Introduction to Cryptography

There’s nothing you can know that isn’t known.
Nothing you can see that isn’t shown.
All you need is…PUBLIC KEY CRYPTOGRAPHY!!!

– with apologies to Lennon-McCartney

French Cipher Machine

Without public key cryptography, cryptocurrency fails. Public key cryptography proves ownership and enforces privacy. It arrived relatively recently, though, appearing on the scene in the mid-1970’s at the same time as the personal computer revolution.

The art and science of cryptography encode (i.e., encrypt) messages so that no one can read them except the intended audience. Only the proper recipient decodes (i.e., decrypts) the message, maintaining privacy between communicators.

A key is used to encrypt and decrypt messages. In asymmetric cryptography (another name for public key cryptography), the key to encrypt a message is different from the key to decrypt the message.

In symmetric encryption, the key to decrypt a message is the same as the key used to encrypt it. This strategy creates a key distribution problem: the sender not only has to send the message but also find a secure way to send the key as well. When a villain intercepts the key and the message both, privacy disintegrates.

Whitfield-Diffie Key Distribution Solution

Linguistics, language, and puzzle skills ruled cryptography through most of history, but from the mid-twentieth century onward, math has been predominant.

In the 1970’s at Stanford University, Whitfield Diffie, Martin Hellman, and Ralph Merkle found a mathematical solution to the key distribution problem. In their solution, they used modular arithmetic and one-way functions. (Among other accomplishments, Ralph Merkle also contributed greatly to cryptocurrency as the inventor of Merkle trees.)

Modular arithmetic deals with remainders and incorporates a set of numbers that wrap around to the beginning after a certain point. That is, 7 mod 3 equals 1 because 1 is what remains after dividing 3 into 7. A 12-hour clock provides the most common example of the wrap-around nature of modular arithmetic. If it’s 8:00 a.m. now, 6 hours from now will not be 14:00 o’clock but 2:00 p.m. The main point to remember is that modular arithmetic behaves non-intuitively and yields unexpected results.

In mathematics, one-way functions execute easily but strongly resist reverse engineering. Think of a bowl of soup served in a restaurant. The cook easily followed the recipe to create it, perhaps even improvising some ingredients at hand. You may well be able to detect this flavor and the spices, but without the recipe and exact ingredients the chef used, you’ll have a difficult time duplicating that bowl of soup.

In the Whitfield-Diffie algorithm, correspondents share some public information for the key but keep private information that prevents an eavesdropper from reproducing that key. The team presented their solution publicly in June 1976 at the National Computer Conference.

Enter Asymmetric Cryptography

Whitfield-Diffie solves the key distribution problem but still uses symmetric encryption.

Upon learning of the Whitfield-Diffie solution, Ron Rivest, Adi Shamir, and Leonard Adelman at the MIT Laboratory for Computer Science began building on those mathematical concepts to discover a solution for asymmetric encryption. In April 1977, they succeeded. This became known as RSA after the names of the creators.

In asymmetric encryption, you publish a public key that everyone knows. People use this to encrypt messages that only you can decrypt because you know the private key. Simply put, a public key is just a number created by multiplying two numbers of the private key. If the numbers used are sufficiently large, discovering those two numbers is computationally intensive and time-consuming.

Encryption for the Rest of Us

Patent Application for Electric Code Machine

Using RSA encryption challenged the resources of the computers in those days. Encryption belonged only to the powerful and wealthy — the military, governments, large corporations, etc. Paul Zimmerman envisioned encryption available to anyone with a personal computer. He implemented Pretty Good Privacy (PGP) and released it to the public for free in June 1991.

Zimmerman overcame the resource intensive computational slowness of asymmetric encryption by implementing a hybrid algorithm. The message itself used a symmetric key, and asymmetric cryptography encrypted the key to safely send it with the message.

 

Hello, Hal Finney

Secret Decoder RingThe first employee Phil Zimmerman hired at PGP was Hal Finney. Hal Finney would become the first person to show any interest when an unknown person calling himself Satoshi Nakamoto arrived on the scene in 2008 proposing something he called Bitcoin.

Multiple attempts to create private digital money protected by asymmetric encryption failed throughout the 1990’s. In Amsterdam, David Chaum created DigiCash but required all transactions to be validated by a centralized company. DigiCash failed when Chaum’s company went bankrupt in 1998. British researcher Adam Back created HashCash in 1997 utilizing a Proof of Work method to create new coins. HashCash failed because a coin could only be used once. Users needed to create new coins every time they wanted to purchase something.

Hal Finney solved the HashCash problem by making the first reusable proof of work system (RPOW). He made his attempt at a digital money project with something he called CRASH (for Crypto cASH). (Lesson learned: call a computer program CRASH and expect it to fail.)

