Crypto payments for business

paiement en crypto

In the contemporary financial landscape, the emergence of cryptocurrencies represents a revolution comparable to the advent of the Internet in the 90s. Once perceived as a niche for geeks and speculators, cryptocurrencies, such as Bitcoin, Ethereum, and other altcoins (for “Alternative Coins”) have gradually gained legitimacy and acceptance. What was once an abstract and complex concept is now at the forefront of discussions about the future of financial transactions. At the heart of this transformation is the adoption of crypto as a means of payment, a development that opens up new possibilities for businesses.

The appeal of cryptocurrencies as a means of payment lies in their very nature. Built on blockchain technology, they offer unprecedented transparency, security and efficiency. Unlike traditional currencies, cryptocurrencies are decentralized, meaning they are not controlled by any central authority. This feature provides unparalleled freedom and flexibility, enabling seamless cross-border transactions and reducing fees typically associated with currency exchanges and international transactions.

For businesses, integrating crypto payments is no longer a question of “if”, but “when”. In an increasingly globalized and digitalized world, companies that adopt these new technologies early can position themselves advantageously in an increasingly competitive market. Crypto payment allows businesses to access a global market, reaching customers who prefer the use of digital currencies for their transactions. Additionally, by adopting cryptos, businesses can brand themselves as being at the cutting edge of technology, thereby attracting a clientele that values innovation and modernity.

Understanding Crypto Payments

This section aims to demystify what crypto payments are, explore their differences from traditional payment methods, and identify the most common types of cryptocurrencies used for transactions.

What are Cryptocurrency Payments?

Crypto payments are financial transactions where digital currencies, such as Bitcoin or Ethereum, are used to purchase goods or services. Unlike fiat currencies (like USD, EUR, or JPY), cryptocurrencies are decentralized. This means that they are not governed by any central bank or government, but rather managed through a distributed network of computers using blockchain technology. This technology not only ensures the security of transactions, but also guarantees their transparency and immutability.

Differences from Traditional Payment Methods

The main difference between cryptocurrency payments and traditional methods is their decentralized structure. While traditional transactions go through banks or other financial intermediaries, crypto payments take place directly between parties, without an intermediary. This peer-to-peer approach significantly reduces transaction fees and speeds up the payment process, making international transactions more efficient.

In other words, any business can accept to be paid in crypto, even if it obviously has no obligation to accept it. All he needs to do is hold a wallet of the crypto he accepts and send his public address to his client as well as the amount of crypto he requests. He is free to keep the crypto and expose himself to the risk of crypto volatility or convert them into fiat currency via an exchange. In France there are different actors that we describe in the last section of this article.

Another major difference is how transactions are secured. Traditional payments rely on institutional security provided by banks, while crypto payments use advanced cryptography. Each transaction is recorded in a block of the blockchain, verified by a network of nodes, and once added, cannot be modified or deleted, ensuring greater transparency and security.

Types of Cryptocurrencies used for Payments

Among the myriad of cryptocurrencies available, some stand out as being more frequently used for commercial transactions. Bitcoin, being the first and most well-known cryptocurrency, is widely accepted as a means of payment. Its popularity is based on its relative stability (in the context of cryptocurrencies) and wide recognition. Businesses looking to integrate cryptocurrency payments often start by accepting Bitcoin, due to its popularity and large user base.

Ethereum, known for its ability to execute smart contracts, is another popular cryptocurrency for payments. Its technology not only enables digital currency transactions but also the implementation of automated contract terms, which opens possibilities for more complex and automated transactions.

Other cryptocurrencies like Litecoin, Ripple (XRP), and Bitcoin Cash are also used, each offering their own benefits. Litecoin, for example, offers faster transaction times than Bitcoin, while Ripple stands out for its ability to facilitate fast, low-cost international transactions.

It is also important to note the emergence of stablecoins, such as Tether (USDT) or USD Coin (USDC), which are cryptocurrencies whose value is linked to that of fiat currencies. These stablecoins offer the stability of traditional currencies while retaining the benefits of crypto payments, making them attractive to businesses and consumers who are concerned about the volatility of traditional cryptocurrencies.

The Impact of Cryptocurrency Payments on Commercial Transactions

The integration of cryptocurrency payments into business operations is having a significant impact. For businesses, this means a potential expansion of their customer base, reaching market segments that prefer or require the use of cryptocurrencies. This includes international markets where access to traditional banking systems may be limited or consumers seeking greater privacy in their transactions.

In addition, cryptocurrency payments can improve operational efficiency. Transactions are generally processed faster than traditional methods, especially in the case of cross-border transactions which can otherwise take several days. This speed can improve businesses’ cash flow and reduce the need for working capital.

Benefits of Cryptocurrency Payments for Businesses

The adoption of cryptocurrency payments offers a multitude of benefits that can significantly transform the way businesses operate and interact with their customers. This section explores the key benefits of crypto payments for businesses, including reduced transaction fees, access to a global marketplace, improved security, and impact on branding.

Reduction in Transaction Fees and Processing Times

One of the most immediate benefits of crypto payments for businesses is the significant reduction in transaction fees. Unlike traditional transactions that involve banks or other financial intermediaries and can incur high fees, cryptocurrency payments are generally associated with much lower costs. This saving is particularly notable in cross-border transactions, where exchange and processing fees can add up quickly.

In addition to reducing costs, crypto payments also speed up processing times. While traditional banking transactions can take several days, especially for international payments, cryptocurrency transactions are often processed within minutes or even seconds. This speed can significantly improve companies’ cash flow and allow them to respond more quickly to market needs.

Access to a Global Market and a Wider Customer Base

Crypto payments open doors to a global market, allowing businesses to reach customers in regions where access to traditional banking services is limited or non-existent. This accessibility significantly expands the reach of the potential market, providing businesses with the opportunity to expand into new geographic territories and attract a diverse customer base.

Plus, with a growing population of digital consumers comfortable with blockchain technology and cryptocurrencies, businesses that embrace these payment methods can connect with a tech-savvy, forward-thinking customer base. This is particularly relevant for technology-driven industries and niche markets where innovation is highly valued.

Improved Security and Reduced Fraud Risk

Security is a major concern for any business, especially in the area of financial transactions. Cryptocurrency payments offer a higher level of security thanks to blockchain technology. Every transaction is recorded in a public ledger, encrypted and distributed, making it extremely difficult to tamper with or modify the data. This transparency and immutability significantly reduces the risk of fraud, a significant advantage in a world where cyberattacks and financial fraud are commonplace.

Additionally, cryptocurrency transactions do not require parties to disclose sensitive information such as bank account numbers or credit card details. This feature minimizes the risk of identity theft and credit card fraud, providing additional peace of mind to businesses and their customers.

Innovation and Modern Branding

The adoption of cryptocurrency payments is often seen as a sign of innovation and modernity. For businesses, this can be a powerful differentiation and marketing tool. By embracing the latest technologies, businesses can reinforce their brand image as being at the forefront of innovation, thereby attracting customers who value modernity and forward-thinking.

This perception of innovation can be particularly beneficial for startups and technology companies looking to stand out in saturated markets. Additionally, it can help established businesses stay relevant and competitive in a rapidly changing business landscape.

Challenges and Considerations for Adopting Cryptocurrency Payments

Business adoption of crypto payments has many benefits, but it is not without its challenges. This section explores the key obstacles and considerations businesses need to take into account when considering integrating cryptocurrency payments into their operations.

Cryptocurrency Price Volatility and Risk Management

One of the biggest challenges associated with crypto payments is the volatility of their value. Cryptocurrency prices can fluctuate significantly in a very short period of time, posing significant risk for businesses that accept these currencies as payment. For example, if a business accepts payment in Bitcoin and the value of Bitcoin drops significantly shortly thereafter, the business could suffer a notable loss.

To manage this risk, companies have several options:

  • only accept stablecoins: this option may seem obvious, however it limits the number of customers who would be willing to pay in crypto. A significant proportion of people who can pay in crypto will in fact prefer to pay in bitcoin or ether.
  • Hence the need to find a service provider who offers the possibility of immediate conversion of the crypto received into fiat or in stablecoins.

Regulatory Considerations and Tax Compliance

Another major challenge is the ever-changing regulatory framework surrounding cryptocurrencies. Laws and regulations regarding cryptocurrencies vary widely from country to country and are often subject to rapid change. Companies must therefore stay informed of the latest regulatory developments in the jurisdictions where they operate to ensure compliance.

Tax compliance is also an important consideration. In many countries, gains made on cryptocurrency transactions are subject to tax. Businesses must therefore keep detailed records of all cryptocurrency transactions to be able to report and pay the appropriate taxes. This may require specific accounting and reporting systems to track and manage these transactions.

Technical Integration and Necessary Infrastructure

Integrating cryptocurrency payments into a company’s existing payment systems can be technically complex. This often requires specific infrastructure and technical knowledge to manage cryptocurrency transactions securely and efficiently.

Businesses should choose a cryptocurrency payment processor that suits their needs, one that can seamlessly integrate with their existing point-of-sale and accounting systems. They must also ensure that their infrastructure is secure to protect against the risks of hacking and cryptocurrency theft.

In addition, it is essential that company staff are trained to understand and manage cryptocurrency payments. This includes not only finance and accounting staff, but also sales and customer service teams, who must be able to answer questions and manage cryptocurrency transactions.

How to Integrate Cryptocurrency Payments into Your Business

Integrating cryptocurrency payments into business operations is a strategic step for businesses looking to innovate and expand their customer base. However, this integration requires careful planning and execution. This section focuses on the key steps to effectively integrating cryptocurrency payments into a business, including choosing a payment processor, integrating with existing point-of-sale systems, and employee training.

There are a certain number of players in France, with their advantages and disadvantages:

  1. Local Cryptocurrency Exchange Platforms: Platforms like Coinhouse or Paymium or even Ledger, based in France, play an important role in the cryptocurrency market by offering exchange and payment services. These platforms have the advantage of having been present on the market for a long time. On the other hand, they offer the highest fees on the market.
  2. Banks and Financial Institutions: Some French banks such as Banque Delubac or Olkypay could begin to integrate payment services in cryptocurrencies, following the global trend of adoption of cryptocurrencies in the traditional banking sector.
  3. Blockchain Technology Startups and Innovators: France has a dynamic blockchain startup scene in which key players in cryptocurrency payments such as Stokn are emerging.


Integrating cryptocurrency payments into a business requires careful planning and strategic execution. By choosing the right payment processor, ensuring smooth technical integration with existing POS systems, and properly training employees, businesses can take full advantage of the benefits offered by cryptocurrency payments. This integration not only positions the company as an innovative player in its sector, but also opens the door to new market opportunities and improved customer experience. With a thoughtful approach and effective implementation, cryptocurrency payments can become a valuable asset for any modern business.

Kraken review: all you need to know [updated 2020]

The Platform

The popularity of cryptocurrencies has been on the rise amongst traders, investors and other market participants worldwide. This has led to the launch of many different digital currencies and venues for trading such currencies, commonly referred to as cryptocurrency exchanges. The cryptocurrency exchanges provide platforms for buying and selling of digital currencies by both small-scale and large-scale traders and investors. This article is a kraken review. We will discuss Kraken, one of the leading cryptocurrency exchanges in the world.

Kraken is an old cryptocurrency exchange, known for its security and being the leading platform for bitcoin to euro trading volume. Kraken was launched in July 2011 by Jesse Powell, and it has its headquarters at San Fransisco. Currently, the exchange provides 47 market pairs with 7 base currencies including US dollar and British pound. This diversification has made it the best platform for large-scale digital currency traders to exchange crypto with other traders.

Kraken has partnered with other crypto exchange platforms to launch the first world’s cryptocurrency bank. The rise of Kraken can be attributed to the fact that it accepts fiat currencies unlike most of other cryptocurrency exchange platforms. The exchange is very popular in Canada, US, EU and Japan.

How to register on Kraken?

Before you can begin to use Kraken, you are required to create an account on the platform. The sign up process is an important step of any kraken review. Follow the steps given below:

  • Open the following URL on your web browser:

This will take you to the official website of kraken exchange.

  • Click the Create Account button on the top right of the page.
Kraken review
Kraken review
  • Enter your email address, choose your username and password. Agree to the terms of service. Click the CREATE ACCOUNT button.
  • An activation key will be sent to the email address that you have provided. Open the email and check for the activation key. Type it in the right text field, confirm your password, confirm that you are not a robot then click the Create Account button.
  • You will be taken to the home page of Kraken. Your balance, trade balances, position evaluations and other details will be shown on the home page. Congratulation, you have successfully created a Kraken account!

At the top of the home page, you will see 5 options including Overview, Trade, Prices, Funding and Support. Below that will be another navigation bar showing your trade details.

How to use the Platform?

The Kraken platform comes with an easy user interface, making it easy for anyone to navigate from one section to another. It also provides you with the necessary tools to make sure that you start your crypto trading journey and finish well. In this section of our kraken review, we will guide you on how to use the Kraken platform:

Selecting Account Type

Kraken provides you with three options to choose your account from, the Starter, the Intermediate and the Pro options. If you are a beginner, you can choose either the Starter or Intermediate options since only few details are required. You can later upgrade to the Pro version. Follow the steps given below:

  • On the home page of Kraken platform, click the Verify button below Verify Your Account for Crypto option:
  • The three account options will be shown. The necessary requirements for you to join any of the accounts are shown at the bottom.
  • Identify the account you want to use then click the Get Verified button. I will choose the Start plan:
  • Fill in the required details then click the Submit button.
  • Once you have clicked the SUBMIT button, you will have submitted your details for verification. The Kraken team will get back to you within 24 hours. The GET VERIFIED button will change to PENDING APPROVAL.

Depositing Funds

You need to make a deposit of funds into your Kraken wallet. Kraken allows you to fund your account with fiat currencies or cryptocurrencies. Follow the steps given below:

  • Click the Funding tab from the menu.
  • You will be taken to the page showing funding options as shown below:
  • Identify the currency you want to fund the account with then click the Deposit button. In my case, I choose Bitcoin:
  • Click “generate new address”. This will generate a new address which you can send funds to from another wallet or exchange. You will then have Kraken bitcoin in your account.

Placing a Trade

  • To place a trade/order, click the Trade tab from the menu.
  • A new page will be opened where you can set a limit order or trade buying at spot price. Choose the cryptocurrency pair that you need to trade in.
  • To purchase crypto, enter the amount. In my case, I have entered 0.00025 BTC. Click the Buy button.

You will have purchased crypto on Kraken.

Kraken Fees

In this part of our Kraken review, we will discuss the various types of fees charged on Kraken.

The Kraken crypto exchange platform matches orders received from users who want to buy cryptocurrencies with orders received from users who want to sell cryptocurrencies and vice versa. Kraken charges its users different types of fees. Let us discuss these:

Transaction Fees

The transaction fees is deducted from every transaction/order completed on the platform. This is what the exchange earns for connecting you to a buyer/seller. The fee ranges between 0% and 0.26% of the total value/cost of the transaction/order. The fee is determined by the following factors:

  • The currency pair under trade.
  • The user’s trading volume (in USD) for 30 days.
  • Whether the order is a taker or a maker.

If an order is cancelled before it is executed, no fee is charged. Such orders are referred to as untouched orders.

Deposit Fees

Kraken also charges deposit fees, although very less compared to the withdrawal fees. The deposit fees are not based on a percentage but they are a flat rate. The deposit fee can be positive or negative depending on the size of the given transaction. The minimum amount of fee is $5, which is unpleasant when depositing a small amount of crypto.

Exchange Fees

Kraken charges very low exchange fees. Makers are charged between 0 and 0.36% while takers are charged only 0.08%. The takers have get an appealing proposition. These low fees make Kraken the best exchange for straightforward trades.

Kraken Withdrawal Fees

To transact on Kraken, you are required to have cryptocurrency. Kraken allows you to withdraw through both cryptocurrency and bank or wire transfers. The withdrawal is done by click the Withdraw option found under the Funding tab. To withdrawal through a bank or wire transfer, you will be required to enter the destination bank or wire account. You will also have to specify the amount of funds that you need to withdraw.

Every exchange requires you to pay some fee to withdraw your money, and Kraken is not different. Note that there are minimum withdrawal amounts and processing fees that are applied on Kraken. For example, for US domestic wire transfer, a user can only withdraw a minimum of $20 at a fee of $5. The withdrawals for fiat currencies range between $20 and $50,000, 5 EU or 50 CAD. Bank wired withdrawals are charged a flat rate. This way, one can easily tell the amount of fee they are going to pay for withdrawals.

Kraken requires you to withdraw your crypto in the same way you withdraw fiat currency from a standard ATM. Kraken will take some fee from the withdrawal. The amount of withdrawal fee charged depends on the type of cryptocurrency that you are withdrawing. For Bitcoin withdrawals for example, you may be charged a fee of up to 2% the amount you are withdrawing. For other cryptocurrencies, the fee charged may be low compared to that of Bitcoin. Simply select the cryptocurrency that you need to withdraw then add the destination wallet address and amount to be withdrawn. You will also have to state the amount that is to be withdrawn.

Kraken wallet

A cryptocurrency wallet helps in securing crypto, hence this is an important section of this kraken review. Kraken provides you with a wallet that you can use to store your crypto coins. This has both advantages and disadvantages associated with it. First, you will not have the burden of providing security to your coins. Kraken will do it for you. When you store your coins in your Kraken account, the exchange will hold the private key. What does this mean? The exchange will take responsibility of protecting the private key. It means that if Kraken gets hacked, you will lose your kraken boitcoin. The private key authorizes payments from your Kraken account. If one steals it, they will be able to steal your crypto coins.

They will only give you the public address of your Kraken wallet which you can use to make deposits. They will allow you to use the balance to trade crypto on their exchange. You will not have a full control over your coins stored in their exchange.

Again, when an exchange owns the private keys, they can do anything with your coins. They can freeze your account or prevent you from withdrawing. It is advisable that you only use the exchange to do transactions, then withdraw your coins thereafter. Don’t store huge amounts of coins in your Kraken account.

It is never 100% safe for a trader to keep their coins in any exchange, including Kraken. The best way to secure your coins is by owning the private keys. This will mean that you will have a full control over your coins. You can consider using a hardware wallet, with which you will have both private and public addresses. This means that you have full control over your coins. Nobody will be able to transfer coins from your wallet except you.

Kraken app

Cryptocurrency trades can become easier when done on mobile devices. With a mobile device, you can place an order from any place at any time of the day. This section of our kraken review will help you learn how to achieve this.

Kraken has not developed an official mobile app for trading on the platform. However, if you want to trade on Kraken using your mobile device, you can use KE (Kraken Exchange) crypto manager. Note that KE crypto manager app is not an official app from Kraken. It is a lightweight app, meaning that it requires a small amount of memory for installation. It will make it easy for you to carry out a number of cryptocurrency tasks on Kraken. The app is available for free, meaning that you can download and use it without paying anything. You can use this app to do a number of tasks on your kraken account, including the following:

  • Check the trade balances on your Kraken account.
  • See the profit or loss margin that you have made in your trades.
  • Place both market and limit orders.
  • Place and view advanced orders (stop loss/ take profit).
  • Open and close margin orders.
  • Cancel any pending orders.
  • See both the profit and loss of your positions.
  • View market data.
  • See the deposit addresses.
  • Create withdrawals from your account.
  • Check your account statistics.

With the KE crypto manager, you can trade all cryptocurrencies that are supported on the kraken platform. You will be able to access all public and private data regarding your kraken account. The app comes with an android version only. This means that the app cannot be used on devices running the iOS operating system, or the devices from Apple Inc. Install the app on your mobile device now and get an easy way of managing your Kraken account.

Kraken coin

The Kraken coin is a digital asset or a cryptocurrency. The circulating supply of the coin is 0 and it has a maximum supply of 20 million coins. During mining of the Kraken coin, each block is generated within minutes. The security of the coin is ensured since a hashing algorithm is used for encryption of the keys. When keys are encrypted, it becomes hard for hackers to gain access into your wallet. Scrypt is the common algorithm used for this.

