BCSE328L

Cryptocurrency
Technologies

Dr. Saranya. P
SCOPE-IoT
VIT-Vellore
 Fundamentals of
Cyrptocurrency

• Cryptocurrency
• Origin and importance
• Usage of cryptocurrency
• Legal status
• Blockchain structure
• Interaction between blockchain
and crypto currencies
• Importance and uses of
Cryptocurrency
• Hardware and software
requirements of Blockchain
 • A cryptocurrency is a digital or virtual
currency
• Secured by cryptography, which makes it
nearly impossible to counterfeit or
double-spend.
• Most cryptocurrencies exist on
decentralized networks using blockchain
technology
What is
• Blockchain technology is a distributed
cryptocurrency ledger enforced by a disparate network
of computers.
• A defining feature of cryptocurrencies is
that they are generally not issued by any
central authority
• Rendering them theoretically immune to
government interference or
manipulation.
 "Crypto" refers to the various
encryption algorithms and
cryptographic techniques that
safeguard these entries

Elliptical curve encryption, public-

What is private key pairs, and hashing
cryptocurrency functions.

Central to the appeal and

functionality of cryptocurrency is
blockchain technology
 The first cryptocurrency was eCash, created by
David Chaum's company DigiCash in 1990.

There were several attempts to create a viable

and accepted cryptocurrency before Bitcoin.

Origin of eCash, B-money, Bit Gold, and Hashcash were

very influential in Bitcoin's creation.
Cyrptocurrency

Issues with ecash – counterfeits, double spending

Cryptocurrencies are a subtype of alternative

digital currencies. The first decentralised
cryptocurrency was bitcoin in 2009.
 Since Bitcoin is an open-source,
decentralised digital currency and
blockchain technology, no one owns it.

It is governed by multiple stakeholders

— including developers, miners, and
users.
Origin of
Cyrptocurrency
Developers write the code that makes
Bitcoin run;

Miners validate transactions; and users

put the software to work by trading,
transacting, holding, and more.
 Importance of Cryptocurrencies
Their importance stems from a few key features:
• Decentralization: Unlike traditional currencies controlled by governments,
cryptocurrencies operate on decentralized networks.
• This means transactions are secured through cryptography and verified by a distributed
network of computers, rather than a central authority.

• Faster and Cheaper Transactions: Crypto transactions can potentially be faster and
cheaper than traditional methods, especially for international payments.
• This is because they bypass the need for intermediaries like banks, which can slow
down processing and add fees.

• Potential for Inflation Protection: Some cryptocurrencies, like Bitcoin, have a capped
supply.
• This means there's a limit to how many units will ever be created. This, in theory, could
make them resistant to inflation, as governments printing more money can decrease
the value of traditional currencies.
 To buy products and services cryptocurrencies
can be used

Purchase the crypto currencies in

cryptoexchanges
Use of
Cryptocurrencies These are businesses that allow you to buy or
sell cryptocurrencies from other users at the
current market price, similar to a stock.

After buying the coins, you will need to transfer

them to a digital wallet or use a third-party
service like Coinbase to store your coins.
 Crypto currency can be used as an asset

Brokerage firms facilitate to invest in different

cryptocurrencies like stock exchanges

Use of
Cryptocurrencies One cannot withdraw them from the platform
for purchases.

