NFTs are the buzzword of 2021 and people often ask what are non-fungible tokens. The acronym NFT stands for “Non-Fungible Token” and it is quickly gaining attention throughout the cryptocurrency industry. To begin with, it is first necessary for the reader to understand the word “Fungible”.
The word “Fungible” has the same terminology like the word “Asset”, this can be a real-world asset such as a car, a house, or a digital asset such as a cryptocurrency.
When items are fungible it means they are interchangeable with other items of equal value, however, they are not identical. For example, if two people swapped $10 notes with each other then they would have both swapped the notes for exactly the same amount of value. However, the two $10 notes that were just swapped would not be exactly the same. Meaning that they would not have the same security codes written on their backs and they would have different identification watermarks. So the $10 notes are both “fungible” assets, in the sense that they are interchangeable for the same value or fungible with each other.
A “Non-fungible” asset is the complete opposite of a “fungible” asset. It is something that is unique and rare, is not divisible into smaller denominations, and it is not interchangeable with anything else because it has its own unique value.
An example of a real-world non-fungible asset would be the Mona Lisa painting currently held within the Louvre museum in Paris. This was designed and painted by the one and only artist “Leonardo Da Vinci”, it is a masterpiece of artwork giving it a priceless value and its own uniqueness. It could never be swapped or interchanged with another painting of its kind because there is only ever going to be one Mona Lisa painting. It is true that copies could be made of the Mona Lisa such as a photograph, but those copies would never hold the same priceless value of the true original painting, it is, therefore, a Non-fungible asset.
Digital NFT’s in the cryptocurrency world:
Within the cryptocurrency industry digital NFT’s can be:
Virtual real estate
NFTs utilise blockchain technology to record ownership and validate their authenticity just like cryptocurrencies do such as ETH and BTC. Whenever a Bitcoin is sent from one wallet to another there will always be transactional data written to the Blockchain. Unlike cryptocurrencies each NFT is unique, it would therefore be better to think of an NFT as a digital collectible item or a cryptocurrency as a picture.
One of the first examples of an NFT was called “Crypto kitties” released in 2017 it was a game that featured pictures of cartoon cats whereby people were able to buy, sell and breed the cats with other cats to make new cats. The game was such a success that it caused major congestion problems on the Ethereum blockchain in which it was running on and the highest amount paid by a person for one of these Cryptokittens was $170k USD in 2018.
A commonly asked question regarding NFT’s is can they be copied? And why spend any money buying an NFT when it can just be copied. The answer is yes, with a simple right-click of a mouse button or a screenshot the digital picture (NFT) can be copied/downloaded and stored as a JPEG file. However, in doing this we immediately run into the same problem as trying to copy the Mona Lisa painting. Buyers and collectors would instantly know that this is just a copy from an original NFT because there would be no evidence of transactional data occurring on the blockchain.
Once a person has ownership of an NFT no other person can withdraw that NFT from them because they are the owner of the private key (the digital receipt). Much the same way a person owns a bitcoin no one can take the bitcoin from that person because they are the owner of the private key.
Digital NFT’s in the gaming world:
At the end of 2020, the video gaming industry was worth an estimated $90 billion USD with one of the most popular online games being Fortnite. This figure is set to grow well into a $100 billion USD industry with continued advancements in technology such as faster internet infrastructure and virtual reality.
Once a gamer has progressed to a new level within their game or they are able to complete the game they are often rewarded with a digital item such as a sword, a shield, a certificate, their name on the hall of fame, etc.
Currently, these digital rewards are always kept within the game itself, the gamer is unable to take their rewards out of the game and store them in their own personal digital wallet of achievements and they are unable to take the rewards out of the game and into other unrelated games as the two are not compatible.
NFT’s in the gaming industry is set to change all of this. In the not too distant future gamers will have the ability to remove their digital rewards such as a sword and place those rewards into their own personal wallet. This new method will give the gamer sole ownership of the digital item (NFT) and not be at the mercy control of the games developers should there ever want to implement new rules or if the game crashes so that the gamer lost all of their rewards and their given time.
Selling and buying NFTs:
At the time of writing the biggest online exchange where a person is able to buy and sell their NFTs is called “Opensea”. Currently, only digital artwork can be traded on this exchange, however, NFT’s within gaming is coming where the gamer would be able to go to the exchange and sell their digital rewards to other gamers.
Future of NFT’s
NFT’s are still a new concept and there is still much confusion among the general population as to exactly what they are. As with all blockchain technology it is constantly evolving and changing over time with much more room within the industry to grow and improve. Cryptocurrencies are simply digital transactions represented on a screen as numbers. Whereas NFT’s can be in the form of a visual picture, to some people this picture may hold increased value because the NFT represents a picture of something that the person admires and wants to keep. From a psychological point of view, a person can become personally or emotionally attached to a picture, thus making them want to keep the picture over a period of time or unwillingly needing to sell their picture (NFT) for a high asking price. This year (2021) Jack Dorsey the CEO of Twitter was able to sell the first-ever “Tweet” from 21st of March, 2006 for an estimated $2.9 million this proving that there is still huge potential for money to be generated within the industry and concluding that anything digital can become an NFT.