Hello, Bitcoin

Hal Finney became the first person after Satoshi to run a Bitcoin node and was the first recipient of Bitcoin from the first transaction on the network.

Hal encouraged Satoshi with the wisdom of a seasoned pro who has not grown jaded with cynicism: “Imagine that Bitcoin is successful and becomes the dominant payment system in use throughout the world. Then the total value of the currency should be equal to the total value of all the wealth in the world…Even if the odds of Bitcoin succeeding to this degree are slim, are they really 100 million to one against? Something to think about.”

Later on, Hal Finney contracted the fatal disease of ALS and posted some parting words to the community on March 19, 2013:

“After a few days, bitcoin was running pretty stably, so I left it running. Those were the days when difficulty was 1, and you could find blocks with a CPU, not even a GPU. I mined several blocks over the next days. But I turned it off because it made my computer run hot, and the fan noise bothered me…The next I heard of Bitcoin was late 2010, when I was surprised to find that it was not only still going, bitcoins actually had monetary value. I dusted off my old wallet, and was relieved to discover that my bitcoins were still there. As the price climbed up to real money, I transferred the coins into an offline wallet, where hopefully they’ll be worth something to my heirs.”

Final Thoughts and Further Reading

The history of cryptography from Whitfield-Diffie to Bitcoin and beyond continues to progress. Math provides the foundation. Modern math unlocks possibilities unheard of before the middle of the twentieth century. Mathematical research continues, and when quantum computing becomes common, new mathematical possibilities will emerge.

Beyond math, decentralization drives the history of modern cryptography. Everyone deserves privacy. When Rivest, Shamir, and Adelman created public key cryptography, only powerful and centralized organizations benefitted immediately. Phil Zimmerman’s Pretty Good Privacy (PGP) expanded the market to include anyone wanting to use cryptography on a personal computer. With Bitcoin, anyone who uses the cryptocurrency gets the privacy of public key cryptography as an integral component of the system.

Further Reading

Many sources provide further in-depth information on the history of cryptography and its emergence in cryptocurrency:

A popular book on the history of cryptography is Simon Singh’s The Code Book: The Science of Secrecy from Ancient Egypt to Quantum Cryptography.

The early chapters of Nathaniel Popper’s Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money cover the early history of cryptocurrency.

Archives, articles, and a wealth of primary material can be found here.


This article by Wilton Thornburg was previously published on Coincentral.com

About the Author:

Wilton Thornburg is a software engineer, currently based in the greater Boston area.

 

Electrum Wallet Review

Electrum is one of the founding fathers of cryptocurrency software wallets. Launched on November 5, 2011, the wallet is a lightweight Bitcoin client, which is to say that it interfaces with Bitcoin’s network without its users having to download the blockchain by running a full node. This Electrum wallet review will walk you through everything you need to know about the Bitcoin client.

From its inception, Electrum was built exclusively for Bitcoin. A different time and a different market, it was created when Bitcoin had few serious competitors and Ethereum creator Vitalik Buterin was still in high school.

Thankfully, though, the client’s technology is completely open source, so with the help of a community of active developers, clones have surfaced for the likes of Litecoin, Bitcoin Cash, Dash, Verge, Monacoin, Vertcoin, and other currencies.

As its open sourced evolution suggests, Electrum keeps with Bitcoin’s decentralized roots. This has made it a favorite software wallet for early adopters and series enthusiasts, as it features the following attractive traits:

  • In-wallet encryption (honestly this is a bare-bones feature at this point in the game, something holders should come to expect from a wallet client software)
  • Two factor authentication option (another expected feature)
  • Multi-signature wallet option
  • Hardware wallet integration
  • Seed recovery phrases for if you lose access to your wallet
  • As a lightweight client, its functionality isn’t limited by Bitcoin’s network
  • Private keys are kept on your personal device, and they are never shared with the wallet’s servers
  • In addition, servers do not store user accounts or their information, you can migrate between servers at will, and you can export your private keys freely
  • Electrum does not download scripts, meaning you’re insulated from hackers sending you codes through these servers to steal your funds
  • Being open source, anyone can run a client, and this decentralization protects it from a central point of failure
  • Now that we’ve gone into the wallet’s background and some of its key features, let’s dive into the thick of what makes it tick.

Setup and User Interface

Electrum offers excellent installation flexibility. If you’re tech illiterate like myself, there’s an easy installation feature, or if you’re tech savvy and plan to develop on Electrum–then well, you probably don’t need this guide to begin with, but there’s a Python source installation for people like you, as well.

