DIGITAL(CRYPTO) CURRENCY - TECHNOLOGY

Dragan Doljanica 1) OF FUTURE, UTOPY OR SOMETHING ELSE

Miodrag Brzakovi 1)
Radomir Brzakovi 1) Abstract: This paper has intention to analyse crypto
currencies in order to attempt to give answer on doubts
1) Faculty of Applied presented in title. Authors are in area of crypto currency more
Management,Economy than 6 years and they will try to give you answer on what you
and Finance(MEF), may belive and what you have to take with special carefulness.
Serbia Considering on different specializations of authors you may
{ ddoljanica@gmail.com, expect three points of view - economy-finance, security of
miodragbrzakovicfmmsp@gma process and data on internet and blockchain techonology as
il.com, business processes.
brzijax@yahoo.com} Keywords: crypto currency, blockchain, centralized-
decentralized currency, mining, processor, graphic card,
exchange portal, investment

1. INTRODUCTION

This paper deals with sensitive, controversial and insufficiently investigated themes. The main goal
was to provide an insight into the world about which is often discussed, but rarely investigated often
with good reasons. During wrote this work, we were trying to leave out our own attitudes, possibly
subjective, and to objectively and reasonably expose what we have experienced or noticed as possibility.
Development of information technologies, one of the todays most propulsive branches of economy, has
led to the occurrence of new forms of alternate currencies. Their basic characteristics are decentralization,
i.e. the absence of a central bank, state, municipality, company or any other central institution that would
issue the concerned currency, along with the 100% reliance on information technologies in the process of
their issuance and realization of transactions.
The end of the XX and the beginning of the XXI century were marked by accelerated technological
improvment which did not bypass any industry as well as there are almost no households that did not
undergo any minor change. The same has happened with money, although the changes in this area came a
bit later. First, we saw payment cards, e-banking and m-bank services, but these are just instruments to
facilitate the use of electronic money that has existed for several decades and is now being used in
different ways. Further technological development has enabled a completely new generation of digital
money in the form of cryptocurrency, which have proved to be very useful in a relatively short time, and
as such have emerged as the successor to the old electronic money1).
Cryptocurrency are a special form of digital or virtual currency. Although cryptocurrency formally are a
means of exchange, unlike "real" currency, they are still not strictly regulated by law in most states and in
some states are forbidden. The initiator, and also the main representative of the cryptocurrency is Bitcoin.
The term Bitcoin itself denotes the same name organization, software and protocol as well as the term
bitcoin represents the unit of measurement (abbreviated as BTC). Principles and algorithms on which are
based all other cryptocurrency, generally came from Bitcoin, and considering on that, it will be the main
theme of further exposition.

2. BITCOIN AND BLOCKCHAIN

From Silicon Valley to Volstritt, technologists and investors are discussing about the potentials of
the Blockchain to produce a real revolution ... in everything2). Expectations are high, the potential is
significant, but the obstacles are also impressive. The financial background becames stronger, and the eco
system, in which it could be applied, is developing. Long time ago, Blockchain was considered just as
Bitcoin's infrastructure, but his technology quickly becames in the focus of attention, taking the bright of
reflectors, which has been reserved for his parent, the cryptocurrency Bitcoin, promising to create a new
set of tools to reduce costs. It also was leading to the question of the source of profit for all intermediaries
as well as doubts in reason for existence of centralized financial institutions which could be obsoleted.
This solution promises help not only to consumers, but also those who are looking for more cost-effective
options.

2.1. BITCOIN

Bitcoin is the first decentralized peer-to-peer crypto-currency founded in 2009. Its main specificity is
the fact that there is no issuer of this currency. On the other hand, the supply of this currency is software-
programmed and limited. Among other things, its main features are relatively secure payments, low
transaction costs, anonymity, inability of counterfeiting, irreversibility of transactions, but also extremely
unstable exchange rate. Despite many advantages, the use of this currency is subject of numerous
discussions, as this currency offers the possibility of performing various abuses and criminal activities.
The future of this and other currencies in this regard depends on both security and privacy of these
currencies, and legal regulation of such payments.

