Bitcoin, Blockchain & Co.

Bitcoin, Blockchain & Co.

EXTRA: Earning Money With Cryptocurrencies, Trading & ICOs

The Most Important Things on One Page

To be active in the emerging world of cryptocurrency, you must first to understand the systems that underpin it and that will help to shape the future. It is vital that you understand three fundamental pieces of information before you begin any activity related to cryptocurrencies. Without these three key considerations, you cannot fully understand and navigate the intricacies of the crypto world. Without these three foundational rules, you become extremely vulnerable to financial losses if you become active.

The rise of Bitcoin & Co. has created a gold rush of sorts. There are a lot of frivolous offers from opportunists out to make a quick buck from the hype. In a more sinister twist, there are also seasoned fraudsters who actively look for ways to part you from your money and your crypto-credit. These criminals range from the shady opportunist to the seasoned professional. To navigate this world, you must always be on your toes. The best way to beat the fraudsters is to stay one step ahead with some knowledge of your own.

For that reason, you should read these instructions repeatedly. Internalize them and let them sink deep into your subconscious. The following principles must be applied intuitively. Gauge everything—every single thought and decision—by these principles. With these three principles at the core of your every decision, you will be safe from fraud and you will understand how our world is going to work in the near future.

1. Ensure that you—and only you—have the “Private Keys” to your cryptocurrencies (that is, Bitcoin and Co.). Always. No one else!

2. You can only unconditionally trust a genuine public blockchain with many completely independent nodes.

3. The Computer Source Code of a trustable blockchain system is always openly accessible and can be examined and used by everyone.

Even if you don’t yet understand what “Private Keys” are or know what a genuine Public Blockchain is, never forget these principles. Analyze every offer from this perspective, no matter how attractive it seems. Do not allow yourself to be tempted into breaking these rules. Read this book carefully, understand the importance of these rules, and question every offer with this knowledge. That is the only way to protect your property. Only then is your future on a firm foundation and only then are you capable of taking informed action. With the knowledge contained in this book, you can successfully deal with cryptocurrencies and other Blockchain systems and shape the future so that you and your family are comfortable.

Chapter 1 — What you absolutely need to know

What you will learn in this book and how you should read it

I stumbled across Bitcoin late—not until 2016. Maybe you discovered it even later than me, or years before me. Regardless of when Bitcoin came to your attention, I am sure you have a few questions that no-one has been able to give you a satisfactory answer to. I am also sure—since you’ve picked up this book—that you are interested in the topic of Bitcoin and cryptocurrency. As an author and journalist, I am fascinated by the subject of crypto. However, no matter how hard I tried to grasp it, to understand it, to get a handle on how it all works, I kept finding myself in a deep dark wood. The more I learned, the more questions I had.

Even after reading dozens of reports, listening to even more podcasts, attending conferences and speaking to lots of crypto experts, I was still in those woods looking for clear answers. But my problem had changed. It wasn’t dark in the woods anymore. On the contrary; now the sun seemed to be illuminating my path, but I could no longer see the wood for the trees. Total information overload.

More conversations, more reports, more articles, more podcasts, and none of it really helped. The only reassuring thing was that I was finding more and more people who were experiencing the exact same uncertainty. There was more confusion than expertise in this new, specialist area. Again and again, I participated in conversations until both sides exhausted our logic and still were no closer to clarity. Why was that so, and how could it be solved?

I believe that anyone who has had any dealings with Bitcoin, blockchains and other cryptocurrencies will know instinctually that this new technology will change the world for the better. Many are intuitively of the opinion that we are approaching a new industrial revolution, or perhaps are already within it. But the world of cryptocurrency and blockchain is anything but intuitive. It runs counter to every framework and system that form the foundation of our modern lives. In large part, it is counterintuitive, strange, unknown, alien. I have often stood with almost literal question marks on my face, my lips forming one astounded “Pardon?” after another. I kept hearing the same stock answer from my friends: “I just don’t believe that.”

Understanding Bitcoin and blockchain runs counter to everything we know

A change in thinking was not the only thing missing in my understanding of what is happening with cryptocurrencies. I lacked the central theme, the overarching framework, or maybe—as I now think—the deeper meaning of Bitcoin and blockchain.

When I realized something was missing from my conceptual framework, I started to seek it out. I looked for a new paradigm.

Many people who get involved with crypto see it as an opportunity to gamble. They want to take a chance at the possible windfall that comes with investing early in new technologies. With Bitcoin, the rate rocketed from a few hundred to over $10,000 within one year, and investors experienced wild fluctuations, up and down, again and again.