The installation is about as easy as they come. When creating a new wallet, the installation wizard will ask you if you want to make a standard wallet, a two factor authentication wallet, a multi-signature wallet, or import an existing wallet. We highly recommend that you consider the two factor or multi-sig option, as it insulates your funds from hacking attempts even further.

Electrum Install Wizard

No matter which option you choose, though, you’ll come to a window asking about seed phrases (if you do the standard setup, this window is the very next one, but if you choose the two factor or multi-sig setups, you have a few steps before you get to it). This window will ask you if you want to restore a wallet using an existing seed or create a new one with a seed, a master key, or a hardware wallet.

Electrum Install Wizard

For simplicity’s sake, we’re going with create a new seed for this review. After choosing this, it’ll ask you whether you want to use a standard or segwit wallet address–choice is yours–then, a recovery seed will show up. The next window asks you to reproduce this recovery seed, but make sure you write it down as it the only thing that will save your precious Bitcoin from the blockchain’s encrypted labyrinth of hash functions if you lose/delete your wallet’s software client. Everyone shudders at those horror stories of unawares Bitcoin users losing thousands to careless errors, and wouldn’t it be a shame if little Timmy’s college fund was irretrievably lost in cyber space because you didn’t save your wallet’s seed phrase?

Don’t disappoint little Timmy; write down your seed phrase and keep extra copies.

Anyway, after you reproduce the seed, you’ll then be asked to give your wallet a password. Again, make it a good one and don’t treat this step lightly–do it for Timmy. After setting your password, you’re all set.

Electrum - Default Wallet

The first thing you’ll likely notice about the Electrum wallet is that it’s pretty minimalistic. No bells and whistles or a flashy UX like Exodus, for instance. Still, what it lacks in flair, Electrum makes up for with good ole roll-up-your-sleeves-and-get-to-work functionality. It includes an invoicing function, a contacts list, encrypted messaging, and transaction history along with your typical wallet features. Overall, it has a smooth layout navigable, it’s fast, and it’s easy to use, so if this is your first foray into Bitcoin, it’s a simple place to start.

Security

As we went over in Electrum’s key features, the wallet is replete with some staunch security features. With options to create a two factor authentication or multi-sig address, users can give their wallet an added layer of protection from hackers. These are extra precautions that exist to complement Electrum’s overall decentralized approach to functionality; ultimately, two factor and multi-sig wallet options and the fact that private keys are kept on local devices means that users are truly in control of their funds from the get-go, and all of these features facilitate an overall airtight security system.

With one recently patched exception, that is. I won’t go into too much detail as it’s been explored in detail elsewhere, but basically, Electrum used to have a vulnerability that would allow hackers to steal funds through infected websites. Essentially, if you logged into your Electrum wallet while an internet browser was on a website controlled by hackers, you could have your wallet drained of its coins.

To date, this is the only security vulnerability Electrum has faced, and for what it’s worth, the team has patched it with an updated version. If you use Electrum, make sure you update your software, as it doesn’t support automatic updates.

Community Sentiment

Even with the recent hiccup in security, the cryptocurrency community in general holds the Electrum wallet in high regard. It’s one of the oldest and most well known, and this reputation has made it a favorite among veteran enthusiasts, especially those who are more technologically inclined. A number of cryptocurrency information websites consider it to be one of the best options for software wallets, as well.

Overall, Electrum seems to have secured the community’s trust even in the face of its failures. This is largely thanks to the team’s commitment to improvement, especially when security and user control are concerned.

Support

Need help managing your wallet? No worries here. Electrum sports an active Bitcoin Talk forum and subreddit for questions. In addition, the team keeps an updated support page that offers several dozen articles and resources.

All of this to say, if you have a question, chance are that the Electrum team has it answered for you.

Final Thoughts

The Electrum wallet is one of the most developed software clients out there. With nearly 9,000 commits on Github, an expansive developer community, and third party plug in support, it’s a sandbox for add-ons and development. Its open source flexibility and developer following have given way to off-shoot clients for popular altcoins.

All in all, Electrum’s esteem in the space as one of the oldest wallet clients, its security features, and its developers’ commitment to building on and improving the software make it a win in our book. It may not be the prettiest wallet, but you’d be hard pressed to find one that gets the job done more efficiently and with its user in mind than Electrum


This article by Colin Harper was previously published on Coincentral.com

About the Author:

Colin Harper is a freelance writer and crypto-enthusiast based in Nashville, TN. When he’s not speculating crypto futures, he’s probably letting his hair down and/or heading to a music festival–because stereotypes exist for a reason.


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How to Backup your Bitcoin Wallet by Fergus O’Sullivan

 

What is the Internet of Services (IOS)?