The basic characteristics of this virtual currency are the following:

BTC is a peer-to-peer (P2P) currency. In other words, as opposed to all other virtual currencies, BTC is
based on P2P networks. Namely, peer-to-peer is a network of computers which are not based on client-
server technology, all computers being the equal network members instead. It is typically used to share
information in the way that, once a computer shares a certain content, all other computers in the
network will have access to the concerned file.
Also, BTC is the first crypted currency or cryptocurrency, based on the implementation of
cryptography aimed at the controlled issuance and turnover of the concerned e-money3). In other words,
the confidence in this currency is based on the security ensured by cryptography, as a science dealing
with the information protection methods, such as encoding and digital signatures4).
The issuers of this currency are neither a central bank nor a company, but the users themselves, i.e. the
owners of the mining computer. This practically means that the issuance and turnover of this currency are
not under the impact of any central banks, i.e. central entities on whose monetary policy or anything
related to it can the currency value depend. The trust in bitcoins depends on the fair functioning of most
mining computers in the network5), which are in charge of transactions verification. The logical
conclusion arising from this fact indicates that the increased volume of BTC transactions implies higher
security, because the higher the volume of BTC transactions, the more difficult it will practically be to
carry out abuses.
BTC is an open-source currency, given that the code managing issuance and transactions is of open
nature, with all interested parties being able to gain access.
In the bitcoin system of payments there are practically no accounts like the ones existing in banks. BTC
could be understood as a safe storing certain value. What the formal owners of a certain amount of BTC
actually own is the key enabling them a unique and authorized access to that safe, i.e. payment.

The above-listed basic characteristics of bitcoin can be illustrated by means of the following sentence:
The foundation of bitcoin philosophy lies in the combination of cryptographic security of the digital
world consisting of a large number of computers connected into a strong and indestructible peer-to-peer
network, and the limited amount of available resources like silver and gold (the maximum number of
bitcoins is 21 million, with about 11.5 million currently in circulation), thereby making the so-called
cryptocurrency, strong and stable, to be found on the Internet network, without being physically present
in any of the countries worldwide6).
Bitcoin has had ups and downs, but has survived and now it is stable cryptocurrency with a constant rise
in value. Probably for somebody it is reason to belive that it's undestroyable, but the authors of this paper
are closer to opinion that its develop and survival is possible only with controlled growth to a limited
value indexed in gold or other crypto currency.
What shows the famous story about Norwegian who has bought bitcoins for 26$ and after few years has
sold for almost 900000 $. Ther are potential success and earnings for person who is ready to belive and to
take risk.
Story about 2 pizzas paid 10000 bitcoins shows opposit.Person who didn't belive enough.
One of author of this paper has given 50 bitcoins to friend who has paid dinner in 2009. From this time
distance it was a pretty expensive dinner, 150000 $ with current value of bitcoin. This shows person who
didn't understand power of crypto currency and didn't see future.

Picture1. How Bitcoin transaction works (source Ubergizmo.com)

In period of almost two years,until November 2015, Bitcoin's value dropped by 67% to around $ 377.
Bitcoin was dead?
Obviously NO if we answer from this time distance.
Those who threw away bitcoins, maybe have missed the golden egg - the technology behind it and which
has potential to rationalize a multitude of businesses. In simply words, Blockchain can live outside the
world of Bitcoin.

2.2. BLOCKCHAIN

There are a lot of different interpretations for meaning of Blockchain.

In core (purest form) Blockchain is a digital platform that records and checks transactions in a way that
prevents attacks (hacking) and revisions and is publicly available to everyone 7). For more information
you may check Goldman Sachs investment bank's report.
Developing the same technology - originally developed in a student room at the Northeastern University
of Napster (and later improved (finishing) by people who are behind the technology companies Skype
and Spotify) - this tool was originally born to support the creation and monitoring of Bitkoin.
Blockchain technology consist functions such are:8)

Hash
Block
Blockchain
Distribution
Tokens
Coinbase

Blockchain technology has enabled digital information to be distributed rather than copied, creating the
basis for new version of the Internet, how is frequently speaking. We may see circle and famous question
"What is older - egg or chicken?" This technology has born needs for the digital currency Bitcoin, but in
the meantime its enormous potential has become an important topic in many industries, especially the
financial sector.