The cryptocurrency Ethereum, whose rate shot from under $10 to nearly $1,000, experienced even wilder fluctuations. Ethereum investors gambled with so-called “Alt-Coins” and via ICOs—but more about that later in the book.

Oh yes, and all that happened within nine to twelve months. Bitcoin shot up 1.333 % in twelve months (December 2016 to December 2017- from $750 to $ 10,000), while Ethereum skyrocketed 5,300% in twelve months (Ethereum from December 2016 until December 2017 - from $8 to $420).

Nearly every crypto-portfolio made the profits of Warren Buffet—the best investor in the world for the last 40 years—look like pocket change. These profits in the thousands of percent were new for everyone, even the high-powered professionals who gamble every day with their financial instruments and move billions back and forth.

But others who come into contact with Blockchain see even more in it. They see better workflows in their company, more peace for mankind, the solution to all problems, the universal world computer.

The truth is probably—as it so often is—somewhere in between. However, this recognition does help us to further understand what it all means. What are the long-term implications of Blockchain? Are there any? Is it all just hype, a new software? Like Windows 10, 11 or 12?

Why a blockchain?

The blockchain is exactly why I looked for the framework. For the skeptics and the curious, I looked for the real purpose of a blockchain, the real reason for the existence of a decentralized system. I looked for the reason why cryptocurrencies generate such hype. Why large industrial organizations, banks, insurance companies, and even governments are strategically involved in cryptocurrencies. I looked for the reason why many of these individuals and organizations were working together, when in the real economy, they were often bitter competitors. Why this sudden co-opetition? Why are those in competition co-operating at the same time?

At some point in my investigation, it all became clear to me. I had stepped out of the dark of the wood and was now bathed in sunshine. I could clearly see the trees, the trunks, the leaves, the ferns and all the flora. I had found it: the truth!

Ok, that sounds a bit theatrical and possibly even esoteric, but it isn’t. The truth is an integral part of a certain kind of blockchain. To formulate it in a different way:

We can rely 100 percent on the information of a public blockchain

Like the Bitcoin blockchain, which is the first and strongest blockchain to date. It contains an unalterable record of all transactions made since the first Bitcoin was created. No intelligence on this Earth can ever change this. No individual person, group of people, computer group or even an artificial intelligence can alter the transactions of the Bitcoin blockchain.

That was the “Wow” moment for me. You’re probably thinking that you already knew that. You already knew that a blockchain is a record of all processes and is immune to changes. You already knew that it is a solid database. That is how blockchains are often characterized, right?

Yes, that is how they are described. But exactly what that all means is rarely correctly understood or communicated.

We know how a blockchain works. We know all the things that you can do with a blockchain. But what we don’t really know is why you should do all of that with a blockchain. The truth, which is stored unalterably by the data in a public blockchain, will change our world. Certainly, and inevitably.

That is why I decided to write this book. It is a complete handbook for the new age of truth. One which will lead the reader into the fascinating world of cryptos.

What knowing the truth means

What does it mean for us that we can rely 100 percent on the details anchored in a blockchain? That is a question that is difficult to answer, and a new question for us because trusting completely in data is counterintuitive to us. We are often happy to give away the data of our orders, our bank accounts, and our movements to Amazon, Facebook, Google, Apple and other digital entities, and for the most part, we don’t even think about what happens with our data. But sometimes we are alarmed—and rightly so. Maybe we are alarmed because a hacker has stolen 140 million records from the Equifax company or because someone has stolen our personal identity. While we might be more trusting in giving data, we are becoming more and more skeptical of the data we receive and rely on.

Fundamentally, we trust these large companies, these centralized administrators and marketers with our data. We rely on them. We have the expectation that a company of their size must know how to protect their customers’ private data. (Ha, ha, ha).

Nevertheless, that trust only goes so far, and it has to stop somewhere. With the number of security failures and leaks that have occurred in recent years, we are beginning to become distrustful of institutions. Blockchain will change all that.

If you can rely 100 percent on entries in a database, could you then purchase something from a third party without knowing who he or she is?

How do you know that this person can pay? How do you know that this person is the legal owner of the goods for sale? Up until now, you didn’t. Up until now, you could only cross your fingers or maintain a level of ignorance and indifference.

