Flag 7: Digital Assets

flagtheory.com /digital-assets/

Digital Assets: Cryptocurrency and Blockchain

This is part of our Pillar Content of Flag Theory where we detail how you can take a billionaires strategy for
internationalization (Flag Theory) and apply it to your life (for free) whether you have $10,000 or $10,000,000

Flag Theory Foundation

Flag 1: Second Passport

Flag 2: Tax Residency

Flag 3: Offshore Company

Flag 4: Offshore Banking

Flag 5: Physical Assets

Flag 6: Digital Security

Flag 7: Digital Assets

Flag Theory is a methodology for internationalizing your self and your wealth. Started in the 1950s and improved
upon over time, it proposes a plan to use geoarbitrage to plant flags achieve more freedom, privacy and legally pay
less taxes.

Most recently Flag 6 deals with internet privacy and protecting yourself online. Digital assets is a new flag (Flag 7)
dealing with cryptocurrency and new forms of electronic money. We have named this Flag Digital Assets as it deals
with both cyrptocurrency and the blockchain. This article aims to be a guide on all things digital assets, from bitcoin
(the first successful decentralized digital cash implementation); to altcoins (alternative iterations of bitcoin) to the
coming blockchain revolution.

Encrypted Currencies or cryptocurrencies have seen serious development and iteration within the last 8 years,
starting with bitcoin in 2008. Bitcoin started as a thread on an email list from a mysterious creator (or group of
creators, no one knows for sure) who suggested a white paper on digital cash. From this point, it went from relative
obscurity to a force in the economic world with a multiple billion dollar market cap.

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What is Bitcoin?
Individual bitcoins are held in a wallet, and each has a set of private and public keys that the individual owns.
Contrast this with a traditional banking in a fiat system where the banks hold your money, your identity is known,
and reports (Suspicious activity reports) will be sent to the government when you send large amounts of money.

Bitcoin is the first widely distributed digital currency. The underlying protocol The Bitcoin Blockchain, is a
decentralized program. This means that no one person or entity can turn bitcoin on or off. This is powerful, because
it allows bitcoin to exist outside the confines of national borders, any one controlling interest, or colluding interest.

Bitcoin works on a proof of work (POW) system where different miners solve algorithms to determine who owns what
bitcoins. These calculations are stored in a nonce or block. This allows the network to reach a state of consensus,
and records that block in a chain of blocks.

There is in theory one way to double spend, if one were to buy enough computing power to perform a 51% attack on
the network, they could alter the network state accordingly. The computing power needed to do this currently is
astronomical, and thus the network is currently secure.

However there are some issues with the way bitcoin was set free into the wild. Only 3 people were given primary
control over bitcoin. Notably, lead developer Mike Hearn recently departed to work on a blockchain project.

The tide has swayed in and out on bitcoin, but as of right now it has lost some favor. Still, the technology which
underlies bitcoin is incredible, and it has gone through huge fluctuations in price (from where I first publicly
mentioned here over 4 years ago the price of bitcoin was $10 and has gone over $1000, and now hovers around
$300-400 price range at the time of writing in early 2016. [update jan 2017 the price as doubled and now hovers
around all time high].

What is An Altcoin
An alternative currency is any coin except for Bitcoin, and there are hundreds of them. Many of them have no merit
whatsoever and are merely a fork of another currency. (A fork means the code repository was forked or copied and
new development was started from that point, as opposed to built from scratch for a specific purpose. Here you can
see a list of almost every alt coin and their current market capitalization on CoinMarketCap.com

Alternative Cryptographic Currencies

Since the invention of Bitcoin, a whole new monetary paradigm was born. This event marked the advent of
cryptographic currency, a type of digital money whose security relies on a distributed transaction ledger, advanced
cryptographic techniques, and a decentralized protocol of consensus.

One of the most important features of Bitcoin is that its also open source, meaning that developers can take a look
at its code and implement their own new form of digital money. By this time, around 800 alternative cryptographic
coins (or altcoins) have been created. Many of them are no more than clones of Bitcoin, but there are quite a few
with remarkably innovative features. In the following article, well be reviewing some of the most interesting altcoins
in the cryptocurrency space.