There are several crypto ETFs that provide

exposure to the crypto asset class without
requiring the investors to maintain their own
wallets.
 • Unbanked Access: Cryptocurrencies can
provide access to financial services for
Use of
people who are unbanked or
Cryptocurrencies underbanked, as they don't require a
traditional bank account.
 • Factors to be considered – growth,
security, risks
• Fixed deposits
• Certificate of deposit
• Bonds
• Public provident fund
Investment • National pension systems
• Real estate
types • Stocks
• Mutual funds
• Antiques
• cryptocurrencies
Pros and Cons of Cryptocurrencies
• The advantages of cryptocurrencies include
cheaper and faster money transfers
• They enable secure online payments without the
use of third-party intermediaries.
• Financial infrastructures like banks – which
typically operate 9 to 5, charge fees for
transactions, limit how much money you can
withdraw from an ATM or wire to someone and
sometimes take days to process deposits,
transaction failures
Pros and Cons of Cryptocurrencies
• Decentralized systems that do not collapse at
a single point of failure.
• Inflation protection for the value of
cryptocurrencies
• Level of privacy for the account
• The disadvantages of cryptocurrencies include
their price volatility
• High energy consumption for mining activities
 Cryptocurrencies and their Purpose
• Many cryptocurrencies were created to facilitate work done on the
blockchain they are built on.
• For example, Ethereum's ether was designed to be used as payment for
validating transactions and opening blocks.
• When the blockchain transitioned to proof-of-stake in September 2022,
ether (ETH) inherited an additional duty as the blockchain's staking
mechanism.
• Energy-intensive proof-of-work (PoW) , eco-friendly proof-of-stake
(PoS) consensus mechanism
• The XRP Ledger Foundation's XRP is designed for financial institutions to
facilitate transfers between different geographies.
• The XRP Ledger enables the effective transferring of assets globally, aiding
instant money transfers for remittances, payrolls, treasury payments and
other cross-border payments for business organizations.
 Why to know the Purpose
• Each crypto coin has been created with a
purpose
• Knowing the purpose can help you decide
whether it is worth investing in
• A cryptocurrency with a purpose is likely to be
less risky than one that doesn't have a use.
• Coin names differ from coin types
 Coin Types
• Utility: XRP and ETH are two examples of utility tokens. They
serve specific functions on their respective blockchains.
• Transactional: Tokens designed to be used as a payment method
for buying goods and services. Bitcoin is the most well-known of
these.
• Governance: These tokens represent voting or other rights on a
blockchain, such as Uniswap.
• Platform: These tokens support gaming applications built to use
a blockchain, such as Solana.
• Security tokens: Tokens representing ownership of an asset, such
as a stock that has been tokenized (value transferred to the
blockchain).
• MS Token is an example of a securitized token. If you can find one
of these for sale, you can gain partial ownership of the
Millennium Sapphire.
 Blockchain Technology
• A blockchain is essentially a set of connected blocks of
information on an online ledger.
• Each block contains a set of transactions that have been
independently verified by each validator on a network.
• Every new block generated must be verified before being
confirmed, making it almost impossible to forge
transaction histories.
• The contents of the online ledger must be agreed upon by
a network of individual nodes, or computers that maintain
the ledger.
• Financial institutions such as JPMorgan Chase & Co. (JPM)
are using blockchain technology to lower transaction costs
by streamlining payment processing.
 Interaction Between Blockchain and
Cryptocurrency
• Blockchain technology and cryptocurrencies are intrinsically
linked.
• With blockchain serving as the foundational technology that
enables the existence and functionality of cryptocurrencies.
• The interactions are as follows:
– Blockchain as a Ledger for Cryptocurrencies
– Creation of New Cryptocurrency Units
– Security and Trust
– Transparency and Immutability
– Smart Contracts and Decentralized Applications
– Tokenization
– Economic Incentives
– Cross-Chain Interactions
 Blockchain as a Ledger for
Cryptocurrencies
• Decentralized Ledger: A blockchain is a distributed
ledger that records all transactions across a
network of computers. This ledger is immutable,
meaning once data is recorded, it cannot be
altered.
• Cryptocurrency Transactions: Cryptocurrencies
use blockchain to securely and transparently
record transactions. Each transaction is verified
and added to a block, which is then added to the
blockchain.
 Creation of New Cryptocurrency Units
• Mining (Proof of Work): In PoW blockchains like
Bitcoin, new cryptocurrency units are created as a
reward for miners who successfully solve
cryptographic puzzles and add new blocks to the
blockchain.
• Staking (Proof of Stake): In PoS blockchains like
Ethereum 2.0, new cryptocurrency units may be
created and distributed as rewards to validators
who participate in the block validation process by
staking their coins.
 Security and Trust
• Cryptographic Security: Blockchain uses
cryptographic techniques to secure transactions.
• Public and private keys are used to sign transactions,
ensuring that only the legitimate owner can authorize
transfers.
• Consensus Mechanisms: Mechanisms like PoW and
PoS ensure that all participants agree on the state of
the blockchain.
• This consensus is crucial for maintaining the integrity
and trustworthiness of the cryptocurrency network.
 Transparency and Immutability
• Transparent Ledger: All transactions on a
blockchain are visible to all participants, providing
transparency.
• This visibility helps prevent fraud and ensures that
