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Introduction to cryptocurrencies: types, digital wallets, mining and its main applications.

The dream of digital money has been long waited and preached. The creation of Bitcoin in 2009 revealed that such dreams were finally fulfilled. Humanity has been waited very long to create a trustworthy method to use digital money all over the world.

Digital money has been preached by many, in particular by one of the greatest economists the world has seen, Milton Friedman. As he stated in an interview back in 1999 conducted by NTU/F:

The one thing that’s missing, but that will soon be developed, it’s a reliable e-cash. A method where buying on the internet you can transfer funds from A to B, without A knowing B or B knowing A. The way in which I can take a 20 dollar bill and hand it over to you and there’s no record of where it came from. And you may get that without knowing who I am. That kind of thing will develop on the Internet.

Is he the prophet of Bitcoin? No, he predicted the rise of these currencies as the internet was gaining track. He saw that the world needed a trustworthy digital cash to interact over the internet. Thankfully, in 2009, Satoshi Nakamoto, introduced to the world Bitcoin, the first reliable and secure method of transferring money over the internet.

A big debate has recently sparked between the technology industry on the actual distinction between of a cryptocurrency or a crypto token. All blockchain networks use a token to function, but not all those tokens are intended to be used as a currency. (For example, Bitcoin is a blockchain whose goal is to facilitate the payments between peer to peers. It does that, by using its native token, the bitcoin. It is a digital coin based on cryptography which transactions are anonymously recorded on a distributed ledger.)

But don’t all blockchain work as it was just described? Yes, but not all tokens are intended to represent currency. Until Ethereum appeared, bitcoin was the unique token available. With the issuance of Ethereum, the possibility of creating any utility token started.

In Ethereum’s case, the token ether is used as a payment method for deploying your code on the Ethereum virtual machine. Even though the ether can be used as a payment method. Its main purpose is to be a token for paying certain code executed on the world’s computer (Ethereums Virtual Machine).

Since Ethereum allowed anyone to peg its new token to the Ethereum blockchain, many companies have used the network to create their tokens on top of it. This means that we now have the ability to represent non-digital assets and transfer them easily through the Internet on a major scale.

Most of these tokens are used as chips to interact inside the blockchain or platform of a company. They represent a number of specific goods and services within the products of a company.

The birth of so many crypto tokens has been funneled by the latest hype of Initial Coin Offerings “ICO´s, which will be explained in next chapters. Even though there are endless choices of cryptos a user can make, we are going to stick to the most famous ones around the crypto community.

What is a cryptocurrency?

A cryptocurrency can be defined as a digital currency designed to work as a valuable medium of exchange between users over the Internet. It uses cryptography to secure the user’s transactions and to control the creation of additional coins.

The coins or tokens are a way for peers to interact with each other without the need of trusting one another. They also bring the possibility to send this coins anywhere in the world within a matter of seconds.

Cryptocurrencies are about to radically shift the way humanity transacts worldwide. Its security, robustness and speed are the key qualities for their success. Normally, all the cryptocurrencies follow a known coin distribution, making them accountable. People can transparently see everything is happening on the blokchain and predict what the supply is or will be.

All of this may have sounded a bit too complicated, that is why in order to make it easier to understand, we have portrayed it below:

How does a cryptocurrency work?
Figure 5: How does a cryptocurrency work?

The creation of this type of cryptocurrencies has put governments around the world in an uncomfortable position as people start to raise question such as why do we need a central bank to control the money supply?

Many discussions have arisen from it and have led to big debates. Currently Bitcoin (or cryptocurrencies in general) have only been banned in some countries such as Algeria, Morocco, Bolivia, Ecuador, Kyrgyzstan, Bangladesh and Nepal. Although many countries such as the United States, China, Russia or South Korea have stated they will conduct extensive studies to prevent actors who intend to use this technology for illegal purposes.

They have also warned those legitimate users, that the use of virtual currencies will not mean an exemption of the TAX requisites of each country and that they will work hard to enforce those requirements are met. Regulation over the crypto markets will soon arrive, being just a matter of time that Regulators catch up and understand the deep implications of using virtual currencies.

