Cryptocurrency tutorial
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This document is a comprehensive tutorial on cryptocurrency, covering topics such as online security, various types of cryptocurrency wallets, and methods for buying cryptocurrency. It details the importance of backups, transaction fees, and how to track transactions on a blockchain explorer. Recommended wallets and exchanges are also provided, emphasizing the need for security and the implications of losing access to private keys.
Cryptocurrency tutorial
- 1. Cryptocurrency Tutorial How to open a wallet and buy cryptocurrency BlockchainHub ■ Valentin Kalinov ■ March 05, 2017 1
- 2. Contents ● General online security ● What is a cryptocurrency? ● Why use cryptocurrency? ● What is a blockchain wallet? ● Types of wallets ● Cryptocurrency exchanges ● Backups: How to secure you cryptocurrency? ● Making a transaction: Sending & Receiving cryptocurrency ● How to track a transaction on the block explorer 2
- 3. General Online Security Before you think of cryptocurrency security, you need to think of general online security! ● Use strong passwords or password managers (1Password) when using online exchanges, email, etc. ● ● Do not use the same password on multiple websites ● ● Always activate Two-Factor Authentication if possible 3
- 4. Online security is crucial for the use of cryptocurrencies! 4
- 5. What is a cryptocurrency? “Limited entries in a database no one can change without fulfilling specific conditions.” 5
- 6. Why use cryptocurrencies? Cause it’s fun! ● Be your own bank ● Low transaction fees ● No third-parties ● Use as a payment method: use when traveling, cross border payments, buy goods, etc. ● Accept as payment method: as a merchant with otherwise expensive cross border payments, marketing reasons 6
- 7. What is a blockchain wallet? ● A piece of software ● ● Communicates with the blockchain network ● ● Allows you to send and receive transactions 7
- 9. Wallets don’t store any coins Wallets are containers for private keys ! 9
- 11. Types of Wallets (1) ● Full node wallets (download every block and transaction) ● ● Lightweight wallets 11
- 12. Types of Wallets (2) Mostly lightweight wallets ● Mobile wallets ● ● Desktop wallets ● ● Online wallets ● ● Hardware wallets ● ● Paper wallets 12
- 13. Types of Wallets (3) Open source vs Closed source ● Open source ○ Pro: Accessible/Reviewable by everybody ○ Con: Can be used to create malicious copy of the wallet ● Closed source ○ Pro: Cannot be used for creation of malicious copies of the wallet ○ Con: cannot be reviewed by anybody ● 13
- 14. Online Wallet ● Web based ● ● Hosted on a central server ● ● Users cannot manage their private keys ● ● Backup is impossible 14
- 15. Online Wallet (Coinbase) 15 Source: coinbase.com
- 16. Mobile Wallet ● It will store user’s private keys on the device ● ● Could be compared to a real cash wallet(could get stolen or lost) ● ● Backup required 16
- 18. Desktop Wallet ● It will store user’s private keys on the device ● ● It is less exposed as a mobile wallet ● ● Backup required 18
- 19. Desktop Wallet (Exodus) 19 Source: exodus.io
- 20. Hardware Wallet ● Stores user’s private keys in a secure hardware device ● ● Private keys are kept offline, therefore are immune to malicious attacks(viruses, hacks, etc.) ● ● Backup required 20
- 21. Hardware Wallet (Ledger) 21 Source: ledgerwallet.com
- 22. Paper Wallet ● Also called “cold storage” ● Private keys printed on a paper (generated completely offline) ● ● The corresponding public address also has to be printed otherwise users cannot receive funds 22
- 23. Paper Wallet 23
- 24. Recommended Wallets ● Online: coinbase.com, blockchain.info, kraken.com, gemini.com ● Mobile: copay.io, mycelium.com, jaxx.io, airbitz.co ● Desktop: electrum.org, jaxx.io, copay.io, exodus.io ● Hardware: ledgerwallet.com, trezor.io, keepkey.com ● Paper: bitaddress.org, myetherwallet.com 24
- 25. Security vs Usability Type of wallet Setup and Usability Security Level Online wallets Mobile wallets Desktop wallets Hardware wallets Paper wallets 25
- 26. Wallet Backup 26
- 27. Why is backup compulsory? ● The button “Reset password” does not exist in the blockchain space ● Once you lose access to your private keys you lose your money ● ● There is always the possibility of hardware breakdown, natural disaster or theft 27
- 28. Different wallets have different backups techniques ● With backup phrase ● Manually copy the private keys on a backup USB, HDD, SSD, etc. ● ● Paper wallets: copy the wallet multiple times ● ● Email recovery link: a backup link gets sent to your email(not recommended) 28
- 29. Consider the following scenarios ● Flooding ● Fire ● Theft ● Hardware failure ● Hacks ● Viruses ● Keyloggers ● Nearby cameras 29
- 32. 32
- 33. QR-codes Can represent a simple address This QR-code represents a Bitcoin address: “3PKB4f2vG8xEzgjpZsJ RKa39jWMNGiKWcg” 33
- 34. QR-codes ● A bitcoin address: "1GdK9UzpHBzqzX2A9JFP3Di4we BwqgmoQA" ● The payment amount: "0.015" ● A label for the recipient address: "Bob's Cafe" ● A description for the payment: "Purchase at Bob's Cafe" Source: “Mastering Bitcoin”, Andreas M. Antonopoulos Can represent a payment request 34
- 35. Exchanges 35
- 36. Ways to buy Bitcoin Types of exchange methods ● Bitcoin ATMs ● ● Peer-to-Peer(P2P) (localbitcoins.com) ● ● Online exchanges (coinbase.com, bitpanda.com, kraken. com) 36
- 39. Online Exchanges 39Source: coinbase.com(left), bitpanda.com(right)
- 40. Payment methods ● Credit Cards ● ● Cash(P2P & ATMs) ● ● Bank Transfers ● ● PayPal 40
- 41. Payment methods tradeoffs Method Fees Buying Price Speed Anonymity Buying Amount Credit Cards Cash* Bank Transfer PayPal Low High Cash: 2 types ● ATMs - have fees ● P2P - don't have fees but you pay premium price 41
- 43. Transaction fees “Transaction fees are included with any transfer of bitcoins from one address to another ” 43
- 44. Transaction fees ● The demand determines the transaction fees ● ● Bitcoin has the highest transaction fees as of today ● ● Most wallets automatically determine the optimal transaction fee 44
- 46. Block explorers How to trace a transaction on the blockchain 46
- 47. Blockchain Explorers “Each transaction happening on a public blockchain gets saved and can be viewed online by anybody, by visiting a so-called block explorer” 47