all transactions are conducted fairly.
• Immutable Records: Once a transaction is recorded
on the blockchain, it cannot be changed or deleted.
• This immutability ensures a reliable and unalterable
transaction history.
 Smart Contracts and Decentralized
Applications (DApps)
• Smart Contracts: These are self-executing contracts
with the terms directly written into code.
• They run on blockchain platforms like Ethereum and
automatically enforce the terms of an agreement
when predefined conditions are met.
• DApps: Decentralized applications use blockchain to
operate without a central authority.
• Cryptocurrencies are often integral to DApps,
serving as a means of transaction, governance, and
incentive.
 Tokenization
• Asset Representation: Cryptocurrencies can
represent various assets on the blockchain.
• For example, security tokens represent ownership in
assets like real estate or stocks
• Utility tokens provide access to a product or service
within a blockchain ecosystem.
• Interoperability: Some blockchains enable the
creation and exchange of various tokens
• Facilitating a wide range of financial and non-
financial applications.
 Economic Incentives
• Incentive Structures: Cryptocurrencies provide
economic incentives for participants to maintain the
network.
• Miners, validators, and other participants are rewarded
with cryptocurrency units for their contributions.
• Decentralized Governance: Some blockchain networks
use cryptocurrencies to enable decentralized
governance
• Token holders can vote on protocol changes and other
decisions.
 Cross-Chain Interactions
• Interoperability Solutions: Projects like Cosmos,
and others are working on solutions to enable
interoperability between different blockchains
• Allowing cryptocurrencies and data to be
exchanged across different blockchain networks.
• Atomic Swaps: These are smart contracts that
enable the exchange of one cryptocurrency for
another without the need for a centralized
exchange, directly on the blockchain.
Blockchain System
 Blockchain System
• Blocks: A block is a group of transactions that
are bundled together and added to the
blockchain ledger.
• Each block contains a hash, or a unique digital
fingerprint, of the previous block, forming a
chain of blocks that is resistant to tampering
and modification.
Chain of Blocks
 Ledger
• A ledger in the context of blockchain technology is a digital record-
keeping system that is used to record transactions in a secure,
transparent, and immutable manner.
• Decentralization: copies of the ledger are distributed across a network
of nodes (computers), ensuring no single point of control or failure.
• Immutability: Once a transaction is recorded on the blockchain ledger,
it cannot be altered or deleted.
• Transparency: allows for verification and auditability of all
transactions by anyone with access to the blockchain.
• Security: Blockchain ledgers use advanced cryptographic techniques
to secure transactions and protect against fraud and unauthorized
changes. Each block contains a cryptographic hash of the previous
block, creating a chain that is tamper-proof.
 Ledger Working
• Transaction Initiation:
• A user initiates a transaction (e.g., transferring cryptocurrency) and broadcasts it
to the network.
• Validation:
• Nodes in the network validate the transaction using consensus mechanisms (e.g.,
Proof of Work, Proof of Stake) to ensure its legitimacy.
• Block Creation:
• Validated transactions are grouped together into a block. Each block contains a list
of transactions, a timestamp, and a reference to the previous block's hash.
• Block Addition:
• The newly created block is added to the existing blockchain, forming a continuous,
chronological chain of blocks.
• Ledger Update:
• The updated blockchain is then distributed across all nodes in the network,
ensuring that every participant has an up-to-date copy of the ledger.
 Example – Bitcoin Network
• In the Bitcoin blockchain:
• Each block contains a list of Bitcoin transactions.
• Miners (nodes) validate transactions and add
them to the blockchain by solving complex
cryptographic puzzles.
• The entire history of Bitcoin transactions is stored
in the blockchain ledger, which is accessible to
anyone with an internet connection.
 Accessing Bitcoin network
• Blockchain explorers are websites that allow you to view
details of transactions, blocks, and addresses on the Bitcoin
blockchain. Some popular blockchain explorers include:
• Blockchain.com
• Blockstream.info
• Mempool.space
• Using Blockchain.com Explorer
• Go to Blockchain.com.
• Enter a Bitcoin address or transaction ID in the search bar.
• View the transaction details, including inputs, outputs, and
the block in which the transaction was included.
Other Bitcoin Network Accessing Methods
• Bitcoin Core
• Bitcoin Core is the original software client for Bitcoin. It downloads the entire Bitcoin
blockchain and allows you to interact with the network directly.
• It's open-source and can be downloaded for free.
• This method requires more technical knowledge and storage space as the entire
blockchain is over 300 GB in size.
• API Services
• API services provide programmatic access to Bitcoin blockchain data. Some popular API
services include:
– CoinGecko API: Provides various blockchain data.
– Blockchair API: Offers detailed search features for transactions, blocks, outputs, and addresses.
• Digital Wallets
• Digital wallets store your Bitcoin and allow you to send and receive transactions. Some
wallets also provide access to blockchain data:
– Electrum: A lightweight wallet that connects to external servers for blockchain data.
– Mycelium: A mobile wallet with blockchain explorer features.
 Blockchain System
• A blockchain system consists of several
components, including:
• Transactions: A transaction is a record of an
exchange of value or information between
two or more parties.