If you buy a car from a complete stranger whom you have only spoken to briefly on the telephone, you would want the papers for the vehicle, right? You would like a purchase contract and invoice, and you would want a reliable record of the payment you have made by putting it into the bank. If you were the seller, you would want evidence that the payment had been received and assurance from the bank that it is not counterfeit or fraudulent. This is particularly true when we are dealing with someone from out of state or even from abroad. You would ideally like a copy of their ID so you can find them if something goes wrong. At the end of the day, you’ve got to be a little bit wary of when completing transactions with total strangers. How can you trust them? Is everything that they are telling you true? Do you know the truth?

What if we’re talking about buying something much bigger? If you want to purchase some real estate, surely there are lawyers for that, right? True. But that’s another professional group that will be made redundant by blockchain technology. What? Pardon? Lawyers are becoming redundant?

Lots of jobs are being lost, and blockchain is making sure of that

Blockchain technology will change the world and how we interact and transact in it. We will no longer need to trust anyone because the truth is anchored for all time, unalterably, in the blockchain.

Whatever is contained in a public blockchain is true and reliable. You can buy a house without a lawyer and even without a copy of the seller’s ID. You can trust that it is the real owner from the data in the public blockchain. If the transaction is then closed, you become the new owner and that new information can be found in the public blockchain. The record of your ownership exists forever, or until you enter the sale to someone else into the public blockchain. It is safe and without risk, and it allows for seamless transactions between strangers anywhere on Earth. It all happens without need for a lawyer and with low or no fees involved.

The public blockchain will automatically enter you as the owner if all the preconditions stored as an smart contract in the public blockchain are met. The public blockchain holds the door open to you because your unique cryptographic key fits and that of the previous owner no longer does. (Please note that I quite deliberately keep writing “public blockchain” and not “blockchain.” There will be more about that later in the book.)

That is, of course, a futuristic example, and I know that it appears a little contrived. But what if I told you that we already have the technology for that? What if I told you that the first projects in which real estate is being managed via a blockchain are already up and running? They are in Costa Rica and Sweden.

I have chosen this example deliberately because it is very provocative. There are many examples which are less challenging, such as digital money, marriages via the blockchain, automatic electricity delivery from neighbor to neighbor, or automatic betting on anything at all. What about a €100 million bond from Mercedes-Benz via blockchain? This has been in place since June 2017.

Blockchain technology is here and it is not going away. It will not disappear overnight or over the weekend. It is far too late for that.

Having a basic understanding is helpful and necessary

To understand what this means for us all, it is first necessary to understand the basics of the technology and the concepts it is built on. That is what I will explain in this book.

Compare it to the time you were learning to drive. You learned the highway code, the rules of traffic, and the basics of how the car works. The driving instructor explained how some cars need diesel fuel and others need petrol. Some cars have a manual transmission and others have an automatic. You also learned how to calculate braking distances so you don’t drive too fast and can stop safely. A little theory was needed before you could get moving in practice.

You really didn’t need to know how engine management software is written or what material the drive shaft is made of to drive a car from A to B. Similarly, you do not need to know exactly how the software works to understand the crypto world. However, you do have to know the signs so that you don’t end up in a cul-de-sac or drive the wrong way up a one-way street. In the first instance, you get stuck. In the second, you could end in an accident. Both scenarios are unpleasant, potentially dangerous, and completely avoidable.

It is the same in the crypto world. You can easily get yourself stuck in a dead end or run yourself right into a fraud, which amounts to an accident. In this book, you will learn the signs and how you must act in “crypto-traffic” to ensure you get where you want to go safely.

If you master the basic rules, you will be able to trade faster and more independently with cryptocurrencies. You can use the skills you have learned for your own needs, or you can join a blockchain company or movement. In any case, you will be the one in the driver’s seat at all times. You will also learn how to earn money with Bitcoin, how you can save, and how you can perhaps make yourself independent of the pension system, which can no longer be financed anyway.

The first part of this book explains how Bitcoin works, what different types of blockchain there are, how you can trade or set up a savings plan with Bitcoin, what other cryptocurrencies exist, and how you can invest in new business models and make good profits in these currencies. The goal of the first section is to give you a thorough framework of understanding for the fundamentals of cryptocurrency.

In the second part, we dive into the dangers and potential pitfalls of the crypto world. We’ll discover how you can lose a lot of money, be taken in by fraudsters, and the incorrect ways to set yourself up that will inevitably lead to losing your Bitcoin or other cryptocurrencies. The goal of the second section is to make sure you’re aware of the dangers so you don’t fall victim to them.

The two halves of this book are essential and inextricably linked. You should study the first section diligently so that the misfortunes described in the second section do not befall you.