In order to clarify possibility of this technology we will give you example of analogy.
Imagine teamwork on a single Word document, for example a contract. When you create a document and
send it by email to another member of the team, all you can do is to wait for someone to complete the
revision and send it back.
This is the way the databases work today - two database owners can't simultaneously work on one record.
This is exactly the way banks today work with transfers - for a certain period of time access to funds is
locked up, while the transfer takes place, and when data is updated on the other side, the access is
unlocked.
Imagine now working on the same document but in Google Docs. Document is located on the Google
Drive cloud platform, and all owners of document can equally access and manage them simultaneously.
This is especially important when dealing with a huge number of documents and iterations - in the first
variant it takes a lot more time and the probability of an error is higher.
Of course, Blockchain does not serve to share documentation, but the analogy of the concept is similar.
Blockchain is a robust mathematical algorithm that can provide maximum transaction security using
cryptographic methods. Blockchain is based on a distributed database that contains encrypted data that
can not be changed or disturbed.
Blockchain contains two types of data transmission chains:
* Transactions
* Blocks
The difference comparing to the existing transaction system is that the Transaction Block, independently,
finds its unique and shortest transfer path from node to node.

EXISTING PROCESS BLOCKCHAIN

Picture2. Existing vs Blockchain process

There are a lot of advantages, but also disadvantages of blockchain. We have to conclude that this is
technology of future, even though disadvantages. One of reason for this conclusion is fact that
MasterCard and Visa are actively working with developers on this technology and both have created APIs
for this technology.

3. DECENTRALIZED VS CENTRALIZED CRYPTOCURRENCY

Like with all technology-related solutions, key issues become questions of who will bear the costs of
development and maintenance which immediately brings into question and scalability (as well as speed).
Is it answer in structure of decentralized\centralized cryptocurrency?
There are a lot of cryptocurrency and main difference between them is whether cryptocurrency is
decentralized or centralized.
In previous parts of this paper we have already written about Bitcoin as main and first representative of
decentralized cryptocurrency.
In this part of paper we will try to clarify differences between centralized and decentralized as well as to
compare some others cryptocurrency with Bitcoin.
3.1. DECENTRALIZED CRYPTO CURRENCY

For decentralized systems it is assumed that each computer is an integral work unit without authorization
from any central point. For such systems, the rule is that behind them aren't bank, government or an
individual, but only the network of users and traders, where the value is based on offers and demands on
the market. One of the essential elements of this system is anonymity in transactions, where every single
transaction is broadcast online and all users have an insight into the execution and validity of the
transaction itself in the so-called "proof of work" system, but not details like - who has sent to whom and
where is a certain number of coins. Each transaction is performed with the help of a digital signature of
the user, private and public key, as well as a combination of the transaction message itself, which makes
any kind of forgery very difficult. Slogan of those cryptocurrency would be "everyone has control, and no
one has the power". The most famous cryptocurrency of this kind: Bitcoin, Ethereum, Ripple, Litecoin,
Monero...

3.2. CENTRALIZED CRYPTO CURRENCY

As for the centralized systems, behind them is usually a certain group of people (management), who with
their credibility and seriousness guarantee the success of the cryptocurrency. In most cases, in such
systems, the identity of the person holding the currency is known through the "know your customer" - the
KYC (know your customer) procedure. This avoids the possibility of misuse and the origin of the money
is possible to verify and introduce the cryptocurrency in the legally transactions and taxation. The most
famous example of this criptocurrency is ONECOIN.

Both systems, decentralized and centralized, have their advantages and disadvantages, and depending on
the current market situation, an adequate moment of investment in a particular cryptocurrency can be
profitable or can produce lost. The basic parameters in deciding the investment in a particular crypto
should be: the final number of coins to be released, the value of the market capitalization of the
cryptcurrency, the stability in a certain period, the security of storage of coins, the number of users and
merchants who accepted this cryptocurrency as a means of payment, reputation of traders, company
management (if any) as well as support of the professional community and compliance with the legal
regulations of the countries that have accepted them as such.
The scariest point of all this is that more and more often, centralization is regarded as a solution for some
problems of cryptocurrency. To fix scalability issues, cryptocurrency propose to use a limited number of
trusted masternodes, witnesses, delegates, federations and so on to fix the too-large amount of
mining nodes in the network. The number of these trusted nodes may vary, but by using this method to fix
scalability issues, developers also destroy the decentralized nature of the currency. Eventually this would
lead to a cryptocurrency with only one performing node, that processes transactions very efficiently,
without confirmation delays and forks, but suddenly a blockchain is not needed.
If we follow conclusion of people who support just centralized option we may collect all their options in
next sentence: Blockchain is not needed for banks; it is needed instead of banks. It is required for
decentralized systems only; applications with a trusted party will always be more efficient, simple, etc.
Unfortunately, most users are not able to determine the lie in cryptocurrency and like these centralized
blockchains more and more, because for sure, the centralized way is (and will always be) more simple
and user-friendly.
Authors of this paper are ready to conclude that truth is probably in the middle.
Based on their experience and researching best solution could be decentralized cryptocurrency with semi-
centralized blockchain.
Below are some claims and comparisons between Bitcoin and other cryptocurrency. Nothing of that is
100% true and because of that authors have concluded that perfect cryptocurrency has to take the best
from both systems.