• In a blockchain system, transactions are
processed and validated by the network
nodes, and then added to the blockchain
ledger in the form of blocks.
 Blockchain Structure
• Each block contains a hash (a digital fingerprint or
unique identifier), timestamped batches of recent
transactions, and the hash of the previous block.
• The previous block hash links the blocks together and
prevents any block from being altered or a block being
inserted between two existing blocks.
• In this way, each subsequent block strengthens the
verification of the previous block and hence the entire
blockchain.
• The method renders the blockchain tamper-evident,
lending to the key attribute of immutability.
 Blockchain System
• A smart contract : is defined as a digital agreement that
is signed and stored on a blockchain network, which
executes automatically when the contract's terms and
conditions (T&C) are met.
• The T&C is written in blockchain-specific programming
languages such as Solidity.
• Other smartcontract languages are Vyper for ethereum,
chaincode, RUST
• smart contracts can be much more complex, involving
multiple functions, state variables, and interactions with
other contracts.
 Example smart contract
• This smart contract allows to store and retrieve a single integer value.
– pragma solidity ^0.8.0;
– contract SimpleStorage {
– // State variable to store a number
– uint256 private storedData;
– // Event to emit when the stored data is changed event DataChanged(uint256
oldValue, uint256 newValue);
– // Function to set the value of the state variable function set(uint256 x) public
– { uint256 oldValue = storedData;
– storedData = x; emit DataChanged(oldValue, x); }
– // Function to get the value of the state variable function
– get() public view returns (uint256)
– { return storedData; }
– }
 Deploying Smart Contract
• To deploy this smart contract, use a development environment like Remix or a
framework like Truffle.
• Open Remix:
– Visit Remix.
• Create a New File:
– Create a new file named SimpleStorage.sol and paste the Solidity code into it.
• Compile the Contract:
– Click on the "Solidity Compiler" tab, select the appropriate compiler version (matching
pragma solidity ^0.8.0;), and click "Compile SimpleStorage.sol".
• Deploy the Contract:
– Click on the "Deploy & Run Transactions" tab.
– Select the environment (e.g., JavaScript VM for local testing).
– Click the "Deploy" button.
• Interact with the Contract:
– Once deployed, you can interact with the contract using the provided UI in Remix. You can
call the set function to store a value and the get function to retrieve it.
 Blockchain System
• Nodes: A node is a computer or device that is
connected to the blockchain network and
participates in the validation and processing of
transactions.
• Nodes can be full nodes, which store and
process the entire blockchain ledger, or
lightweight nodes, which only store and
process a subset of the ledger.
 Blockchain Nodes
• Copies of the ever-growing blockchain are stored
on another set of computers known as “nodes,”
which are voluntarily operated.
• Because nodes, unlike miners, receive no
compensation, they are typically operated by
people who are invested in Bitcoin and therefore
want to see it succeed.
• In order to mine, a person must also run a node or
be part of a mining group that operates a node.
 Blockchain System
• Consensus mechanism: A consensus
mechanism is a set of rules and protocols that
govern the process of adding new blocks to
the blockchain ledger.
• There are several different types of consensus
mechanisms, including proof-of-work, proof-
of-stake, and delegated proof-of-stake.
 Transaction verification types - PoW
• Proof of work (PoW) is a decentralized consensus
mechanism that requires network members to expend
effort in solving an encryption puzzle.
• Proof of work is also called mining, in reference to
receiving a reward for work done.
• Having thousands of mining computers around the world
compete against each other to solve the same problem
for a winner-takes-all prize can be inefficient, however.
• This types often criticized by environmentalists for all
the energy it wastes.
Transaction verification types - PoS
• PoS: Proof of stake approach to verify transactions. Under this
system, only those who own the cryptocurrency can verify
transactions.
• Those who manage PoS systems are known as forgers. The more of a
cryptocurrency they own, the more rewards they can collect for
verifying transactions on their computers, which are known as
masternodes.
• Like mining, forging requires technical expertise and special
software.
• One needs to buy a considerable amount of coins to be eligible to
forge.
• In other words, mining and forging are not something that’s easy to
take up for the casual cryptocurrency investor
 How blocks are secure?
• Validated blocks are considered secure in
blockchain technology for several reasons.
• Primarily due to the consensus
mechanisms ,cryptographic principles and
distributed ledger that underpin blockchain
networks.
• Also attractive incentives and community
governance enhances the security of the
blockchain
 Cryptographic Security
• Hash Functions:
• Immutable Records: Each block contains a
cryptographic hash of the previous block,
creating a chain. Any change to a block would
alter its hash, making subsequent blocks invalid.
• Tamper Resistance: Because altering a single
block would require recalculating the hashes of
all subsequent blocks, tampering with the
blockchain becomes computationally infeasible.
 Cryptographic Security
• Digital Signatures:
• Authentication: Transactions are signed by the
private keys of the parties involved, ensuring
that only the rightful owner of the
cryptocurrency can authorize transactions.
• Integrity: Digital signatures verify that
transaction data has not been altered since it
was signed.
 Decentralization and Distributed Ledger