The coin has a steady price, meaning that there are no wide fluctuations in terms of the coin price. In some days, the price of the coin may not change. This makes it a good investment opportunity for cryptocurrency traders. This is because they will not be worried by making huge losses. The 24-hour trading volume for the coin is always around 34 million. This shows that the coin has a good demand in the market. The web wallet for the wallet is available, so you can use it for storage of your coins. This will make it easy for you to run fast transactions with the coin.

The coin is currently listed on Masternode stats. The data shows the coin has a market cap of 2 K.  Kraken coin has been featured in the ranking. It has also been listed as one of the cryptocurrencies for trade on second exchange. This shows that the popularity of the coin is growing. The currency will soon join the league of the leading cryptocurrencies in the world. The coin has also received a new partner, GINcoin, who provides a non-developer possibility of launching the Kraken coin masternode directly from a web interface.

Kraken chart

Kraken automatically generates charts for you that show your progress in trading on the platform. To see the charts, first login to your Kraken account. The Sign in button can be found on the top right corner, similar to the Binance login button on Binance exchange.  

Next, scroll to the footer section of the home page and click Charts below Resources:

You will be taken to a page with different types of charts. The charts are shown for different types of currency pairs. Your task is only to choose the pair whose chart you need to view by clicking the dropdown menu shown below:

In the above case, I am viewing the charts for XBT/USD, that, Bitcoin and US Dollar pair.

Spread Chart

The first chart in the page is the Spread chart.

On the vertical axis, you can see we have Bids/Asks. A Bid refers to an order that is listed on the buy side of the order book. An Ask refers to an order that is listed on the sell side of the order book.

The Bid/Ask depth shows the cumulative volume of buy and sell orders at a certain price. The bid depth at any particular price is the cumulative volume of the current buy orders on the book at that price or higher, while the ask depth at any particular price is the cumulative volume of the current sell orders on the book at that price or lower.

The bid/Ask spread shows the difference in price between highest bid and lowest ask on the order book. The bid/ask spread chart offered for Kraken markets only displays the spread between the highest limit buy order and the lowest limit sell order (that has been plotted over time). This gap will be filled by a market order if there are matching market orders of the opposing type that is sufficient to fill it. Otherwise it will be filled, at least in part, by use of the limit orders of the opposing type.

Depth Chart

This is the second chart shown on the Kraken page. It shows the demand and supply at different price levels. The bid/ask depth offered for Kraken markets only shows the bid and ask depth of the limit orders on the order book. Here is an example depth chart for XBT/USD-market:

Pros and cons of the platform

This is the last section of our kraken review and we will be discussing the pros and cons associated with the kraken platform.

The following are the pros of trading on Kraken cryptocurrency exchange:

  • The platform is easier to use. One can familiarize with the exchange within a few days of joining the platform.
  • The exchange can support a large number of transactions per user.
  • The platform is more secure. You are guaranteed of the security of your coins.
  • Kraken charges its users lower fees compared to exchanges like Coinbase.
  • Its features are suitable for both individuals and institutions. It offers limit orders and pre-defined trigger trades. The traders can access comprehensive and robust trading features.
  • US customers have access to margin lending futures trading.
  • There are no geographical restrictions for the account holders.
  • One can trade several fiat currencies on the platform.
  • The platform also supports a wide range of cryptocurrencies for trade.

The following are the cons associated with the Kraken cryptocurrency trading platform:

  • The platform does not provide a friendly user interface to its users. This means that there is a lot for the Kraken team to do to improve the users’ experience.
  • The platform does not support extensive customer support options.
  • It takes long for new accounts to be approved on the exchange. In some cases, the users may have to wait for up to a week. This can be attributed to a poor customer base.
  • Currently, Kraken a small user base. This means that traders may sometimes find it hard to find traders with matching orders.
  • The platform charges its users a bit higher fees. There are different types of fees charged by the exchange, most of which are free on other exchanges.
  • The platform does not support debit and credit cards and e-payments.

More on this topic

Binance review: all you need to know

Bitcoin Value in Dollar – how to analyze and predict it?

Ledger Nano S review – The Safe of the futur [2020]

Ledger Nano S avis
Ledger Nano S avis

It’s not a week without us hearing about a bitcoin exchange or users who have been hacked. So is it possible to keep bitcoins and cryptocurrencies safe? Well yes and it’s not that complicated thanks to the Ledger Nano S.

If you want to become a crypto-investor, it is essential to know how to keep your cryptocurrency.

But before anything else remember that what you need to keep are your private keys. If we compare the use of cryptocurrencies like bitcoin to a credit card, the public key is your credit card number and your private key, your secret code.

The purpose of a crypto wallet is to keep these private keys so that you can spend your cryptos. The whole question is how to keep them safe.

Leaving your cryptos on an exchange or in an online wallet (“hot wallet”) is to entrust the code of your credit card to a provider that you do not know. Maybe you start to understand the risks that you take by leaving your cryptos on the internet.

Ledger Nano X - The secure hardware wallet

Ledger Nano S in few words

This is where the Ledger Nano S comes in. This is one of the first crypto portfolios to keep private keys out of the internet. The idea is of course to limit the risks as much as possible.

From this point of view, the Ledger Nano S is surely one of the safest ways to keep your cryptos at the moment.

It must be seen as a safe rather than a wallet. Indeed, the goal of a portfolio like the Ledger Nano S is not to be practical, but to keep your cryptos safe. So, if you want to pay for your coffee in bitcoin, it is better that you download a wallet on your mobile that will be less safe but much easier to use on a daily basis.

The best is to have both and keep most of your crypto in the ledger wallet, much like a checking account and a savings account.

What are the Cryptos covered?

The list is now extremely long and almost all cryptos are covered:

I still remember the first Ledger Wallet that only covered bitcoin. Now it is possible to keep almost all cryptos. As we will see the memory of the Ledger Nano S is however not illimited, which is sometimes a little frustrating.

The Ledger Nano S is also used to store ERC20 tokens, i.e. tokens that are compatible with the Ethereum protocol. A lot of ICO (“Initial Coin Offering”) use this standard today, so it is very popular to be able to keep the chips purchased at an ICO directly in your Ledger Nano S.

What does your box contain?

Ledger Nano S Box
Ledger Nano S Box

You will receive a sealed box. The idea is of course to protect the content and ensure its authenticity. This type of protection, however, has many limitations since the seals could have been peeled off and glued. For maximum security, we advise you to buy Ledger Nano only from the official Ledger store. You can access it by following ce lien.

Résultat de recherche d'images pour "ledger nano s pictures"

You will find a small folder with instructions “Getting Started” and a form in which you will be able to note what we call the “seeds of recovery”. These are 24 words that will allow you to access your cryptocurrency if you lose your Ledger Nano. It is therefore essential to keep them in a safe and inaccessible place.

Straps and rings also carry your Ledger Nano around your neck or keychain. The USB cable will allow you to connect your Ledger Nano S to a computer. For connection with an Android smartphone, an OTG adapter is required that you can purchase from the ledger store.

Configuring your Ledger Nano S

It goes without saying that you should never buy an already configured e-wallet. Generally, we do not recommend buying a second hand Nano Ledger S.

Step 1 – Connect to Ledger Live :

The first step is on your computer. You must first connect toLedger Live. If you have not downloaded it, start by doing it. Make sure you have downloaded the latest version of Ledger Live.

Ledger Nano S - Ledger Live
Ledger Nano S – Ledger Live

Once you have downloaded it, you will have to choose between several options:

  • Initialize a new device
  • Restore a Ledger device
  • Use a device that has already been configured
  • You do not have a Ledger yet

Step 2 – Choosing the type of configuration

For the next steps, we will now switch to the Ledger Nano S. Once connected to your computer, the software opens automatically and you can start via the “Start” button. Just read the instructions on the screen of your device and press the two buttons on the top to start:

Ledger Nano S - Get Started
Ledger Nano S – Get Started

We will assume that you have purchased a new device. So you just have to choose the first option “Configure as new device” by clicking on the right button.

Step 3 – Choosing a PIN

You are now asked to choose a PIN that will allow you to secure access to your Ledger Nano S. Note that versions after version 1.3 require a PIN code between 4 and 8 digits. Press the right or left buttons to select the numbers and both buttons at the same time to confirm. Once you have chosen all your numbers, section the icon (✓) and press both buttons at the same time to validate your PIN.

Ledger Nano - Le choix du type de configuration
Ledger Nano – Le choix du type de configuration

Step 4 – Transcription of passwords

The 24 passwords will now appear and you will be able to note them one after another on the notebook provided in the box. It is essential to note these words without fail and in the order in which they are transmitted to you, otherwise they will be unusable to find your crypto-assets in case of needs.

Ledger Nano - Le choix de votre pin code
Ledger Nano – Le choix de votre pin code

Once you have written down all your words, the Ledger Nano S will ask you to confirm one. You just have to choose it by navigating with the right or left buttons and validate it by pressing the two buttons.

Ledger Nano - Transcription des mots de passe
Ledger Nano – Transcription des mots de passe

Once again, it is essential that you are the only one to know these 24 words, since they can give access to your crypto-currencies without your Ledger Nano S.

Once these steps are over, you should see on your computer screen: “Your Device is Now Ready”. Which means, as you probably know, that your wallet is ready for use. It will now be necessary to install the corresponding applications cryptos that you want to add.

Ledger Nano - Ledger is Live
Ledger Nano – Ledger is Live

Installing applications

You will now be able to install cryptographic applications that you want to use. For that you will click on the “Manager” tab of your Ledger Live.

Ledger Nano - Ledger manager
Ledger Nano – Ledger manager

You will arrive on a page containing all the cryptos supported by your Ledger Nano S. As you can see they are numerous. Simply click on “Install” in front of the crypto that interests you and your Ledger Nano S will be ready to welcome this crypto.

Ledger Nano - ledger Manager 2
Ledger Nano – ledger Manager 2

We have to admit that Ledger Live makes it much easier to use your device. It’s a long way from downloading all apps on your computer from Google Chrome and navigating from one to the other.

Add an account

Once you have installed the application, you can add an account by clicking on the “plus” next to “Account”.

Ledger Nano - ledger Manager 3
Ledger Nano – ledger Manager 3

If you choose a bitcoin account for example, you must choose the bitcoins and name your account.

Ledger Nano - ledger Manager 4
Ledger Nano – ledger Manager 4

You must then connect to your Ledger Nano S by dialing your code and then select the Bitcoin icon by clicking both buttons simultaneously.

Ledger Nano - ledger Manager 5
Ledger Nano – ledger Manager 5

Limits of the Legder Nano S

For a long time, only about five applications could be installed simultaneously on the Ledger Nano S due to the small amount of disk space. This space depends on the installed applications and their order.

Since March 2018 with the latest version, it is possible to install many other applications. Many cryptos rely on the Bitcoin protocol, so Ledger has taken over this common code base in the Bitcoin application, which has significantly reduced the size of other applications.

Following this principle, it is possible to install up to 18 applications and therefore 18 different cryptos. However, if the applications are installed with a completely different code base (Bitcoin, Ethereum, Ripple, for example), you will not be able to add more than 4 or 5 applications.

In summary, depending on the type of applications installed, a very different result can be obtained. You will normally be able to install up to 10 applications. Note that you can still manage your applications by not installing them all at the same time.

For example, if you do not use your Ledger Nano S often to keep your Ether, the application can be temporarily uninstalled. Alternatively, you can buy a second Ledger Nano, or switch to Ledger Nano Blue which contains twice as many memories. If you start with cryptos, the Ledger Nano S will be more than enough.

Ledger Nano X - The secure hardware wallet

To go further

Binance review: all you need to know [2019]

Buy bitcoin without verification: it’s still possible !!

5 Industries Ready To Start Using Blockchain


By now most recognize the term “blockchain” and associate it with bitcoin, or with cryptocurrency transfers in general. But with so many other uses for the technology having emerged in the last couple of years, it’s worthwhile to step back on occasion and look at how it is impacting (or may impact) society more broadly. The following are just a few industries and practices that are ready to start making effective use of blockchain – and in some cases may have already started doing so.

1. Real Estate

This may be one of the more fascinating areas to discuss, because it’s one that very few people saw coming, but which has already begun to make use of blockchain. Proponents of integrating blockchain into real estate argue that it will grant people looking to invest in property the ability to liquefy and sell just like one would through a stock exchange. This could in theory allow people to sell fractions of property, rather than having to find a single buyer in order to move on with a transaction. Meanwhile, the blockchain can also be used to help people create what are called “smart contracts,” which can be of use in more conventional buy-and-sell situations. A smart contract in this context essentially guarantees through a blockchain application that funds will be transferred exactly as has been agreed upon, and in exchange for the deed to a property. 

2. Voting

Election security has become a major issue in recent elections around the world, prompting discussions about how to circumvent potential problems. Some have suggested doing away with electronics altogether and reverting to paper voting ballots. But this seems unlikely, and if we look forward instead of backward, the blockchain may offer the best solutions. Keep in mind, if you’re not particularly familiar with this technology, that blockchain can transfer data as readily as wealth. And given that it’s designed to be incorruptible and wholly transparent, it may just prove to represent the tamper-proof, secure election system we’ve been waiting for. 

3. Online Gaming

The world of online gaming is one that has always stayed current with regard to digital innovations. Some related sites have in fact already experimented with cryptocurrency, which opens the door to further blockchain integration. Where conventional gaming is concerned this may result in faster downloads and more efficient microtransactions. There’s also casino gaming to consider though, which is where the greatest blockchain potential may be. For one thing, a universal wealth transfer system like this may make people more comfortable and secure dealing with international platforms, which is significant given that online casinos in New Zealand and other far-flung locations are some of the biggest worldwide providers. The instantaneous withdrawal and deposits that blockchain could offer in this space would be valued by many as well. 

4. Crowdfunding

The internet has made it incredibly easy to send and receive money digitally, not only with friends but with strangers as well. This is exhibited in particular by the rise in crowdfunding platforms, which has been ongoing for several years now. As good as these platforms have gotten though, blockchain looks particularly promising in this space because of its ability to reduce fees associated with the actual collection of money raised. Blockchains are decentralized by nature, and thus not connected to any one processing or crowdfunding company that would be looking to collect fees to generate a profit.

5. Health Care

It may take a while to see sweeping adoption in health care, but ultimately this is an industry that may make significant everyday use of blockchain functions. To be sure, the technology could be used to streamline various processes relating to insurance and payments. However, the more constant use might ultimately be in handling patient data and records. This is by nature sensitive and confidential information, and yet it also needs to be transferred, fairly frequently, from one doctor or facility to another. Storing patient information in the blockchain would in theory make this process instantaneous while protecting the integrity of the data, ultimately allowing for more efficiency in numerous hospital functions. 

Binance review: all you need to know [2020]

binance review
binance review

The Platform

Are you interested in buying or selling any cryptocurrency? There are a few cypto exchange platforms that you can consider. You could now be facing the problem of many choices. Binance is one of the many crypto exchange platforms that we have today. It is the most popular crypto exchange platform in the world today. It is the leading crypto exchange platform in terms of trading volume. In this Binance review, you will know why you should choose Binance as the platform for exchanging cryptocurrency.  

Binance was founded by Changpeng Zhao in 2017 and rose to prominence due to its ability to support a wide variety of cryptocurrencies. It is one of the most reliable and fastest crypto trading platforms that we have today. Binance became worth more than $1 million in less than a year, which made it one of the first few companies in the cryptocurrency industry to achieve the “unicorn” status. The platform offers very competitive rates. In this article, I will give you a deep and thorough Binance review to make it easy for you to trade cryptocurrency on the platform.

Inscription on Binance?

This is the first step before you can begin to use the platform, hence we had to discuss it in this Binance review. Follow the steps given below to join Binance for free:

Opening the home page of the Binance website. Here is the URL:

Click the Register button located on the top right of the home page.

  • You will be taken to the registration page in which you will be required to enter your personal details including your email address and password.
Binance exchange
Binance exchange

Enter the details and click the checkbox to agree with the terms of use. Click the Create account button.

  • Verify your email address by clicking the Go to email and verify button.
  • Open the email that has been sent to you by Binance and click the Confirm registration button.
  • A new tab will be opened. You will be notified that verification was successful Click the Log In button.
  • You will be taken to the Binance login page.Enter your email address and password and log into your account by clicking the Login button.
  • You can answer the quiz or skip to answer them later. You will be taken to the dashboard of Binance exchange platform.

Now that you have created your account, you can begin to use it to trade cryptocurrency.

How to use the platform?

In this section of the Binance review, I will guide you on how to use Binance. You will know how to open an account and exchange crypto.

Funding your Account

Your Binance account should be funded before you can begin to perform transactions. There are various through which you can fund your Binance account, but in this Binance review, we will use a credit card. Follow the steps given below:

  1. On the home page of your Binance account, point the Wallet dropdown from the menu bar using your mouse cursor. Choose Deposit.
  • On the new page, click Buy BTC & ETH with credit card now.
  • You will be able to purchase binance bitcoin or eth using your Visa or Mastercard credit card. Specify the type of cryptocurrency you need to but, the amount and select whether you will pay with US dollar or euro.
  • You will be required to confirm your billing information, email address and your identity.

How to Trade?

Binance provides you with two options for trade setting, Basic and Advanced. If you are a beginner, you should start with Basic.

The Basic option will provide you with a simple layout that is easy to understand. You will only see the information that is important for trade. It won’t take you long to grasp how to use Binance with this setting.

The Advanced setting is for expert traders. They can access market data, trade charts and venture into complex trades. Here is how to place a trade in the Basic setting:

  1. First, open the Binance login page and log into your Binance account.
  2. Click the Exchange taskbar then choose Basic.
Binance login
  • Select a trading pair. On Binance, you will get hundreds of trading pairs. The kind of crypto you fund will determine your trade. The change can be done on the right side of the window as shown below:
Binance chart
Binance chart
  • Select the type of trade you need to place. Binance provides you with three types of trades:
  • Limit orders: this will allow you to set the maximum price you are willing to pay for coins or the minimum price you are willing to sell the coins for. The trader will have to wait for a buyer or seller to accept their price.
  • Market orders: this will allow you to trade coins at the current prices in the market. It is a simple and fast trade.
  • Stop-limit orders: this will allow you to sell or buy a coin after it has reached a specified price.
  • Select the amount that you need to trade. Click the Market tab then enter the amount that is to be bought.
Binance order
Binance order
  • Lastly, you can click the Buy … button. You will have become a Binance crypto trader!

What are the fees?

If you need to maximize your returns when using binance, pay attention to the following fees:

Deposit Fees

Binance will not charge you any fees to deposit any cryptoasset. If you have fiat currency, you should first swap it for crypto on a cryptocurrency exchangeplatform like Coinbase. After getting your crypto, you can deposit it on your Binance account for free.

Trading Fees

Once you have deposited some crypto into your Binance account, you are ready to trade. However, the trading fees determines the amount of returns that you will get from your transactions, hence we have to discuss it in this binance review.

Binance will take a percentage of every trade that you make, similarly to other centralized platforms. The percentage charged is determined by two factors:

  1. Whether you have BNB tokens and how much you hold.
  2. Your trading volume for 30 days.

Binance charges a fee of 0.1% for makers and takers. When you pay fees with BNB, you get a 25% discount. If your account holds BNB, Binance will use it by default. However, Binance allows you to turn this setting off.

Increasing your trading volume will lead to a reduction in Binance fee. This is because a bigger trade volume translates to a bigger discount. Binance offers 8 levels of discount, with each level requiring you to have a certain number of BNB in your Binance account.

You only get a reduction in your taker fee when you reach the third level (VIP 3). This level requires you to have not less than 4500 bitcoin in your account.

Withdrawal Fee

It is recommended that you take off your crypto from Binance as soon as you can. When making a withdrawal from Binance, a flat fee is charged on the asset you are withdrawing. A different amount of fee is charged for different assets. For example, to withdraw any amount of ether, you will be charged ETH 0.01. For majority of the assets, the withdrawal fee is one-half the minimum amount that can be withdrawn.