The gaming industry appears to have much to gain from the introduction of NFT’s, also the owner of a website’s URL could become extremely lucrative. However the NFT market is given its value by speculation, all NFTs are only valued by whatever a person is prepared to pay for it. With this in mind from an investment point of view, it would make sense to buy an NFT that represents a very rare moment in history or invest in the next digital Crypto kitties craze.
Defi is a hot topic giving people options from money lending, money borrowing, earning interest on money, and insurance are all examples of what is offered by a centralized financial service to its customers. Centralized means that the sector is controlled by a central authority overseeing the operation of the business. Although these services have been available to the public for many decades (within western countries), they possess many inefficiencies and disadvantages. One of the most memorable events which brought the whole centralized financial service into question was the global financial crisis (GFC) between the periods of 2007 and 2009. From research gathered, there appears to be no one primary cause of the GFC. Although it is widely accepted that the deregulation of the financial industry (which allowed banks mostly based in America to lend out funds to be used to buy real estate) was then used as a hedge fund to continue their profit growth. It was this lack of transparency within the centralized financial services whereby the financial governing bodies were then not made aware that property was being used as a hedge fund leading further to a real estate crash.
Other disadvantages of a centralized financial service can be described as:
Always the requirement for a third party to oversee any transaction of assets between two parties resulting in service fees being paid by the two parties.
Plagued with regulations that exclude many people from the financial system due to its stringent requirements e.g., you have to be an Australian citizen to hold an Australian bank account.
Is at risk of fraud or mismanagement of funds from lack of transparency.
A third party holds sensitive information about their customers which can be exposed.
A custodian third party (a bank) is trusted with safeguarding their customer’s financial assets.
Extended time to process customers’ transactions due to a third party having to examine all of the necessary terms and conditions within a contract.
Conventional Financial Contracts:
Conventional financial contracts are used to ensure that both Party A and Party B meet their terms and conditions within the contract before the final execution of that contract. The disadvantage of this however is that there is always the need to incorporate a trusted third party entity which then oversees and ensures that the terms and conditions are met by both parties.
Trusted Third party Entities:
A conventional financial contract is always used when a large expensive asset such as real estate is to be brought or sold. The two parties are going to have to utilise the services of a third party such as an estate agent and a lawyer. It is the job of these third parties to oversee that the process complies with the local law and that the transaction takes place from Party A to Party B. Currently, without the use of these third-party services a peer-to-peer transaction would immediately run into problems. One of those problems would be an issue of trust between Party A and Party B. Once the transaction has been executed, the third parties take their commission fee. This can be as high as 6% of the sale price of the asset which would then be passed on to Party A and Party B.
The acronym “DeFi” stands for “Decentralized Finance”. It came into existence in 2018 and its explanation is within the name itself. It is simply any form of financial service or a financial sector that provides a service to its customers in a decentralized way. This means that there is no one central entity or central authority controlling the financial service that is being offered and there is no need for any third-party service within the process.
DeFi is only made possible by utilising Blockchain technology. Because a Blockchain is a decentralised network allowing for the storage of digital data that cannot be deleted or modified, it allows this data to be viewed on an open-source platform. The advantage is that this transaction can be openly viewed between two parties, thus allowing a peer-to-peer method of transfer to take place. There is now no need for any third parties to be involved to oversee the transaction.
This is only possible because a DeFi service is used by customers in the form of a computer protocol or program using a blockchain as its underlying platform. Much the same way as Microsoft Windows is the operating system for a desktop personal computer (PC). Other software programs can be built and run on top of the existing operating system such as Microsoft Word or Microsoft Excel. The Android operating system for a smartphone (owned by Google) would be another example whereby third-party developers can build and run their applications on top of the Android operating system.
These comparisons can be used to describe a DeFi program explained again, it is simply a computer protocol or program operating on top of a blockchain platform that services its customer’s financial needs. More specifically, a DeFi protocol can also be termed as a “smart contract”.
Before reviewing what exactly is a smart contract it must be noted that there are currently many different types of Blockchains available and still in development. Each of these Blockchains is being designed so that they can work and integrate within a given industry as each industry functions in its own unique manner. For example, there is now Blockchains in development to serve:
The logistics and distribution industry;
The video streaming industry; and
The gaming industry.
It must also be noted that earlier blockchains are incapable of running smart contracts as they are now too basic and were never designed to run smart contracts. Think of this in terms of trying to run a high-performance video game on a PC built in the early 90s.