• Redundancy: Copies of the blockchain are

maintained by multiple nodes across the network.
• This redundancy ensures that even if some nodes
are compromised or go offline, the blockchain
remains intact and accessible.
• Consensus Across Nodes: Changes to the
blockchain require consensus among a majority of
nodes, making it difficult for a single malicious
actor to alter the blockchain without being
detected by others.
 Economic Incentives and Game Theory
• Cost of Attack: In both PoW and PoS, launching an attack
(e.g., gaining majority control) is prohibitively expensive.
• In PoW, it requires immense computational resources, and
in PoS, it requires acquiring a majority of the
cryptocurrency
• Alignment of Interests: Participants in the network are
incentivized to act honestly to earn rewards and avoid
penalties.
• Malicious behavior is not only costly but also
counterproductive, as it devalues the cryptocurrency they
hold.
 Community and Protocol Governance
• Transparency and Auditing: Blockchain networks are
often open and transparent, allowing anyone to audit
and verify transactions.
• This transparency increases trust and reduces the
likelihood of undetected malicious activity.
• Protocol Upgrades and Forks: The community can
propose and vote on protocol upgrades to improve
security and functionality.
• In cases of severe disputes or security issues, the
network can undergo a hard fork, creating a new chain
with enhanced security measures.
 Transactions and block creation
• For a single transaction, typically only one block is directly created.
• However, understanding this process in the context of blockchain
technology involves a few key points:
• Inclusion in a Block:
• Single Block Inclusion: When a transaction is created, it is
broadcast to the network and collected by miners (in Proof of
Work) or validators (in Proof of Stake). This transaction will then be
included in the next block that is created and added to the
blockchain.
• Transaction Propagation: Once the transaction is included in a
block, this block is propagated to all nodes in the network to
ensure consensus.
 Transactions and block creation
Block Confirmation and Chain Depth:
• Confirmations: While a transaction is included in a single block initially,
its security and finality are strengthened as more blocks are added on
top of this block.
• Each additional block that builds on the block containing the transaction
is referred to as a confirmation.
– For example, in Bitcoin, a transaction is considered very secure after receiving
six confirmations, meaning five blocks have been added after the block that
included the transaction.
• Forks and Reorganizations: Occasionally, the blockchain may experience
temporary forks, where two blocks are created nearly simultaneously.
• Nodes will eventually agree on the longest chain, and the other fork will
be discarded. Transactions in discarded blocks will be re-included in
future blocks of the accepted chain.
 Transactions and block creation
Multiple Blocks in Different Contexts:
• High Transaction Volume: In high transaction volume
scenarios, multiple blocks will be created over time,
each containing different sets of transactions.
• However, each specific transaction is only recorded in
one block.
• Layer 2 Solutions: In some blockchain systems, layer 2
solutions (such as the Lightning Network for Bitcoin) may
create multiple off-chain transactions that are later
consolidated and recorded on the main blockchain in a
single block.
 Transactions and block creation
Transactions Across Multiple Blocks:
• State Changes and Contract Interactions: In
smart contract platforms like Ethereum,
complex transactions may involve multiple
state changes that are reflected across several
blocks.
•
 Blocksize
• Block Size Limit:
• The maximum size of an individual block is limited by the protocol of
the specific blockchain. This limit affects the number of transactions
that can be included in a single block.
• Bitcoin: The maximum block size is 1 megabyte (MB). With
Segregated Witness (SegWit) and other optimizations, the effective
capacity can be slightly higher.
• Ethereum: Instead of a fixed block size, Ethereum uses a gas limit.
• Gas is the fee required to successfully conduct a transaction or
execute a contract on the Ethereum blockchain platform.
• The block gas limit determines the maximum amount of
computational work that can be included in a block.
• As of 2023, this limit is around 30 million gas.
 Blockchain Length
• There is no maximum length (number of blocks) for a
blockchain. A blockchain is designed to grow indefinitely as new
blocks are continuously added over time.
• Block Height: The term "block height" refers to the total
number of blocks in the chain, starting from the genesis block
(block 0).
• For instance, if the block height is 700,000, it means there are
700,000 blocks in the blockchain.
• Indefinite Growth: Blockchains are intended to be immutable
and append-only.
• They keep growing as long as the network is active and
continues to process transactions.
 Technical and Practical Considerations
• Scalability: As the blockchain grows, the size of the
blockchain ledger increases, which can lead to storage and
scalability challenges. Nodes must store and process all
historical data, which can become cumbersome over time.
• State Pruning: Some blockchains implement state pruning
techniques to manage the size of the blockchain state and
reduce storage requirements for full nodes.
• Archival Nodes: These nodes store the entire history of
the blockchain, while other types of nodes might only
store recent blocks and state data.
 State pruning
• State pruning is a technique used in blockchain technology
to reduce the size and complexity of the blockchain’s state.
• The state of a blockchain refers to the current status of all
its transactions and smart contracts.
• As the blockchain grows, the state can become increasingly
large, making it more difficult to store and sync for full
nodes on the network.
• This can be a major barrier to the scalability and adoption
of a blockchain platform.
• There have been several approaches to state pruning in
blockchain systems – partial, recursive, sparse
 Blockchain Hardware Requirements
• To deploy the blockchain network hardware components are essential
• High-Performance Computers (HPCs): Running a blockchain node
often requires powerful computers. These handle tasks like validating
transactions and storing the blockchain ledger.
• Processing Power and Memory: CPUs and sometimes GPUs are
important for fast and efficient processing of complex cryptographic
operations.
• Storage: Blockchains can grow quite large, so sufficient storage space
is crucial, preferably on a Solid State Drive (SSD) for faster data access.
• Reliability: Consistent operation is essential. Look for hardware with
good uptime and features like redundancy to minimize downtime
risks.
 Additional Hardware Considerations
• Proof-of-Stake vs. Proof-of-Work: The
consensus mechanism used by a blockchain
can affect hardware requirements. Proof-of-
Stake systems generally require less processing
power compared to Proof-of-Work systems.
• Cloud-Based Options: Cloud services like
Blockchain-as-a-Service (BaaS) can provide an
alternative to running your own hardware
infrastructure.
 Software Requirements
• Blockchain Node Software: This software allows your computer to
participate in the blockchain network. Specific software depends on the
blockchain platform (e.g., Bitcoin Core for Bitcoin).
• Development Tools: For developers building blockchain applications,
smart contract programming languages (like Solidity for Ethereum) and
Integrated Development Environments (IDEs) are needed.
• Wallets: Crypto wallets are software applications to store, manage, and
transfer your cryptocurrency holdings.
• Additional Tools: Depending on your purpose, other blockchain-related
software might be helpful, such as block explorers or blockchain
analytics tools.
• The specific hardware and software requirements will vary depending
on your role in the blockchain ecosystem (user, developer, node
operator) and the chosen blockchain platform.
 Mempool.space
• Mempool.space is a blockchain explorer that
focuses on the Bitcoin network.
• It provides real-time information about Bitcoin
transactions, blocks, and the mempool, which
is the collection of unconfirmed transactions
waiting to be included in a block.
 Mempool.space -features
• Viewing the Mempool:
• It shows unconfirmed transactions in the Bitcoin
network. Users can see how many transactions
are pending, the size of the mempool, and the
current state of network congestion.
• The explorer displays unconfirmed transactions,
along with details like transaction IDs, sizes, fees,
and how long they've been in the mempool.
 Mempool.space -features
• Transaction Fees:
• Mempool.space provides a visual guide to help
users choose the right transaction fee. It shows a
fee market, where users can compare different
fee rates required for transactions to be included
in the next block or get confirmed quickly.
• It gives a fee estimation for transactions based on
current network congestion and transaction sizes.
 Mempool.space –features