Binance wallet

A Binance wallet provides you with a secure place to score your crypto.
A wallet can be a hardware, software or a paper wallet. Software wallets are popular because of the convenience associated with their use. Each crypto wallet is identified by two keys, the private key and public key. The public key is the address of the wallet. Other crypto traders will use it to send you money. This means that the public key can be disclosed to the public. The private key grants authorized access to the wallet. This means that it should be kept private.

You can access your wallet from top menu on the home page of your Binance account.

Binance account
Binance account

When you point at the dropdown menu, you will see various options including Balance, Deposit, Withdraw etc. You can choose any of these options based on the action you want to perform.

You can create a wallet on Binance DEX and it will allow you to store private keys on your own. To create the wallet, visit the following URL:

Click the Create Wallet as shown below:

Binance Dex
Binance Dex

You will be guided through a sequence of simple steps to create the wallet.

Binance app

The goal of Binance is to make it easy for crypto traders to trade cryptocurrency on their exchange. That is why they have developed a mobile app, for both android and iOS devices. You can use the Binance app to buy cryptocurrency such as Bitcoin. The app comes with the live chat feature.

The Binance app provides you with the fastest and simplest way to buy and sell crytocurrency using your mobile device. The crypto trading app has Binance crypto margin trading. The trading app will connect you to a matching engine capable of supporting 1.4 million transactions per second. This will ensure that trade runs smoothly on various cryptocurrency markets.  

 With the Binance app, you can trade a wide range of cryptocurrency including Bitcoin Cash (BCHABC), Bitcoin (BTC), Ethereum Classic(ETC), Ethereum (ETH), Ripples (XRP), Basic Attention Token (BAT)*, Litecoin(LTC), Zcash (ZEC)* TrueUSD, USDT, 0x,(ZRX)* and USD Coin (USDC). It also supports many other altcoins, meaning that you can trade them from your mobile device.

The Binance app has made it easy for you to keep track of your digital assets. It allows you to view live trades and check your account. You get an easy access to live prices and tools such as charts at any time of the day.

Their customer support team is dedicated towards helping you solve any issues that may arise when using the app. You can contact them using the live support feature or by sending them an email.

Binance coin

Binance coin, abbreviated as BNB is the coin used on the Binance platform for payment of fees.
This makes it an important topic of discussion in our Binance review. Many businesses are now accepting Binance coin as a form of payment. When you pay Binance fee using the Binance coin, you get a discount.

Binance coin was introduced during the period between June 26th and July 3rd, 2017 through ICO (Initial Coin Offering). 11 days after the launch of Binance coin, the Binance Exchange was opened for trading.

The Binance coin was used on the Ethereum network with a supply of up to 200 million coins. The ICO received a total of 100 million coins, but this amount has reduced as a result of periodic coin burns.

There are various use cases of the Binance coin. For instance, you can use it to buy virtual gifts, pay travel expenses etc. But how can Binance coin help you when trading crypto on Binance?

When trading on Binance, one incurs a fee of 0.01%. To pay for this fees, you can use either the assets that you are trading or Binance coin. Paying with Binance coin has an advantage in that you will receive a discount on the trading fees.

What does this mean to those who trade regularly on Binance? It will be good to get more Binance coins and use them for fee payment.

Btc_usdt Binance

Tether (USDT) is a cryptocurrency whose cryptocoins that are in circulation have to be backed by a traditional fiat currency. The amount of the cryptocoins in circulation and the amount of fiat currency backing it must match. Examples of fiat currencies include the Japanese yen, US Dollar, euro etc. Tether tokens, which are the native tokens for Tether network, are traded under the USDT symbol.

Tether is in a new breed of cryptocurrencies given the name stablecoins with a goal of stabilizing cryptocurrency prices. Cryptocurrencies such as Bitcoin and Ethereum have shown wide swings in prices. Since this is not the case with Tether, it is suitable for use as both a medium of exchange and mode for value storage. Other cryptocurrencies can only be used for speculative investments.

Tether was developed to create a bridge between cryptocurrencies and fiat currencies and offer transparency, stability and reduced transaction charges. Its value has remained at 1:1 in relation to the US Dollar. However, no guarantee has been provided for us to exchange tether for real money such as US Dollars.

On Binance, you will get the biggest Bitcoin exchange by volume. They will allow you to exchange your BTC to USDT at favorable prices. Binance provides the biggest Bitcoin exchange in the world. They provide you with price tables showing the price relationship between Btc and USDT. You will also get price charts showing the price fluctuations over a specified period of time.

Binance pro

The Binance pro is the right tool for you to automate your Binance tasks. It will make it easy for you to trade when tired, busy or when you are asleep. It is the best tool to relieve you of sleepless nights. The tool can be accessed on the following URL:

With the Binance pro trading tool, you will get a safe trading. It will allow you to place Stop loss and Take profit orders at once. Your task will be to place your order and their bot will take care of the rest. It is capable of taking care of Stop loss, Take order and Trailing Stoploss. The Binance pro trading tool comes with simple user interface, making it easy for you to carry out your tasks.

The tool comes with a profit trailer, hence, you will be able to make as much profit as you can. The good news is that you don’t need any special skills so as to configure it. This is not the case with other trading bots and automate strategies.

Isn’t it amazing for you to trail your profit without having to log into the exchange? This is now possible with the Binance pro trading tool. You will be able to see the amount of profit that you have made overtime. You will then determine the necessary actions to take to improve the profits.

Referral bonus can help you boost your online profits. The Binance pro trading tool will give you some bonus for any new member that you refer. The tool can also be used on any device that has a web browser. You don’t need to have a virtual private server (VPS). Just sign up by opening the above URL and begin to use the tool. They will require you to enter your Telegram username so that you may receive instant notifications for any orders. The tool offers a 7-day trial period. After that, you will have to make a monthly payment of 0.01 BTC.

Binance chart

A good Binance review must include a discussion on the Binance chart. Binance provides basic charts with a larger amounts of crypto coins for trade compared to other platforms.

To see the Binance chart, log into your Binance account and hover over the Exchange tab. You will see two options, Basic and Advanced.

Binance chart
Binance chart

A basic trading is as shown below:

Binance chart
Binance chart

An advanced trading chart is a shown below:

Binance chart
Binance chart

The advanced chart is a bit harder to read compared to the basic chart. Here are the major parts of the chart:

Binance chart
Binance chart

Let us discuss the items that have been numbered:

  1. This is known as the trading pair tab. We are currently looking at a BTC/USDT chart. The chart is for trading Bitcoin against Tether. You can choose another pair by clicking the dropdown and all pairs will be shown.
  2. This is the time scale or the time signature and it is very good for trade. If you change this, the time represented in the candlestick will change. The small m is for minute. The H is for hour, and it is marked as 1H which means 1 Hour. 1D is for 1 day, 1W is for 1 week while 1M is for 1 month.
  3. This is the order book. It shows the list of all current Buy & Sell orders that await to be filled. The orders have been placed by people but are yet to be completed.
  4. These are orders that have been executed and filled recently. This section makes it easy for you to benchmark your trade. You can see your most recent orders then plan for your buying and selling.
  5. These are volume bars. They correspond to the time signature that you have selected. They show the amount of the crypto that has been traded over that period of time. The volume gives you an indication of the chances of you finding a buyer or seller for the crypto.

Pros and cons of the platform

The Binance platform is has made the exchange of cryptocurrency easy by providing the latest technology. This has made it the leading platform for crypto exchange in the world.

Here are the pros of the Binance exchange platform:

  • It supports a wide array of cryptocurrency pairs to trade.
  • It charges a lower fee compared to other exchanges. The platform takes only 0.01% of every transaction that you, which is a reasonable amount. The payment of the fees has been made easy since you can use BNB for this. In such a case, the fee will not be deducted from your trading balance.
  • Has a simple interface friendly to beginners.
  • Transaction can be completed faster due to the high speed of the platform. The platform can support up to 1.4 million transactions per second.
  • Supports a wide variety of devices including Android, web browsers, HTML5 and others.
  • Has a very stable mobile app.
  • One can create an anonymous account and get a generous limit.
  • Users get discount for payment of fee using the Binance coin (BNB). This is because BNB is the native coin for the platform.

Here are the cons of the Binance exchange platform:

  • The platform does not support fiat currency. This means that you cannot fund your Binance account using fiat currency.
  • It has a relatively low liquidity that resulted from regulations by the Chinese government.
  • You only have access to limit and market orders.
  • The buyback policy may reduce the prices. The BNB developers are planning to buy back a particular amount of the coins. This will cause a reduction in value, and the prices may diminish.
  • BNB is limited to Binance exchange. This means that it will be affected greatly by the performance and reputation of the exchange.

Buy bitcoin without verification: it’s still possible !!

Acheter bitcoin sans inscription
Acheter bitcoin sans inscription

Bitcoin is a revolution because it makes it possible to exchange value between users anonymously. This is why it has been called “Internet Cash”. Yet, is it still easy to see today possible to buy bitcoins without verification or identity checks and so anonymously?

With the success of cryptocurrencies, regulators around the world quickly set about controlling the purchase and sale of tokens. They have indeed asked different players in the blockchain universe, exchange exchanges and brokers in particular, that they comply with the same requirements as banks. That is verifying the identity and origin of investors’ funds. These are the famous “KYC” for “Know your Customer” or “Know your customer”.

Therefore, it is now increasingly difficult to buy bitcoins and other crypto-currencies without providing a copy of your passport and often other documents.

There are still methods to buy bitcoins without checks.


LocalBitcoin avis
LocalBitcoin avis

As we already mentioned in our full article (“Localbitcoins Avis“), this platform connects buyers and sellers of bitcoins. You can also check out our video that will show you how to use Localbitcoins step by step:

The transfer of bitcoins and currencies, however, do not pass through LocalBitcoins. For this reason, they are not legally obliged to verify the identity of its users.

The platform only offers a secured environment for bitcoin buyers. But transactions are made directly between them.

Benefits of peer-to-peer platforms

– very low fees:

The services offered by these platforms are limited and for this reason they offer very interesting fees. For example, if you buy bitcoins on Localbitcoins, you will not pay any fees. Only the seller will incur a 1% fee.

– large number of possible payment methods:

As you trade directly with the bitcoin seller, you are free to choose the payment method that best suits both parties. These platforms therefore offer a wide choice of payment methods. It is important to note that the choice of the means of payment can vary the fees significantly.

– anonymous:

Again, because the transactions are peer-to-peer, the platform is not required to verify your identity. You will be able to buy bitcoins anonymously if your seller or buyer does not ask you to reveal your identity.

Disadvantage of peer-to-peer platforms

– more risks:

The fact that payments are made only between users is a risk. Fortunately, these platforms typically offer pledge services to ensure that bitcoins are kept until the end of the transaction.

– limited number of crypto currencies available:

as for the broker, it is generally possible to buy only bitcoins on these platforms. But no other crypto currencies.

How to use Localbitcoins anonymously?

Choose an anonymous payment method:

To use Localbitcoins, simply register on the platform. You can add the name and email address you want. And that’s it, you can use Localbitcoins.

signup localbitcoin
signup localbitcoin

You will then have to choose a country, a national currency and a payment method.

Localbitcoin achat
Localbitcoin achat

To purchase bitcoins anonymously, you will need to choose payment methods that do not require your original identification, such as a bank transfer or credit card payment. You can choose a payment in hope or through prepaid card like NeoSurf.

Localbitcoin achat
Localbitcoin achat

Once you have chosen these different options you will get a list of proposals for sale or purchase.

You can choose the one that suits you best.

Choose a seller / buyer who agrees to buy or sell anonymously

The price will not necessarily be the most important criterion. Indeed, the reliability of the seller or the buyer, as well as the proposed conditions will also be decisive.

As we have already mentioned, the role of LocalBitcoins is to ensure the security of the transaction. You therefore have information on the seller and the buyer and in particular a note on their reliability, the number of transactions made …

Localbitcoin vendeur
Localbitcoin vendeur

The conditions of sale or purchase differ from one offer to another. They describe the steps necessary to complete the transaction. Note that some sellers / buyers will require that your identity has been confirmed by the LocalBitcoins site, but not all.

You will need to follow these steps to complete the transaction. Also note that once the bid is accepted by the seller or buyer, bitcoins are pledged by Localbitcoins and will only be released once both parties have confirmed that they have completed their obligations.

In case of disagreement, a third party will be appointed to study the evidence and decide. Therefore, it is essential to only use Localbitcoins messaging to communicate with the seller or buyer.


bitcoin cash machine
bitcoin cash machine

The concept of bitcoin distributors is the same as that of cash dispensers. You can buy bitcoins at a kiosk with a credit card or in cash.

Advantage of bitcoin vending machines

  • Simplicity: Although the operation of these terminals varies from one manufacturer to another, they are studied to be particularly simple. It is usually sufficient to follow the instructions.
  • Anonymity: No verification of your identity is required to use bitcoin distributors and you can use cash.

Disadvantages of bitcoin vending machines

  • Limited number of crypto available: in general you will have access only to bitcoins and in some cases to Ether and Litecoin. But the choice stops there. If you want to buy other crypto-currencies, you’ll have to transfer your bitcoins to a crypto / crypto exchange.
  • Fees: The fees are higher than if you buy your cryptocurrency on an exchange. The service rendered by the distributor at a price (purchase and maintenance of the machine, rental of the location …) and you will have to pay for this service. These fees range between 6 and 10%, which corresponds to the fees charged by brokers like Coinhouse or Coinbase.
  • Maximum amount: You can buy or sell a limited number of bitcoins at the terminals (500 euros on average). Obviously nothing prevents you from having several different portfolios and repeat the operation for each of them.

Acheter des bitcoins sur un distributeur automatique

acheter bitcoins avec cb
acheter bitcoins avec cb

To buy bitcoins, you will need to have created a bitcoin wallet beforehand.

As you may already know, a bitcoin wallet consists of a public key and a private key. If we compare the payment in bitcoin with the credit card payment, the public key corresponds to your card number and the private key to your secret code. It is therefore essential to never divulge your private key otherwise it is like giving your crypto.

So you can disclose your public key without any problem in any form you want. By email, by QRcode where even in you tattooing on the arm.

This is your public key that will be asked when you use the distributor. It is strongly recommended that you use the QR code provided when creating your portfolio. The QR code is nothing else than your public key represented in another form. You can scan it directly on the distributor and avoid making a mistake by copying your public key.

Bitcoin QR code
Bitcoin QR code

To obtain this public key, you must have created a wallet that can accommodate your bitcoins. Note that the wallet you choose must accommodate bitcoins. If you buy Ether or Litecoin, you should also choose crypto-compatible portfolios.

Ideally you should choose a portfolio “Off the Internet” type Ledger Nano S which are the most secure. But they are not the easiest to handle. You can create an online wallet in 5 minutes by going to

If you want to buy Ethers, you can choose a wallet like Myetherwallet which is free, fast, anonymous and secure. To learn more about creating a Myetherwallet portfolio, you can read our article Myetherwallet avis.

Once your portfolio is established, you can proceed to the purchase or sale of bitcoin, ether or litecoin.

Where to find bitcoin distributors?

You can visit «buybitcoinworldwide» which offers a map of all the bitcoin distributors in the world.


A broker is an intermediary who buys wholesale bitcoins in order to resell them at retail. These are just simple resellers, as we currently know sellers of precious metals (gold, silver …).

There are a large number of brokers available today. The advantage of using a broker is usually the ease of use. On the other hand, brokers sometimes offer personalized advice for people who have difficulties with technology. This is particularly the case of the bitcoin house which offers appointments in their Parisian shop.

coinhouse logo
coinhouse logo

Obviously these services have a price and brokers normally take a large commission that can oscillate between 6% and 10% of the amount purchased.

On the other hand brokers are regulated and must verify your identity before you can sell cryptocurrencies.

Yet some brokers based outside the European Union, can buy crpyotmonnaies without checks. However, the amount of your purchase is almost always a limit to the number of bitcoins you can acquire.

You will find below a list of these brokers as well as their limits:

  • BitBoat : 500 euros per week, in money order, Toneo First, Neosurf card, etc.
  • Bity : 1000 dollars a day, by bank transfer or Sofort.
  • VirWox : 90 euros per day, and 270 euros per month, in credit card, Paypal or Paysafe.
  • Happycoins : Variable ceiling, by bank transfer, Sofort, Bancontact.

More on this topic

local bitcoins review – Read this before using [Full Guide 2019]

Bittrex review: Get access to almost all available cryptos

Bittrex review: Get access to almost all available cryptos

Bittrex avis
Bittrex avis

Bittrex is an exchange based in Seattle in the United States. It was founded in 2013 by a former Microsoft security specialist. The purpose of this article “Bittrex Reviews” is to offer you a complete guide to use one of the best crypto buying platforms at the moment.

If you’re new to crypto exchanges, you should check out our complete guide to these bitcoin exchanges. This will allow you to choose the exchange that is most appropriate for you.

Bittrex review in a few words

Bittrex is one of the best known exchanges because of its large volumes, the large number of cryptos that are listed and its reliability in terms of security.

A “crypto-to-crypto” exchange

Until June 2018, Bittrex was called a “crypto-to-crypto” exchange, ie it was only possible to deposit crypos and not national currencies. It is now possible to deposit dollars on Bittrex subject to having passed the verification tests.

Multiple levels of authentication

Bittrex also has several levels of authentication: “unverified”, basic and “enheanced”. These three levels provide access to different trading and withdrawal volumes. In addition, you will need at least one “enhanced” verification level to deposit US dollars on Bittrex.

If you want to use Euros, you can buy your first cryptos on a “fiat-to-crypto” exchange, such as Bitstamp or Kraken, and transfer these cryptos to Bittrex to access a much larger panel.

Provides access to its API

Bittrex is particularly popular with professional traders who typically use custom trading platforms that are set up for algorithmic trading. Indeed Bittrex offers access to its API that allows high frequency trading.

Actively collaborates with US regulatory authorities

Another important point is that Bittrex is actively working with the US regulatory authorities. The goal is to stay in line with the ever-evolving market rules.

This is largely why Bittrex is the first platform to have received the New York Bit License. This license is a certification proving the reliability and reliability of Bittrex.

Availability of Bittrex

Although Bittrex is registered in the United States as a Broker, it is not available in a number of US states. A complete list of countries in which Bittrex is accessible to be found in section 2 of the “Terms and Conditions” of the exchange.

It should be noted that the conditions of verification may vary from one country to another.


Trading fees

A commission of 0.25% is imposed on each transaction, whether you are a “Maker” or “Taker”. We describe the difference between “Maker” or “Taker” in our article on “Cryptocurrency Exchanges”.

Deposit and withdrawals

Bittrex does not charge a fee for crypto deposits and withdrawals, which facilitates movement between the exchange and your cold wallet. It is recommended that you do not keep all your crypto currencies on an exchange.

It should be kept in mind that fees can also be attached to the cryptocurrency themselves. For example, for every bitcoin transaction minors charge a fee to add your transaction in blocks and blocks to the blockchain. These fees may be higher or lower depending on demand. These fees are systematic and are not collected by the exchange.

It is also important to note that your withdrawal capacity depends on your level of verification on the exchange:

  • Unverified: With an unverified account, you can only withdraw 1 bitoin per day or its equivalent.
  • Basic: By subscribing to the dual authentication option, you will switch to the basic level and remove 2 bitcoins per day or equivalent.
  • Enhanced: “Advanced” accounts allow you to withdraw up to 100 bitcoins per day or equivalent.

After sales service

Bittrex offers a Zendesk on which you can submit your tickets. You can follow the progress of your request by registering on their support page. Bittrex also offers a fairly complete FAQ that can answer many questions. It is also possible to submit your questions on Slack, Twitter and Facebook.

Opinions are mixed as to the response speed of the after-sales service. For some it is the fastest of all exchanges and for others much too slow. Difficult to get an idea, mails it is likely that it largely depends on the level of affluence on the site. In case of high volatility as was the case during the last quarter of 2017, we should not expect an immediate response.