A smart contract is a digital automated agreement or terms and conditions that only executes when certain agreements within the contract have been met. Their main advantages and purposes are to:
Remove the typical third party seen within conventional contracts so that the smart contract can be executed in a peer-to-peer fashion between Party A and Party B; and
To execute the transaction by minimizing the amount of trust required between Party A and Party B.
The Vending Machine:
A popular real-world comparison used is the vending machine example. This is whereby a customer inserts their funds into the machine with the intent of purchasing a soda drink, then the corresponding buttons are pressed and the selection of drink is made. The mechanical lever within the machine is activated and the soda drink is dispensed. The take-home point is that the transaction occurred without the need for third-party intervention, no cashier, clerk, or governing body was needed and the transaction was peer to peer. When in operation, the vending machine is following a set of rules (or algorithms) which it does not deviate away from. It is told (or programmed) to only dispensed the soda drink when the correct amount of funds has been inserted and only once these terms and conditions have been met then the drink can be dispensed (contract fully executed). A vending machine can be seen as a physical device that executes a smart contract in the real world. By digitalizing this concept and running it on top of a Blockchain, a smart contract can offer many new advantages to the customer.
Advantaged of Defi:
The world bank estimates that 1.7 billion people are currently unbanked and have no access to financial services. DeFi services give the potential to open up the rest of the world to new financial services irrespective of their income, race, wealth, culture, or geographic location. A new user only requires internet access. Because smart contracts allow for the use of peer-to-peer methods of transfer, they can save both parties’ funds by not having to pay for third-party services. The result is that these transactions are drastically faster than traditional methods. Now the sale of real estate that usually could take months to finalise can potentially just take a few days. This would in turn potentially speed up the process it takes to unlock this financial capital which for many people is their largest asset. The trust issues between the two parties are now minimized but unfortunately not completely eliminated just yet. It can however be seen that:
Digital peer to peer transactions is now a reality;
Transactions are cheaper because the third party is no longer taking a commission fee from the transaction;
Faster transactions occur because no third party is required to oversee and sign off on the transaction; and
Because the smart contract is digital, it opens up new business opportunities to the world.
Disadvantages of DeFi:
Because DeFi is still such a new and emerging industry, many problems have already been reported such as:
A Blockchain being unstable would have a knock-on effect on the operating smart contract.
Scalability is a Blockchains ability to process transactions. If there is too much data traffic on the Blockchain then this will cause a slow down in transaction speeds.
The coding within a Smart Contract must be written without any errors or bugs whatsoever. If a Smart Contract is in operation containing errors it could lead to the complete loss of funds.
Smart Contracts are and can have poor user interfaces, therefore making them confusing to use for the customer.
When evaluating the data gathered, the new DeFi industry can be seen as what Uber has done to the Taxi industry or what Airbnb has done to the hotel industry. It is a new transition away from the traditional financial services and giving way to customers having more freedom and options. Smart Contracts should save both parties a lot of time and money by not having to utilise third-party services. The DeFi industry could open up a whole world to new financial services as only an internet connection is required.
DeFi is any form of financial service that services its customers in a decentralized way. A Smart Contract is simply a piece of code running on top of a blockchain that cannot be deleted or modified. It can be viewed by both parties simultaneously which brings trust and transparency to the transaction. It will only execute once certain terms and conditions within the contract have been met. No third parties are needed to oversee the Smart Contract as the coding within the contract already complies with local laws and terms and conditions are already set out. Conventional financial contracts will most likely still be used for many years to come until the general public gains much-needed knowledge and better user interfaces are developed that make a smart contract much easier to use by the average person.
Written by Rob Lavington, to check out more of his blog visit
A Blockchain is a method of permanently recording digital information on to open-source data blocks, much like an open-source ledger meaning that anyone on the network can view the data entries in near real-time. Before any new digital data is recorded to a block a number of nodes on the network must cross-reference the newly recorded data. These nodes are in fact other computers on the network located all over the world that are used to validate the Blockchain. The Nodes are surveying every single new data entry that takes place on the Blockchain. If at any one time these nodes detect that there is a discrepancy within a data entry (one nodes data entry is not matching the other nodes data entry) then the Node will not allow the data entry to be recorded. An example would be a digital voting system whereby the nodes must all vote in the same direction and all concur on the same data that they have received. Once a block is filled with data that block is then timestamped and “Chained” to another block using cryptography mathematics hence it’s given the name “Blockchain”. This method of security makes a Blockchain very difficult to hack, delete or edit the data once it has been inputted into a block and it is a fact that to this present day the Bitcoin Blockchain has never been hacked due to the enormous computing power and cost that it would take for an external force to hack every single node on the network simultaneously.
Advantages of blockchain technology to the average person
The Internet of things (IoT) is a broad word to describe the new digitalised world in which we are entering whereby smart houses, cars, drones and computers are all fitted with sensors accumulating data, even your smartwatch is collecting external data right now. This data will then be exchanged with other devices and systems over the world. As this data expands at an exponential rate over time there is going to be a greater emphasis to document and store this data in a secure way.