Litecoin

Litecoin was one of the first alternatives to come out to the digital currency ecosystem. By 2011, Bitcoin was
experiencing a great financial bubble where its price rose beyond $1000. This was quite a convenient time to
release a faster and lighter alternative to the well known digital gold.

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 Alternative currencies are growing in popularity. Highlighted are two I believe are promising.

Litecoin was made to do everything that Bitcoin did, but faster.

By reducing the block generation time to 2.5 minutes instead of 10 minutes, and introducing scrypt as a more
accessible mining algorithm, Litecoin was rapidly adopted as the internets digital silver.

Although it doesnt add significant innovation to Bitcoins original functionality, these traits allowed Litecoin to gather
a substantial community of users, presently making it into the second largest cryptocurrency by market
capitalization.

Dash

In a network provenly enclosed by extreme surveillance, the need for personal privacy stands out as a fundamental
right and a desirable feature in this technological quest for decentralization.

DASH is a currency which truly leverages cryptography at its best. DASH is short for Digital Cash, and its
designed to be used instantaneously over the internet, and in a completely anonymous manner. Originally labeled
Dark Coin, it has been rebranded. This is one of the top 10 currencies in terms of total market cap.

Despite common perception, Bitcoin transactions are not really anonymous. In fact, the transaction ledger is open
for anyone to see. Bitcoin addresses might not necessarily be tied to any personal data, but with the proper tools and
knowledge, it would be possible to trace someones history of transactions.

Dash is a cryptocurrency designed to be completely anonymous, while also being able to transact instantaneously,
making it ideal as a means for true digital exchange of value.

Masternode Network

The most unique feature of Dash is the way the network is designed. In this scheme, there is a special type of node
which is known as Masternode. These nodes are specialized servers offering particular functions to the network,
thus giving support to the main characteristics of the Dash cryptocurrency.

To run a masternode, a user must prove to own at least 1000 Dash. This is a mechanism to ensure trust, and it

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protects the network from a wide diversity of possible attacks.

This special two-tier topology provides the platform with a stack of interesting features, and the possibility of
implementing new functionalities without the governance problems that the current Bitcoin network presents. Given
any proposal to upgrade the protocol, itd be just a matter of setting up a poll in which masternodes would decide the
outcome by decentralized voting.

As for the anonymous aspect of the currency, the Masternode network provides a coin mixing service. Only when
users desire so, they can mix their coins. This guarantees the fungibility of Dash, meaning there is no relevant
history behind any amount of money, thus ensuring complete financial privacy to its users.

Some people look down on this quest for anonymity as it provides the ideal platform for illegal activities, yet getting
out of reach from the eye of over-vigilant governments and institutions is also an unalienable right to some users, as
privacy can be seen as a necessary quality in a truly democratized economy.

At the time of writing, Dash is #5 in the cryptocurrency market, which shows the community has given a very wide
support to it.

Ripple

Much more than a cryptocurrency, Ripple is a company that has been working since 2012 on the ambitious project
of establishing a global standard platform for electronic payments, promising everyone an easy access to global
economy. Ripple is oriented to be used by banks and financial institutions to offer themselves as gateways for
exchanging and transacting currencies.

For that matter, theyve created the Ripple protocol, which works in a distributed ledger network similar to Bitcoin,
but it supports a wide spectrum of currency types, including fiat. Also, the protocol defines a consensus mechanism
based on reputation and an algorithm for finding the best exchange routes for a given cross-currency transaction.

This makes Ripple into a Decentralized Autonomous Exchange. When there are enough gateways operating on
the network, anyone can send money to anyone in the world without worrying about currency exchange.

To provide liquidity within the network, the protocol defines its own native currency, the Ripple (XRP). Currently,
Ripple is second to Bitcoin in the market capitalization chart.

Many interesting things are being done by the Ripple team, such as Interledger, which is an open protocol for
transacting among different payment networks.

