Blockchain: Is it a hype or a hoax?  3

Features of Bitcoin

• Decentralisation: Bitcoin is decentralised. No single institution con-

trols the Bitcoin network as it is maintained by a group of volunteer

coders and run by an open network of dedicated computers around

the world. With Bitcoin, the integrity of the transactions is maintained

by a distributed and open network, owned by no one.

• Limited supply: Fiat currencies (dollars, euros, pounds, etc.) have

an unlimited supply, i.e. central banks can issue as many as they

want and can attempt to manipulate a currency value relative to

others. However, for Bitcoin, the supply is tightly controlled by the

underlying algorithm. A small number of Bitcoin comes into the net-

work every hour until a maximum of 21 million has been reached.

If the demand grows and the supply remains the same, the value will

increase.

• Pseudonymity: Since there is no central validator, users do not need

to identify themselves when sending Bitcoin to another user. When

a transaction request is submitted, the protocol checks all previous

transactions to confirm that the sender has the necessary Bitcoin as

well as the authority to send them to others.

• Immutability: Bitcoin transactions cannot be reversed, unlike elec-

tronic fiat transactions. It also means that any transaction on the

Bitcoin network cannot be tampered with.

• Divisibility: The smallest unit of Bitcoin is called a Satoshi. It is one

hundred millionth of a Bitcoin. This could enable microtransactions,

unlike traditional electronic money.

Cryptocurrency overview

As of 15 November 2021 (Coinmarketcap, 2021), there are about 14,131

cryptos with a market cap of ~ $2.87 trillion. The two dominant cryptos

making up the market cap of $1.6 trillion are Bitcoin (43.3%) and Ethereum

(19.4%) (at the time of writing on 15 November 2021).

Key layers of the cryptocurrency (CC) ecosystem

• Miners or mining: Cryptocurrencies are mined by individuals using

computers to process transactions and earn a CC reward

• Wallets: Wallets store CCs and can come in many forms including

online wallets (App- or browser-based). Examples: Coinbase, Crypto.

com, Blockchain.info, etc.

• Exchanges: CCs can be bought or sold on exchanges. Most exchanges

allow trading for CCs for fiat currencies.

• Processors: They provide services and tools for merchants to accept

CCs as a form of payment. Examples are stripe, Shopify, Braintree,

Coinbase, etc. (Figure 1.1).