Since Bitcoin was the first ever cryptocurrency to be available, it is known as the ‘King coin’. All of the other coins created after are perceived as a blend of Bitcoin and are denominated as ‘altcoins’.

Let’s dive in further on the various cryptocurrencies coins missions:


Bitcoin was created after the financial crash of 2008 by Satoshi Nakamoto, with the goal of proving that users can have a currency that is digital, decentralized with no control undertaken by central banks and censorship resistant to any third parties. Bitcoin is an internet platform that holds a decentralized digital ledger (aka Accounting book) on which people can mine, store, and trade bitcoins.


Ethereum is believed to be the holy grail of blockchain applications, it was created by the Ethereum founder, Vitalik Buterin.

Its coin is denominated “ether” and it is used to pay for the computational resources needed to run any type of application on top of the Ethereum blockchain (network). It was not created to be a pure currency, rather to be the fuel for all the decentralized applications that run on the network.


Although Bitcoin and Ethereum are the most well-known cryptocurrencies, in the past year Monero has started to spark a huge interest in the crypto community. Monero was created with the aim of providing a secure, extra-private and untraceable currency.

This is achieved through the use of ring signatures, which hide the user’s information and amount sent to another user, making 99.9% untraceable. Many people believe that a powerful enough tracking application has not yet been created to trace Monero’s ring signatures.


It is a peer-to-peer Internet currency that enables instant, near-zero cost payments to anyone in the world. Many people call Litecoin the son of Bitcoin as the project was created after a group of developers forked the Bitcoin code. It has become popular that Litecoin is the test ground for Bitcoin upgrades as they have implemented the same upgrades as Bitcoin but available to their community sooner. Throughout the writing of this report, Litecoin has tripled is market cap.

This is due to the improved Segregated witness solution. Its purpose is to help expanding a cryptocurrency transactions volume. Litecoin is known as the cryptocurrency for testing bitcoin upgrades.

Digital Wallets

All crypto coins are handled using digital wallets available on the internet. A bitcoin/ethereum wallet allows you to store your cryptocurrencies online. It is a must when interacting with the range of apps and use cases. Basically, it is just a digitized version of your daily wallet. The value of it is just to simply store currency and additionally to keep your private key safe.

In other words, a digital wallet becomes your identity in the digitalized world. Digital wallets, therefore, store your cryptocurrency of choice, your public, and private key. A public key is how you are identified in the crowd (like an email address), a private key is how you express consent to digital interactions (your «PIN» number). There are a wide variety of wallets in the market.

Some are hosted by a third party and some are hosted on your computer. It is up to the user to use the wallet that fits the most according to their lifestyle or purpose of use. If you are not a tech-savvy, it is recommended that you use a third party wallet since it will be easier for you. Remind you that the key aspect of all blockchain crypto tokens is to have the private key under your control.

If a third party is the owner of your private key they are not practically yours, they are the wallets providers, who just offer you an interface. Most of the digital wallets allow you to be in control of your private key, making them the widely used and accepted.

From our point of view, the below companies are standing out in this market segment:


Xapo offers the convenience of using a bitcoin wallet with the addition of storage vault security for it. It allows users to purchase bitcoins and manage them through an easy to use online wallet, spend them with a swipe of the Xapo Debit Cards or store them in your wallet.


Mobi allows smartphone users to gain access to over 100 currencies including bitcoin, gold and reserve currencies such as USD and allows users to instantly convert, store or transfer funds globally to other smartphone users. Mobi accounts are simply linked to users’ mobile numbers and therefore a smartphone is all that is needed to use the app.

The main feature of BTCC’s Mobi app is the BTCC bitcoin debit card, which operates just like a normal bitcoin wallet. Funds in the wallet are pegged to the debit card and balance is automatically deducted when users make payments at retail points of sale (POS) that accept Visa or withdraw cash via bank ATMs.


Breadwallet is one of the best working open source wallets on the market. It is a very secure and easy way to get started with bitcoin. They ought to be better than a bank by allowing people to send and receive money from anywhere in the world 24/7. An account is so easy to set up it only takes a few seconds, allowing you to use bitcoin as digital cash.