Forbes magazine stated in a 2020 article that Blockchain technology was predicted as one of its defining technologies in the next decade describing it as a super-secure method of storing, authenticating, and protecting digital data.
Voting by ticking a piece of paper with a pencil currently feels absurd knowing that anybody can easily manipulate the vote with the potential of changing a government in their favour by rubbing out the pencil tick with an eraser. Digitally voting on a Blockchain will become secure and truly democratic due to its transparency and security. It will be nearly impossible to tamper or rig an election restoring public trust and faith towards a government. It could also have huge positive implications for 3rd world unstable countries where a dictatorship has been in power for far too long.
Over the years there has been an explosion of “Fake news” whereby some of this news completely violates common knowledge i.e. The Earth is flat?? Fake news could be stamped out and only trusted resources from respected media outlets could be documented on to a Blockchain freely available to the public to review.
Building and operating a supercomputer is extremely expensive. As of June 2020, the Fugaku computer located in Japan holds the title of the world’s fastest computer. Its construction costs topped US$1 billion and it has ongoing operating costs. Supercomputers have many uses cases such as weather prediction, climate research, and medical drug research. Currently, computer scientists are suggesting that idle desktop computers could be put to work by processing small packets of scientific data effectively renting out the idle computers CPU then allowing the computers to send back their scientific results via a Blockchain. This method could lead to greater scientific breakthroughs and would reduce the need to build and run yet more expensive supercomputers.
Autonomous vehicles (AV) are already available although they are still in their infancy and must oblige by strict road rule conditions, their use cases make perfect economic sense. An autonomous truck for example has the ability to travel long distances without having to stop for rest breaks and would only have to refuel. Transport costs and time could be reduced dramatically. Road accidents claim millions of injuries and deaths every year with huge economic implications. Studies have found that about 90% of these accidents can be contributed to human error. However, the underlining software of an autonomous vehicle has been addressed as a potential threat posed by computer hackers which have already been demonstrated in test conditions whereby a Tesla vehicle in autonomous mode was deliberately hacked, and its guidance system was overtaken by a 3rd party. A nightmare scenario would be a computer hacker taking control over a major transport network to their advantage. Now major car companies are looking towards Blockchain technology to stop this from ever happening by verifying every software update which the autonomous vehicle receives therefore preventing any modified or malicious software which hackers could implant into the software update.
Donating money to charities
Currently when fiat currencies (the USD) are sent to charities particularly overseas a lot of the money will be lost on international transaction fees. Unfortunately, sometimes this money does not go directly to the intended charity and ends up in the hands of corrupt governments or organized crime. Blockchain technology can be used to send a synthetic version of a “stable coin” most likely pegged to the USD which is running on a Blockchain. Using this method, it is now guaranteed that the funds will be sent to their intended charity and at a lower transaction fee.
Buying real estate
Looking back at the American housing bubble that led to the global financial crisis (GFC) it’s easy to see how greed and a lack of transparency within financial industries had catastrophic consequences. Blockchain technology provides the public with transparency as to where the transactions are going and builds added trust.
A smart contract is a digital electronic protocol running on a Blockchain. It must be noted that the Bitcoin Blockchain is not capable of running a smart contract as its blockchain protocol was never designed in that way. Smart contracts are effectively taking Blockchain technology to the next level whereby it is used to execute a set agreement that will execute when certain parameters within the agreement are met. One of the Blockchains that is capable of supporting smart contracts is called “Ethereum” founded by Vitalik Buterin in 2015 in which its native token is called ETH. Smart contracts could be used when purchasing expensive real-world assets such as a house or a car, they use a peer to peer purchasing method meaning that there is no need for the involvement of a bank, real estate or lawyer (no 3rd party). In the simplest of terms, a smart contract agreement could look like the example below.
“Person A wants to buy a house from Person B. When Person A pays Person B the sum of 300 ETH as the agreed payment then Person A will receive ownership of the house”.
Once this smart contract has been executed it cannot be reversed and Person B will receive their 300 ETH as payment for the house. Using a smart contract both parties have saved money by not having to pay real estate commission fees or lawyer fees.
IoT and Blockchain
By reviewing the current data, the Internet of things (IoT) is predicted to be a $1.1 trillion industry in the USA alone by 2022. Data has been increasing at an exponential rate and with the introduction of new infrastructure such as 5g towers, this influx of new data is not going to slow down. It is predicted that Blockchain technology will play a major role in the integration of the IoT by guarding against hackers, gaining public trust through its transparency, the security of documenting this digital data and its ability to move the data worldwide. Now both governments and private companies are looking at the potential benefits that Blockchain technology could offer them. It has been noted that it is possible to hack a Blockchain, but this would mean gaining the power of more than 51% of the blockchain nodes which requires extreme computer processing power and it is costly. Blockchain technology is still evolving and still, public education is needed before the majority of the public understand it. With the few known disadvantages of Blockchain technology, it is obvious that the positives are currently far outweighing the negatives.