While sometimes looked with suspicion by the most libertarian branch of the crypto community, approaching the
big banks and financial institutions with this type of technology is probably a smart move for a more complete
disruption of current financial platforms.

Ethereum

Much more than a simple cryptocurrency, Ethereum is presently regarded as one of the most ambitious projects in
this era of technological innovation. As vague and big as it sounds, Ethereum team is working on a decentralized
network of everything. Having raised around $19m in its funding round, they are aiming for the decentralization of
the whole web.

For that matter, Ether is defined as a native currency that works as the fuel needed to develop Decentralized
Applications on the Ethereum network.

Lead by Vitalik Buterin and a team of high profile computer experts, Ethereum implemented its own blockchain,

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which includes in itself a Turing-complete programming language. That means that any transaction on the
distributed ledger is no longer a simple transaction, but a whole computer software that can be implemented as
complex as desired. Ethereum is a blockchain of programs, and as such it has the potential to become a platform
for platforms.

Although the project is still in its early days, there is high expectation among the internet community. If successful,
this project could seriously disrupt several areas of the interconnected society.

Nxt

Nxt is one of the most innovative platforms being developed in the cryptocurrency space. It is a unique crypto 2.0
technology developed from scratch, and it features a wide variety of interesting components. Also, its 100% Proof
of Stake, which is a very efficient way to secure the network in terms of energy consumption.

Much more than a digital currency, Nxt is in itself an infrastructure for a decentralized economy. Its current repertoire
of features is quite impressive, and its development team is innovating on it at a very fast pace.

Some of the main features include a decentralized marketplace for buying and selling digital goods, a private
messaging system, and an asset exchange where companies can issue and sell their own custom assets, among
many other features.

One of the most interesting things Nxt provides is a platform for decentralized voting, in which users can create
their own polls and broadcast them to the network. Other users can cast their votes through the Nxt client interface.
Results are then settled on the blockchain and made visible to the whole network.

This allows for a very elegant form of collaborative governance system, among other possible uses.

Nxt Decentralized Voting Interface

Nxt is also designed in a completely modular fashion, so far making it into the only platform which can be extended
with plugins.

The development of a digital currency not directly based on Bitcoin allows for the creation of a truly innovative
platform, while also giving the chance to correct any known issues with previous paradigms. In this regard, Nxt is a
very clever proposal, which if succeeds in competing among the top digital currencies, will only boost the overall
evolution of the whole crypto space.

A more complete visualization of Nxts features can be seen here.

Crypti

Crypti is a platform for developing and publishing decentralized applications. Although somehow similar to other
proposals such as Ethereum, Crypti presents itself as a more straightforward and practical solution in the scope of
Decentralized Applications.

Crypti provides developers with the possibility to code and deploy applications using Node.js, while also offering a
platform for publishing, distributing, and monetizing their applications through a decentralized app store. By being
based on familiar tools like javascript and HTML/CSS, most developers can start working on Crypti right away,
without having to learn any specific technologies.

Each application is endowed with its own sidechain, which is a form of complementary blockchain that is able to
transact to and from other sidechains. This allows for an interconnected network of decentralized applications, each
with its own customized blockchain, currency and rules. Through a rather intuitive and simple interface, a whole

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cryptocurrency ecosystem could be deployed just by using the most familiar web development tools.

Transactions within the network can be made using Bitcoin or XCR (Cryptis main chain currency). Also, developers
may implement custom tokens in their dapps, and use these tokens as the currencies within those dapps.

Altcoins Generating Social Value

Some digital currency creators have realized that much of Bitcoins mining power is practically being wasted, as all
this energy-burning activity only exists to maintain the network by solving pointless hashing puzzles. Although
protecting the network is a noble cause in itself, many have asked the question: What if we utilize all that
infrastructure to generate truly useful contributions to society?

The following digital currencies are designed to leverage mass distributed computing in order to produce real benefit
to society.

SolarCoin

SolarCoin is an eco-friendly cryptocurrency made to encourage sustainability by rewarding users for generating
solar power.

Each MWh of power generated is awarded with 1 SolarCoin. Thus incentivizing the usage of solar power.