I have never had a problem with Bittrex since I use it (3 years), so I can not comment on the subject.

How to join Bittrex?


You will start by registering on the Bittrex website. Once you have entered your email address and password, you will receive a confirmation e-mail that may take a little while. So do not panic if you do not receive it immediately.

bittrex avis
rejoindre bittrex

If you are looking for Bittrex via Google, be careful that this is the original address of the site. Indeed, it is not uncommon to see scams use Google Adwords (paid links at the top of the search page) to promote fake links.

A strong password

Another important point is that you must use a password that is strong enough. For this you can use a site that will generate a password for you as “Password Generator“.

Bittrex avis
Password generator

Double authentication mechanism

Once you are on the site, do not forget to secure your account with a dual authentication mechanism. This is a well-known mechanism, where a code is sent to your mobile phone once you have entered your password. You must enter this code to verify that you are the owner of the account.

To do this, simply click on the “Setting” tab at the top right of your screen and then choose the “Two Factors Authentication” tab.

Bittrex avis
Bittrex avis

Then just follow the instructions. It will normally download an application on your mobile and scan a QR code.

Send cryptos on Bittrex

Once your account is registered, you can send cryptos to your account from your wallet or from any other exchange.

To do this, simply click on “Wallet” at the top right of your screen.

Bittrex avis
transfert to wallet

Choose a crypto

You will land on the page below. You will then need to choose the type of crypto you want to transfer. For example, if you want to transfer ether, you are going to type ETH or Ether in the small red box, which will show the line relating to the Ethereum portfolio below.

Bittrex avis
transfert to wallet

Deposit or withdraw

Then click on the green icon on the left of this line to bring up the next window where you can see an address and a QR code. The QR code is simply a way of coding your address provided to be able to transmit it more easily.

Bittrex avis
transfert to wallet

Clicking on the green icon will take you to the page below. Just click on the “Generate new wallet address” tab.

Bittrex avis
transfert to wallet

Save the generated address

Once generated, you will copy this address by clicking on the button framed in red and paste it in the part “address where should be sent the BTC” of your portfolio or exchanges. It is best to use the button to copy the entire address without forgetting a part, otherwise your corners could be permanently lost.

Bittrex avis
transfert to wallet

Once you have made the transfer, your bitcoins will appear under the “Available Balance” section (see red box above). It is important to note that this transfer can be fast, but can take up to an hour. It is considered that a bitcoin transaction is irrevocable only after 6 additional transactions have been made. A block is added to the blockchain every 10 minutes, so it can take up to 1 hour.

Disclaimer :

We wanted to remind you that your cryptos are not safe on an exchange for the simple reason that you do not hold your private keys. If we had to compare the payment with crypto to the credit card payment, the public key would correspond to the number of your blue card and the public key to your secret code. To leave your crypto on an exchange is to entrust your number of blue card and your secret code to an exchange. Perhaps you better understand why it is much safer to keep your crypto on non-internet portfolios like the Ledger Nano S.

You should ideally keep only a small portion of your crypto on an exchange, that is, those you use for trading.

Choose the market that is of interests for you

To do this, simply click on the “Bittrex” logo at the top left of your screen.

Bittrex avis

You will arrive on a Bittrex homepage. Note that the corner that appears on this page is the corner that features at the time when open the page of the biggest volume and the biggest gains. On the image above it is XRP and Bittorrent for the volume and Gambit and Nolimitcoin for the most important gains. You will arrive on a Bittrex homepage. Note that the corner that appears on this page is the corner that features at the time when open the page of the biggest volume and the biggest gains. On the above image it is XRP and Bittorrent for volume and Gambit and Nolimitcoin for the biggest gains.

Bittrex avis

You will then be able to choose the type of cryptocurrency you want to use. First a little reminder of the information provided to you for each pair of crypto.


This is the market you will choose. In the image above, you can see that the first line refers to the “USD / BTC” pair, which is the number of US dollars you can get for a bitcoin. Sis you go down, you will have access to all other markets, like the bitcoin market where you can see the number of bitcoin you can get compared to other crypts and so on.

You must choose the market based on the crypto you use to buy and the crypto you want to buy. This may seem obvious, but if you want to buy Ether with bitcoins, you will select the “BTC / ETH” market.


This is the full name of the cryptocurrency that you could acquire with your bitcoins.


If we take the example of the “USD / BTC” pair, this column is the total amount of bitcoins currently held in US dollars.


This corresponds to the percentage growth or decrease of bitcoin against the dollar during the last 24 hours. If the number is in green is that the bitcoin has appreciated against the dollar, if it is red then it is the opposite.

Last Price

This column corresponds to the current price of the cryptocurrency mentioned in the second column, expressed according to the first crypto. In our example, this is the current price of bitcoin expressed in dollars.

24H High et 24H Low

These two columns are relatively simple, it is the highest price and the lowest price that cryptocurrency has known during the last 24 hours.


Expressed as a percentage, this is the difference between the asking price and the purchase price obtained.


Corresponds to the date that crypto was added to Bittrex.

Note that you can click on each of these parameters to arrange them differently, that is, increasing or decreasing.

Place a buy or sell order

Once you have identified the market you are interested in, click on it. For example here we chose the BTC / XRP market. In other words, we want to buy XRP (Ripple) with bitcoins or sell XRP to get bitcoins.

Bittrex avis

By clicking on the line that interests you, you will arrive on a page that shows the chart of the course that interests you, the order book, the possibility of placing buy or sell orders and the order history that you have placed.

Bittrex avis

What information you need to add in order to place an order:


You must first specify whether you want to buy or sell by clicking on one of the two icons.

Order type

You can choose between several types of orders. The default setting is “Limit order”, which means that you will set the exact amount of chips you want and the price at which you want to buy them.

This is not the purpose of this article, but other types of orders can buy when the price of the token has reached a certain price for example. Or sell when the price of a token drops below a certain level.


You will then be able to add the number of chips you want to buy or sell.

Bid Price

This price is the current price of the token. Note that in case of high volatility, it is generally recommended to set a specific price, for the price you get in the end is not too far from the one you had set.


The total is the amount of tokens requested multiplied by the price you set.

Time in Force

The default setting is “Good you Canceled”, which means that your order will be maintained by the exchange until you cancel it yourself. This point is important because it means that potentially your order will be completed for a price different from the one you were hoping for. Indeed, if there is not enough liquidity on your token, your order may take some time to complete. But the price may change during this period of time.


Once you have completed each section you just have to validate your order by clicking on the “buy / sell” icon.

Other terms

We would like to draw your attention to the different terms you can find at the top of the trading page.

Bittrex avis
  • Last Price: is the price at which the last transaction was made in the order book.
  • IDB: corresponds to the highest purchase price in the order book.
  • ASK: corresponds to the lowest selling price in the order book.
  • BID / ASK Spread: is the difference between the BID price and ASK price.

Concretely if you want to sell your crypto quickly, you have to sell to BID Price. If you want to buy quickly, you have to buy at ASK Price. This is the default position in Bittrex, as we saw above.

Using Graphics

As you can see when you arrive on the trading page, a chart is available to analyze the evolution of the cryptocurrency price since it was issued. A tab at the top left of your screen allows you to zoom in on the chart by choosing the duration of each candle.

Bittrex avis

For example, if you choose 1 day, each candle will represent one day. It will be red if during this day the price of the crpto you chose has dropped and it will be green if the price has increased. It’s the same if you choose 1h for each candle. It will be green if during this time the price has increased and red if it has dropped.

The chart also offers many technical analysis tools. To use them, just click on tools. For example, you can choose to use lines to mark support and limits on the curve. You can also choose the thickness and color of these lines.

Bittrex avis

Bittrex also has some thirty indicators needed to perform a technical analysis.

It should be noted that Bittrex currently does not offer Margin Trading.

More on this topic

cryptocurrency exchanges list

local bitcoins review – Read this before using [Full Guide 2019]

Bitcoin Value in Dollar – how to analyze and predict it? [Ultimate guide 2019]

local bitcoins review – Read this before using [Full Guide 2020]

LocalBitcoin avis
LocalBitcoin avis

LocalBitcoins could be compared to the “eBay of bitcoin”. Bitcoins are indeed exchanged directly between the members of the network without passing through an exchange or a broker. Indeed, the platform only provides a secure environment for buyers and sellers to exchange bitcoins but does not hold any token itself. In this article (“Localbitcoin review”), we tell you all the steps necessary to use the platform safely.

This platform is used for several reasons:

  • The platform only links buyers and sellers of bitcoins and therefore charges much less than other methods.
  • It does not verify the identity of its users. The transactions are therefore anonymous.
  • All means of payment are accepted as long as the seller and the buyer agree. The fees applied by the seller however a lot depending on the means of payment used.
  • The platform can provide certain services such as pledging bitcoins for the duration of the transaction to ensure that it runs smoothly and to collect user feedback to rate recurring vendors.

A disadvantage of Localbitcoins is that you can only buy bitcoins. You can not buy other cryptocurrencies. This is not a major problem, however, since you only need to transfer these bitcoins on a crypto / crypto exchange like Bittrex, to acquire other cryto-currencies.

Register on Localbitcoins

You will visit the Localbitcoins website. As with all cryptocurrency trading platforms, you must be careful about the URL you use. In other words, you must make sure that the link you are clicking on corresponds to the official Localbitcoins website. The presence of a small green locker usually confirms that you are on the right site.

Localbitcoin avis
Localbitcoin avis

There are many scammers using google ad, ie google ads at the top of search pages to offer links to fraudulent sites.

If you have any doubts, you can use the link below:

Once on the Localbitcoins homepage, it is extremely easy to register. You just have to click on “sign-up free”.

Localbitcoin sig-up
Localbitcoin sig-up

Insert your details (exacts or not)

A window will open and you will need to fill in the required information.

Localbitcoin info
Localbitcoin info

You must enter the name that will appear on the site and your e-mail address. Note that you do not have to add your exact last name and last name. Localbitcoins allows to buy and sell crypto-currencies anonymously, so you can invent a nickname and add an email address created for the occasion.

A tamper-proof password

You are also asked to choose a password that is complicated enough to make your account really secure. The best way to get one is to create it from a platform generating passwords like strong Password Generator.

As a first step, simply choose the password settings. That is, the number and type of characters you want to embed.


You will then be able to generate the password by clicking on “Generate Password”.


Once you have your password you must save it in a safe place on your computer or write it on a paper.

I emphasize this because it is important to understand with the cryptos that you will acquire are your responsibility. Crypto-currencies bring great freedom by eliminating a large number of intermediaries such as banks and credit card companies. But that means that you are now in charge of the safety of your money. However, you should be particularly careful when buying, transferring and keeping your cryptos. That’s it, you have to be vigilant all the time.

Rest assured, getting started is easy and today there are many tools that allow you to use cryptos securely. On the other hand, it is not certain that your money is more secure when it is in the hands of intermediaries.

It is also important to realize that Localbitcoins is not the most secure way to acquire bitcoins. We will describe all the elements that you need to be careful about to take no chances.

Two factor authentification

For this reason, it is essential to enable the two authentication option. This type of protection is now well known and adds a layer of security to your account. For each operation you will solve on Localbitcoin, you will need to add a code.

To activate it, you must click on “Account Security”.

Localbitcoin 2fa
Localbitcoin 2fa

Then ask to activate the “Two Factor Authentication”.

Localbitcoin 2fa
Localbitcoin 2fa

You will then be able to choose the means of issuing your code. Either on your mobile or on a separate page.

Localbitcoin 2fa
Localbitcoin 2fa

If you choose the paper code, you will be able to download a word page containing 100 codes numbered from 1 to 100. For each operation, you will have to provide a random code.

If you choose the mobile code, you will have to download the “Google Authenticator” application on your mobile. You will then have to configure your application by clicking on “Proceed to activation” which will reveal a QR code that you will have to scan with your mobile phone from the “Google Authenticator” application.

Localbitcoin 2fa
Localbitcoin 2fa

Opening of a wallet

By opening an account on the Localbitcoin platform, you open a bitcoin wallet instantly. You can use this portfolio without buying bitcoins on the platform beforehand.

Localbitcoin wallet
Localbitcoin wallet

The charges for depositing bitcoins are 0.00015 BTC regardless of the amount you transfer.

Again this is not the most secure kind of bitcoin wallet. This is indeed what is called a “hot wallet”. This type of wallet is convenient because it is accessible on the internet from any computer, but you do not hold your private keys. In other words, the secret code that allows you to use your bitcoins (your private key) is kept by the website and therefore at the mercy of any potential hacker. So ideally do not leave your bitcoins too long in this wallet and transfer them to cold storage. As a reminder, with portfolios of cold storage (Ledger, Trezor …), you keep your private keys off the internet on a device that looks like a USB key.

Receving bitcoins

To receive bitcoins on your Localbitcoins portfolio, simply use the public address that is provided on the Localbitcoin site. Note that this is your public address, that is to say that you can disclose it without risk. The public address can be compared to your blue card number and the public address, your PIN.

Localbitcoin wallet
Localbitcoin wallet

It is important to transmit your public address without errors. Indeed if the public address that you transmit is not complete, you will not be able to receive your bitcoins and the person who sent them will not be able to recover them. For this reason, the best is to use the button provided for this purpose next to your public address.

Localbitcoin wallet
Localbitcoin wallet

A good habit is to copy this address to another document and have it in your mailbox, for example, to be able to easily send it to people who must send you bitcoins without having to connect to Localbitcoins each time.

Another important point to consider is that the public address issued by your Localbitcoins wallet will change periodically. Of course, you can continue to use the previous public addresses at the same time as the news and you will always receive bitcoins in your wallet.

Send bitcoins

It’s just as easy to send bitcoins from your Localbitcoins wallet than it is from any other wallet. It’s just about introducing the public address of the recipient of the bitcoins, as well as the number of bitcoins you want to send.

Be careful to add all the data that is required by the recipient.

Localbitcoin wallet
Localbitcoin wallet

Buy bitcoins on Localbitcoins

Choose an offer

The great advantage of Localbitcoin is that it is not a centralized platform. In other words, the platform gives sellers and buyers the freedom to organize the transaction as they want.

Localbitcoin achat
Localbitcoin achat

They are first free to choose the currency they will use to determine the amount to buy. If you buy from a person based in the EU, it is likely that the euro is chosen. But this is not always the case and the dollar is often used as the reference currency.

Localbitcoin achat
Localbitcoin achat

You will then be able to choose the country where you want the transaction to take place. This field is especially important when you choose the option of payment in cash or bank transfer. Indeed, the geographical proximity with the seller is in this case important. For example, if you decide to pay by bank transfer and your seller is also in the EU, you will be able to use a SEPA transfer and therefore not pay any fees. Which would not be the case if you had to make a bank transfer to a bank based in the United States.

Localbitcoin achat
Localbitcoin achat

Finally, LocalBitcoins is renowned for offering the ability to pay with almost all available payment methods. Just find a seller who uses the payment method you want. We will now see below how the most commonly used means of payment work.

Localbitcoin achat
Localbitcoin achat

Once you have selected these three variables, you will see a list of sellers responding to these criteria. You can quickly sort the offers according to what interests you.

Localbitcoin achat
Localbitcoin achat

This information is as follows:

Trader: This is of course the seller’s preudo. As for you, the seller is not obliged to reveal his true identity. The two digits in parenthesis located next to it, correspond to the number of transactions realized by the salesman and the score that attributed to him by his previous customers.

In the example above, the seller has completed more than 3,000 transactions and has a 98% satisfaction rate. So you have to go to a serious seller.

Payment Method: This column refers to the payment method you selected in the previous step.

Price / BTC: as you will understand, this is the price per bitcoin. The lower you go, the higher the price. It is important to note that the price of Bitcoin on LocalBitoins, can be very different from the price you will find on reference exchange such as Bitstamp. This price difference is due to the often unconventional means of payment used by the sellers. In other words, you pay the service provided by the seller who offers the means of payment that suits you. This means of payment is generally not available on traditional exchanges.

Limits: These numbers correspond to the minimum and maximum number of bitcoins that the seller is willing to offer you. In the example below, the seller is ready to sell you at least 25 and up to 150 euros of bitcoins.

It’s up to you to choose the offer that suits you best.

Identify good sellers

Once you have made your choice, you will be able to obtain additional information about the seller by clicking on his name. You will go to the seller’s presentation page where you will have access to additional information.

First information about the reliability of the seller with the number of stars allocated to him, the number of trades made and feedbacks that we have just described. You will also be able to determine the frequency of its sales. Suspicion if he has not made a sale for several months.

Finally the speed at which you will get your bitcoins once the transaction has been completed.

Localbitcoin vendeur
Localbitcoin vendeur

It is also important to consider when the seller’s account was created and if its identity was verified by LocalBitcoin.

Note that some vendors may also claim that you have validate your identity.

In the example below, you will also see all the offers currently offered by the seller. This also allows you to see all the payment methods accepted by the seller and perhaps choose one that suits you best.

Localbitcoin vendeur
Localbitcoin vendeur

Finally, at the bottom of the seller’s page, you will be able to access the notice of previous buyers. Naturally, the more recent they are, the better. These reviews are interesting because they sometimes allow you to get information about the process of completing the transaction. It will appear in some cases that it is too complicated.

Localbitcoin vendeur
Localbitcoin vendeur

The transaction steps

How to contact the seller?

Once you have chosen the offer that interests you, you will be able to send a message to the seller using the space provided for this purpose in the offer. It is recommended not to use external communication channels. Indeed in case of dispute, it will be easier for you to prove your good faith if you used the Localbitcoin messaging system.

Follow the steps prescribed in the offer

On the right side of the offer, the seller can specify the conditions that you need to fulfill for you to be eligible as a buyer. It can also provide guidance on the steps to complete the transaction.

These steps are always different from one seller to another and from one type of payment to another.

Bitcoins are pledged

In addition to an evaluation of sellers (and buyers), LocalBitcoins offers a bitcoin pledging service to ensure that transactions are completed to the limit by significantly reducing scams.

The bitcoins that the seller proposes to sell you are in fact retained by the site until the seller confirms that he has received the payment.

Localbitcoin gage
Localbitcoin gage

In case of dispute, a trusted third party belonging to Localbitcoin will decide according to the rules established on the website and according to the reputation of the seller and the buyer.

The fees applied by LocalBitcoins

As we have already mentioned, LocalBitcoins is a platform that connects buyers and sellers of bitcoins. It offers only a secure environment for buying and selling bitcoins, but does not hold bitcoin itself. This limited risk-taking allows LocalBitcoins to offer uncompromising fees.

There is indeed no charge on buyers and only 1% on sellers. We are far from the 4% imposed by brokers like Coinbase. Note that sellers generally pass on sales charges, which is why Localbitcoins prices are higher than on traditional exchanges.

The main methods to buy bitcoins

Buy bitcoins in cash

For cash purchases, you can do them either in person or through a pre-paid card.

If you are in the same geographical area as the seller, you can meet him. Just make sure that it releases bitcoins well before your eyes. Otherwise it would be difficult to prove that you gave him the funds.

Neosurf or PCS prepaid cards seem a better solution. You usually only need to provide the code on the card to complete the transaction.

Buy bitcoins with a credit card

Buying with a bank card is relatively simple. Once you have chosen an offer that interests you, you will contact the seller. Remember to use Localbitcoins email at the bottom of the sales page. In case of conflict, it will indeed be easier to prove your good liver.

The seller will then send you the details of his account. You will make the transfer and upon receipt of payment, it will indicate to Localbitcoins that bitcoins can be sent to you. In most cases, as in the example below, the seller will wait for funds to be credited to his account. So it’s not surprising to have to wait a day or two before you receive your bitcoins.

Localbitcoin achat carte
Localbitcoin achat carte

Buy bitcoin with Paypal

As you can see in the example of an offer to sell bitcoins with Paypal, the purchase conditions are much more restrictive than for other means of payment that you can use on LocalBitcoins. This comes from the fact that Paypal is perceived right or wrong as an unsafe way of payment. The sellers consider indeed that there is a possibility to convince Paypal to return to the transaction once it has been done on LocalBitcoins.