Blockchain Bitcoin Wallet

The mission is to build a more open, accessible and fair financial future, one piece of software at a time. It is the world’s leading software platform for digital assets. Offering the largest production blockchain platform in the world, they are using new technology to build a radically better financial system.

Bloomberg for blockchains, First in leading-edge research and leading blockchain development platform.


Free, open-source, client-side interface for generating Ethereum wallets & more. Interact with the Ethereum blockchain easily & securely. Double-check the URL ( .com ) before unlocking your wallet.


Most of the cryptocurrencies out in the market are successful according to the process of mining. In order to run them in the decentralized blockchain network, people need to be willing to set up the right equipment for the benefit of all.

This is achieved by a well designed incentivized reward mechanism. Mining is a complicated process to explain, and we have tried our best to explain it in the most simple way.

Nowadays, a central bank can print money whenever they need to it. In the cryptocurrencies world this cannot happen since, in order to «print» coins, one must mine them first. Mining is the process by which transactions are verified and added to the public ledger, known as the blockchain, and also the means through which new coins are released.

People are transacting with each other over the network at all times, but unless someone keeps a record of all these transactions, no-one would be able to keep track of who had transfer what to whom and when. Any blockchain network deals with this by collecting all of the transactions made during a time period into an ordered list, called a block.

The miners confirm those transactions and update them into the general ledger of that cryptocurrency. When a block of transactions is created, miners put it through a process. They take the information in the block, and apply mathematical formulas and algorithms to it, transforming it into something else.

That something else is a far shorter, seemingly random sequence of letters and numbers known as a hash. This hash is stored along with the block, at the end of the blockchain at that point in time. Every time a miner succeeds on the creation of a new block, a reward is given to the miner for their work (computational power).

The mining space is a complicated market segment. As we have seen looking in the bitcoin world, mining can be quite profitable if it is properly executed. Although nowadays, very few companies are able to run profitable crypto mines due to the high cost of purchasing and maintaining the highly technical equipment needed.

On the other hand, there are still plenty of benefits to gain while working with any of the available cryptocurrencies. The problem most of the miners are encountering at this time are electricity costs. Huge amounts of electricity are needed to maintain the network. At this rate of electricity usage, it’s predicted that by 2020 the bitcoin network will consume as much energy as the entire country of Denmark.

The amount of electricity usage is one of the main debates throughout the bitcoin world and its use of a PoW (Proof of Work Consensus Algorithm). The consensus is achieved by providing the network the right solution to the problem all the miners are trying to solve.

The solution of this problems is achieved by a constant computational power running at all time. The faster the hardware is, the higher chance to obtain a block reward (crypto token). Not all blockchain require mining, indeed the Ethereum Blockchain is trying to move from a PoW system into a PoS (Proof of Stake Consensus Algorithm) in order to reduce the amount of energy wasted on mining.

Many critics argue that in order for a blockchain to fully be trusted, it needs to have a PoW algorithm but only the future will tell who’s right and wrong.

The mathematical problems that come along with Proof of Work consensus algorithms can be solved with a different type of hardware equipment. Although, the more valuable a coin becomes, the better the equipment that is used to solve the mathematical problems.

There are three different types of hardware miners can use to mine cryptocurrencies:

  1. CPU: Central Processing Units are used to mine less profitable or less known altcoins, such as Riecoin or Slimcoin. This method of mining is widely used within the scientific community for research purposes.
  2. GPU: Graphic Processing Units are used to mine many of the top cryptocurrencies (by Market Cap) such as Ethereum, Monero, Zcash, Ethereum Classic. This method of mining is used for coins that do not want “centralization” in their mining infrastructure as ASIC hardware is highly more expensive.  
  3. ASIC: Application Specific Integrated Circuits are used to mine coins such as Bitcoin, Litecoin, Dash. This method of mining is used for those coins who want the bring users the most secure blockchain. ASIC hardware is in fact more expensive, but most of the coins that use them trade at high prices.