At the present time, verification and distribution of coins is being made manually, but the founders have revealed to
be work on the development of automated means of verification and distribution, making it an even more
decentralized and eco-friendly cryptocurrency. If SolarCoin gains traction, it could really foster the usage of clean
(and decentralized) power.

Gridcoin

Gridcoin takes mining to a new level, while making use of the networks computational power to contribute to run
scientific simulations. By collaborating with the BOINC project, Gridcoin employs the computational power of its
nodes for collaborating with a wide array of open scientific projects.

There is great satisfaction in knowing that your computer resources are aiding in the research of the next biomedical
breakthrough or even the search for extraterrestrial life.

The BOINC idea is so good, that its already valuable without the incentive. By joining in while also getting rewarded
with Gridcoin, its purpose is doubly justified.

Primecoin

Bitcoin was the first effective cryptocurrency to be invented, and part of its strength lies in its Proof of Work
consensus mechanism. This computational competition for finding cryptographic proofs, however, serves only to
protect the network, while wasting huge amounts of energy in the process.

Primecoin, on the other hand, is a cryptocurrency that takes Proof of Work to a whole new level. Primecoin proof of
work mechanism consists in searching for particular chains of prime numbers, specifically Cunningham chains and
Bi-twin chains.

The nature of prime number distribution is still not very well understood within the current scope of mathematics. By
utilizing the distributed processing power of the Primecoin network, some interesting scientific insight could actually
be gained.

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For the time being, Primecoin is still not that popular. Nevertheless, its core idea is undoubtedly revolutionary.
Making use of these vast networks of distributed computing to actually compute useful things could be the next step
for proof of work cryptocurrencies.

What is the Blockchain?

The underlying technology of bitcoin the blockchain is essentially a shared ledger (also known as a shared ledger
or a permissioned ledger) that makes it easier to achieve consensus. There are many different projects that utilize
blockchain technology, both with and without a native currency. The blockchain as been called the internet of value
because of the unique ability to transfer and track data, assets (either on chain or off) in a way that is more cost
effective and efficient when compared to traditional industries like escrow, clearing houses or other forms of middle
men. There are many different proposed technologies at the time of this writing, it will be interesting to see in coming
years what technology comes to fruition and ends up being disruptive, and what is merely hyperbole.

Conclusion
One must realize that this is new and innovative technology (referring to cyrptocurrency specifically)- and NOT as
stable as a traditional fiat currency. However, there are a few major advantages to cryptocurrency over traditional
money.

1. control of the private keys

2. instant unrestricted transfer is oftentimes possible
3. ability to potentially be anonymous is oftentimes possible
4. (sometimes) the ability to mine the currency
5. Additional abilities (Augur, ethereum,smart contracts )

Trying to choose the best cryptocurrencies at present time is a monumental task, given the wide array of unique
implementations on the market. Nevertheless, there is an evident tendency towards the development of second
generation cryptocurrencies, which are characterized by featuring advanced functionalities beyond value
exchange, such as the custom issuance of assets, and platforms for the development of decentralized applications.

In any case, Bitcoin gains traction at a pace which is hard to match. As it is the invention that brought the possibility
of existence for all these decentralized platforms, its a paradigm shift by itself. Therefore, any successful alternative
development in this space seems to validate Bitcoin as well. Competition, nevertheless, is well known for boosting
technological evolution.

For a paradigm still so young, innovation rate is already outstanding. We cant even imagine what the future holds
for this unconstrained race for disruption.

Here is more articles on Digital Currency, Blockchain revolution.

Bitcoin
KYC Blockchain
Governments as Entrepreneurs Part 1 : Blockchain for passports and residency
Governments as Entrepreneurs Part 2 : Blockchain for arbitration and companies house

Dont stop reading. Here is more of our pillar content

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Flag Theory Foundation

Flag 1: Second Passport

Flag 2: Tax Residency

Flag 3: Offshore Company

Flag 4: Offshore Banking

Flag 5: Physical Assets

Flag 6: Digital Security

Flag 7: Digital Assets

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