Decentralized Digital Currencies
The concept of a digital currency has been in development since the 1980s. One of the first examples and widely used digital currency of its kind was called “E-gold” launched in 1996 by Dr Douglas Jackson it aimed to digitalize the value of gold which could then be sent worldwide used as a method of payment via the early internet age. Within a 10 year period, five million people had open active accounts with E-gold and at its peak in 2006 E-gold was processing more than US$2 billion. However, E-gold suffered from a major fault the first being that it was governed by a centralized entity (Gold & Silver Reserve Inc) that oversaw the system and that it was using Microsoft Windows as its operating systems which meant that was open to hacking and phishing attacks.
Following the global financial crisis (GFC) in 2007, there was now a new push towards developing a truly decentralized digital currency one that was open source, capped at a finite limit and operated on a secure network other than Windows to keep digital hackers out. Bitcoin is crowned as the world’s first cryptocurrency. It came to the public’s attention in 2009 when a person referring to themselves as “Satoshi Nakamoto” registered an internet domain under the URL name of bitcoin.org. Within the webpage was a link to a white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” where the use of Bitcoin was first proposed. The official Bitcoin whitepaper is still available to be read on the webpage which is highly recommended.
Bitcoin was the first-ever cryptocurrency made available in 2009 acting as a proof of concept that Blockchain technology works. The Bitcoin Blockchain is limited in its use cases and more time is need for more advanced Blockchains to become available. Data is growing at an exponential rate as we enter the information age and now there exists a need to document and process this new data in a secure and decentralized method. Blockchain technology is appearing as a vital link to integrate the Internet of things (IoT) by offering a method of security and transparency.
Written by Rob Lavington, to check out more of his blog visit
Are you wondering how you keep your crypto safe? Previously we have given in-depth discussions on Bitcoin, blockchain technology, the security of cryptocurrencies, and investing in cryptocurrencies. This blog will be discussing centralized exchanges, the types of cryptographic keys, and an in-depth review of cryptocurrency security. Multiple examples have been used for further education for the reader.
Centralized Cryptocurrency Exchanges:
A centralized exchange is a website platform that allows a person to buy and sell cryptocurrencies using their fiat currency or it gives the option to trade cryptocurrencies for other types of cryptocurrencies. As stated in previous blogs there are currently thousands of different centralized exchanges in operation today where each one varies in fees that they charge and the type of cryptocurrencies that they sell.
Centralized exchanges are given their name because they are the 3rd party within the buying and selling process of cryptocurrencies. These are privately managed businesses that need to generate profit and the majority of their profits will be coming from their customers paying a percentage fee every time they buy or sell a cryptocurrency, much the same way as a shareholder pays a stockbroker a fee to buy or sell shares on their behalf.
Security of Exchanges:
Within the crypto world, there is a commonly stated phase, “Not your keys, not your crypto”. This statement is referring to the holder of the private key which will be explained in further detail within this blog. Centralized exchanges work as custodian banks meaning that they take responsibility and safeguard the individual’s cryptocurrency assets held on their exchange. Because these exchanges can hold large amounts of cryptocurrency assets at any given time, they have unfortunately become the targets of digital hacking attacks.
Mt Gox Exchange hack:
One of the most memorable attacks occurred in 2014 in which the Mt Gox exchange located in Tokyo, Japan became the target of one of these attacks resulting in an estimated 850,000 Bitcoin being stolen. At the time of the attack, the amount of Bitcoin lost was valued at more than USD 450 million and it is understood that customers are still locked in with legal battles to this today trying to recoup their stolen investments.
There is a misconception within the general public that when a hacking attack occurs on an exchange and Bitcoin has been stolen then there must be a design fault with Bitcoin itself and therefore the cryptocurrency must not be trusted. It must be reiterated that this is not the case and that it is factual that Bitcoin’s Blockchain has never been hacked. When put into a different comparison this statement would be like the example below.
Example: The Commonwealth Bank of Australia in Sydney gets robbed and the criminals get away with over $450 million Australian dollars. The general public now puts the full blame on the Australian dollar and it should not be trusted anymore.
This was in fact the cryptocurrency exchanged that fell victim to the digital hack which has got nothing to do with the Bitcoin or the Bitcoin Blockchain itself.
Do Not keep large amounts of cryptocurrency assets on the exchange:
The first take-home message from these hacking attacks would be to not keep large amounts of cryptocurrency assets on the exchange. It is difficult to define what a “large amount” is because all people are different in their individual assumption of wealth. However, if a person chooses to keep their assets on an exchange then the hacking threat is always present. Therefore, it is recommended that a person moves their cryptocurrency assets to their own private wallet as quickly as possible once it has been purchased from an exchange.