After you have mastered the basic procedures and techniques, you will understand and value what it means to know the truth in relevant areas of our life, because it is anchored always and forever in the public blockchain. You will recognize the potential danger of the massive changes that will occur for you, your company, or your industry as crypto shakes things up. And with your knowledge and understanding of blockchain, you will be able to act accordingly. You will understand and be able to see what is coming. You can prepare, position yourself to capitalize on these shifts and set yourself up for success.

That is why I have written this book—so that you are not caught by surprise when the new wave of automation inevitably hits. Because one thing is sure: the world is about to change in a huge way. The data which we will soon be relying on will make millions of jobs redundant. At the same time, it will enable and encourage completely new business models. Be prepared. Be on board.

…

Chapter 2 — The Truth and Nothing but the Truth:

Bitcoin, Ethereum, Cryptocurrencies and Blockchain - Why blockchain will change our world and our society, and how we ought to manage it

We all know that once toothpaste has been squeezed out of its tube, it will never go back in. Turning back time breaches so many laws of physics that it is just not possible to do. Who among us would willingly choose to go back to the old practice of recording music from the radio onto cassette tapes, when we know the current quality of digital music from CDs, iTunes or Spotify?

These advancements and inventions that characterize our modern lives will not just disappear from use. Unlike advancements of the past, they will not be lost.

Knowledge, on the other hand, can be lost. It has only been in recent years that we have we discovered—with astonishment—why the ancient Romans were able to produce vastly superior and more durable cement than the builders of today. The materials and techniques we use for our motorway bridges crumble after just 50 years of use, while the Colosseum is—more or less—still standing almost 2000 years later. This superior building knowledge was lost to us through time.

Knowledge can be manipulated. In the era of “fake news,” manipulation of information is an easy feat to accomplish. Apparently. Because actually, the word was never really any different. Manipulation of every kind—from faked news to counterfeit banknotes, falsified records to forged signatures—has defined our past and created our society.

Why can’t we just blindly trust this data and information?

An analysis shows why knowledge is lost through time, and the result is unequivocal: knowledge and information could only be managed centrally up to now. Central management, central storage, central control. Anything that is centralized can be changed, manipulated and lost through destruction.

Who knows what valuable knowledge was contained in the thousands of scrolls and books at The Great Library of Alexandria—one of the largest and most significant libraries of the ancient world—before it was destroyed by a series of fires over a number of years. The information lost could have been the foundation of many great advancements for humanity, and the loss has probably held back the development of the western world considerably. Just as the knowledge of the Inca was lost, no one knows for sure what contributions from other cultures we have missed out on. What everyone today knows, though, is hard disk drive errors and computer crashes. In some ways, that is also a loss of knowledge. When the excel table or the document you’ve been working on are gone, you have no choice but to start from scratch. Your carefully formulated thoughts are lost. The skilfully created table is lost. Annoying.

Until now, this system of central management was the best solution to maintaining, organizing and protecting our valuable knowledge. States were and are centralized structures; sometimes that took the form of a monarch ruling a kingdom or a democratic government that leads and manages the state. Ultimately, everything is ordered and managed from a central point of control, even if there is devolved local administration.

Even if you live in a democracy or a federalized state, you should be under no illusions. The most important information—for example, tax numbers, our social security number, and our vehicle registrations—are all centralized at the highest data levels and are stored in some linked database. These databases, which can be manipulated at any time, can also fail, be hacked, and are permanently under threat of viruses.

If centrality is the problem, or if centrality is identified as the predetermined breaking point, is there another solution?

Yes, there is. A solution to the problem of centrality came to the fore in 2008 with the birth of a concept called “Bitcoin.”

The Bitcoin white paper, the folding paper of the crypto industry, was published by Satoshi Nakamoto. To this day, no-one knows who is behind this pseudonym. It might be a lone wolf or it could be a group of computer software experts. Nakamoto describes how a group of computers can technologically be made to deliver the truth, and nothing but the truth.

A truth that is firmly written for all time and on which you can rely 100 percent. A truth, on the basis of which one can blindly base one’s future, and that works completely without any trusted persons or trust in itself.

And so an exciting idea was born. Today that idea is building an ever-growing following of enthusiasts. It is reaching the masses increasingly quickly and efficiently, and it is massively changing our society and its administration. That is why it is all the more important to know the basics of this technology; otherwise we are each facing a fait accompli, wondering how we can jump onto a train to the future that is already departing.