Only Etherium has correct POW system. Probably that Etherium really has very good POW,
but claim isnt correct if we dont compare POW of Etherium and all other currency.
 AdsCasch COIN has intention and power to take Bitcoin position. This can't be true considering
that AdsCash has intention to become main and probably only accepted coin in online
advertaising. Idea of AdsCash is to be analogy to Bitcoin for investment area.
Only ONECOIN is right centralized currency. ONECOIN has survived all attacks as well as it
has launched platform where consumers may buy or sell goods for ONECOINS. We are ready
to think about ONECOIN as first centralized cryptocurrency, but not to accept claim. Platform
for buying\selling should be created to accept only ONECOIN as 100% payment means for
goods. Also, let's see what will happen with ONECOIN on market. In this moment isn't
possible to give prediction, based on science, for 2018 year. Considering this we may say that
picture bellow maybe give some answers, but for sure doesnt provide material for any trustfull
conclusion.

Picture3. ONECOIN vs Bitcoin

Picture4. DASCOIN vs Bitcoin

Picture 4 presets comparison between DASCOIN and Bitcoin. Question "Who is the Future of money ?"
isn't right question and only what we may conclude is that comparison is too much affirmative for
DASCOIN without , at least attempt, to give also some critics.
Based on everything what we have analyzed, authors wish to create right question Which cryptocurrency
will have fastes improvment to satisfy all elements?"

4. MINING, EXCHANGE PLATFORMS, PONZI CURRENCY

In this part we will give short overview for elements from title. Authors have more than one reason for
fact that these elements are grouped together.

4.1. MINING CRYPTO CURRENCY

This area is too wide even for book and considering on it authors will try to answer on several questions
in order to give picture of main contents.
Whats the difference between CPU and GPU cryptocurrency mining?
There is no difference in terms of what you are computing. Cryptocurrency mining is the proof-of-work
process that goes into guaranteeing that the blockchainunderlying the currency has integrity and is
immutable. This was the fundamental innovation that gives cryptocurrencies value. Only difference could
be in the fact that some cryptocurrency have faster mining using CPU and vice versa.
Why do people use expensive GPUs for Bitcoin mining and not multiple CPUs like Quad
Xeon?
Somewhere authors have read pretty good explanation: GPUs are faster than CPUs for the kind of
repetitive math involved in mining. They solve more blocks in the same amount of time.
On other side our opinin is that doesnt has sense to discuss about CPU or GPU mining after
introduction of ASICs to the market.
What ASICs means and which power it has?
Application-specific integrated circuits (ASICs) are customized pieces of computer hardware that are
designed solely to perform one specific function.
The hashrate of most GPU units is below 1GH/s, and as of 2014, some single ASIC units are able to reach
speeds of over 1,000GH/s while consuming far less power than used by a GPU.
Is It Worth It to Mine Cryptocoins?
Today, there is very much a digital gold rush where people can make a small profit by investing a few
hundred dollars in equipment, and then spend months mining for digital coins before any return on their
investment sets in.
Litecoins, Dogecoins, and Feathercoins are three Scrypt-based cryptocurrencies that are the best cost-
benefit for beginners. At the current value of Litecoins, a person might earn anywhere from 50 cents to 10
dollars per day using consumer level mining hardware. Dogecoins and Feathercoins will yield slightly
less profit with the same mining hardware but are becoming more popular daily.
What to mine?
All answers on this question you may find on https://whattomine.com/coins.
Pool vs Solo mining?
Although you have money to invest in equipment and to strat solo mining , our suggestion is pool mining.
You will share coins, but you won't invest in equipment too much, you will share risk as well as income
will be higher few %. One also good think is zero fees for pool.