The Internet of Services (IOS) is a blockchain infrastructure that’s aiming to solve maybe the biggest problem in blockchain today – scalability. The platform’s native token is the IOS token, IOST for short.

Market Problem: Current blockchain architecture has seemingly hit a plateau in which additional adoption only leads to exorbitant fees, slow transaction times, and poor throughput. Even though some second-layer scaling solutions are being implemented, they’re largely untested and may still not reach the level of scalability that an enterprise-level company like Amazon would need.

The IOS team believes that the current consensus protocols and blockchain architecture are the inherent causes of these scalability roadblocks. In this IOS beginner’s guide, we’ll look at all aspects of the blockchain infrastructure project including:

How does the Internet of Services (IOS) work?

The Internet of Services (IOS) utilizes five primary innovations to traditional blockchain architecture and consensus algorithms. Let’s take a closer look at each one individually. Warning: It’s going to get a little dense.

1. Efficient Distributed Sharding (EDS)

Before getting into EDS, you need to have an understanding of how sharding works. Sharding splits the nodes on a network into groups who then verify a proportional number of transactions. The groupings enable concurrent verifications to take place, increasing the network throughput.

This poses a few questions, though. How do you select which nodes are in which shard? How can you remain resistant to malicious nodes? What’s the node leader election process? (Bitcoin does this through mining.)

To answer these questions, IOS uses the Distributed Random Protocol (DRP). Simply put, this protocol implements client-server communication with non-interactive zero-knowledge proofs (NIZK) and publicly verifiable secret sharing (PVSS) to create an unforgeable, uniformly random value. That may not have been so simple… The IOS white paper spells out the protocol in more detail.

DRP works great if there are no malicious or failing nodes on the network. But, we know that often isn’t the case. To prevent the impact of the activity caused by these nodes, Internet of Services elects leaders using Algorand and Omniledger. These mechanisms ensure that leader nodes run the DRP protocol, and if they don’t, are then excluded from participating on the network.

2. TransEpoch

IOS switches batches of nodes in and out when transitioning between epochs. To do so, it uses TransEpoch, a node-to-shard transition assignment protocol that allows remaining nodes to continue working while having new nodes bootstrap and download history data.

The TransEpoch algorithm keeps the Byzantine Fault Tolerance (BFT) consensus on each shard. This essentially means that malicious nodes shouldn’t be able to take over the shard during the transition.

3. Atomix

With any sharding system, there’s the likelihood that you’ll need to make transactions across shards. This causes an extra layer of complexity that opens the network up to double spend hacks and inaccuracies between the transaction ledgers of different shards.

IOS’s implementation of the Byzantine Shard Atomic Commit (Atomix) protocol should make those problems a non-issue. Here’s how it works:

  1. Node a in shard A wants to send funds to node b in shard B.
  2. If the nodes in A approve the transaction, they’ll log it in A’s blockchain.
  3. Simultaneously, the client will lock the a funds into a transaction message and send it to B.
  4. A sends the transaction to B’s blockchain for validation.
  5. If the nodes in B approve the transaction, b receives the funds.
  6. If at any point in the process the nodes reject the transaction, the funds return to a.

4. Proof-of-Believability (PoB)

Proof-of-Believability separates all of the IOS nodes into two leagues: believable and normal. First, nodes from the believable league quickly process transactions. After that, the normal nodes validate samples of the transactions and provide verifiability.

The likelihood of a node being selected for the believable league is based on its believability score. This score is comprised of the token balance, reviews, and community contributions, among other things.

The purpose of the normal nodes is to ensure that the believable nodes are acting honestly. If a normal node catches a believable node acting dishonestly, that believable node will lose all of its tokens and its believability score will return to zero.

5. Micro State Block (MSB)

Having each node in a network store the entire blockchain is great for security and immutability. However, as more transactions attach to the chain, this process becomes time and resource intensive. Instead, Internet of Services prunes blockchain storage through Micro State Blocks (MSBs).

With this strategy, each shard only stores the headers of previous blocks and the blockchain state is dispersed across multiple shards. Because of the MSB generation protocol, nodes only need to validate the last part of the blockchain as opposed to checking the entire thing.

IOS token (IOST) and Servi

IOS token (IOST)

The IOS token (IOST) is the medium of exchange on the IOS network and a factor into a node’s believability score. Additionally, you receive IOST by validating transactions and contributing computing power for services such as smart contract execution.

The team minted the entire supply of IOST (21 million) during the private ICO event. They distributed the tokens accordingly:

  • 40%: Token Sale
  • 35%: IOS Foundation
  • 12.5%: Community Building
  • 10%: Team
  • 2.5%: Investors and Advisors
IOST Uses

Servi

The amount of Servi is another main factor in a node’s believability score calculation. You receive Servi when you provide services to the community, evaluate third-party services, and/or help out in other ways.