It is not uncommon for sellers to ask you:

  • your exact identity and verified on LocalBitcoins
  • request SMS verification
  • A verified Paypal account
  • A personal Paypal account that corresponds to that of LocalBitcoins
  • The money must already be on your Paypal account
  • You must have already completed a number of LocalBitcoins
  • transactions and obtained positive feedback.
Localbitcoin achat paypal
Localbitcoin achat paypal

Buy bitcoins with other crypto-currencies

Among all the methods that are offered, you can also use some altcoins to pay the seller. At present, only Dash, Ripple, Litecoin, Monero and Ethereum are usable.

The process is then the same, you will transfer your altcoins to the public address that you have provided the seller and upon receipt of the tokens, it will release bitcoins.

Localbitcoin achat ripple
Localbitcoin achat ripple

More on this topic

How to buy bitcoins and altcoins: the ultimate guide

Bitcoin Value in Dollar – how to analyze and predict it? [Ultimate guide 2019]

Bitcoin Value in Dollar – how to analyze and predict it? [Ultimate guide 2020]

Bitcoin gold

Appeared in 2009, bitcoin is still an enigma for a large number of investors. How to classify it? How is the bitcoin value in dollar determined? What are the elements that influence its price?

Bitcoin, like all other crypto-currencies, has created a new business model very different from that of traditional companies. Indeed, none of the valuation instruments that we currently use can be applied to cryptos.

This article will give you many keys to better understand what these new ecosystems really are. We will also try to explain how they work and existing theories at the moment to try to value it.

Where to find the bitcoin value in Dollar?

It is essential to begin by clarifying how the value of the bitcoin is represented. It is always determined by national currencies or other cryptocurrency. For example, the price of bitcoin to be determined in dollar, we then speak of the pair “USD / BTC”. As you can imagine, there are a large number of pairs available.

The price of bitcoin is constantly changing and results from the confrontation between supply and demand in the cryptocurrency market. In other words, the price of bitcoin at a “T” time is what sellers and buyers are willing to accept for their bitcoins.

The history of all these prices is usually represented on a graph with the date on the abscissa and the price on the y-axis.

Value of Bitcoin in dollar

The price of bitcoin in dollar can be found in many places. A quick way to find is through Google. For this, simply type “Bitcoin” in the search bar and you will immediately see the price.

bitcoin value in dollar

However, this application only offers the price of bitcoin. If you are interested in the price of other cryptocurrencies, you can visit Coinmarketcap.


Bitcoin price live

The bitcoinwisdom website offers a graphical representation of bitcoin prices against the dollar from its creation. This platform brings together the prices proposed by several exchanges. We advise you to use the one that exists from the beginning, which is the price proposed by Bitstamp.


You will thus be able to chart as well as many tools of technical analysis.


Bitcoin value against other cryptocurrencies

If you are looking for the value of bitcoin against other crypto-currencies, then you have an advanced level. The best place to find them is on crypto exchanges, where supply and demand meet. It is indeed on these exchanges that you can find all these pairs. But not all exchanges offer an important number of pairs. Crypto / Crypto exchanges, on which it is only possible to deposit crypto-currencies, generally count much more.
Indeed, exchanges like Bittrex or Binance offer hundreds of possibilities. It is thus possible to buy any cryptocurrency with bitcoins.

As you can see on the page below, Bittrex offers many Bitcoin / Cryptocurrency peers:


What is bitcoin?

Before describing the elements that impact the bitcoin price, it is essential to determine what bitcoin is. There has been much debate in recent years to clarify whether bitcoin is a currency, a financial security or a commodity.

To answer this question, we must first better understand the structure of the bitcoin network.

Bitcoin is a network and a coin

The word bitcoin defines both the network of bitcoin users and the token that is exchanged between these users. The bitcoin network consists of a large number of user members connected to each other by their computers. The purpose of this network is only to exchange value between its members, thanks to bitcoin tokens.


veryone can become a member of this network. If a user wants to interact directly with the network he will download the bitcoin protocol on his computer by downloading the bitcoin source portfolio. It is also possible to take part in the bitcoin network through an intermediary, such as an exchange. You can also interact with the bitcoin network without downloading the protocol. That’s what you do when you buy your bitcoins on a cryptocurrency exchange.

[Bitcoin protocol: The bitcoin protocol is the source code of the bitcoin. It is an open source computer program, that is to say accessible to all. This program provides all the operating rules of the bitcoin network: creation of transactions, mechanism of mining, interaction between members. For simplicity, the bitcoin protocol contains all the rules to tell your computer how to join the bitcoin network].

All transactions are then added to the blockchain. The blockchain is a decentralized database that is updated by miners. Miners are therefore the bankers of the bitcoin network since they are the ones who update the “accounts” of the network recorded on the blockchain. The big innovation is that the update of the account is no longer done by a trusted tier (bankers for example), but directly by members of the network (the miners).

What is important to remember is that bitcoin is a decentralized network of computers, which perform transactions with each other using bitcoin. All these transactions are then stored in a blockchain chronologically.

Is bitcoin a currency?

Really sorry, but the answer is both yes and no.

First, bitcoin shares many features with traditional currencies. Bitcoin is indeed a unit of account. That is, it can be used to measure the value of another good. Then bitcoin is used to exchange value. As we have done this exchange of value is between the members of the network or those who use an intermediary as a stock exchange. Finally, bitcoin is a store of value. The strength of its technology based on advanced cryptographic mechanisms, allows its users to store value for the future.

Yet bitcoin is not a currency in the same way as the Euro for example. First of all, bitcoin does not have a “legal tender”. In other words, not all economic actors are obliged to accept euros. Although more and more merchants are accepting payments in bitcoin, you can not force those who do not want it.

bitcoin currency

Another important difference is that the euro is a currency managed by a central bank. In other words, monetary policies related to the euro and its volume are managed centrally. This is not the case for bitcoin as we have seen previously. Indeed, bitcoin is based on a decentralized technology (blockchain), so its management is subject to the permanent consensus of its users.

Finally, bitcoin is not yet regulated, unlike national currencies. That’s why if you lose your bitcoin no regulation can protect you. This is not the case if you steal your credit card since your bank will theoretically compensate you.

Bitcoin and crypto-currencies in general represent an important advance in that they allow the exchange of value directly on the Internet between people who do not know each other. Until today, we always had to go through an intermediary (bank or credit card company). This freedom comes at a price since bitcoin holders are fully responsible for their conservation.

Is bitcoin a financial Security?

Like traditional financial securities, the value of bitcoin is determined by the market. It is therefore legitimate to wonder if bitcoin and other cryptocurrencies cannot be qualified as traditional financial securities.
The answer to this question must be balanced. Indeed the role played by a token in the network that created it is not always the same. The main role of tokens is to transfer value between members of the network, as does bitcoin. But in other applications, tokens can have different or additional functions. In the “Utility Tokens” for example, are qualified thus by that they can have very different functions.

William Mougayar is also one of the first to have listed the roles that can have tokens.

William Mougayar

You may be wondering what the regulators’ position is on this issue. Many of them have not yet pronounced. In France, it has been admitted that tokens are not financial securities. That’s why a full-fledged lefak category has been created to oversee tokens, the famous Initial Coins Offering (“ICO”)

The American Stock Exchange regulator, the Security and Exchange Commission (“SEC”), submits the tokens to the “Howey Test”. The Howey Test determines that a token represents an investment contract if

“a person invests his money in a joint venture and is expected to expect profits solely from the efforts of the sponsor or a third party”.

Certain token fulfills these conditions when for example they produce dividends for their holders. Numerous ICOs have thus been requalified by the SEC as an “Initial coin offering” and have been sanctioned for failing to comply with the regulations in force.

However, SEC chairman Jay Clayton confirmed in a statement released in late December 2018 that bitcoin is not an investment contract and as such is not subject to current regulations.

Is bitcoin a commodity?

What is a commodity?

A commodity could be defined as a unit of a tangible asset or not. This asset can be alive like livestock, cereals or not such as coal, gold, gas or electricity. Unlike other financial stocks such as stocks or bonds, it does not matter who produces the commodity. Indeed, the action of a company A can never be valued in the same way as the action of a company B.

On the other hand, a commodity is by definition fungible. This means that one gram of gold can be replaced by any other gram of gold provided both are of the same nature and quality. In other words, the price of a commodity is almost solely determined by a confrontation between supply and demand on the market. It does not have any value in itself that can influence the way its price is determined. That means you have to sell it to make money with it.

This first definition seems to perfectly stick with what is bitcoin. A fungible intangible asset that must be produced and has no intrinsic value, which implies that the price is solely determined by the market. Indeed, as for gold or coal, the production of bitcoin has a cost. The term used for the production of bitcoin is also the same since we are talking about “mining” bitcoin. Miners are network members whose mission is to produce bitcoins.

The cost of mining

It is important to understand that the mining of bitcoin is a business for miners. Indeed, they compete with each other to add blocks to the bitcoin blockchain. The first miner who solves the mechanism of the “Proof of work”, is indeed the one who can add the block to the blockchain. The “Proof of Work” can be compared to a problem that miners must solve.


But to be able to participate in the “Proof of Work” mechanism, you need very specific and expensive equipments. Added to this is the cost of internet connection and electricity. Miners must therefore invest extremely large amounts to remain competitive in the race for mining. They are paid only by receiving 12.5 BTC for each block added and the fees attached to each transaction.

It is also important to remember that the difficulty of the “Proof of Work” increases with the number of miners involved in the mining mechanism.

Some analysts have estimated that bitcoin can be considered a commodity because of its cost of production (or “extraction”). Like gold, the creation of bitcoins generates significant costs. It is in this sense that the other policeman of the American stock market, the United Commodity Futures Trading Commission (CFTC), decided by officially qualifying the bitcoin of raw material.

Now, there is no evidence that this cost of mining impacts the evolution of bitcoin prices. On the other hand, the opposite is much clearer. Indeed, the price of bitcoin directly impacts the mining industry. Many miners have invested in hardware at the time when bitcoin was worth USD 20,000 and end up in 2019 with a very different profitability. Bankruptcies in the mining industry are so overwhelming that some wonder if bitcoin can survive at too low prices.

The future will tell, but in theory yes, since the protocol adapts to the number of miners (“Hashing power”) present on the network.

What is the real value of bitcoin: the elements to take into account

In this section, we will go into the details of what makes or contributes to the value of bitcoin. In fact, many factors influence the price of bitcoin and we will try to list them below. As mentioned above, the price of bitcoin is the result of the confrontation of supply and demand on the capital markets. So what drives people to want to buy bitcoins?

The service rendered by the network

First, the bitcoin network renders service efficiently to its members. As we have seen, bitcoin is a decentralized and autonomous network made up of all computers that have downloaded the bitcoin protocol. But the initial goal of this network is to solve a very specific problem. That of the transfer of value on the internet.

The transfer of value on the internet

This is one of the great contributions of blockchain technology. To illustrate, take the example of the transfer of a video on the internet. At the moment when you transfer a video on the internet you keep a copy on your computer. But if you want to transfer 20 euros, you must make sure that the sum has been sent to you and has not been sent to another person in the meantime. For this, the only way is to go through a trusted tier, a bank for example.

bitcoin network
bitcoin network

But using bitcoin, you can now transfer the 20 euros directly to a stranger via the internet and without an intermediary. This is the service bitcoin provides. It makes it all the better that the transfer is immediate and almost free whatever the country of the recipient and the volume of the transfer.

Each cryptocurrency solves a very particular problem

Each cryptocurrency available today has set itself to solve a very particular problem. There are thousands of them, so there are thousands of problems that need to be solved through these decentralized exchanges. The tokens issued by these crypto-currencies are only the means necessary to solve the problem. Bitcoin is only the means to allow the transfer of value. But it is nothing without the protocol, the network of programmers, miners, users, the blockchain and all the other constitutive elements of these crypto-currencies.



The number of tokens issued

The case of bitcoin: a non-inflationary cryptocurrency

Unlike national currencies that can be produced without limits, the number of bitcoins is limited. The bitcoin protocol provides for the maximum number of bitcoins that can be issued. This figure is 21 million.

As you may know, bitcoins are emitted through the mechanism of mining. Indeed, each time a block is added to the blockchain by a miner, 12.5 bitcoins is emitted (“created”) and distributed to this miner. This one then puts them (or not) in circulation, by transmitting them to other users of the network. The protocol also provides that a block is added to the blockchain every 10 minutes. 12.5 bitcoins are created from scratch and put into circulation every 10 minutes.

At this rate, it is estimated that all bitcoins will have been mined by 2022. Bitcoin is therefore not an inflationary currency, which directly impacts its valuation. The fact that the total number of bitcoins that will be issued is already known leads to a feeling of scarcity in the face of the growing demand for this cryptocurrency.

This feeling is accentuated by the fact that bitcoin is often perceived as a “store of value”. Remember that bitcoin is also called “digital gold”. Bitcoin is still young, but we must recognize that since its creation no hacker has managed to find and exploit a flaw in the bitcoin protocol. Many stock exchanges and cryptocurrency portfolios have been hacked, but never bitcoin itself. Yet, with a valuation of several billion dollars, it is obvious that bitcoin is a prime target for any hacker. That would be the immediate glory for the latter!

The number of tokens issued

It is also important to note that the number of tokens issued by a project, directly impacts its volatility. The price of a token will rapidly increase or decrease if the project has issued 100,000,000 tokens or less. It’s different from a billion chips.

Ripple, for example, has several billions of tokens in circulation. If a large number of investors decide to withdraw their chips at the same time the price will only be slightly impacted. Obviously, the opposite is also true.


For these reasons, it is generally considered that cryptocurrencies with more than 1 billion chips are less risky. It should be kept in mind that the gains are proportional to the risks taken by the investor. Crypto-currencies emit a large number of chips offering a more progressive return. This does not mean that performance cannot be important. An XRP (tokens issued by Ripple) went from $ 0.01 in 2016 to $ 3 in 2018, a price multiplied by 300.
A cryptocurrency with a number of token in circulation between 100 million and 1 billion, presents a moderate risk. Below 100 million, the risk and volatility are as old.

In summary:

Number of Tokens Risks and return on investment
Above 1 000 000 000 Not high
Between 100 000 000 and 1 000 000 000 Limited – the best balance is around 500 000 000
Below 100 000 000 High

Price manipulation

If the decentralized network does not have any objective or tries to solve any particular problem, then the token emitted by this network can not theoretically have any value.
The only explanation for valuing in these circumstances would be price manipulation.

Crypto market is still unregulated and for this reason, are the prey of many course manipulations.

The best known is that carried out by the most important investors. Also called “whales” (or whales), it is not uncommon to see these investors massively buy the tokens of a network to raise the price artificially. Once the price is inflated, they abruptly down all their tokens, thereby dropping the price of the token.

Whales investors
Whales investors

All small investors attracted by the rising price and the buzz that accompanies it, is usually found with a worthless token. These operations are often called “Pump & Dump”. These manipulations are usually very well orchestrated. They are accompanied by a promotion campaign on forums lead by people paid by the Whales or simply informed by the latter.

Indeed, knowing in advance that the tokens will be the subject of a “Pump” is the insurance of quick returns. In addition to the manipulation of the courts, there is an insider’s offense or at least a complicity in manipulation.

All these manipulations have largely contributed to the instability of the prices of crypto-currencies in recent years and to their important volatility. It is important to note that on regulated markets, all these acts are penalized.

This type of manipulation obviously occurs without taking into consideration the real value of the network. This real value can only be obtained by carrying out a thorough analysis of the project that interests us.

Token Valuation Theories

Several methods or theories have been proposed to try to determine the current or future value of bitcoin and crypto-currencies in general. We will focus here on the two best-known models. You can also check out models developed by Vitalik Buterin, Brett Winton, and Percy Venegas

The Network Value to Transaction (NVT Ratio)

Imagined by Willy Woo, the NVT ratio could be compared to the Price / Earning ratio which is a classic business analysis tool. Willy Woo describes it in this way:

“We did not know how to value Internet securities in the 1990s. The P / E ratios were at their peak and people did not understand the zero marginal cost of businesses. … In Bitcoin, we know the flow of the transaction, but we do not know its income, because it is not a company. It’s the closest proxy we have. That’s all it really is. If Bitcoin was a payment company, measure its debt to its value. “

NVT = Network Value / Daily Transaction Value

You can find this information on The “Network Value” is what we also call the market capitalization of the bitcoin network at a given moment. This is the dollar value (or any other currency) of all bitcoins. The “Daily Transaction Value” as its name indicates is the amount (always in national currency) exchanged during the last 24 hours.

Divide the first by the second and you get the “Network Value to Transaction ratio”. The NVT Ratio is based on the idea that we can use money flowing through the network as a proxy for network evaluation.

NVT ratio
NVT ratio

As Willy Woo says on his blog:

“When the Bitcoin NVT is high, it indicates that the value of its network exceeds the value transmitted on its payment network. This can happen when the network experiences high growth and investors value it as a high yield investment, or when the price is in a bubble. “

Clearly, the higher the NVT, the more it indicates that the value of the bitcoin is superficial and a correction is probably close. The opposite is also true. If the NVT is too low, a reversal of trend could be expected. It is one of many tools that we mention because it allows us to anticipate changes in trends.

It determines whether the price of a token is underestimated or over-valued, but not to predict its exact value.

“Equation of exchange” (Token economy)

Developed by Chris Burnisk, this theory uses the same equation used to value traditional currencies. Chris Burnisk is indeed the first to have proposed to use the Equation of Exchange.
The equation is presented in the following way: M x V = P x Q
M = the total value of the tokens
V = the velocity of the tokens, that is to say the number of times they have been traded over a given period.
P = in the case of cryptocurrencies, P represents the price of resources monetized by the network represented in $ / GB.
Q = total resources used by the network.

We could take the example of SIA COIN, a project based on the Ethereum blockchain. The purpose of SIA and to share the unused memory space of the members of the computer of the network. In other words, information belonging to members of the network could be stored in the memory of the computers of other members of the network.

Sia coin
Sia coin

In the case of SIA, to find “P” it will be necessary to determine the price in dollars of Gigabites of storage available on the network, represented in $ / GB. “Q” will represent the number of Gigabites available on the network.
If we multiply P and Q (where P = $ / GB and Q = GB), we get an amount in $. PQ represents the exchange of value in the ecosystem. It is in a way the Gross Domestic Product (“GDP”) of the micro-economy created by the protocol and the network. But this GDP is recorded on the blockchain.

Now that we know the value “PQ”, we must determine the velocity of the tokens on the network to be able to deduce “M”. Indeed M = PQ / V.
Once we know “M”, we can divide it by the set of tokens issued by the network and thus obtain the value of a token. To forecast the evolution of this value it is necessary to replace these data over several years.

As you can imagine all these data are relatively subjective. That’s why Chris Burnisk often recalls that he uses this method as an indicator rather than a foolproof instrument.

More on this subject

A general introduction on blockchain

How to buy bitcoins and altcoins: the ultimate guide

How to securely store your coins: the ultimate guide

Blockchain and driverless cars – what’s the connection?

Autonomous cars are an amazing invention of this era. They relieve the drivers from the tricky task of managing brakes, acceleration and avoiding barriers while they drive. So basically, you can now focus on reading and other activities while the wheel drives itself.

How is this possible? Well, the system is quite ingenious. The vehicle takes information of gigabytes from its environment and keeps processing them to calculate the next step. This self-driving technology makes use of highly sensitive cameras and sensors with state-of-the-art mechanisms in Machine Learning and AI. Besides this, the recent scientific discovery that states that blockchain can connect automobiles, is also opening up new avenues for the future.

Recently, Uber was in real trouble when one of its autonomous vehicles hit and killed a pedestrian in Arizona. This incident derives the fact that technology is still not perfect and there are some serious risks involved. The only way to settle this problem is to have a common entity that can decide what will happen on the road.