• Blockchain Data:
• It provides real-time information about the latest Bitcoin
blocks, including block height, time, size, and the number
of transactions.
• The explorer allows users to explore specific blocks and
view details about all the transactions included in them.
• Transaction Tracking:
• Users can search for individual Bitcoin transactions by
transaction ID (TXID) to track their status. This helps users
see if their transaction has been confirmed and included
in a block.
 Mempool.space -features
• Visualization:
• Mempool.space provides a clear and user-friendly graphical
representation of the mempool and transaction fees. This makes it
easy for users to understand network congestion and choose optimal
transaction fees.
• The "mempool" graph helps users visually see the pending
transactions and estimate the time it might take for a transaction to
be confirmed based on its fee rate.
• User-Friendly Interface:
• The website has an interactive, easy-to-use interface that appeals to
both Bitcoin novices and experienced users.
• Its clean design and visual elements make it accessible for anyone
looking to track Bitcoin transactions and network activity.
Blockchain core Software - Components
• Foundational software infrastructure that
enables the operation of a blockchain
network.
• It is responsible for the core functionalities of
a blockchain, including transaction validation,
consensus mechanisms, ledger management,
and peer-to-peer communication.
• The software ensures the integrity, security,
and decentralization of the blockchain system.
Blockchain core Software - Components
• Blockchain Protocol:
• Defines the rules and procedures for transaction verification, block creation,
and consensus.
• Examples include Proof of Work (PoW), Proof of Stake (PoS), Delegated
Proof of Stake (DPoS), and others.
• Ledger Management:
• Manages the distributed ledger that stores all transaction history.
• Ensures that each node in the network has an identical copy of the
blockchain.
• Consensus Mechanism:
• Ensures that all nodes in the network agree on the current state of the
blockchain, preventing double-spending and other issues.
• Examples include PoW (Bitcoin), PoS (Ethereum 2.0), and Practical Byzantine
Fault Tolerance (PBFT).
Blockchain core Software - Components
Peer-to-Peer Network:
• Facilitates communication between nodes, ensuring that blocks and transactions are
propagated to all network participants.
• Transaction Management:
• Handles the creation, validation, and recording of transactions on the blockchain.
• Ensures that each transaction is cryptographically secure and complies with the protocol
rules.
• Smart Contract Engine (optional):
• For blockchains like Ethereum, the core software includes a mechanism for creating,
executing, and managing smart contracts—self-executing contracts with the terms of
the agreement directly written into code.
Node Software:
• Each participant in the network runs a node, which is the software that connects to the
blockchain and participates in validating transactions and blocks.
• Different types of nodes include full nodes, light nodes, and archive nodes, each serving
different purposes in the network.
Example Blockchain Core Software
• Bitcoin Core (Bitcoin):
• The reference implementation of Bitcoin, responsible for validating transactions, creating blocks,
and ensuring the integrity of the Bitcoin blockchain.
• Protocol: Proof of Work (PoW).
• Geth (Ethereum):
• The Go implementation of Ethereum, responsible for running Ethereum nodes, interacting with
smart contracts, and supporting the Ethereum Virtual Machine (EVM).
• Protocol: Initially Proof of Work (PoW), transitioned to Proof of Stake (PoS) with Ethereum 2.0.
• Hyperledger Fabric (Enterprise Blockchain):
• A permissioned blockchain framework designed for use in enterprise contexts, supporting
modularity and scalability for building blockchain solutions.
• Protocol: Uses a consensus mechanism called "Practical Byzantine Fault Tolerance (PBFT)" or
other pluggable options.
• Parity (Polkadot):
• Parity Ethereum was the reference implementation for Ethereum 1.x and Ethereum 2.0. Now, it
serves as the client for the Polkadot network, focusing on scalability, interoperability, and cross-
chain communication.
• Protocol: Nominated Proof of Stake (NPoS) for Polkadot.
 Bitcoin Mining Softwares
• Essential for anyone who wants to participate in the
mining process of Bitcoin.
• This software allows miners to connect their
hardware (ASICs Application-Specific Integrated
Circuit or GPUs) to the Bitcoin network to solve
complex cryptographic problems, validate
transactions, and secure the network.
• In return for this computational work, miners are
rewarded with newly minted Bitcoin and
transaction fees.
 Example Bitcoin Mining Softwares
Awesome Miner
• Platform: Windows
• Type: Windows GUI for managing multiple miners
• Features:
– Awesome Miner is designed for managing and monitoring multiple mining rigs.
– It supports a variety of mining hardware (ASICs, FPGAs, and GPUs).
– It allows integration with mining pools and even includes support for cloud
mining services.
– The software supports over 25 mining engines, such as CGMiner, BFGMiner,
and others.
– It includes advanced features for overclocking, fan control, and detailed
performance monitoring.
– Note: Offers both a free version with limited features and a paid version with
advanced functionalities.
 CGMiner