You’re unable to trade or exchange Servi, and your Servi balance resets to zero when you validate a block.

IOS team & progress

The IOS team consists of over 30 members spread across Asia and North America. Resumes include CoinLang creator, EtherCap CTO, Forbes 30 under 30, National Olympiad in Informatics Gold Medalist, and numerous other roles. IOS also has an advisory board that includes names such as Yusen Dai (Jumei co-founder), Ryan Bubinski (Codecademy co-founder), and Robert Neivert (500 Startups venture partner).

An impressive amount of companies and venture capital firms have partnered with and invested in the project as well. The list includes Huobi, FBG Capital, and Sequoia Capital.

IOS Investors and Partners

With a focus on scalability and enterprise-level usage, IOS is competing with decentralized application (dapp) platforms that have the same focuses. Obviously, IOS’s biggest competitor is Ethereum. However, EOS and NEO have come out with announcements that they also plan to solve the scaling issues that have plagued other blockchain projects.

ICON, Lisk, and VeChain also aim to provide blockchain solutions to enterprise clients. In the end, there are plenty (and will probably be plenty more) dapp platforms that IOS competes with.

Trading

The IOST price saw one sharp spike shortly after the ICO but hasn’t had much volatility since – a rarity in the cryptocurrency space. It’s unclear what may have caused that initial spike to the all-time high of ~$0.13 (~0.00001 BTC), but it could’ve just been investors simply finding out about the project.

After the end of the January pump, the IOST price immediately dropped down to almost ICO price levels. It continued to slowly drop through most of March before turning around. Starting at the end of March, the price steadily rose and is now at ~$0.05 (0.000006 BTC).

This project has a long roadmap ahead of it, so it’s difficult to say what may affect the price. Overall market conditions will most likely be the biggest influencer. Partnership announcements could lead to some positive price actions as well.

Where to buy IOST

You can purchase IOST on Huobi, Binance, or OKEx with BTC or ETH. However, the coin has the largest trading volume as a trading pair with Bitcoin on all three exchanges.

If you don’t own any cryptocurrency, you can first pick up some Bitcoin on an exchange like Gemini or GDAX.

Where to store IOST

Because IOST is currently on the Ethereum network, you can store it in any wallet with ERC20 support. MyEtherWallet is a great online choice while the Ledger Nano S is a solid hardware wallet you can use.

Once the team launches the mainnet, you’ll want to store your coins in the official wallet that they provide. This launch isn’t scheduled until Q3 2019, though, so the team hasn’t released that wallet yet.

Conclusion

IOS is attempting to build a more scalable blockchain infrastructure. Easily one of the more complex projects in the space, it’ll be at least a year before we’ll be able to measure the success of it.

If the team can achieve the ambitious goals they’ve set for themselves, we may see an entirely new blockchain infrastructure conquer the space. However, with the number of developers working on scaling solutions for projects that are much further along, it may be too late.

Additional IOS resources

Twitter
Telegram
Reddit
Medium
Github


This article by Steven Buchko was previously published on Coincentral.com

About the Author:

Steven is a managing editor at Coin Central and a blockchain investor. He’s also the co-founder of Coin Clear, a mobile app that automatically turns your daily spending habits into cryptocurrency investments.

 

Paying Your Bills with Bitcoin

The decentralized market continues to see massive adoption on a global scale but many new investors are still unaware of how to spend their crypto in practical ways such as paying bills directly. New investors are flocking to the marketplace in record numbers and this investment capital is getting reinvested back into the BTC services marketplace.

As more people learn about the benefits of blockchain technology, the decentralized economy continues to expand. While most of the media’s attention is focused on how Bitcoin can assist you in acquiring your Lambo, many people are still unaware of the multitude of ways in which they can spend their Bitcoin earnings on day-to-day items. There is no shortage of services that allow you to pay your bills directly using Bitcoin and new platforms with even more innovative concepts continue to emerge in the market daily.

Pay Your Bills with Bitcoin

You hear all about the HODLers of BTC but rarely do you get to hear stories about the people that use their cryptocurrencies to do more mundane tasks such as pay their cell phone or electric bills. While these activities lack the luster of a cherry red Lamborghini Diablo, they are, in fact, much more important to mass scale Bitcoin adoption.

Bitcoin users from around the world are finding unique and innovative ways to avoid using fiat currencies in their lives and if you are bit more practical than a bright red Lambo, or just looking to use your hard earned Satoshis to get by, there are many ways in which you can spend your BTC on your living expenses. Below are just a few of the most popular ways that you can pay your bills directly from your BTC wallet and avoid paying any crypto-to-fiat transition fees.