The role of blockchain technology

Essentially, the technology of driverless cars depends on big data. It collects, analyzes and uses the information within nano-seconds to enhance precision. The role of blockchain in this system is more like ensuring the transparency of data transfer and protecting against all kinds of manipulation. To a layperson, this transparency might seem useless. But imagine, what will happen if a cyber-terrorist group gains access to the databases of these driverless cars running on a crowded street or on a highway?

It will be a catastrophe!

A transportation system that works with blockchain can allot due time to the movement of each vehicle, where the waiting period for each car can be controlled and distributed fairly. So, hackers will be unable to penetrate into this system because of ultra-secure protocols that blockchain follows. Also, there will be no privacy concerns because the blocks are anonymous.

Builds a channel of trust

The fact that blockchain will now power driverless cars tends to remove the uncertainty among the vehicles. It can strengthen the trust that autonomous cars have with every turn. The technology needs to cater to individual cars and the road. This collaboration asks for the teamwork of all the vehicles running on the road to elevate efficiency and security.

There are some speculations concerning what will happen if more cars join the network. And there is still some work to be done on these lines to make sure that the computational power of the system is strong at saturation times. In a perfect system, every vehicle will not only consider avoidance with non-vehicular objects (walls, trees) but will also convey these calculations to others on the network.

Despite all the benefits that the system seems to offer, there is still one aspect that it fails to cover. That is, it cannot replace the cameras, sensors, and software that the self-driven vehicles are using. The blockchain cannot provide any notification that will avoid collision with a pedestrian or animal. For now, it can only stick to minimize car-to-car collisions.

Protection of user information

Apart from ensuring crash security, the blockchain technology also guarantees the protection of user information. Before the introduction of this model, hackers were able to access user information such as their addresses, names and payment details which they later used against them. In a driverless taxi that will be operating via blockchain, the information of the passengers such as their names, pick-up and drop-off points can be stored and distributed on a secure central ledger. Thus, offering a completely tamper-resistant system.

Free payment network

The primary use of blockchain, since its inception, has no doubt been payments that do not have to rely on any intermediaries. When Bitcoin surfaced in 2008, it’s main aim was to become a truly decentralized peer-to-peer currency which ensures fast payments from one party to another. On similar lines, we find that other compelling projects are popping into the industry — for example, the AutoBlock where car enthusiasts from across the globe can deal in the vehicles of their interest using its distinguished currency, the AutoCoin. It is operating in the cryptocurrency space to enable near-instant and absolutely free payments.

The technology can also improve on how taxis are charging their clients and keeping track of their accounts. The smart contract technology of blockchain holds the capability of making the payment process easy. This system makes sure that each party holds their end of the bargain and in case of any dispute, they find a solution without involving a central authority.

Self-driving cars which were only a distant realm that we saw in sci-fi movies are now a reality. Plus the internet, as we know, has brought a fundamental change in commerce. So, if you are someone who is planning to give this technology a shot, then this is the right time. The incorporation of blockchain in this system forecasts promising developments that are coming in shortly. Start by getting rid of that traditional vehicle that you are using currently. This step is also possible on virtual grounds.

Gone are the days when the buyers had to visit numerous dealers, take test drives and find a car that fit their requirements. Websites, like we buy cars today, are operating to provide a free valuation of the vehicle, arrange pick-up of your car and pay its price right away. You can then buy an affordable autonomous vehicle without any hassle.

Author Bio:

Evie harrison is a blogger by choice.  She loves to discover the world around her. She likes to share her discoveries, experiences and express herself through her blogs. Find her on Twitter:@iamevieharrison

Security Tokens: the next wave of ICO?


While we are currently witnessing a rally in the number of ICOs on Utility Tokens, many experts believe that the coming wave of ICO will concern Security Tokens and will be much larger. Why do they think Security Tokens will be so successful? This is what we will try to clarify by first defining these two types of tokens.

Utility Tokens

As its name suggests, Utility Tokens are tokens that have a role in the functioning of a decentralized ecosystem based on a blockchain. As we have already discussed in detail in this article, these functions are extremely varied to such an extent that they are difficult to categorize. Their role in the ecosystem may be more or less important, but without them the network should not be able to function.

Without bitcoin, network members could not exchange value between themselves and miners could not be paid.

This function is not always so obvious, especially when the tokens are issued by protocols stored on a blockchain that does not belong to them (Ethereum for example). In this case, all the mechanics of the blockchain are remunerated in Ether whereas the tokens issued by the decentralized application can be used to operate the application. This is, for example, the case of Augur using Ether, but also the REP for its operation.


Security Tokens

Security Tokens are intended to digitize physical assets or not without having a function in the development of a decentralized network. These tokens are generally recorded in smart contracts and will therefore offer all the advantages of the blockchain on the internet (security, flexibility, speed of circulation, transparency) to real-world goods that are physical (paintings, concert tickets .. .) or not (music, films, financial assets, titles of ownership, patents …). We will actually assist to the massive tokenization of the real to facilitate the exchange on the internet.

Tokenization of stocks and bonds could, for example, allow traditional companies to raise funds without having to take out a loan or make an IPO. Many companies whose business model has nothing to do with blockchain technologies already organize ICOs to finance themselves. These financial securities would have the form and thus the flexibility of the tokens but would offer the same types of financial and legal rights as traditional stocks and bonds. The issuing entities of these tokens can naturally adjust the legal and financial rights as they intend.


The Security and Exchange Commission, the US Stock Exchange Constable, uses a number of criteria to determine whether a token is a Security Token and as such must be subject to the same transparency and registration requirements as any other financial asset.

These criteria are defined in the “Howey test”. The “Howey test” is a test created by the Supreme Court to determine whether certain transactions qualify as “investment contracts” under the Securities Act of 1933 and the Securities Exchange Act of 1934. A financial asset is an investment contract when the following four elements exist:

  1. Money investment
  2. In a joint venture
  3. With profit expectations
  4. For the efforts of others

A number of creators of ICO have discovered this interpretation at their expense, seeing the chips they issued requalified in the investment contract. In most cases, the rules applicable to takeover bids for financial assets had not been respected, resulting in heavy fines from the SEC. The example of the DAO (Decentralized Autonomous Organization) is probably one of the most explicit.


The differences between utility and security tokens

Unlike Utility Tokens, Security Tokens are a part of the property they represent. If they are shares, Security Tokens represent a share of the capital of companies that issue them.

Utility Tokens, on the other hand, do not confer any governance rights on the ecosystem to which they belong. However, they can, when the mode of consensus chooses is the Proof of Stake or the Delegated Proof of Stake, since it is the possession of tokens which gives access to the rights of mintage or confers a right to vote for the election of ” Witness “. This is, for example, the case for Steemit, Eos or Bitshare.

A consequence of what has just been said is that dividends are only rarely paid to the holders of Utility Tokens. When this is the case, as for Dash or Neo, these dividends are not proportional to the results or the capitalization of the ecosystem.

Finally, the applicable legal regime is different for both types of tokens. In the United States, the SEC requires issuers of Security Tokens to follow the same rules as financial assets falling within the criteria of the Howey Test. It is different in France, where the legislator decided to create an independent regime for Utility and Security Tokens (see Article 26 of the PACTE Act).


Why Security Tokens will know a spring

The question that arises, for example, is why should we use Security Tokens instead of Action or Obligations? Could employees accept to receive Security Tokens rather than shares?

In the world of start-ups as well as large groups, it is very common for employees to receive shares to supplement a cash income and align the interest of the employee with that of the company.

The problem with equities is that their value is not shared until the company does an IPO. But with the increase in private funding in recent years, these operations are carried out more and more later. For example, Drop Box’s IPO came 13 years after its creation. Throughout this period employees who had stock could not resell them on a regulated exchange.

It is this liquidity problem that tokens can solve and probably revolutionize the way employees are paid. Listing a token on an exchange is indeed much simpler and in some cases almost instantaneous. The prestige and requirements of crypto trading vary a lot, but if you want to list a token on an exchange such as Liqui and put them on sale, it is possible.


The tokens will, therefore, help to streamline the payment of employees in with share equity. This is certainly the bet that some start-up, such as Quidli, have done. Quidli is indeed a French start-up supported by Consensis, whose objective is to offer traditional companies solutions to tomkenize their assets in order to facilitate the circulation.

From this point of view, Security Tokens appear as an excellent way to raise funds and distribute them among employees of the company.

Another significant advantage of Security Tokens lies in the possibility of valuing them using the valuation tools traditionally used for stocks and bonds. In a previous article, we talked about the complexity of valuing utility tokens because of the novelty and diversity of their business models. This problem does not exist with Security Tokens, which makes them much safer and easier to market. It should be noted, however, that the price of Utility tokens will be determined on crypto exchanges as for Utility Tokens, according to the laws of supply and demand, but it will be possible to estimate with much more precision if they are over or under-valued through valuing their the underlying asset they represent.

Of course, this is only an example and this logic can apply to all existing assets, opportunities are unlimited.

Hyperledger Project: How to Make the Blockchain Flexible!!


The Hyperledger project was initiated in 2015 by the Linux Foundation, a group of members from different industries and a community of developers to meet the application needs.

IBM was one of the first members. The project now has more than 200 members, an active structure (“Fabric”) and 7 other projects under development. Hyperledger is an open source and open governance project that offers its members a technological structure to develop a project based on a blockchain (protocol, blockchain and smart contracts). It also offers an environment and the tools necessary to develop the project and put in relation to the different parts of the project.

The objective is to set up an open source and inter-industries platform to develop blockchain-based projects and enable them to experiment quickly. Hyperledger offers 5 structures (Fabric, Sawtooth, Indy, Iroha and Burrow) and 4 tools to facilitate the development of applications are currently in development (Cello, Quilt Composer and Explorer). Hyperledger goes further than Bitcoin and Ethereum by proposing to align the protocol with the very practical needs of applications developed by companies. Hyperledger Fabric.


One of the main features of Hyperldger Fabric is its flexibility. Its goal is to allow the most interaction between hyperledger members while being closer to their operational needs. Hyperledger offers four types of services: Identity Services, Policy Services, Blockchain Services, Smart Contract Services.


– Identity Services: as its name indicates this service allows to manage the identity of the members of the network.

Policy Services: manages network access issues, privacy issues, consortium rules, and consensus rules.

– Blockchain Services: this service manages the issues related to the peer-to-peer communication protocol, the state of the blockchain, the consensus algorithm used by the consensus mechanism.

– Smart Contract services: provides an execution environment for Chaincode. This service is only available to “full nodes” also known as “validating nodes.” This service also includes secure containers (“secured containers”) corresponding to the Ethereum Virtual Machine (“EVM”) used for the execution of Chaincodes. The applications communicate with each of these services through APIs. CLI is an interface used to invoke these APIs.


The Hyperledger Fabric model is made up of many elements that we will describe individually:


1- Members (“Peers”): “Peers” are members of the network who initiate transactions and maintain the status of the blockchain. There are three types of members: the Endorsers Peers or Endorsers have the mission to receive, validate and sign the transactions they receive and return them to the application that created them. “Ordering services” have the task of collecting the transactions that have been validated, adding them to the blocks and sending them to the “Committing Peers”. These check that the transactions have not been completed several times and the signature and add them to the blockchain.

2 – Assets: assets represent tangible or intangible assets that are represented on the blockchain and traded over the network, such as financial securities or food. These properties are formalized on Hyperledger in “<key.value>” in a Json file.

3 – Chaincode: these are the smart contracts used on Hyperledger. Their function is to define the assets that we must evoke by organizing their storage, as well as the functions that make it possible to act on these assets and change their state. Smart contracts can also include application-specific policies and policies.

4 – Ledger: the blockchain used by Hyperledger is the same as the other blockchain, that is to say, a register which marks in time the changes of transactions or state of the blockchain. The state changes on the blockchain are initiated by the Chaincode functions itself powered by transactions sent by network members. This operation is not very different from that used by Ethereum. A <key-value> is attached to each transaction which makes the blockchain a storage register for <key-values>.

5 – Channels: these channels offer the possibility of using “Fabric” privately and confidentially, ie only by members who have been shortlisted and on a private blockchain. However, it is possible to make transactions between different channels through Chaincode cross-links according to the rules determined in the Chaincode.

6 – Membership: Unlike public blockchains like bitcoin that are open to all, the blockchains used by Hyperledger are private and therefore imply that the identity of all members is known. The identié of “Peer Nodes”, “Client Applications”, “Business Entities” and “Administrators” is digitally established through an X.509 certificate. These certificates contain the role of each of the entities and their level of access to the information contained on the blockchain.

7- Consensus method: the consensus mode is the technique used by the members of the network to decide which block of transaction will be next to be added to the blockchain and by which member. Verification of the order and validity of transactions is part of the consensus mechanism.

Hyperledger has a significant advantage in this regard. The fact that the members of the network can choose between different methods of consensus. As we have already mentioned in our article on the differences between public and private blockchains, the mode of consensus depends on the level of trust between the members of the network. The more confidence there is, the more the consensus mode can be light. Indeed the mode of consensus ensures the security of the network, so it is normal that a network on which members do not know each other adopts a more secure mode of consensus (like the mechanism of the Proof of Work for example).

In the case of Hyperledger, the members of the network know each other, so the chosen consensus mode may be less secure (such as PBFT, “round robin policy” or “Simple Consensus”). Of course, it is also possible to use the Proof of Work mechanism with Hyperledger.


Hyperledger Fabric first offers the ability to use a blockchain and set it to match the needs of network members. Fabric allows to set up private blockchain and to assure the confidentiality of the transactions realized between the members.

It is also possible not to reveal the identity of the members who joined the network. Fabric then segregates the created blockchains, one from the other, while allowing the exchange of information between them using Chaincodes.

Hyperledger thus offers an extremely efficient and flexible development environment for creating a blockchain-based network.

Why Blockchain is a great tool for Companies?

blockchain for business

No business evolves in a vacuum. Companies develop relationships with other organizations, whether social, commercial or governmental.

The purpose of a business is to create value. But a company will create value by circulating goods or services through this network.

The goods concerned can be of two natures: tangible or intangible.

Tangible goods are all the material goods that you can touch: a car, a house, a DVD, a coin.

In contrast, intangible assets are immaterial. For example, music, films, financial assets, patents, title deeds or identity. With the digitization of our societies, the list is now almost infinite.

Ledgers are responsible for recording the transfer of these goods from one organization to another. When a property is transferred between two organizations, the latter two update their records. For example, when a company transfers real estate to another company, both companies will reflect the sale on their balance sheet. Similarly, the administration will update its various registers (tax, real estate …), or the banks that will transfer a sum of money from the account of the first company to the second.

The fact that each network entity has its own registry and its own process to update it has many disadvantages. It is initially inefficient since the action is replicated by all members separately. It is then very expensive since each member of the network must devote a number of hours and therefore important means to update these registers. It is finally risky since each member of the network must ensure the security of his systems alone.

If the network uses the blockchain, there is only one register. Each member has a copy of the general ledger that is updated simultaneously each time a block is added to the blockchain. The network, therefore, has a single system, which results in significant time savings and economies of scale.

The different advantages of the blockchain:

– Decentralized: The blockchain is a decentralized database. In other words, all members of the network have a copy of the blockchain in their systems. This feature makes it possible to organize and facilitate the access of all members to information that is always the same for everyone, which increases trust between members. This feature also ensures the security of the latter since to change or remove it, it is necessary that all databases of all members are also changed or canceled.

– Immutability: Once the transactions are added to the blockchain, it is not possible to return to it. The fact that we cannot go back on the transactions adds trust between the members of the network.

– Chronological: The blocks are added one after the other without it being possible to change their order of addition. This feature allows you to keep a history of adding transactions to the blockchain and easily resolve any conflicts between network members.

– Instantaneity: Transactions are signed and added to the database almost instantaneously which, in a large number of cases, saves time and significant operational expenses.

– Finality: means that two transactions cannot be added at the same time to two different blocks. This characteristic, which is not specific to private blockchains, ensures that there is no conflict between the different members of the network.



The blockchains used for businesses are different from the one on which bitcoin is based.

It is important to understand that bitcoin is a cryptocurrency that works by using a public blockchain, that is to say open to all.

Companies use private blockchains or consortium. The latter propose four major differences:

– Members: members of the blockchain are chosen. Private and consortium blockchains are not open to all, members are chosen and their identity is known. This element is essential because it will allow to apply to the blockchain much lighter and more efficient security procedures than for public blockchain in which the members do not know each other. Consensus mechanisms such as “Pratical Byzantine Fault Tolerance” will be able to replace the very heavy mechanisms of the “Proof of Work“.

– Private: it is first possible to make private certain transactions. On a public blockchain, all transactions are accessible to everyone, even if the members’ identity is not directly accessible because they are represented by their public address. In private blockchain, it is possible to programme the blockchain so that members only see the transactions that affect them.

– Consensus: the people in charge of adding the blocks to the blockchain are chosen and identified. In public blockchains such as bitcoin or Ethereum, all members can participate in the consensus process without being selected.

Smart Contracts: smart contracts are not unique to private blockchains. Ethereum for example is a public blockchain on which smart contracts are deployed. In business networks based on a private blockchain or consortium, smart contracts are used to exchange business logic.

Private blockchain
Private blockchain


Given these elements, what are the benefits of blockchain:

– Time Savings: The fact that transactions are instantly added to the blockchain by all members of the network at the same time, can really impact the speed of transactions between members of the same network. For example, a letter of credit can take several days to establish. With a blockchain, it would be exchanged immediately.

– Money Gains: All members update the blockchain at the same time, in other words they all agree on the state of the register they share. This avoids the use of internal and external audits for each network member.

– Limits the risks: Firstly because the registry is decentralized, which implies that all members of the network have a copy. This aspect makes the blockchains more resistant to the risks of cyber attacks. Added to this is the fact that blockchains are protected by very strong cryptographic mechanisms.

On the other hand, there is only one shared register and not a different register for each member, which considerably limits the risk of discrepancies between the different registers.

Increases trust between the members of the network, since they are constantly in agreement on the state of the transactions that they realize between them.



Shared databases

This type of project can be a good way to start creating an organization network around a shared database.

Each member retains their current systems, but adds information to the blockchain directly or through a third party.

Each network member controls who can access this data. The configurations are multiple. These data can be contained in a single set or in several subgroups. A subgroup for each member for example.

These shared databases make it possible to gather all the information that a network wishes to share in a secure and very efficient way. This allows network members to access this data in real time.

Supply chains

The airbus parts supply chain is an excellent example of an inter-industry organization in which blockchain adds value.

This organization allows to save on the blockchain all the parts and their origins, the program that created them, and their replacement. In other words, the blockchain offers a centralized database of all the constituent elements of an aircraft as well as the moment at which they were added to the aircraft.

This database is therefore a proof of the origin of the parts, the way they were made and their assembly process. This makes it possible to immediately detect the damaged parts and to deduce the origin of the problem.

It is also possible to imagine that in the near future smart contracts will automatically order the missing parts.

What works for a complex environment like the assembly of an airplane also works on a smaller scale. For example, it is likely that all the foods in your refrigerator will be soon saved and plotted on a blockchain. In the same way, smart contracts can automatically recommend food when it has been consumed.

EVERLEDGER is an example of a supply chain based on a blockchain. It aims to avoid any pollution of the diamond supply chain by diamonds from parallel markets.


Some institutions (bank or real estate) may have an interest in including all their property portfolio on a blockchain, to ensure that the valuation of the latter is accessible by all parties with interest and in a secure manner.

The blockchain offers here the possibility to have a real-time view of the entire portfolio and its valuation which encourages managers to better manage it and understand the risks.

The blockchain is powered by transactions by the different systems of the organization. The latter therefore has a chronology and tamper-proof log which greatly facilitates the internal audit and saves time and money.

Letter of credit

They are indispensable for international exchanges. They have always existed, but as we have already mentioned, they are often complex to implement. The blockchain allows to replace the signature process, which usually takes several days, by an exchange of consents almost simultaneous. For example, the triggering element of the letter of credit could be the electronic signature of the customs officer who scanned an RFID chip attached to the goods being transported.