Platform: Windows, Linux, macOS

• Type: Open-source, command-line
• Features:
– CGMiner is one of the most widely used mining software.
– It supports ASIC, making it very versatile.
– Highly customizable, with features like fan speed control, overclocking,
and temperature monitoring.
– Optimized for performance and compatibility with a variety of mining
hardware.
– Advanced mining pool support with automatic switching and failover
to avoid downtime.
– Note: CGMiner has a steep learning curve due to its command-line
interface, but it's very powerful.
Hardware Requirements – User perspective

• To start trading the amount of data your

computer or laptop will be receiving is enormous.
• You need a computer with high performing
hardware if your plan is to be a full time trader.
• Multiple monitors are an advantage to a full time
trader as one can keep track of different trades
and charts with ease
• It will help to run trading softwares smoothly
Hardware Requirements – User perspective

• Budget: intel i5, i7, more performance : Intel Core

i7-6950x which has 10 COREs @ 4.0 GHZ
• The best system for trading crypto will have at
least 16GB of RAM.
• One can also upgrade to 32GB
• A trading system with an SSD as primary drive
will help you host your desired operating system,
the trading softwares and other applications.
• To run all the programs you need while trading.
Hardware Requirements – User perspective

• A graphics card that supports 4K or 5K

resolution and 3 or more computer monitors.
• Cooling is important and the best should have
two or more fans.
Software Requirements – user perspective

