AMITY BUSINESS SCHOOL, AUUP

CSIT TERM PAPER

TOPIC: CRYPTOCURRENCY

A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of

exchange that uses strong cryptography to secure financial transactions, control the creation of
additional units, and verify the transfer of assets.

The first and still the main cryptocurrency bitcoin was developed by an unknown person alias
named satoshi nakamoto on 3 January 2009, whom no one has ever seen or knows about his
current location. This project was developed so that to introduce a currency with no drawbacks
like regular fiat currency. On 3 January 2009, the bitcoin network came into existence with
Satoshi Nakamoto mining the genesis block of bitcoin (block number 0), which had a reward of
50 bitcoins. Embedded in the Coinbase of this block was the text: The Times 03/Jan/2009
Chancellor on brink of second bailout for banks.
The cryptocurrency can be designed or developed in two ways i.e. centralized and
decentralized cryptocurrency. Centralized crypto is monitored and maintained by an
organization or the developers while decentralized cryptocurrency is not governed by any one
person.
The idea of cryptocurrency gained so much supporters because of its Decentralized approach
initially and it was an effort put to demoralize banking surcharges. cryptocurrencies like bitcoin
or Ethereum runs with the help of miners and can be transacted in its own blockchain through the
processing power of miners.

Cryptocurrency like bitcoin can be compared to gold because gold is a limited natural resource
which will be extinct from earth crust after all gold is mined from it. Similarly, the total
bitcoins which exist are 21 million and around 17 million bitcoins are already mined i.e. around
17 million bitcoins are circulating in the blockchain.

Miners are nothing but processors which solve the algorithm required to make a transaction
successful and in return gets some amount of bitcoin (In case of bitcoin mining) as fees for
 AMITY BUSINESS SCHOOL, AUUP

processing the algorithm. In a time, interval mining computers collect a few hundred pending
bitcoin transactions (a “block”) and turn them into a mathematical puzzle. The miner who
found the solution gets a portion of bitcoin as a reward. These algorithms are predefined and
gets more complex if more miners are present in the blockchain due to which the processing
power of mining device needs to be increased with time for sustaining the number of mined
bitcoins.
Miners are machines (processors) run by different people worldwide to earn bitcoin. Initially
a simple 4 giga byte NVidia GeForce graphics card could many bitcoins in a day but as the
bitcoin is getting more and more popular the miners are increasing and hence the bitcoin
blockchain is making the algorithm of transaction more and more complex. Now a days the ant
miner s9 from company bitmain. (Bitmain is a Chinese brand which manufactures specific
mining device for cryptocurrency mining whose latest and most advanced miner is ant miner s9
with around 14 tera hash per second mining power valued around 120000 rupees without taxes)
can mine 0.0001 (in average Indian conditions) bitcoin in a day and using a graphics card
will not even fulfill the energy cost of running the gpu.
If miners won’t be there then transactions will not be possible for a decentralized cryptocurrency
so the miners are like worshipers and a decentralized crypto currency is god who will be useless
without its worshipers.
When we transfer out bitcoin from an address to another address the encrypted data (crypto
currency) is transferred from one wallet (node) to the receiving wallet through block chain
medium by travelling from one block to next block till it reaches the block with the receiving
node. This block to block travel is the transaction and is done by solving algorithm by miners.

After all bitcoins are mined then it will only be a store of value and the value will purely depend
upon demand and supply.

Blockchain

The validity of each cryptocurrency's coins is provided by a blockchain. A blockchain is a

continuously growing list of records, called blocks, which are linked and secured using
 AMITY BUSINESS SCHOOL, AUUP

cryptography. Each block typically contains a hash pointer as a link to a previous block, a
timestamp and transaction data. By design, blockchains are inherently resistant to modification
of the data. It is "an open, distributed ledger that can record transactions between two parties
efficiently and in a verifiable and permanent way”. For use as a distributed ledger, a
blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol
for validating new blocks. Once recorded, the data in any given block cannot be altered
retroactively without the alteration of all subsequent blocks, which requires collusion of the
network majority.

Blockchains are secure by design and are an example of a distributed computing system with
high Byzantine fault tolerance. Decentralized consensus has therefore been achieved with a
blockchain. It solves the double spending problem without the need of a trusted authority or
central server.

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. By the
time of block completion, the included data becomes verifiable. This is practically when the
money transaction takes place, so a shorter block time means faster transactions.

What is Cryptography?

Cryptography provides for secure communication in the presence of malicious third-parties—

known as adversaries. Encryption (a major component of cryptography) uses an algorithm
and a key to transform an input (i.e., plaintext) into an encrypted output (i.e., ciphertext).
A given algorithm will always transform the same plaintext into the same ciphertext if the same
key is used.