Bitcoin Debit Cards – Pay Your Bills with BTC

Bitcoin Debit cards are considered by many as the missing link between the cryptomarket and the traditional market space. Crypto Debit cards can function in a couple of different ways but most utilize a protocol that converts your crypto into fiat currency the moment you swipe your card. You will pay a small processing fee for the transaction but with most cards, it is far less than what Coinbase would charge you.

Bitcoin Debit Card Featuring NFC Card

Since the merchant is only receiving fiat currency, you can use your crypto debit card at any retailers that accept credit cards such as Visa. This makes crypto debit cards perfectly suited for paying your bills. You can even sign your card up for automatic bill payments just like a traditional credit or debit card.

Click here to view a comprehensive list of the crypto debit cards currently available on the market.

Welto.io

The Welto.io platform provides users the ability to pay their bills directly from their Bitcoin wallet. The platform boasts immediate transaction times and even allows you to use a combination of crypto and fiat currency to pay your bills. There is 2% flat transaction fee for their services; which is far less than fiat-based payment systems and despite the $300 payment limit, Welto is expanding quickly.

The Welto platform is currently working on a large-scale update that would allow for the use of more cryptocurrencies in the future. Currently, users can pay bills with BTC, LTC, ETH, ZEN, ETC, and CRW. There is also a mobile app available for download on the Android operating system.

If that isn’t easy enough for you, you can download the Amazon Alexa app and pay your bills with voice commands. The best part is that the Welto platform is not alone. Click here to see a list the most popular crypto bill pay platforms currently available.

Living Room of Satoshi

The Living Room of Satoshi platform is an Australian-based cryptocurrency bill payment system that is already seeing substantial use in the country. This 2014 startup is currently processing around $1 million a week in small bills for BTC users in Australia. The system is integrated with the BPAY bill system to provide users access to the most popular service providers in the area.

This platform is excellent in its abilities and overall informative feel. You can see the actual payment statistics of the platform’s users by category for the last 14 days. A quick review of this data is truly eye-opening. Credit cards bills are the #1 bill paid on the platform followed by the internet, phone, electricity, and gas. The platform even allows you to pay your rent with crypto.

This is truly a remarkable tool for the BTC users of Australia and hopefully, they will expand their operation in the future.

Pay Your Bills Directly

You should always ask your service providers if they accept BTC directly as a form of payment. You may be surprised to find out that they already do or are planning to integrate it in the near future. Corporations and governments from around the world are getting hip to the benefits of accepting cryptocurrencies and you may not be too far off from the day that you can even pay your taxes in crypto.

It was reported in February of this year that Arizona was considering becoming the first state to accept cryptocurrency payments for property taxes. This would be a huge step forward for the decentralized economy and more states will surely follow Arizona’s example in the coming months.

Arizona State Capitol Building

Is it Possible to Pay Your Bills by Using a Bitcoin Wallet?

Yes, it is very easy to pay your bills with your Bitcoin wallet and there are thousands of people already doing this every day. These are the individuals that are taking the decentralized economy forward by forcing retailers to take a serious look into cryptocurrencies such as BTC and as you probably already know, just a peek at BTC can be enough to take you down the blockchain rabbit hole.

What do you guys think? Are you ready to abandon fiat currency altogether? Let us know on Twitter and be sure to sign up for our newsletter to stay informed on all the latest and greatest crypto news hitting the marketplace.

This article by David Hamilton was previously published on Coincentral.com

About the Author:

David Hamilton aka DavidtheWriter has published thousands of cryptocurrency related articles. Currently, he resides in the epicenter of the cryptomarket – Puerto Rico. David is a strong advocate for blockchain technologies and financial sovereignty.

Allright, You Want to Start Cryptocurrency Trading?

Well, you’ve come to the right place. Getting started with cryptocurrency trading can be a daunting task. You may be wondering, “What wallet should I use? Where do I buy Bitcoin? What even is a Bitcoin?”

Worry no more. We’re here to provide you with all the information you need to learn how to begin your cryptocurrency trading adventure.

What’s Your Strategy?