What are cryptographic Keys:
Cryptographic keys are the basic principles that allow cryptocurrency user to access their crypto assets. Once a digital wallet is created a mathematical algorithm will create two types of keys that are mathematically linked to each other.
Is termed a Public Key
Is termed a Private Key
Below is an example of an Ethereum linked Public Key: 0xb2a7abd9fa5de3fc728cb69bd6bb5d3d3f51b438.
When a person views this public key, it will have no meaning to anyone because it is in fact encrypted. This is where the private key is needed to decrypt the public key, the private and public keys work in conjunction with each other.
A further misconception is when a person believes that they hold cryptocurrencies within their private wallet. This again is not the case, when a person states that they own and hold cryptocurrency in their wallet a more accurate statement would be that that person owns the private key to that cryptocurrency.
What is the private key?
The private key acts as a digital signature that synchronises with the blockchain and then finds the cryptocurrency where it is stored on the blockchain that belongs to the owner of the key. It acts as proof of purchase that the coins that the person has purchased do indeed belong to the hold of the private key.
Example: A Bob has a Ferrari car parked on his driveway and has the keys to the car in his pocket. Bob can currently get into his car and drive the car away with no problems, so there are no discrepancies that the car really does belong to Bob. Now Bob has lost the keys to his Ferrari and has now lost the ability to drive the car away. There now exists a discrepancy whether or not the car really does belong to Bob.
The take-home message from this example is whoever holds the private key controls the cryptocurrency. The private key acts as a digital signature that allows the holder of the private key to move or spend their cryptocurrency. If the private key gets lost then the person no longer has access to their cryptocurrency.
Is it safe to share your private key with anyone?
NO! Absolutely not!! A person must not share their private key with anyone, this is why it is termed “private key” and it has to be kept “private”. If another person is asking for your private key or already knowns your private key, then that person has the capability to transfer your cryptocurrency assets to their own private wallet. The take-home message is never sharing your private key with anyone it is the holder’s responsibility to keep it safe.
Returning to exchanges and it must be noted that when a person chooses to leave their cryptocurrency assets on the exchange what they really are doing is leaving their private key on the exchange. This means that the exchanges now have full control of the private key much the same way as if a person leaves their car keys within a safety deposit box at a bank.
What is the public key?
The public key is a cryptographic key and it is used as a public viewed receive address where cryptocurrency assets can be sent to.
Example: Bob lives in Australia and he wants to send an email to his friend Sarah who lives in Canada. The first vital piece of information that Bob needs to know in order to go ahead with the email is what is Sarah’s email address? Once Bob knows what Sarah’s Email address is, he then simply copies in the email address and he can then send the intended email.
Apply this basic knowledge to Cryptocurrency and think of the public key as the email address. If a cryptocurrencies holder wants to send their crypto assets to another exchange or to their own private wallet then they are first going to have to know what the public address is of that exchange or wallet.
Importance to note:
It is highly important to note that once a cryptocurrency has been sent to another wallet or to an exchange using the public key (receive address) that the transaction cannot be undone or be reversed. Therefore, a sender must check and double-check that they have the correct intended public key before sending any cryptocurrency.
Example: Bob has written a paper letter and has sealed it up into an envelope. He then writes the intended address on the back of the envelope and posts it into a letterbox. Monuments later Bob realizes that he has made a huge mistake. He has misprinted the address on the back of the envelope, the intended address was Sydney, but he has accidentally written Melbourne on the envelope. At this point there really is nothing that Bob can do because he does not have the key to open the letterbox and retrieve back his envelope, Bob has now effetely lost his letter. The bottom line is that a sender of cryptocurrency must check and double-check that they have the correct intended public key before sending any cryptocurrency.
Is it safe to share your public key with anyone?
Yes, it is completely safe to share your public key (receive address) with anyone. This is why it is termed a “public” key and no other persons have the ability to remove or transfer any cryptocurrency assets out of another person’s wallet with just the public key alone the blockchain platform simply will not allow the transaction to occur.
Cryptocurrencies are giving people all over the world new opportunities to make life-changing wealth. They are achieving this by giving the users of cryptocurrencies more control over their individual wealth by removing the 3rd party banking system and many of the projects that they are backup by will have world-changing implications. However digital criminals are becoming extremely aware of this and over the years they have found that it is very difficult to steal assets from banks, both physically and digitally. So now these digital criminals are starting to target the individuals who own the private keys to cryptocurrencies. Therefore, it is highly recommended that any inexperienced persons coming into the cryptocurrency industry must know the basics of security when it comes to protecting their cryptocurrency. Digital criminals appear to be using social medial platforms to search and target their victims with both scamming attacks and phishing attacks. A common-sense approach would be not to advertise the fact of ownership of cryptocurrency on social medial platforms and have a good understanding of scamming and phishing tactics.