Choosing the key hardware components is a crucial part in the creation of a mining rig. GPU hardware is cheaper than ASIC hardware because its a more “flexible” hardware, as they can be used to mine many different coins or for video games, while ASIC hardware can only be used to mine one specific coin. It is up to the user to decide which type of hardware she/he wants to build.

Here are some of the most important companies working in this market segment are the following:

Bitcoin – Bitmain

Is developing and selling what they claim to be the world’s leading ASIC chip technology for Bitcoin miners. Their most important product is the Antminer S1. It is the world’s most powerful efficient bitcoin miner which gives users the best ROI.

The Antminer can hash up to 125.4 GH/s and processes over 1 Ghz while consuming less than 0.5 V. The latest product characteristics is the one that attracts the most customers, since electricity costs are a very high when mining.

Nvidia – GPU

Is developing and selling almost all of the markets GPU’s used either for video games or for mining. To the point of running out of GPU to sell due to the high amount of orders received from the crypto community.

Dwarf pool

It’s a pool for mining mainly Ethereum transactions as well as Monero, Litecoin, Zcash, Expanse, GroestlCoin.


It’s one of the first pools to exist in the Bitcoin Spain. It has been running since 2010 and has mined more than 1 million bitcoins.

As introduced above, there are two types of consensus i) Proof of Work (“PoW”) and ii) Proof of Stake (“PoS”). Both try to attempt consensus and prevent from double-spend in the blockchain.

PoW uses the fundamentals of Bayes’ Theorem to prove that a given block has indeed required a certain amount of work to be mined. In this sense, users can simply pick the longest valid chain with the highest amount of work as the appropriate chain. However, this remains inefficient in terms of energy and therefore expensive.

PoS is not based on mining processes but it is about validation rules. Practically, blocks still need to be provided to the chain by a user but who gets the next block depends on the specific PoS algorithm which applies a distributing voting share. Each validator owns a stake in the chain and users can deposit some money into the chain, as part of a collateral for each block.

In summary, PoW ensures a chain is valid because users participate in the mining process, while in PoS you trust the chain with the highest collateral.

Main applications

Cryptocurrencies are an emerging technology that has the potential to change and improve commerce as we know it. It has advantages for both buyers and merchants.

Payment system

There are no fees for merchants to take payments (in contrast to the cut any credit card company takes for handling your transactions with their machines or cards). It also works the same way across the globe (there are no fluctuations in fees between countries).

Below an illustration of how a cryptocurrency fits on the payment system:

Figure 6: Payment path using cryptocurrencies
Figure 6: Payment path using cryptocurrencies.

From our point of view, these are the companies that stand out the most in the cryptocurrency payment for good and services market segment:


Allows you to create a virtual wallet on your phone. This wallet can be used to accept bitcoin from other users, send bitcoins to any address (whether it be a store or a friend) and helps you turn Bitcoin into physical cash with the BitPay Card. With their credit card, a user can make purchases in any store, or take out cash at any place VISA is accepted. They also offer services for merchants to help them set up their store to accept bitcoins.


Their goal is to simplify the use of Bitcoin. They offer a platform with a secure payment system, private billing, and no sign-up fees. They allow merchants to accept any cryptocurrency of their choice by implementing a payment processing software to their existing platforms.

Another great characteristic of using a token on a blockchain is that such token becomes borderless. Within the Bitcoin blockchain, a bitcoin can be sent from anywhere to everywhere, all its needed is a phone and internet connection. This characteristic allows this cryptocurrency to become very appealing for money transfer companies.

Lots of companies are offering services to create new ways for foreigners to send money back home, transforming from head to toe the remittances industry. The creation of cryptocurrencies allows the transmission of money to be immediate, secure and cheap.

The fees of the network and the new competitors are so much more competitive and cheaper than any of the price offered by services like Western Union. The remittances sector handles around 500 Billions of Dollars meaning it’s big business.

Cryptocurrencies can become a decentralized, secure and cheap way of making sure all that money truly gets to the person and not on big unfair fees.