Before even looking at potential cryptocurrencies, you should figure out which strategy you want to pursue. Everyone has their own tactics, but they generally fall into one of the following categories:

  • Long-term hodler – You just want to buy a few different coins and keep them as a long-term (>1 year) investment. This is the simplest trading strategy and usually involves the least amount of risk. You’ll most likely stick to cryptocurrencies with a larger market cap.
  • Mid-range investor – You have a slightly higher risk tolerance than the long-term hodler. There may be coins you hold for awhile, but you also rebalance your portfolio every month or so. Your holdings probably include a mixture of large and medium market cap coins.
  • Daytrader – The most advanced and riskiest cryptocurrency trading strategy. You focus mainly on technical analysis to trade volatile swings in the market. This can be lucrative if you do it properly, but it’s difficult to execute well. All coins are fair game with this strategy.

Your strategy can be some mixture of these three tactics as well. If you’re just starting with cryptocurrency trading, we recommend you stick with the first two.

Choose a Cryptocurrency

It may seem obvious, but you need to put some effort into choosing the cryptocurrencies you invest in. Take your time with this. There will always be new opportunities, so don’t just jump into a trade in an attempt to catch a pump.

Research, Research, Research

Did we mention research? The most important step of every investment opportunity is to research the coin you want to buy. Doing this one step will set you notably ahead of many other investors out there.

At the very least, you should figure out what problem the coin is solving, why the team is qualified to create it, and what purpose the coin has in the overall ecosystem.

Reading the coin’s white paper is a great way to gather all of this information. These documents may seem intimidating, but after reading the first couple, you’ll find that they aren’t so bad. The Bitcoin white paper is the perfect starting point for any cryptocurrency novice. Check it out and learn what started the whole blockchain revolution.

After proper due diligence on your coin (or ten coins), it’s time for you to make the investment.

Find an Exchange

There are a seemingly endless amount of exchange options. Each one consists of pros and cons for different traders as well as different lists of available coins.

When finding an exchange, it’s important that you first see if it supports the coins you want to trade. Most exchanges have an easy-to-find page that lists all of the available coins. We’ve also compiled a list of tradeable cryptocurrencies on the most popular exchanges here.

Beginner Exchanges

If you’re a beginner interested in sticking to the most well-known cryptocurrencies, Coinbase is your best bet. Ever so slightly more advanced, GDAX and Gemini offer similar coin selections with lower trading fees.

Kraken has similar ease-of-use as the previously mentioned exchanges but consists of a larger list of coins.

You can purchase cryptocurrency with fiat (i.e. USD) on all of these platforms.

cryptocurrency

Moderate Exchanges

These platforms support a wider array of coins than the beginner exchanges and usually have lower fees as well. However, this comes at the expense of user experience.

None of these exchanges allow you to use fiat to purchase crypto. You need to have already owned or first purchased Bitcoin or Ethereum on one of the beginner exchanges.

Reputable exchanges in this list include Binance, Bittrex, and KuCoin.

Decentralized Exchanges (Advanced)

As you become a seasoned cryptocurrency trader, you may find yourself trading small market cap coins. Most of these coins aren’t available on centralized exchanges. Instead, you have to use an Ethereum-powered decentralized exchange (DEX).

On these exchanges, you trade directly on the blockchain. There’s no intermediary to match orders. You use a tool like MetaMask to execute your trades. Once again, decentralized exchanges are only recommended for experienced traders.

If this is something that interests you, Ether Delta and IDEX are two solid DEXs to check out.

Select a Wallet

Finally, and most importantly, you should have a secure wallet if you plan on holding your coins for an extended period of time. Once again, you have plenty of options for storage.

Exchanges

Exchanges are by far the least secure place to store your funds. They’re common targets of hackers and are susceptible to phishing attacks. If you do plan on leaving your money on an exchange in order to have some trading liquidity, make it the least amount possible.

Online Wallets

Online wallets are your next best option. These are slightly better than exchanges, but since they’re still online, they have many of the same vulnerabilities. Even a reputable wallet like MyEtherWallet has recently proven that malicious players will always find a way to circumvent the system.

Software Wallets

Even better than online wallets are software wallets. Many of these wallets store your information locally on the device you download it to. However, if your computer or phone catches malware, it could compromise your security. Exodus and Edge are two popular software options.

Hardware/Paper Wallets

Ideally, you should use a hardware or paper wallet for storage. Both methods keep your coins offline and provide the highest level of security. Paper wallets are free, but hardware wallets typically cost around $100. The price tag brings enough security to make them worth it, though. The Ledger Nano S and Trezor are the top hardware wallet picks.

Ledger Nano S

Get Out There and Start Trading

Those are the basic steps you need to follow in order to begin cryptocurrency trading. From there, it’s a lot of trial and error and learning as you go. If you’re itching for more information, check out the guides on the common mistakes to avoid when trading as well as how to evaluate a coin.

This article by Steven Buchko was previously published on Coincentral.com

 

About the Author:

Steven Buchko is a managing editor at Coin Central and a blockchain investor. He’s also the co-founder of Coin Clear, a mobile app that automatically turns your daily spending habits into cryptocurrency investments.