It is not recommended to keep a large number of cryptocurrency assets on a centralized exchange due to the threat of a hacking attack. The private key acts as a digital signature, whoever has ownership of the private key owns the cryptocurrency, it is highly important to keep the private key safe. The Public Key can be shared with other people as it acts as the receiving address of where the cryptocurrency assets need to be sent but is also not recommended to be shared if not necessary. Digital criminals are now targeting individuals who own the private keys. Education into the basics of cryptocurrency security is essential so that an individual does not fall victim to an attack.
Written by Rob Lavington, to check out more of his blog visit
Are you ready to start investing in cryptocurrency and make amazing returns on your investments? Not so fast, it must be noted that as of the year 2021 there are currently 4,000 different cryptocurrencies available to choose from (that’s right Bitcoin is not the only cryptocurrency available to investors). So, which one should you invest in? Well, that is completely up to you. As with any sort of investment, there is always a certain element of risk and cryptocurrencies are no exception to this fact.
In this new world of crypto, you’re going to hear the term “DYOR” (Do your own research) quite a lot. Never at any point within my blogs am I going to say to my readers that you should invest your fiat currency into a certain cryptocurrency because to put it simply I cannot predict the future. If I knew that a certain cryptocurrency is about to increase in value by 200% and there is absolutely no risk to your investment then obviously would invest every cent that I had into that coin then retire on a beach in the Bahamas sipping cocktails for the rest of my life, unfortunately, I cannot. I can, however, advise you on ways to minimize your risk thus helping you choose that killer coin that is going to reap those big rewards. One of the ways to do that is to “DYOR”. Below are some basic concepts that you should be looking for before investing.
Do your own research
Who is leading the project and what is their credential background?
For example, I consider myself as a very conservative investor, therefore, I would be very cautious of a newly launched cryptocurrency being led by a CEO who has no experience in the industry and does not hold any prior credentials. To state the obvious if a CEO does not know what they are doing then there is not much hope for the rest of the project. In today’s world, a person can easily be researched on their employment background using online tools such as LinkedIn or a simple google search. Finding out who the CEO is and how respected they are within the crypto industry is a priority before any investment is made to minimize your risk.
Vitalik Buterin is the CEO of Ethereum which is the 2nd biggest cryptocurrency by cap market value, in 2014 he was awarded the Thiel Fellowship, and in 2018 and he was awarded an Honorary Doctorate by the University of Basel. He is well established and recognized within the cryptocurrency industry and Ethereum has a clear goal of its future focus.
Charles Hoskinson is the CEO of Cardano, is a mathematician and co-founder of Ethereum. In 2014 he left Ethereum for personal reasons and started Cardano. He holds university degrees from the Metropolitan State University of Denver and the University of Colorado Boulder.
What does the project aim to achieve?
Understand that the cryptocurrency is backed up by the project that the company is running. For example, ETH is the name of the cryptocurrency coin itself (it is the currency of the Ethereum Blockchain). Ethereum is the name of the project, it is a community-run open-source blockchain that aims to run thousands of decentralized applications run by 3rd parties.
When was the cryptocurrency launched and how long has it been in circulation?
Bitcoin was launched in 2009 and is still active to this present day, it still sits at number 1 on the cap market value leader board and is well established worldwide. I would personally give any new cryptocurrencies several months to settle in before investing in the project. That way it gives the community time to understand the new coin and if the worst-case scenario occurs and the coins turn out to be a scam then this should be identified early. Remember that If the project is backup by absolutely nothing then the chances are high that the price of their cryptocurrency will do just that, absolutely nothing.
Where does a person buy cryptocurrencies from?
So, congratulations on getting this far, you have completed your “DYOR” and you have found the cryptocurrency coin that you wish to invest into. The next step is where do you buy the coin from? A person buys their cryptocurrencies from an online exchange which is a website where a person can buy/sell all types of cryptocurrencies.
It must be noted that there are also over 200 different exchanges operating around the world. So, which one do you choose from? I use the Binance exchange because at the time of writing it was the biggest exchange in the world and uses some of the best cybersecurity which even some banks would envy so I have been told. Their user interface can be a bit tricky to master especially for a beginner but there are plenty of YouTube tutorials to help you navigate your way through.
So, once you buy your crypto what do you do with it now? That again is your own decision to make. You can choose to Hodl (Hold On for Dear Life) in the hope that years later your coins are worth a small fortune. Or you could choose to become a trader, for those of you just starting into the crypto world I do not recommend trading until you have a solid understanding of the industry as this is something that can take many years to master.
Security and Scammers
At this point, you all need to pay attention to. Market crashes happen all the time throughout the crypto cycle and it would be very bad if your investments lost 80% of their value due to a crash, on the bright side you would still own the coins and there is a chance that the value of those coins could go back up in the future one day so that you could recover your investments. But what would be terrible would be if your coins got stolen effectively taking wiping out 100% of your investment and the chances of you ever recovering your investments is next to zero.