From our point of view, these are the companies that stand out the most in the cryptocurrency payment for good and services  market segment:


BitPesa is a pan-African platform redefining how businesses make payments to and from sub-Saharan Africa. Focused on using cutting-edge blockchain technology to increase efficiency across markets, BitPesa opens corridors for business payments and trade between Africa and the rest of the world.


Fund your wallet with bitcoin, your bank account, or use cash by visiting an Abra Teller in your area. Use the Abra app to send or receive money worldwide with no sending fees. Buy things online wherever Abra or bitcoin is accepted.

Use the app to transfer funds to your bank account, your bitcoin wallet, or find a nearby Teller to get cash. In my opinion, this is by far the best private app to take on the financial world and has great potential to succeed in the nearby future. It targets one of the most costly markets, which are remittances.

It allows users with USA bank accounts (currently expanding) to transfer funds to many countries worldwide. With its teller network, a user can just contact another user to transfer them bitcoin instantly in exchange for the amount in physical dollars (currency) they agreed on. They are trying to build a worldwide decentralized atm system, which is a quite impressive goal.

The facility for creating these digital cryptocurrencies has allowed a lot of people to find a way of getting access to funding much faster with the sale of the tokens. In the beginning, they were only a few cryptocurrencies available in the market. Now with all the hype around blockchain technology, many companies have created a token to take profit of this new era of the gold-rush.

At the moment of writing, coinmarketcap (most popular website to find the price of cryptocurrencies), is listing a total of 1283 cryptocurrencies. Taking into account that not all coins are listed on there, but, we can assume that the vast majority are.

But where is exactly this online market?

Over online cryptocurrency exchanges. Online cryptocurrency exchanges are websites where a user can buy, sell and exchange cryptocurrencies for another digital currency or for fiat money (Eur, Usd, Yuan…). Cryptocurrency Trading is the Forex of cryptocurrencies.

This means a user is able to trade different bitcoin or altcoins normally for fiat currencies. Cryptocurrency Trading is an alternative way to get involved in the Crypto-ecosystem. Cryptotrading can either be a very good or bad investment since most of the coins are very volatile.

Before entering an exchange platform and invest in any cryptocurrencies, a user should try to learn as much as possible from the crypto-coin it will put his money on. Trading without knowledge can make you lose an important amount of money.


Is the world’s largest and most advanced bitcoin trading platform. Is a full-featured spot trading platform for major cryptocurrencies such as bitcoin, ethereum, Ethereum Classic, Zcash, Monero, Litecoin and Dash.

The platform offers leveraged margin trading through our peer to peer lending market. It offers the most liquid order book in the world, allowing up to 3.3x leverage trading by giving users access to a peer to peer market.


Is one of the leading roles in the bitcoin industry. It offers a wide range of products such as a digital currency exchange, payment processing, consumer wallets, developers platform.

One of the most interesting things about this company is one of their products, named Mint Physical. They offer real physical bitcoins that you can buy on their website in the form of shiny coins or poker-style chips.


Coinbase is a secure online platform for buying, selling, transferring, and storing digital currency. Their mission is to create an open financial system for the world and to be the leading global brand for helping people convert digital currency into and out of their local currency.

Sending or receiving digital currency between online wallets, friends, or merchants on Coinbase is free. Their products range from a wallet, a currency exchange and merchant tools all within one simple interface.


Bitcoin exchange for serious and professional bitcoin trades. Focused on extreme security. Bitcoin leverage for long positions. Has never been reached by hackers.

The Largest bitcoin exchange in euro volume and liquidity and also trading Canadian dollars, US dollars, British pounds and Japanese yen. First exchange to pass a cryptographically verifiable proof of reserves audit and is a partner of the first cryptocurrency bank.


Bittrex is a US-based crypto-currency exchange designed with security and scalability in mind. Providing individuals and businesses a world-class experience to buy and sell cutting-edge cryptocurrencies and digital tokens.

The Cryptocurrencies industry has space for many actors, its own freedom to create whatever one can think of, that attracts everyone to join. There is still a lot of development and room for new players as this technology is just a newborn.

Over the coming years, we are going to see a rapid development of the blockchain space, allowing people to get in their hands the power intermediaries stole.

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