For example:

Let us assume that we have to send a private and secure message to our counterpart. But the
 AMITY BUSINESS SCHOOL, AUUP

medium through which we have to send is unsecured like internet or by post. Therefore, we
will send the message in such a way that only sender and receiver can understand the message.
Therefore, the sender will convert the message into an encoded form using an algorithm. This
message is encoded using a key and then sent through the medium. The receiver has same key
using which he unlocks or decodes the cyphertext.
Let us assume sender wants to send "do it" message to the receiver in a secure way.
He will use an algorithm in which this message will be converted to a code. In this case we will
use an easy algorithm like converting the alphabets into numbers according to their numerical
position in abcd. In that case "d" is 4th word "o" 15th word , space can be taken as 0 , "i"
will be 9th word and "t" is 20th word. So we will write :

Do it (information) —-> algorithm (encoding) —-> 4 15 0 9 20 (encrypted information) —

-> sent through medium (attackers see useless encoded info) —-> receiver receives —->
applies key to unlock which is number to alphabet (decoding) —-> do it (decrypted
information)

P.S - it is a very basic algorithm to explain the process but when we have computers to
calculate then we can complicate the key very heavily so that it will become impossible to
decrypt the information without a key. For example in the above example we can apply another
formulae on each converted number to make it more complex like in the encrypted text - 4 15 0
9 20 we can multiply individual terms with - 5(2.5 +7.9) ^8 / 8(3.5 - 1.114)^5.
If we multiply each term with this like 4 multiplied by this then 15 multiplied by this ......
then to decode same expression will be needed as key to retrace the original information but it is
easy when we have processors to easily and rapidly perform this task for us.

Cryptocurrency vs Fiat currency

A cryptocurrency is 100% secure and better in every aspect then the traditional fiat currency.
We can say that because of the following major properties:
 AMITY BUSINESS SCHOOL, AUUP

- a cryptocurrency cannot be duplicated.

- A cryptocurrency coin can be divided into multiple decimal places. Bitcoin is divisible up to
8 decimal places. The decimal portion of bitcoins are measured in satoshi units.
- Cryptocurrency works within its blockchain and the blockchain has a ledger format. This
means every transaction is recorded and stored in the blockchain.
- a cryptocurrency cannot be hacked or cracked even if we use all the supercomputers present
in the world together for 100 years for trying all possible keys using trial and error as the
algorithm used in a good cryptocurrency is always very complex mathematics which is
impossible to breach.
-Fiat is a physical medium of exchange while crypto is a digital asset.
- fiat is unlimited supply as govt can increase the currencies while crypto has a limited supply.
-Issued by governments is fiat currency but crypto currency is produced by computers which
cannot be manipulated.
- currency is centralized i.e. it is backed by government. Governments had a history of
ruining their currencies and mismanagement as its ultimately in the hands of few people. While
cryptocurrency is decentralized.
- Value of Fiat currency is determined by market and regulations while the cryptocurrency is
valued on the basis of demand and supply.

Venezuela's blockchain-based digital Petro is the world's first state-backed virtual currency that
recently tied up with a Delhi-based digital currency exchange Coinsecure to sell oil-backed
digital currency on its platform.

Venezuela is a major oil producing country and its economy is very unstable and almost
destroyed. Therefore, in order to give a boost to their economy they have proposed and
announced their own national cryptocurrency called PETRO COIN. They have announced to
make this crypto currency a legal tender of their nation by 2020.
The catch in this step is that they are approaching many countries to buy oil from them using
petro coin and if a country uses petro coin to make the payment then they are ready to give 30-
 AMITY BUSINESS SCHOOL, AUUP

50 % discounted oil prices to its customers. Recently Venezuelan delegation approached India
offering 30% discount in crude oil price but unfortunately due to international dynamics and
pressure Indian govt have not taken any step for the same.
It’s worth noting that India is one of the biggest importers of crude oil from this country by
importing more then 5 billion USD worth of crude oil every year and buying oil using petro coin
would have been a very beneficial step from Indian perspective.

In 2018 December and 2019 January the price of largest cryptocurrency bitcoin skyrocketed to
around 1000% growth from its price of 2 years back. It crossed 15000 USD per Bitcoin and
then came down due to heavy selling pressure.

Applications

Cryptocurrency has a lot of applications apart from its main motive of being used as a currency
which are described as follows:

1. Wealth management

Wealth management is one of the most exciting ways cryptocurrency can be used. That's why
companies such as SwissBorg -- a company that's created its own tokens for investment
solutions -- are giving investors some great opportunities to manage their wealth without
boundaries or restrictions. According to the SwissBorg website, "Whether you are an
individual, a DAO [decentralized autonomous organization] or a financial expert, SwissBorg is
a democratic ecosystem where you can manage a portfolio of crypto assets."