Unfortunately, where there is money to be made it will attract scammers and I am personally getting quite concerned with the never-ending scammers that pratol social media websites such as Facebook and WhatsApp looking to pray on their next victim. I’m hearing horror stories of people losing huge amounts of money and sometimes their entire life savings through these scams. Last year alone Australians reported a record-breaking $37 million lost to digital scammers and that is just the reported figure. I have no doubt that you have all worked hard to save money for your investments and you all want to enjoy a good retirement, you should not be losing your money to digital scammers. If you use social media websites then the chances are very high that you will in the future be contacted by a digital scammer, so please listen next. If you are new to cryptocurrency then you are at high risk of being scammed. Scammers deliberately target new people in the crypto space because they know that these people are the most vulnerable.
What is digital scammer?
It is a person who wants to steal from you by tricking you into handing over your money or your personal information fraudulently and dishonestly. So, you’re probably thinking that that’s never going to happen to me, well you will be very surprised when you realize that some of the smartest people can also fall victim to these scams. Digital scamming is big business and is well organized right up to the state level, yes, the country of Nigeria I’m looking at you! The internet has truly changed the world that we live in, we can connect to anyone in the world however it has also allowed the digital scammer to connect with us and the more digitalized our personal lives become the more open we are to a scammer attack. A person just has to look through their spam email box and I guarantee that there will be an email in there from the FBI or the Prince of Saudi Arabia who has found $10 million which they just so happen wish to share with you.
Here are some very basic rules to keep yourself safe:
Rule number 1: If it sounds too good to be true then it probably is. In other words, if a person contacts you claiming to be able to mine you 10 bitcoin per day which is equal to USD 10,000 every day for the rest of your life and there is absolutely no risk then I would say that it’s highly likely a scam, simply block them on the medial platform and report them.
Rule number 2: Trust no one online who you have never met in person before. It is all too simple for anyone to set up a fake Facebook account and then start calling themselves Doctor Bob who is head of the US Federal Reserve. A scammer will contact you will their typical statements of wanting to help you make millions of dollars. Ask yourself this question, why would they be wanting to help you become a millionaire, and what is in it for them? Look at their spelling and grammar, I would expect a person who claims to be from an English-speaking country not to have any spelling mistakes in their sentences and have good knowledge of their own countries geographics.
Rule number 3: As stated above always do your own research on a cryptocurrency before you invest in to it, read through its white paper, and understand what the project is trying to achieve. But remember that no one really knows what the market is going to do. If a person claims that a certain coin is going to be worth a small fortune in the future approach it with caution.
What is a phishing scam?
A phishing scam is another form of scam but this one is email or tx messaged based (Think fishing = Phishing). For those of you who think that your safe, because you don’t use any form of social media, think again, you are still vulnerable to attack. It is basically a fake email or tx message that is a near replica of the real thing such as a banking email, cryptocurrency wallet, or government website. As with making a fake Facebook account, it is again all too easy for a person with good computer skills to copy a legitimate webpage and then design a fake email from that webpage. These phishing scams will be asking you to input your personal details, banking details, or crypto details. Since these phishing scams can closely resemble the real thing it can be sometimes very difficult to spot them apart however are a few red flags to look for:
Do not click on any links or open attachments from emails that have come from an unknown address.
Google search the names of the companies within the email, have other people heard of this company before and what does it do?
Have you been contacted out of the blue and is the email threatening you?
Unfortunately, already a lot of our personal information is freely available to scammers who use the dark web. The best security is yourself, be vigilant and stay up to date with the latest scamming attacks. Below is a basic example of a “phishing” email or tx message that you could receive in the future:
Your account has been hacked! In order for us to maintain the safety of your cryptocurrency and your personal information, you must open the link below immediately.
Failure to do this will result in your cryptocurrency being stolen! And there is no way to get it back!
You must provide your personal details to us now or else!
Date of birth:
Yours sincerely from the CEO.
236 Greens Street, New York city, USA
There are so many red flags that stand out within this email
Look at the URL, there is a clear spelling mistake of the word “Cryptocurrency” spelt with a “Z”??
A CEO of a large company is hardly going to have the spare time to contact you personally.
This email is obviously generic because it is not addressed to you personally and is not using your full name.
The company is asking for personal data which it should already have access to if you are one of their clients.
The email is not written professionally.
No company is ever going to threaten you into handing over your personal data and certainly is never going to ask for your password.
Research the physical address at the bottom on Google Maps, does that address really match up to the location of the company that it says that it is?
When it comes to investing in cryptocurrencies remember that your family, your health, and your house whole bills always take priority over cryptocurrency investing. You only ever invest what you can afford to lose, you would never go to your nearest casino and bet your entire life savings on “Black”. Be responsible with your finances, stay safe out there, and help the new people who are coming into the crypto world.
Written by Rob Lavington, to check out more of his blog visit