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Coins, Coins Everywhere

When starting cryptocurrency trading, the vast number of coins to choose from can be overwhelming. From the thousands out there, how can you possibly decide which few to keep in your portfolio?

Although there are an endless amount of strategies when choosing coins, there are a few different tactics you should follow to minimize your risk. In this guide, we’ll teach you the tips and tricks on building your portfolio, so you have a more successful cryptocurrency trading experience.

Diversify Across Market Caps

A great way to minimize your downside risk when cryptocurrency trading is to diversify your holdings across different market caps.

In case you don’t know, the market cap of a cryptocurrency is its price multiplied by its circulating supply. Usually, the higher the market cap of a coin, the less volatile it is. A properly diversified portfolio contains a mix of large (>$5 billion), medium ($250 million to $5 billion), and low (<$250 million) market cap coins.

Large market cap coins like Bitcoin and Ethereum may not experience the same 40-50% runs that smaller altcoins do, but their price typically holds better in bear markets.

How you diversify among these classes depends on your risk tolerance. If you think that investing in cryptocurrency is already a gamble, a portfolio that consists 95% of large-cap coins may be appropriate for you.

Maybe you have disposable income, though, that you wouldn’t be too upset losing. In that case, it may be worth putting over half of your portfolio in small-cap cryptocurrencies. Coins in this class have a high probability of being worth nothing down the road, but the ones that end up growing 100-200x could make the risk worth it.

In the end, you should do a serious evaluation of your risk tolerance as well as the amount of money you’re willing to lose and choose your market cap split based on that.

Consider the Industry

Another thing to consider when building your cryptocurrency portfolio is the industry that each coin is targeting. There are a couple of different ways you can approach this.

Diversify Across Industries

Once again, diversity is key. Because blockchain is still young, it’s difficult to predict which sectors will be most accepting of the new technology. To hedge against this risk, it’s recommended that you invest in coins across different industries.

You can group the most popular cryptocurrencies into a few different categories:

These are just a few of the categories in which you can place coins, and you’ll quickly find that there’s plenty of overlap for some of them. The idea of this strategy is to avoid investing too heavily in any one category. If for some reason that category ends up bombing, you don’t want to be left holding the bags.

Bitcoin TradingDouble-down on Your Favorite Industries

Even when holding coins across a diverse set of industries, you should consider putting additional capital in the industries that you’re most confident in.

There’s a popular notion in the cryptocurrency industry that only one coin per category will win out. But, that just isn’t the case. Take a look at any other business sector. Delta, American, Southwest (airlines), AT&T, Verizon, T-mobile (cell carriers), Chase, Wells Fargo, Bank of America (financial institutions) – and the list goes on and on. People have their preferences and categories are large enough for multiple cryptocurrencies to survive.

For example, if you think blockchain and file storage is inevitable, you may invest in Sia, Filecoin, and Storj. Or, if you’re a big believer in supply chain projects, VeChain and Waltonchain could take up a considerable amount of your portfolio.

Look for Hidden Gems (if you have the time)

The best coins to have in your portfolio are oftentimes the ones that not many other people have. There’s wisdom in going against the crowd.

Finding coins that haven’t haven’t become popular yet is a time-consuming process, though. It usually involves days (or even weeks) of research and slogging through a bunch of white papers. Even reviewing fifty projects may only lead to one or two that you deem worthy to invest in.

However, these one or two coins could be the key to an uber-successful portfolio. Let’s look at some examples:

  • Early investors in AntShares (now NEO), have seen ~160,000% return on their investment.
  • An investment in Bitquence (now Ethos) would have brought you a 4,300% return.
  • And, your portfolio would’ve grown by almost 4,000% by finding OmiseGO early.

As you can see, there’s immense value in finding coins early. If you have the time to research and enough money to take the risk, it could really pay off.

Cryptocurrency Trading is All Trial and Error

As you build out your cryptocurrency trading portfolio, you’ll probably find other tactics that also fit in well with your trading strategy. Additionally, you’ll most likely try out advice that sucks. You may even find that you don’t agree with the tips listed here.

And, that’s okay. Becoming a cryptocurrency trader is a learning process, and each investor inevitably molds their own unique style as they become more experienced. The important thing to remember is to keep an open, yet skeptical, mind and enjoy the ride.

This article by Steven Buchko was previously published on Coincentral.com

About the Author:

Steven Buchko is a managing editor at Coin Central and a blockchain investor. He’s also the co-founder of Coin Clear, a mobile app that automatically turns your daily spending habits into cryptocurrency investments.