FIN80016 Report: Crypto-Currencies, Ethereum, and Blockchain Analysis

This report provides a comprehensive overview of crypto-currencies, with a specific focus on Ethereum and its underlying blockchain technology. It defines crypto-currencies as digital forms of money built on blockchain, emphasizing their use of cryptography for secure transactions. The report details the role of crypto-currencies, particularly Ethereum, in a world where fiat money is influenced by governments, and highlights the advantages in countries with weak currencies. It explains blockchain technology, its properties (immutability, transparency, and decentralized control), and its application in Ethereum. The report further explores Ethereum's features, including smart contracts, decentralized autonomous organizations (DAOs), and its potential as a platform for other currencies. It also analyzes the advantages of the Ethereum network, such as numerous applications, data security, and corruption-free applications. The report also mentions drawbacks such as loopholes in smart contracts and security threats. Finally, it provides a competitor analysis, discusses future possibilities, and concludes that crypto-currencies are becoming an important means of business.

Crypto-Currencies
Ethereum

Title and Content Layout with List
• Define Crypto currencies and there associated Roles.
• Concept of Block-Chain.
• Ethereum as a Crypto-Currency.
• Lightning Network.

Crypto-Currencies
• A Crypto-Currency is a type of tradable or a digital form of money that is
built on the block-chain technology and is traded on an online basis.
Crypto-currencies generally use cryptography to verify and secure
transactions that are done by users.
• Crypto-currency as an digital currency is also referred as an key
internet-based medium of exchange that applies the principle of
cryptographically functions for the purpose of conducting and carrying
out various financial transactions.
• Crypto-currencies can be sent directly between two parties via the use
of private and public keys.

Price Trend of Bitcoin as a Crypto-Currency
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Bitcoin Price Trend

Role of Crypto-Currency
• The advancement in technology and innovation lead to a new type of currency
which was invented in the form of Crypto-Currency. This was developed
with the start of the Bit-coin in the year 2009, which was developed by a still
unknown creator known as Satashi Nakamoto (Narayanan, Felten, Miller and
Goldfeder 2016).
• Crypto-Currencies can serve as a key stable store of value in a world where the
value of fiat money is directly dependent actions of national governments,
both in the domestic economy as well as in the international currency
markets.
• Crypto-Currencies can be particularly beneficial to those countries that are
having a weak national currency associated and is undergoing through excess
inflation stage.

Block-Chain Technology
The block chain technology which was first used in the mining of bit-coin is the same
principle which is used in the Ethereum network. The block-chain is a set of ledger
consisting of all the entries of transaction in a set of block. Key properties of the
mentioned technology are as follows:
• They cannot be tampered with easily.
• They record the transaction between the two parties without the involvement of
any intermediary.
• The block is available with every user of the block chain technology.
• Since the block chain cannot be tampered, data or entries can only be included
thus making the block chain relatively permanent.
• Since there is no central authority controlling the block chain any data update is
made by a consensus vote of the block chain users.

Ethereum as a Crypto-Currency
• The Ethereum is an application on the internet where various coders can
write application and programmes which are safe and can run easily.
• The benefit of this platform is that it is safe from the loss of theft of data by
various other users. The currency which is used in the internet application is
called Ether. Thus the users of Ethereum can use this currency to transfer
payments and receive payments in the form of Ether all around the globe.
• The Currency is an alternative option for Bit-coin and has to be mined as
similar to Bit-coin by programmers around the globe.
• The Ethereum is a platform which is decentralized and the users of the
platform can be a part of an open financial system, as well as develop various
application which are of some digital value in the practical world (Fry and
Cheah 2016).

Background of Ethereum as a Crypto-Currency
• The Ethereum network was created by Vitalik Buterin and laid the foundation
for this network in the year 2013. There were total four co-founders for the
Ethereum network which got active in the year 2015.
• The Ethereum network also uses the block-chain technology which is used by
Bit-coin miners to mine bit-coin. However the miners use the block-chain
technology to mine Ether which is a crypto-currency used in the Ethereum
Network.
• Also another coin known as the gas is generated by using the Ethereum
Network which is used to pay transaction and other fees (Makarov and
Schoar 2019).

Background of Ethereum as a Crypto-Currency
• The Ethereum network was created by Vitalik Buterin and laid the foundation
for this network in the year 2013. There were total four co-founders for the
Ethereum network which got active in the year 2015.
• The Ethereum network also uses the block-chain technology which is used by
Bit-coin miners to mine bit-coin. However the miners use the block-chain
technology to mine Ether which is a crypto-currency used in the Ethereum
Network.
• Also another coin known as the gas is generated by using the Ethereum
Network which is used to pay transaction and other fees (Makarov and
Schoar 2019).

Ethereum as a Smart Contract
• This feature makes the use of Ethereum a relatively unique and
different from Bit-coin. The smart contract is a programme which is
written by coders which include various digital assets which have
some value.
• Thus the purchase and sale of anything which has a value can be
written as a programme and this programme will be running in the
background. This programme is not reversible and hence the concept
of block chain is preserved.
• These contracts are executed when certain conditions of the contract
are met and thus they are relatively free from any interference which
might affect it. All the block chain which are present are capable of
processing such programs or codes.

Reason for Creation of Ethereum
• Since the block chain are created to serve a specific purpose and for a
new application an entirely new block chain has to be created. Thus as
the Bit-coin is used as a payment platform between peers and any new
application has to be created using a different block chain.
• To overcome this problem the founder of Ethereum created the
network known as the Ethereum Virtual Machine.
• Since the creation of a different task would require the user to expand
the function of the existing block chain which would involve a lot of
money and time, thus Ethereum involves creation of potentially
thousands of application from the same block chain.

Decentralized Autonomous Organization
• The removal of centralized control on the operations of the
network is an important feature of the Ethereum Network. Thus
organization which are decentralized and operate without the
presence of a leader is created by using a code of program on
smart contracts.
• Thus the presence of intermediary is removed and the people can
own a Decentralized Autonomous Organization by providing
donations.
• These donations are known as tokens which give the donation
givers rights to vote. Thus the organization keeps on running until
it generates its survival cost as revenue and provides services
which are useful to its consumers.