2. Digital publishing engagement

Digital publishers and advertisers are scrambling to find ways to increase their relevancy with
one another. Today, traditional banner ads that have almost nothing to do with an article are
simply ineffective with users. To fix the irrelevance problem, SolidOpinion has introduced a
new type of pay-per-article advertising where advertisers can pay for valuable ad real estate just
above a relevant article that a target audience member is consuming on a publishing site.
 AMITY BUSINESS SCHOOL, AUUP

This technology utilizes a proprietary form of cryptocurrency, Engagement Token, to fuel

engagement; both publishers and audience members can earn tokens by commenting and
publishing original content, and advertisers buy tokens to select their ad placements among
relevant articles.

A great cryptocurrency is the ability to take advantage of its trackability. So with advertising,
this technology makes sense: SolidOpinion, for example, has created its own digital currency
(engagement tokens) that track engagement and the viral spread of information, which gets
online advertisers the information they need and the capability to use it efficiently.

Related: Bitcoin and Other Cryptocurrencies: the Next Shiny Object or the Next Gold Mine?

3. Ethical business practices

Cryptocurrency can also be used to encourage ethical business practices. Because blockchain
makes it possible to track every transaction with complete transparency, businesses with a record
of human rights abuses -- the fishing industry, for instance, -- will (hopefully) take on
more ethical business practices.

4. Battling electoral fraud

Another ethical application of cryptocurrency will be its ability to help battle electoral
fraud. Santiago Siri is the co-founder of Democracy Earth, a non-profit that's designing an app
to combine voting with blockchain technology. Siri says that with cryptocurrency, electoral
fraud -- or any other kind of corruption involving money -- will no longer be possible.

"The blockchain is incorruptible; no one can modify or subvert how the votes are stored, and
that's vital for democracy," Siri has said.

5. De-corrupting charities

Additionally, cryptocurrency can be used to avoid corruption in charitable organizations.

Because of its ability to keep companies accountable, blockchain can eliminate many
 AMITY BUSINESS SCHOOL, AUUP

problems occurring with charities, such as fund leaks. That's why the World Food Programme
(WFP) is using blockchain to securely distribute cash assistance to the hungry.

6. Going green

If you're an environmentalist, you'll be happy to hear that cryptocurrency can be used to make
the world greener, too. For example, there's the Brooklyn Microgrid. With this system,
people who already have solar panels are able to sell environmental creditsthrough a phone app,
to residents who don't have direct access -- which means using less carbon-based power and
more solar-based energy.

7. Travel

As Bitcoin becomes accepted by more and more retailers, people are going to have the chance to
use them for a huge number of transactions. Travel transactions are just one category. The
website cheapair.com, a travel agency where you can purchase flights, hotels, car rentals and
cruises, has been accepting Bitcoin since 2013.

8. Education

More and more, schools are accepting cryptocurrencies as a form of payment. According
to Futurism.com, universities in Switzerland, Germany, Cyprus and the United States have
started to accept Bitcoin as payment. This form of payment will surely grow as this currency
becomes more and more popular.

9. Fund-raising

Many startups are now using cryptocurrencies in order to fund their ideas, services and
products. Instead of using traditional VC funding, or using fund-raising websites such
as IndieGoGo or Kickstarter, startup leaders are looking to cryptocurrency as a way to raise
money for what they need. Because it's easy to track and obtain money this way, it's
revolutionizing the entire fund-raising process.
 AMITY BUSINESS SCHOOL, AUUP

10. Augmented reality

I saved the best for last as I have a slight bias because of my company Blendar, which rewards
users for viewing AR experiences with cryptocurrency. Thanks to the Pokémon Go craze and
companies like Candy Lab, which have paved the way for location-based AR, a whole new
breed of startups has evolved. Location-based augmented reality experiences will be the future
of experiential marketing.

And here, Fluffr.io, is another company to keep your eyes open for, as it has partnered with
Blendar and Candy Lab to drive revolutionary in-person experiences, using a social currency
based on the blockchain.

As you can see, there are plenty of ways that cryptocurrency is changing every single aspect of
our lives. As cryptocurrencies gain popularity in the business world and in our daily lives, more
and more uses will come about, revolutionizing the world as we know it.

Major companies like visa, Mastercard, amazon, Vodafone, google and also the government
sector is researching in this field as well as using the technology for the purpose of secrecy and
ledger behavior.

Citation

 No of the author(s) 05
 Page numbers 10

References

 https://en.wikipedia.org/wiki/Cryptocurrency

 https://blockgeeks.com/guides/what-is-cryptocurrency/

 https://www.cnbc.com/cryptocurrency/

 https://economictimes.indiatimes.com/topic/cryptocurrency
 AMITY BUSINESS SCHOOL, AUUP

 https://cointelegraph.com/explained/how-cryptocurrency-prices-work-explained

Thank You,
NANDINI A01
AISHWARYA A13
ADITYA KUMAR A32
AKHIL KUMAR A34
SWABHI GUPTA A50
PRATEEK A60