interoperability With the increasing number of blockchain systems appearing, even only those that support cryptocurrencies, blockchain interoperability is becoming a topic of major importance. The objective is to support transferring assets from one blockchain system to another blockchain system. Wegner[127] stated that "interoperability is the ability of two or more software components to cooperate despite differences in language, interface, and execution platform". The objective of blockchain interoperability is therefore to support such cooperation among blockchain systems, despite those kinds of differences. There are already several blockchain interoperability solutions available.[128] They can be classified in three categories: cryptocurrency interoperability approaches, blockchain engines, and blockchain connectors. The IETF has a recent Blockchain-interop working group that already produced the draft of a blockchain interoperability architecture.[129] High energy consumption Blockchain mining — the peer-to-peer computer computations by which transactions are validated and verified — requires a significant amount of energy. The Bank for International Settlements criticized the public proof-of-work blockchains for high energy consumption.[130][131][132] In a 2021 study conducted at Cambridge University, researchers determined that Bitcoin (at 121.36 terawatt-hours per year) uses more electricity annually than Argentina (at 121 TWh) and the Netherlands (at 108.8 TWh).[133] According to Digiconomist, one bitcoin transaction requires about 707.6 kilowatt-hours of electrical energy, the amount of energy the average U.S. household consumes in 24 days.[134] U.S. Treasury Secretary Janet Yellen called Bitcoin "an extremely inefficient way to conduct transactions", saying "the amount of energy consumed in processing those transactions is staggering."[135] "Bitcoin uses more electricity per transaction than any other method known to mankind", Bill Gates said. "It's not a great climate thing."[136] Nicholas Weaver, of the International Computer Science Institute at the University of California, Berkeley, examined blockchain's online security, and the energy efficiency of proof-of-work public blockchains, and in both cases found it grossly inadequate.[137][138] The 31–45 TWh of electricity used for bitcoin in 2018 produced 17–22.9 MtCO2.[139][140] Inside the cryptocurrency industry, concern about high energy consumption has led some companies to consider moving from the proof of work blockchain model to the less energy-intensive proof of stake model.[141] Academic research Blockchain panel discussion at the first IEEE Computer Society TechIgnite conference In October 2014, the MIT Bitcoin Club, with funding from MIT alumni, provided undergraduate students at the Massachusetts Institute of Technology access to $100 of bitcoin. The adoption rates, as studied by Catalini and Tucker (2016), revealed that when people who typically adopt technologies early are given delayed access, they tend to reject the technology.[142] Adoption decision Motivations for adopting blockchain technology (an aspect of innovation adoptation) have been investigated by researchers. Janssen et al. provided a framework for analysis.[143] Koens & Poll pointed out that adoption could be heavily driven by non-technical factors.[144] Based on behavioral models, Li[145] discussed the differences between adoption at the individual level and organizational levels. Collaboration Scholars in business and management have started studying the role of blockchains to support collaboration.[146][147] It has been argued that blockchains can foster both cooperation (i.e., prevention of opportunistic behavior) and coordination (i.e., communication and information sharing). Thanks to reliability, transparency, traceability of records, and information immutability, blockchains facilitate collaboration in a way that differs both from the traditional use of contracts and from relational norms.[148] Contrary to contracts, blockchains do not directly rely on the legal system to enforce agreements.[149] In addition, contrary to the use of relational norms, blockchains do not require trust or direct connections between collaborators. Blockchain and internal audit External video video icon Blockchain Basics & Cryptography, Gary Gensler, Massachusetts Institute of Technology, 0:30[150] The need for internal audit to provide effective oversight of organizational efficiency will require a change in the way that information is accessed in new formats.[151] Blockchain adoption requires a framework to identify the risk of exposure associated with transactions using blockchain. The Institute of Internal Auditors has identified the need for internal auditors to address this transformational technology. New methods are required to develop audit plans that identify threats and risks. The Internal Audit Foundation study, Blockchain and Internal Audit, assesses these factors.[152] The American Institute of Certified Public Accountants has outlined new roles for auditors as a result of blockchain.[153] Journals Main article: Ledger (journal) In September 2015, the first peer-reviewed academic journal dedicated to cryptocurrency and blockchain technology research, Ledger, was announced. The inaugural issue was published in December 2016.[154] The journal covers aspects of mathematics, computer science, engineering, law, economics and philosophy that relate to cryptocurrencies such as bitcoin.[155][156] The journal encourages authors to digitally sign a file hash of submitted papers, which are then timestamped into the bitcoin blockchain. Authors are also asked to include a personal bitcoin address in the first page of their papers for non-repudiation purposes.[157]