Blockchain is still an emerging technology. It’s actually hard to get used to the technology and find a really useful use of the blockchain. Therefore, it is recommended to start with simple and easy-to-implement projects to move towards more complex projects. The following projects can give an idea of progression:

1 – A compliance register: create a shared database allowing to have a real time view of all data while enjoying the benefits of the blockchain: immutability, purpose, timeline, security. These properties make it easier to access data by the various interested parties: auditors, business, regulator. Note that this first step can be done at a single company level.

2 – A shared registry by a Consortium: the next step is to extend the database beyond the enterprise. The idea is to include certain members of the industry in which we are located in order to facilitate exchanges and the sharing of registers.

3 – Exchange of assets: during this stage, the consortium members start exchanging assets through smart contracts. These assets are at this stage only information.

4 – Creation of a market: exchange of assets between the members

Token Economics: How To Value Tokens?

Blockchain image
Blockchain image

In a previous article, we described the revolutionary organization of ecosystems based on a blockchain, but also their diversity and complexity. Faced with the variety of structures that have appeared in the past few years, the central question of the best method to value the tokens issued and used by these networks came up.

Unlike traditional companies, each of these projects develops a business model of its own. It is therefore difficult to develop a valuation method that would apply equally to all start-ups using blockchain technologies.

On the other hand, there are many methods for traditional companies such as “Discounted Cash Flows” and many indicators such as “Price-Earnings Ratio”. The main difference with token-issuing ecosystems is that there is no cash flow, since tokens themselves ensure the flow of value.

It is also important to remember that the blockchain industry is still nascent and that there is little or no history of ecosystem valuation. It is therefore almost impossible to analyze the behavior of tokens in the past.

It is therefore necessary to imagine new methods to value the projects. As we have already mentioned, each Altcoin is a decentralized network that aims to solve one or more problems. Tokens are issued to allow this network to exchange value and develop, as does money in a national economy. The tokens therefore have a functional value resulting from their use in the ecosystem. This functional value is particularly difficult to determine because of the number of data (often subjective) which influence this valuation (such as “Staking” or the velocity of the chips).

The difficulty of valuation is reinforced by the fact that the value of a token is not only functional, it is also speculative. Part of the value of the tokens, which is difficult to quantify, is directly related to speculation. The latter could be defined as the value resulting from the impact of token trading on the exchange of cryptocurrencies. As evidenced by the high volatility of some tokens, this value can be perfectly uncorelated from the functional or actual value of the token. It is usually based on a purely technical analysis of price curves, rather than a thorough analysis of the ecosystems on which the token is based.

decentralized idea
decentralized idea

However, several methods have emerged to try to value a blockchain-based ecosystem and to deduce the price that the tokens should have. The valuation model proposed by Chris Burniske is by far the most famous model and we will focus on that one. You can also check out the models developed by Vitalik Buterin, Brett Winton, Willy Woo and Percy Venegas.

Equation of Exchange

Chris Burniske is the first to propose applying the Equation of Exchange concept to projects based on decentralized registry technology. This equation is traditionally used to determine the value of a currency in an economy. As we mentioned, tokens play (among other things) the role of money within their ecosystem, so it is possible to apply this formula to them.

Chris Burniske points out, however, that he does not use this technique to determine the price that tokens should have in the present or the future, because the information we can collect about these ecosystems is still nascent. He uses it more as a method to ask the right questions and better understand the environment in which the project evolves. The equation is presented in the following way:

M x V = P x Q


M = the total value of the chips

V = the velocity of the chips, that is to say the number of times they have been traded over a given period.

P = in the case of cryptoassets, P represents the price of resources monetized by the network. If we take the example of SiaCoin, it will be used to determine the dollar price of Gigabite available storage, represented in $ / GB.

Q = total resources used by the network. In the case of SiaCoin, this would be the number of Gigabites available on the network. If we multiply P and Q (where P = $ / GB and Q = GB), we get an amount in $.

PQ represents the exchange of value in the ecosystem. It is in a way the GDP of the micro-economy created by the protocol and the network. But this GDP is recorded on the blockchain. Thus the GDP of an ecosystem corresponds to the volume of transactions in reference token, even if this indicator must be relativized because of the many transactions between exchanges which, according to Chris Burniske, correspond to about 30% of transactions and are purely speculative.


Once we have the PQ value in dollars, we have to find “V” to be able to deduce “M”. The latter would allow us to value all the tokens (M = PQ / V). Once we know these elements and have been able to get a value for “M”, we are able to determine the “Current Utility Value” or “CUV” of a token. The CUV is obtained by dividing “M” by the number of chips in circulation (with the exception of “Bonded” or “Hodl’d” tokens).

Token Velocity

“V” is the velocity of the token, which is the number of times a token changes hands in a given period. But this velocity depends on the use of tokens in the development of the protocol by the members of the network. The more the protocol provides for the use of tokens between the members of the network, the more the circulation of these tokens and therefore the velocity will be important. The velocity of the chips is an important indicator of the volatility of the chip you want to buy, even if its determination will be impossible if it is a project under development. Indeed, the velocity of the tokens of a network is generally calculated over a period of one year according to the following method:

Velocity = Total Volume of Transaction / Average Volume of the Network

Let’s take the example that Chris Bruniske uses in his article:

“For example, in 2016, the network (bitcoin) processed an average of $ 160 million worth of transactions in US dollars a day, for a total of $ 58 billion in one year. Bitcoin’s average asset size in 2016 was $ 8.9 billion (M). As a result, V = $ 58 billion / $ 8.9 billion, or 6.5. A velocity of 6.5 means that in 2016, each bitcoin changed hands 6.5 times. In fact, a small percentage of bitcoins were probably traded much more than that, while a higher percentage was stuck in the hands of the hodlers, but later. By comparison, the velocity of the USD M1 money supply is currently 5.5, although it has fallen dramatically since the 2008 financial crisis. “

According to Nate Nead, a project that encourages its users to keep the tokens will create value, unlike a network on which the velocity is too important. But according to him, if the velocity is too low, there will be a lack of liquidity on the network, causing a drop in price. It takes a minimum of velocity for a token to reach its true value.

In the two most famous valorization formulas (those of Burniske and Buterin), the value of a token is inversely proportional to the value of a token.

For the value of a token to grow, it is therefore essential that the protocol provides mechanisms to achieve a balance between circulation (velocity) and conservation (“staking”) of tokens.

Several methods allow for example to limit the velocity of a token:

– a consensus method based on the “staking” of tokens, such as the Proof of Stake or the Node consensus developed by NEO.

Gamification to encourage the possession of tokens: this is a mechanism to encourage users to use the protocol and application to acquire more chips. Steemit is a great example: the more chips you have, the more influence you have on the network and your ability to earn chips. So the more chips you have, the more chips you will earn by participating in the protocol.

– Make it a store of value: Bitcoin / Ether.


A Great Explanation of Tendermint and Cosmos!


We have transcribed the really exciting speech of Gautier Marin-Dagannaud, product engineer at Tendermint, during the CryptoMondaysParis from 23/07/18 at Station F in Patis!

Gautier: So, hello everyone, my name is Gautier, I’m an engineer at Tendermint, and today I’m working on a project called Cosmos. So I know that it is not necessarily well known in the French-speaking ecosystem. Who knows Cosmos, or has already vaguely heard of Cosmos? Not that bad. I’m going to talk about the Cosmos vision, which is an alternative to the vision of smart contracts and decentralized applications today, which are mostly developed on blockchains virtual machines, blockchains that run a virtual machine like Ethereum.

The vision of Cosmos is based on three points, and the first point, was to allow developers to develop their own blockchain, what we call our application specific blockchain, that is to say, an application for a blockchain. Unlike on Ethereum, we will develop its smart contract, then deploy it on Ethereum, that is to say full of applications that run on the same blockchain. We propose an application per blockchain. I will explain later why we chose this design.

The second is that we want all these blockchains, which are now easy to develop, to talk to each other, that is, to exchange tokens and data. This is the problem of interoperability. This is the second thing we try to solve.

And the third thing we try to solve is the problem of scalability, that is to say, the rise to scale, which today is almost all blockchains we have problems of scalability, we try to solve this problem.

I’ll explain a little bit how we get to that.


The first point is to allow people to deploy their own blockchain easily. And so here is where the Tendermint product comes in. For that, we need to come back in 2014. In 2014, if we wanted to develop its decentralized application, we did not have much choice. Most people, what they were doing was either they were deploying something on the protocol, on Bitcoin directly, which was quite limited, or they were rebuilding a blockchain from the beginning, which was very hard and very long. That’s why qu’Ethereum worked well, they came up with a new value proposition where they said now, it’s easy to deploy decentralized applications. That’s why today, almost everyone deploys on Ethereum.

Tendermint started in 2014, so at the same time as Ethereum started, we started thinking about another vision. We said, instead of making a single blockchain on which everyone will build its application, we will create an engine that will allow everyone to create his blockchain easily, which was not possible before.

To understand how this engine works, we must understand how a blockchain is constituted. Basically, there are three fundamental layers, there is the network layer, which is the layer that propagates the messages, there is the consensus layer, which allows the nodes to agree on the same state at the same time, and the application layer, which in fact gives meaning to the message and depends on the use case, what is called business logic. For example, for Bitcoin, it is accounts with scales, for a governance application it would be the rules governing governance.

And so Tendermint will propose, as engine, the network and consensus layers, so that the developer only has to focus on the application layer. And these network and consensus layers are both difficult to develop, and we propose a powerful engine and the developer can then really focus on the application layer.

In addition, Tendermint has a lot of advantages. The first advantage is that this application layer can be developed in the programming language you want. We are not limited to Solidity, we can develop it in C, C ++, Go, whatever we want. The second advantage is that Tendermint is a very powerful blockchain engine, in the sense that it is called Byzantine Fault Tolerance, BFT. For the little note, today, BFT is a word that comes up quite often in the world of blockchain. In 2014, Tendermint’s CEO, Jae Kwon, was the first to return to the 1980 papers, and bring this BFT research back into the world of blockchain, which is today, and which Casper of Ethereum and others for the Proof of Stake.



Tendermint is a BFT engine, it has two interesting properties among many, which are instant finality, once that a transaction is included in a block, it can not be canceled, and the second is the light client which is very easy to implement on Tendermint. This is not the case on the Proof of Work blockchains. Another interesting point is that Tendermint allows you to develop applications, blockchains both public and private. So, whether your application is for a public blockchain in Proof of Stake or a private blockchain in Proof of Authority or others, you can do it on Tendermint.

So, now, we have plenty of easy-to-develop blockchains with this engine. But the fact that all these blockchains are developed on an engine that has the property of instant finality as already said, it allows to connect them together. We developed a protocol called IBC, Inter Blockchain Communication Protocol, which allows to connect these blockchains that have this property of finality between them. In a decentralized way, obviously. Today, we already know how to connect blockchains centrally, what we do not know is to connect them in a decentralized way.

So we have this protocol, now, IBC, which allows to connect blockchains that have finality. All blockchains developed at Tendermint have it, but for example, other blockchains like Casper also have this finality property.

Now we can connect the blockchains together. How do we go to a network, to a blockchains internet? This Cosmos, basically, is a network of blockchains, an internet blockchains, that is to say an ecosystem where blockchains can talk to each other. The naive solution is to connect all the blockchains with each other, but that does not work very well, because the internet has not been built like that for obvious scalability issues. If we have M blockchain in the network, we will grow in M squared. It does not take very long. In fact, what Cosmos does is that we have a hub and spoke architecture, that is, we have hubs and zones, and hubs act as routers.

If I want to develop my blockchain in Cosmos, I use Tendermint in a few days and I develop a blockchain, and then I put an IBC connection with the hub, and I’m connected with everyone. There may be several hubs, of course, but there will be many more areas than hubs.

So the Cosmos Hub is what we are developing today at Tendermint, and it will be the first blockchain in Cosmos, and that will mark the launch of Cosmos. For those who follow a little closer, it should happen very soon, in a few weeks.

The third problem I’m going to talk about is scalability. How do we get there? In fact, there are two ways to achieve scalability, the first is that Tendermint alone can reach several thousand transactions per second, and if Tendermint reaches its maximum, that is that our application has too many transactions, too many transaction requests, what we can do is put multiple strings in parallel, with the same application, and resolve via IBC so that they understand each other. It’s called vertical scalability, and it will not be until 2019. But theoretically, it’s feasible.


Here is. These were the three points of Cosmos to understand. Now, I’m just going to finish on the vision, because for those who have entered the blockchain and actually know that smart contracts and decentralized applications on Ethereum, it may sound a bit weird to say, “Why would I go to develop my application as a blockchain, with my own blockchain, rather than developing it on a smart contract? ” So, there are several reasons why we think it’s a better design in the long run, the first is that, for performance reasons, how to lift the virtual machine between the application and network layers or consensus, we gain in performance, as most languages that compile directly are more efficient than languages that run with a virtual machine. Performance.

The second is flexibility. We can develop its application in the language we want. But that’s not all. When we have a blockchain that is a virtual machine, by the virtual machine imposes limits on the application. And these limits are perfectly justified because there are many applications that can come, so you have to put limits to guarantee security. An example, on Ethereum, it is not possible to have automatic code execution. Any code execution must be triggered at the base by a Hedge-user. And that makes sense, on Ethereum, if we want to guarantee safety.

But if you have an application for a chain, then security issues evolve and you can have automatic code execution. Which unlocks lots of use cases. We, for example, for the Cosmos Hub, use a lot of automatic code executions. Just be careful, like any program, that you do not have an infinite loop and so on. But if we have a problem, and we have an infinite loop, it does not matter because we turn on our own blockchain, we can completely go back, and other blockchain will not be affected.

And that brings me to my third point, which is, like me, the most important, and that is often not mentioned much today and for me, the reason is that it is a very black point on the blockchain, virtual machines like Ethereum et cetera, that’s the issue of sovereignty. That is to say that when one deploys its application on a blockchain of the Ethereum type or virtual machine in general, one has a very limited sovereignty. The two very well known examples on Ethereum are the DAO Hack and the Parity Hack.


DAO Hack, there was a bug, a lot of money was lost, what did we do? There was governance that was not enough. The governance of the DAO was not enough we needed to spend on the governance of the network, and there was a hard fork. I think we will not see a hard fork anytime soon, considering the scandal it has done.

There was the Parity Hack, there was also a lot of money lost, there was no hard fork. Why ? Because the Parity governance, of the Parity application, is not aligned with the governance of the protocol below, which runs the application.

What we want is to realign the governance. That is, an application for a blockchain. If the application has a problem, we can go back. This is not a problem because this governance is limited to the blockchain. The other blockchains will not come back if a BK goes back. And we keep this compatibility via Cosmos. So the general idea is to say: “Everyone has his own sovereignty, his own independence, but is still able to discuss with others and scale.”

That’s the vision for which we think that in the long run many applications will come on their own blockchain beyond scalability issues, beyond the issues of flexibility, there are also issues of sovereignty which are very important.

Finally, where we are today, we hope to launch in a few weeks. Cosmos is an ecosystem, it’s a decentralized network, it’s a blockchain network. Anyone today can come and build their own blockchain in Cosmos. The Cosmos Hub which is developed by Tendermint, which is also a company, will be the first blockchain that will mark the launch of Cosmos, but today you can come and develop on Tendermint, whether you have a private project or a public project, for Proof of Stake, for Proof of Authority, today you can build on Tendermint, it is a stable product that has been developed since 2014, it has been audited many times.

The Cosmos tool kit is a little more recent, a little less stable, but we approach the stability and within a few months, we can have an ecosystem that will develop it. I finally add that we have more than fifty projects today that are developing on Cosmos today. We hope that many more will join them quickly. Here. Thank you.


Vitalik Buterin Explains Casper’s last developments in a ‘Tweet Storm’


This Tweet thread can be found on Vitalik Buterin’s Twitter page. We have transcripted it here for convenience.

“ Today I am going to make a tweet storm explaining the history and state of Ethereum’s Casper research, including the FFG vs CBC wars, the hybrid => full switch, the role of randomness, mechanism design issues, and more.

Ethereum proof of stake research began in Jan 2014 with Slasher. Though the algorithm is highly sub-optimal, it introduced some important ideas, most particularly the use of penalties to solve the nothing at stake problem.

Here’s Vlad’s retelling:

The History of Casper — Part 1
Republished from the Ethereum blog at the request of Steve D.

We spent much of late 2014 trying to deal with “long-range attacks”, where attackers withdraw their stake from deposits on the main chain and use it to create an alternate “attack chain” with more signatures than the main chain, that they could fool clients into switching too.

If the attack chain diverges from the main chain at a fairly recent point in time, this is not a problem, because if validators sign two conflicting messages for the two conflicting chains this can be used as evidence to penalize them and take away their deposits. But if the divergence happened long ago (hence, long-range attack), attackers could withdraw their deposits, preventing penalties on either chain.

We eventually decided that long-range attacks are unavoidable for pretty much the reasons PoW proponents say (eg. However, we did not accept their conclusions. We realized that we could deal with long-range attacks by introducing an additional security assumption: that clients log on at least once every four months (and deposits take four months to withdraw), and clients simply refuse to revert further than that.

Proof of work
Proof of work

This was anathema to PoW proponents because it feels like a trust assumption: you need to get the blockchain from some trusted source when you sync for the first time. But to us dirty subjectivists, it did not seem like a big deal; you need some trusted source to tell you what the consensus rules of the blockchain are in any case (and don’t forget software updates), so the additional trust required by this PoS assumption is not large.

Here’s Vlad’s retelling:

The History of Casper – Chapter 2
This chapter describes the game theory and economic security modeling we were doing in the Fall of 2014. It recounts…

Now that we settled on deposits and penalties, we had to decide what those deposits and penalties are. We knew that we wanted an “economic finality” property, where validators would sign on blocks in such a way that once a block was “finalized”, no _conflicting_ block could be finalized without a large portion of validators having to sign messages that conflict with their earlier messages in a way that the blockchain could detect, and hence penalize.

I went on a bit long, and ultimately unproductive, a tangent on a direction I called “consensus by bet”:

Understanding Serenity, Part 2: Casper
Special thanks to Vlad Zamfir for introducing the idea of by-block consensus and convincing me of its merits, alongside…

Consensus by bet was an interesting construction where validators would make bets on which block would be finalized, and the bets themselves determined which chain the consensus would favor. The theory was that PoW also has this property, as mining is a bet where if you bet on the right chain, you gain (reward — mining cost), and if you bet on the wrong chain, you lose the mining cost, except with PoS we could push the odds on the bets much higher.

The odds on validators’ bets would start off low, but as validators saw each other getting more and more confident about a block, everyone’s odds would rise exponentially, in parallel, until eventually, they would bet their entire deposits on a block. This would be “finality”.

In the meantime, Vlad started heavily researching mechanism design, particularly with an eye to making Casper more robust against oligopolies, and we also started looking at consensus algorithms inspired by traditional Byzantine fault tolerance theory, such as Tendermint.

Vlad decided that traditional BFT was lame (he particularly disliked hard thresholds, like the 2/3 in PBFT and Tendermint), and he would try to effectively reinvent BFT theory from scratch, using an approach that he called “Correct by Construction” (CBC)

In Vlad’s own words:

The History of Casper — Chapter 5
In this chapter, I recount the story of Casper’s birth as an application of the principles of Aviv Zohar and Jonatan…

The correct-by-construction philosophy is very different from traditional BFT, in that “finality” is entirely subjective. In CBC philosophy, validators sign messages, and if they sign a message that conflicts with their earlier message they have to submit a “justification” proving that, in the relevant sense, the new thing they are voting for “has more support” than the old thing they were voting for, and so they have a right to switch to it.

To detect finality, clients look for patterns of messages that prove that the majority of validators is reliably voting for some block B in such a way that there is no way they can switch away from B without a large fraction of validators “illegally” switching their votes.

For example, if everyone votes for B, then everyone votes on a block that contains everyone’s votes for B, that proves that they support B and are aware that everyone else supports B, and so they would have no legitimate cause for switching to something other than B.


