The Essentials: Bitcoin, Blockchains, and Cryptocurrencies

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Bitcoin, blockchains, and cryptocurrencies are a new set of technologies that can be difficult to understand at first. This book aims to present the ideas behind this new technology using an easy to read writing style, pictures, and charts where necessary. With a background in traditional business consulting as well as in the credit card payment processing industry, Burkhardt & Company has firsthand experience working with this new technology both on an enterprise and user level. This new technology is emerging as the next phase of the internet itself, allowing the exchange of value and enabling decentralized applications across the internet. At its peak in December 2017 the cryptocurrency space had a market capitalization of over eight hundred billion dollars, with traditional investment firms now entering the space on behalf of their demanding clients. Blockchain based technologies are here to stay. If this new set of technologies can fulfil its potential, it will become a world-wide monetary system replacing large institutions, banks, and other functions of government. Don’t wait to learn about the possibilities of new blockchain technology and this next phase of the internet. Discover the essentials you need to know about Bitcoin, blockchains, and cryptocurrencies.
Table of Contents

Disclaimer  2
Introduction   2
About the Author  2
Table of Contents  3

Chapter 1 - The Short History of Bitcoin   7

Section 1.1: General Overview of Bitcoin and Cryptocurrencies  7

Section 1.2: Cryptography & Cypherpunks  8

Cryptography  8
Cryptocurrency  8
Cypher-Punks  9
Crypto Anarchy  9
Occupy Wall Street  10

Section 1.3: Satoshi Nakamoto   11

Satoshi Nakamoto   11

Section 1.4: Governance & Issuing Bitcoin Blockchain Updates Via Consensus  12

Decentralization   12
Decentralized Governance   12
Bitcoin Node   12
Consensus  12
5 Consensus Mechanisms  13
Hard Fork  13
Bitcoin Cash & The August 1st, 2017 Hard Fork  14

Section 1.5: The Original Bitcoin.org Whitepaper  15

Abstract  15
Introduction 15
Transactions 16
Timestamp Server 16
Proof-of-Work 17
Network 17
Incentive 18
Reclaiming Disk Space 18
Simplified Payment Verification 19
Combining and Splitting Value 19
Privacy 20
Calculations 20
Conclusion 22
References  22

Chapter 2 - Cryptocurrency Essentials  23

Section 2.1: The Bitcoin Blockchain   23

Bitcoin   23
Blockchain   24
Blocks  24
Block Hashes  25
Transactions  25
A Bitcoin Wallet/ Bitcoin Public Address  27
A Wallet’s Private Key  27
Satoshis  27
Sat/b (Satoshis per Byte)  27

Section 2.2: Bitcoin Mining  28

Mining  28
Proof of Work (PoW)  28
Mining-Rig  29
Mining Pools  30
Hash Rate   31
Mining Reward   32

Section 2.3: Bitcoin’s Currency Supply-Cap   33

Total supply of bitcoins  33
Halving of The Bitcoin Mining Reward   33

Chapter 3 – The Ethereum Blockchain   36

Section 3.1: Ethereum, The Programmable Blockchain   36

Ethereum    36
Decentralized Applications (DAPPs)  36
Smart-Contracts  36
Ether  36

Section 3.2: Enterprise Ethereum Alliance (EEA)  37

The Enterprise Ethereum Alliance (EEA)  37
EEA Working Groups  37

Section 3.3: Initial Coin Offerings (ICOs) & Alt-Coins  39

Initial Coin Offering (ICO)  39
Alt-Coins  39

Section 3.4: Mining for Ether  40

GPU Mining  40
Ethereum’s Proof of Work (PoW)  41
Ethereum’s Proof of Stake (PoS)  41
Master Nodes  41
PoW & PoS Transition   42

Section 3.5: Ethereum’s Governance and Consensus  43

Vitalik Buterin   43
Ethereum Classic (ETC)  43
Difficulty Bomb   44
Ice Age   44

Chapter 4 – Buying and Selling Cryptocurrencies  45

Section 4.1: Exchanges, ATMs, & Person to Person Trades  45

Exchange   45
Centralized Exchanges  45
Decentralized Exchanges (Non-Regulated Exchanges) 46
Bitcoin ATMs  46
Person-to-Person Trades  46

Section 4.2: Buying Bitcoins from a Centralized Exchange   47

Section 4.3: How to Chart the Price of Bitcoin   52

Cryptowatch   52

Section 4.4: How to Sell Your Bitcoins and Cash Out  54

Chapter 5 – Storing Cryptocurrencies  57

Section 5.1: Exchange Wallets & Hot Wallets  57

Exchange Wallet  57
Hot Wallet  57

Section 5.2: Printed Paper Wallets & Cold Storage   58

Paper Wallet  58
Cold Storage   60

Section 5.3: Hardware Wallets  61

Hardware Wallet  61

Chapter 6 – Cryptocurrency Security Practices  62

Section 6.1: Recommended Security Practices  62

Step 1: Computer’s Operating System (OS)  62
Step 2: Internet Browser  63
Step 3: Internet Browser Plug-Ins  63
Step 4: Email Accounts  64
Step 5: Bookmark Cryptocurrency Websites  64
Step 6: Control Your Wallet’s Private Key  65

Disclaimer  66