• Crypto trading software uses blockchain — a more

transparent solution.
• Simplified UI
• Intuitive Navigation
• Data Visualization
• Chart View
• Biometric Security
• Gamification
• Automation
Applications -Crypto Trading Exchanges
• Cryptocurrency exchanges work similarly to a broker,
giving you the tools to buy and sell
cryptocurrencies like Bitcoin, Ethereum, and Tether.
• Exchanges are built using the following building
blocks
– a market access interface and a market data interface
– a matching engine as the core of the exchange
– a data warehouse to receive and store all events taking
place on the exchange
– a set of APIs to bring them all together.
 Commercial Crypto Exchange Software
• Binance Cloud:
• Overview: Binance Cloud offers a full-fledged exchange solution
leveraging Binance's technology and liquidity.
• Features: Access to Binance’s liquidity, multi-currency support,
customizable user interface, high security, and support services.
• Website: Binance Cloud
• AlphaPoint:
• Overview: AlphaPoint provides white-label exchange software
solutions for launching digital asset exchanges.
• Features: Advanced trading engine, multi-asset support,
customizable UI, compliance tools, and robust security
measures.
 Key Considerations for Choosing Crypto
Exchange Software:
• Scalability: Ensure the software can handle high transaction
volumes and scale with your user base.
• Security: Look for robust security features, including multi-
signature wallets, cold storage, and DDoS protection.
• Regulatory Compliance: Ensure the platform supports
compliance with local and international regulations, including
KYC (Know Your Customer) and AML (Anti-Money Laundering)
requirements.
• Customizability: The ability to customize the user interface and
functionalities to match your brand and user requirements.
• Support and Maintenance: Consider the availability of ongoing
support, updates, and maintenance services from the provider.
 Legal Status
• Fiat currencies – government issued currencies, derive
their authority from the government or monetary
authorities.
• For example, the Indian rupees is recognized and issued by
the government as the official currency of India and is "legal
tender.“
• But cryptocurrencies are not issued by any public or private
entities.
• Therefore, it has been difficult to make a case for their
legal status in different financial jurisdictions throughout the
world.
• It doesn't help matters that cryptocurrencies have primarily
functioned outside most existing financial infrastructure.
 In US Legal Status
• The legal status of cryptocurrencies creates
implications for their use in daily transactions
and trading.
• In June 2019, the
Financial Action Task Force (FATF)
recommended that wire transfers of
cryptocurrencies should be subject to the
requirements of its Travel Rule, which requires
AML compliance.
 In US Legal Status
• Although cryptocurrencies are considered a form of
money, the Internal Revenue Service (IRS) treats
them as financial assets or property for tax purposes.
• And, as with most other investments, if you reap
capital gains selling or trading cryptocurrencies, the
government wants a piece of the profits.
• How exactly the IRS taxes digital assets—either as
capital gains or ordinary income—depends on how
long the taxpayer held the cryptocurrency and how
they used it.
 In US Legal Status
• In the United States in July 2023, courts ruled that
cryptocurrencies are considered securities when purchased by
institutional buyers but not by retail investors purchased on
exchanges.
• However, crypto exchanges are regulated by the SEC security
and exchange commission, as are coin offerings or sales to
institutional investors.
• So, crypto is legal in the U.S., but regulatory agencies are
slowly gaining ground in the industry.
• SEC took action against crypto frauds following the
bankruptcies of FTX, BlockFi, Voyager Digital, and other
cryptocurrency platforms
 Legal Status In India
• Cryptocurrencies as a payment medium are not regulated
or issued by any central authority in India.
• There are no guidelines laid down for sorting
disagreements while dealing with cryptocurrency.
• So, if you wish to trade in crypto, do it at your own risk.
• Nirmala Sitharaman, the Finance Minister of India, initiated
a tax on digital assets that has increased the discussion on
the cryptocurrency legality in the country.
• Given the stance of the Reserve Bank Of India (RBI)
Governor and other key ministers from time to time, it can
be safe to state cryptocurrency is not banned in India.
 Legal Status In India
• Till 2022, cryptocurrency was unregulated in the country.
This changed after the government set forth a 30% and 1%
tax on profits from cryptocurrencies and tax deducted at
source respectively in the Union Budget of 2022.
• Virtual Digital Assets (VDA) like Bitcoin (BTC), or other
cyptocurrencies, non-fungible tokens (NFT), metaverse
tokens, other similar assets are taxed at a flat 30% tax rate.
• Plus applicable surcharge depending on the individual tax
slab rates and education cess at the rate of 4%.
• In addition to this tax, 1% TDS will also apply on the sale of
crypto assets of more than Rs 50,000 (or Rs 10,000 in
certain cases).
 Legal Status In India
• Crypto Gains should be reported under Schedule VDA in the ITR.
• No legal specification still for i) trading and issuance of
securities; (ii) trading of commodities; (iii) acquisition and sale of
assets to and from persons resident outside India; and (iv)
acceptance of deposits by companies
• If a VDA is used as a “store of value”, e.g. Bitcoin, then it is freely
tradable by individuals within India without any reporting
requirements apart from the application of the IT Act.
• Companies incorporated in India, on the other hand, are
required to report any VDA holdings to the regulator as part of
their annual returns.
Why is cryptocurrency so important in today’s world and economy?

• Faster and More Affordable

Transactions:Using traditional banking systems
may be time-consuming, costly, and sluggish.
• With cryptocurrencies, transactions can be
finished quickly (within seconds or minutes)
anaonymously, crossborder and inexpensively.
• Businesses and people may now operate
more effectively and spend less money