4.1.1 SCAM MINING

In last few months we are noticed so many online as well as desktop tools which guarantee amazing
amount of bitcoins in short time. Scenario is next: launch tool, choose amount of bitcoins for mining and
see process like script. Just for comparision author has done test and has seen 0.1 BTC after less than one
hour. In next step you will see that you have to pay certain fees to certain Bitcoin wallet.
Fees aren't huge, but problem is that there isn't any guarantee that you will receive bitcoins after paying
fees. Author has decided to give up. If you ask WHY, next sentence will answer.
In todays Bitcoin ecosystem if something seems too good to be true it probably is.
4.2. EXCHANGE PLATFORMS

Cryptocurrency exchanges are websites where you can buy, sell or exchange cryptocurrencies for other
digital currency or traditional currency like US dollars or Euro. For those that want to trade professionally
and have access to fancy trading tools, you will likely need to use an exchange that requires you to verify
your ID and open an account. If you just want to make the occasional, straightforward trade, there are also
platforms that you can use that do not require an account.
There are a lot of real platforms, but also some sites which could be platforms or some kind of exchange
tool. You have to check https://www.cryptocoincharts.info/markets/info in order to have as much as
possible safe exchange.
Authors wish to suggest to everybody to check sites below( this isn't advertising, just wish of authors to
give everyone same opportunity which they have had). Authors dont give any guarantee for these sites
and platforms, but this suggestion based on their experince.
http://adzbuzz.blog.rs/blog/adzbuzz/ (you may earn for similar activites which you do on
Facebook. DZcoin is a decentralized crypto that can be easily traded, and you can transfer your
earned ADZcoine into Dollars or EUR.)
https://tbc004.net/ ( new cryptocurrency THE BILLION COIN)
https://www.gtcexchange.com/ (looks that platform has some element of MLM, but authors
known several person who has returned investment and has started to earn)
https://advcash.com/en/ (Advanced Cash is faster than conventional money transfers, cheaper
than a regular bank account, and easier to use than other e-currency systems.)

4.3. PONZI CURRENCY

If you have suspicion that some crypto could be ponzi (scam, fraud) check potential signs listed below:
Bitcoin has not reached fame through Multi Level Marketing, Network Marketing,
Recommended Marketing or anything similar. Be careful if cryptocurrency ideology is based
only on these elements.
Almost all are centralized what means they are not present on online stock exchanges
coinmarketcap.com. Maybe this doesn't means scam crypto, but for sure you have to be careful,
especially if you don't know, at least, time when crypto will be on market.
The price of Bitcoin and other cryptocurrency are defined on stock exchanges and they are
freely traded, while ponzi coin can be traded only within the company (network, mlm group).
Take special attention if you heard that investments in mining mean purchasing the right to
mining, education package or similar things. Probably there is ponzi schema.
You have to insist for example from practice and ask when crypto will be launched on market.
Free market is the only real indicator of how real some crypto is worth.
Bitcoin designed the blockchain as a technology whose main purpose is transparency. As soon
as it is not publicly available or hidden, it means that it is a blurry action.
Another indication of whether a cryptology is valid is the name and surname of the programmer
or team of developers behind it. If they are not known, or their names are kept confidential, it
can also mean that the blockchain exists only on paper, while its role is performed by an
ordinary excel table.

5. CONCLUSION

Balancing the views between the darkest predictions and those based on the paradise, it is very difficult
to get an objective picture of how cryptomarket and cryptocurrency will behave as well as their users
and what impact everything will have on the world economy.
Bitcoin became mainstream. Is such popularity really good?
It is excellent for idea of cryptocurrency, but for the idea of decentralizationmproblem is the form of
Bitcoin taxation and fees taking by large exchange offices. Also inevitable that Bitcoin will be converted
into fiat money, especially in countries where there are no companies that accept Bitcoin on a daily
basis.
There is no perfect system, but does not mean that the blockchain system is not perfect.
It is a constant perfection that is achieved through work, effort and idea.
Authors have conclusion that some cryptocurrency will be global means of payment ( in this moment we
are ready to bet on Bitcoin or Monero). Unfortunately, it will be under one or more centralized system as
control of currency flow.
Such kind of centralization will bring some benefits (reduce of "black market", using cryptocurrency for
trading with illegal goods...), but will destroy main benefits of decentilezed crypto.

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