I eventually gave up on consensus-by-bet because the approach seemed too fundamentally risky, and so I switched back to trying to understand how algorithms like PBFT work. It took a while, but after a few months I figured it out.

I managed to simplify PBFT and translate it into the blockchain context, describing it as four “slashing conditions”, rules that state what combinations of messages are self-contradictory and therefore illegal:

Minimal Slashing Conditions
Last week Yoichi released a blog post detailing the process of formally proving safety and liveness properties of my…

I defined a rule for determining when a block is finalized, and proved the key “safety” and “plausible liveness” properties: (i) if a block is finalized, then there is no way for a conflicting block to get finalized without >= 1/3 violating a slashing condition; moneybalresorts to(ii) if a block is finalized, 2/3 honest validators can always cooperate to finalize a new block. So the algorithm can neither “go back on its word” nor “get stuck” as long as > 2/3 are honest.

I eventually simplified the minimal slashing conditions down from four to two, and from there came Casper the Friendly Finality Gadget (FFG), which is designed to be usable as an overlay on top of any PoW or PoS or another blockchain to add finality guarantees.

Finality is a very significant advancement: once a block is finalized, it is secure regardless of network latency (unlike confirmations in PoW), and reverting the block requires >= 1/3 of validators to cheat in a way that’s detectable and can be used to destroy their deposits. Hence, the cost of reverting finality can run into the billions of dollars. The Casper CBC and Casper FFG approach both achieve this, though in technically different ways.

Note that Casper CBC and Casper FFG are *both* “overlays” that need to be applied on top of some existing fork choice rule, though the abstractions work in different ways.

In simplest terms, in Casper CBC the finality overlay adapts to the fork choice rule, whereas in Casper FFG the fork choice rule adapts to the finality overlay.

Vlad’s initial preference for the fork choice rule was “latest message-driven GHOST”, an adaptation of GHOST ( ) to proof of stake, and my initial preference was to start off with hybrid PoS, using proof of work as the base fork choice rule.


In the initial version of Casper FFG, proof of work would “run” the chain block-by-block, and the proof of stake would follow close behind to finalize blocks. Casper CBC was full proof of stake from the start. At the same time, Vlad and I were both coming up with our own respective schools of thought on the theory of consensus *incentivization*.

Here, a very important distinction is between *uniquely attributable faults*, where you can tell who was responsible and so can penalize them, and *non-uniquely attributable faults*, where one of multiple parties could have caused the fault. The classic case of a non-uniquely-attributable fault is going offline vs censorship, also called “speaker-listener fault equivalence”.

Penalizing uniquely attributable faults (eg. Casper FFG slashing conditions) is easy. Penalizing non-unquely-attributable faults is hard.

What if you can’t tell if blocks stopped finalizing because a minority went offline or because a majority is censoring the minority?

There are basically 3 schools of thought on this issue:
(i) Penalize both sides a little (ii) Penalize both sides hard (Vlad’s preference) (iii) Split the chain into two, penalize one side on each chain, and let the market decide which chain is more valuable (my preference).

Or, in my words:

The Triangle of Harm
The following is a diagram from a slide that I made in one of my presentations at Cornell this week: If there was one…

In November 2017, the Casper FFG slashing conditions, plus my ideas for solving “the 1/3 go offline” problem through a “quadratic leak” mechanism, became a paper:

[1710.09437] Casper the Friendly Finality Gadget
Abstract: We introduce Casper, a proof of stake-based finality system which overlays an existing proof of work…

Of course, I was well aware that appealing to the social layer to solve 51% attacks was not a very nice thing to do, so I started looking for ways to at least allow online clients to *automatically* detect which chain is “legitimate” and which is the “attack” in real time.

Here is one of my earlier ideas:

Censorship rejection through “suspicion scores”
Each client maintains a “suspicion score” for each chain C, which works as follows: score = \underset{v \in votes}{max}…

It was something, but still sub-optimal; unless network latency was exactly zero, there was only a guarantee that clients’ suspicion scores would differ by at most delta, not that clients would fully agree.

In the meantime, my main criticism of Vlad’s model had to do with “discouragement attacks”, where attackers could credibly threaten to make a 51% attack that causes everyone to lose money, thereby driving everyone else to drop out, thus dominating the chain at near-zero cost. Vlad (along with Georgios Piliouras) started doing economic modeling to estimate the actual cost of such an attack under his model.

It’s worth noting here that all of these issues are not unique to proof of stake. In fact, in proof of work, people tend to simply give up and assume preventing 51% attacks is outright impossible, and a 51% attack is a doomsday that must be prevented at all costs. But, as is the Ethereum tradition, Vlad and I were both unaware that the word “ambitious” can be anything but a compliment and kept on working on our separate approaches to disincentivizing, mitigating and recovering from 51% attacks.

In early 2018, Vlad’s work on CBC started to move forward quickly, with great progess on safety proofs. For the state of progress in March 2018, see this epic two-hour presentation:

In the meantime, Casper FFG was making huge progress. A decision to implement it as a contract that would be published to the Ethereum blockchain made development easy. On Dec 31, 2017, at 23:40, we released a testnet written in python:

Alpha Casper FFG Testnet Instructions – HackMD
Alpha Casper FFG Testnet Instructions Welcome to the first release of the alpha Casper FFG

Unfortunately, development of FFG then slowed down. The decision to implement FFG as a contract made some things easier, but it made other things harder, and it also meant that the eventual switch from EVM to EWASM, and single-chain Casper to sharded Casper, would be harder. In addition, the team’s work was being split between “main chain Casper” and “shard chain Casper” and it was clear there was enormous unneeded duplication of effort going on between the Casper and sharding teams.

In June 2018, we made the fateful decision to scrap “hybrid Casper FFG as a contract”, and instead pursue full Casper as an independent chain, designed in such a way that integrating sharding would be much easier. The switch to full proof of stake led me to start thinking much harder about proof of stake fork choice rules.

Casper FFG (and CBC) both require the *entire* validator set to vote in every “epoch” to finalize blocks, meaning there would be tens to hundreds of signatures coming in every second. BLS signature aggregation makes this practical in terms of computational overhead but I wanted to try to take advantage of all of these extra signatures to make the chain much more “stable”, getting “100 confirmations” worth of security within a few seconds.

Here were my initial attempts:

Attestation committee based full PoS chains
Status: not a new idea but discussed before, but deserves its own post for reference and to assist with understanding…

However, all of these approaches to the fork choice rule had a weakness: they split up validators into “attesters” and “proposers”, and the proposers, being the key drivers of block production, had outsized power. This was undesirable, primarily because it required us to have a strong source of on-chain random number generation to fairly pick the proposers. And on-chain randomness is *hard*, with simple approaches like RANDAO looking more and more problematic.

RANDAO beacon exploitability analysis, round 2
Let us suppose that, for pure proof of stake, the main chain uses a simple RANDAO-based RNG. That is, the main chain…

Justin Drake and I went off to solve this problem in two ways, Justin by using verifiable delay functions which have a deterministic and verifiable output, but take a large amount of unparallelizable sequential time to compute, making manipulation ahead of time impossible. and myself by making a major concession to the Cult of Vlad™, using GHOST-based fork choice rules to greatly reduce the dependence on proposers, allowing the chain to grow uninterrupted even if >90% of proposers are malicious, as long as >50% of attesters are friendly.

Vlad was very happy, though not fully: he preferred a version of GHOST based on validators’ *latest messages*, whereas I preferred a version based on *immediate* messages:

Recursive proximity to justification as FFG fork choice rule
There are two desirable goals for fork choice rules that the current proposed fork choice rules [1] [2] fail to…

Around this time I also managed to come up with a way to “pipeline” Casper FFG, reducing time-to-finality from 2.5 epochs to the theoretically optimal 2 epochs:

Beacon chain Casper FFG RPJ mini-spec
The purpose of this document is to give a “mini-spec” for the beacon chain mechanism for the purpose of security…

I was very happy that the RPJ fork choice rule (which I have since renamed “immediate message-driven GHOST”) is nicely compatible with Casper FFG in a way that most others are not and that it has a very important “stability” property: that the fork choice is a good prediction of the future fork choice. This seems obvious but is very easy to accidentally make fork choice rules that do *not* have this property.

The most recent development of all is a result that latest message driven GHOST may, due to a technicality, only give 25% fault tolerance within two rounds, but immediate driven message GHOST (with FFG or CBC) still gives the full 33% (no writeup yet). The main tradeoff between FFG and CBC is that CBC seems to have nicer theoretical properties, but FFG seems to be easier to implement.

In the meantime, a *lot* of progress on verifiable delay functions has been made:

VDF reading list – CodiMD

Also, I recently decided to look into Leslie Lamport’s old 1982 paper, where he had a consensus algorithm that has 99% fault tolerance if you add the assumption that all nodes, including observers, are online with low network latency:

A Guide to 99% Fault Tolerant Consensus
We’ve heard for a long time that it’s possible to achieve consensus with 50% fault tolerance in a synchronous network…

The network latency assumptions arguably make this unsuitable as a primary consensus algorithm. However, there is one use case where it works *really* well: as a substitute for suspicion scores for 51% censorship detection. Basically, if a 51% coalition starts censoring blocks, other validators and clients can detect that this is happening, and use the 99% fault tolerant consensus to agree that this is happening, and coordinate a minority fork.

The long-run goal of this research is to reduce reliance on the social layer as much as possible and maximizing the cost of destabilizing the chain enough so that reverting to the social layer is necessary.

What’s left now? On the FFG side, formal proofs, refinements to the specification, and ongoing progress on implementation (already started by >=3 teams!), with an eye to safe and speedy deployment. On the CBC side, much of the same. Onward and upward!


Byzantin Fault Tolerance: The Private Blockchains Consensus Mechanism

Algorithme des Généraux Byzantins
Algorithme des Généraux Byzantins

With the question of the Byzantine default, we touch one of the main problems that face decentralized networks relying on a blockchain.

When computers are organized in networks, there are mainly two types of defaults: the default of a computer for purely material reasons (” fail Crash “) or the fact that a computer communicates incorrect information to the other computers of the network, in a deliberate way or not.

This last case is known as the ” Byzantine failure “. The question that arises is to know up to which number of ill-intentioned members, it is possible to have trust in a consensus mechanism and thus in the good health of a decentralized network.

In a decentralized network, the purpose of a consensus mechanism is to ensure that all members agree on the order of the addition of the transactions to the shared database, i.e the blockchain.

It is possible to reach an honest consensus in spite of the existence of malicious members whose objective is to harm the network by preventing it from reaching this consensus. When a certain number of members cannot be trusted, a consensus cannot be securely reached and the order of transactions added to the database is not certain anymore. If this happens this is the end of the network because no transactions cannot be exchanged between the members anymore.

Many of the solutions that have been devised over the last twenty years to solve this issue also know as the « Byzantine default problem », are widely used nowadays to develop consensus protocols that meet the expectations of blockchain applications.

1 – The problem of the Byzantine generals:

The example of the “Byzantine Generals” is has been used to illustrate the “Byzantine default” and to better understand the difficulties faced by a decentralized network to reach consensus.

The problem of Byzantine generals was first imagined by Leslie Lamport, Robert Shostak, and Marshall Pease in their 1982 essay, and is intended to illustrate the communication and understanding problems (voluntary or not) that may arise between different members or nodes of the same network.

You must imagine a group of generals directing the Byzantine army encircling an enemy city and whose objective is to carry out a coordinated attack. To do this, the leading general decides the time of the beginning of the assault and orders his messenger to carry the information to other generals. Each general must pass on the information he receives to the other generals so that they all have the same information and launch the attack at the same time. If they do not attack at the same time, they are sure to lose the battle.

Byzantine generals
Byzantine generals

The problem arises when one or more generals are malicious and decide to transmit information that is not correct such as advancing the attack by one hour. The consequence is that some of the generals will attack at a certain time and the other party an hour later.

Transposed into computer science, each general represents a computer of the network and the time of attack, the order of the transactions on the ), it is necessary to set up algorithms that will reach a common answer despite the malicious members, that is to say if we take our example, to agree on a single moment to attack the city.

2 – The proposed solutions

The algorithms of the Byzantine Generals better known as “Byzantine Fault Tolerance Algorithms” (“BFT”) are highly sought after because they guarantee to maintain security properties on a network as long as a certain number of “f” nodes are not failing.

This approach of the consensus system implies that the identity of each member is known, which requires the existence of a centralized entity in charge of the management of this data. From this point of view, the protocols based on a BFT algorithm are more adapted to “private” blockchain models or requiring permission (“permission blockchains”) and offer a much greater resistance to attacks.

This type of protocol has the advantage of the finality of its consensus which means that a block added to the blockchain cannot be questioned (by a separate fork). This is not the case with the mechanism of the Proof of Work where two blocks can be added at the same time to the blockchain creating two competing chains.

With BFT it is not possible to create a “fork” on the blockchain, which permit to align execution and confirmation of transactions and thus accelerate considerably their realization.

 3 – Practical Byzantine fault tolerance: the example of Hyperledger

The protocol of “Practical Byzantine Fault Tolerance” (“PBFT”) was presented for the first time in an essay by Miguel Castro and Barbara Liskov published in 1999. This protocol has the huge advantage of being able to perform tens of thousands of transactions per second, which is, of course, a must to be applicable to large networks.

The algorithm maintains security properties as long as less than one-third of the nodes or replicas are corrupted.

The basic communication pattern under the PBFT protocol is realized in several steps:

byzantine fault tolerance
byzantine fault tolerance

  1. REQUEST: The client sends a message including its service request to the main server.
  2. PRE-PREPARE: The primary server assigns a number to this request and sends a PRE-PREPARE message to the other servers (members).
  3. PREPARE: Each server sends each of the other servers a message of “PREPARE”.
  4. COMMIT: Each server sends each of the other servers a message of “COMMIT”.
  5. REPLY: Once a sufficient number of servers agree on the order of the request, each server sends its response to the client.

If the client does not receive a response after a certain period of time, it retransmits a request to all the replicas that transmit it to the main server. If it does not implement this request in a given period, the replicas will consider that the main server is missing and will start a “change of view” to all servers. When enough replicas have started a “change of view”, they are able to receive the next request using a different primary server.

The performance of the PBFT has been significantly improved through the use of “message authentication code” (MAC) that allows authentication of different servers rather than using digital signatures.

This system is therefore both fast and efficient but also decoupled from any form of participation in the network (unlike Proof-of Stake), which allows small members to participate in the regulation of the network.

A major problem, however, is that PBFT-based systems require all parts of the network to agree on an exact list of participants. Indeed, leaving the open network would put him at risk of a so-called « Sybil attack », during which an attacker can create a significant number of nodes in order to dominate the system since decisions are made if the vote reaches a threshold (or certain quorum).

The Practical Byzantine Fault Tolerance is therefore particularly suitable for closed blockchain networks requiring identification and validation of each member.

4 – The Hyperldger Consensus:

1 – The customer creates a transaction and sends it to a peer in charge of the submission (“submitting peer”) of his request. The “submitting peer” can here be compared to the main server that we have described above.

2 – The “submitting peer” prepares a transaction and sends it to the peers in charge of approving new transactions or activating existing transactions (“endorsing peer”). These “endorsing peer” can be compared to “replicas” also mentioned above.

3 and 4 – The “submitting peer” then collects the approval and submits the transaction to the service of consensus (“consensus service”).

5 – The “consensus service” then distributes the transaction to the members of the network who will verify that it contains no error.



5 – The Ripple Ledger Consensus Process: Probability Based Voting

In a very basic way, Ripple can be considered as creating a network of people or entities that claim credit authorizations from each other.

A server (called the “s”), which is an entity that has access to the Ripple Server Protocol and therefore participates in the implementation of the consensus (unlike the Ripple Client Software that can only make transactions), has a “Unique Node List” or “UNL” (literally a “single node list”). Only the vote of Servers contained on this list of participants is taken into account to reach the consensus. It is therefore a subset of the members of the network which, when taken collectively, is considered by “s” to be trustworthy. Note that the server “s” is not obliged to trust a server individually.


Concretely, the Ripple Protocol consensus consensus algorithm (“RPCP”), takes place every second in several steps:

  • Each server gathers all the valid transactions it received before the beginning of the consensus process in a batch called “candidate group” (“set candidates”) that it then makes public.
  • Each server then groups all the candidate groups of all the list servers on its “Uniq Node List” and votes on the accuracy of each of these transactions.
  • Transactions that receive a minimum percentage of vote are selected for the next vote, if there is one. Transactions that do not meet the required percentage are rejected and add to the next “group of candidates”.
  • The last vote requires that each transaction has a minimum of 80% of the vote of all the servers of the UNL, otherwise the transaction can not be added to the register (“Ledger”). This means that as long as 80% of the servers on the UNL are honest, no fraudulent transaction can be approved.


6 – Stellar Consensus Protocol (“SCP”): the Federated Byzantine Agreement

SCP is developed to deal with the problem of “Byzantine Default”, leading to consensus without having to obtain the consent of all members of the network. This is an important difference with other Byzantine fault resistant systems that require the consent of network nodes to achieve this.

More precisely, SCP proceeds in 4 phases in the same way as protocols like Paxos. The nodes of the network exchange a series of polls to confirm and finally accept a value. For that, it determines a minimum quorum, ie a minimum number of members of the network having to vote to obtain an agreement. Each node chooses one or more parts of quorum (“quorum slice”) and included in each part of the nodes in which it has confidence. Each of these quorum shares will then intersect each other.


To reach an agreement, the SCP protocol relies on a property called “the intersection of quorums”.

The idea behind this concept is that each node that is honest has a network topology strong enough to reach a consensus. For this, we assume that if we remove the nodes that are malicious and the nodes that depend on it and that the intersection of the quorum is maintained, then the topology of the network is strong.

Cryptoeconomics is THE revolution!


Most of the mechanisms used in a blockchain network existed before Satoshi’s whitepaper. Peer to peer network, Cryptographic Hashing, Asymmetric key encryption, Merkle Tree, for instance, have been well known for a long time. The true revolution brought about by the Bitcoin in 2009 is cryptoeconomics and it is paramount to understand it if you want to grasp the real value of the blockchain revolution.

The purpose of cryptoeconomics is to build strong protocols that will be able to govern and securely develop peer-to-peer decentralized networks.

Peer to peer networks exist for some time. “Torrents” for instance, that many people used to share folder online, are peer to peer networks. However, they lake efficiency because members are happy to download content, but have no interests in sharing theirs. Blockchains, through cryptoeconomics, would give members this incentive to share folder, by giving token in exchange for instance.

In other words, blockchain networks could be compared to an incentive machine that will inject market structures in decentralized networks.


How does Cryptoeconomics work?

A peer to peer network such as the bitcoin is a decentralized and autonomous economy that needs to be implemented by its members since this function is not delegated to a third party anymore. But these members like any humans, are rational and will not spend their time working for a network for free. That’s the reason why they need to be rewarded and this is precisely what Satoshi has invented.

Cryptoeconomics refer to “crypto”, which are the technical mechanisms of a decentralized network, and “economics” which are the way these mechanisms are organized to incentivize members of the network to action it or develop it. To speak in basic terms, cryptoeconomics is the use of money to secure and develop a decentralized network.

Security means that the decentralized network must find a consensus on the way to update the shared database (i.e the blockchain) even when a certain amount of its members are not trustable (the Byzantine General Attack).

Development means that the members of the network are incentivized to update the shared database, i.e to use the service provided by the protocol and the network. We will now describe these two points.

The Byzantine General Attack

This concept is essential to understand how rogue members of the network can attack a decentralized network. It is important to note that attack would only come from the inside, i.e from persons who have downloaded the protocol and have decided to use it against the rest of the network. If several members are acting in breach of the rules of the protocol or exploiting them at the same time, the network is under attack since it could become impossible to update the shared database and so monitor additional transactions among members of the network.

Byzantine generals
Byzantine generals

The example of the Byzantine Generals has been created to illustrate the concept. You just need to imagine 5 generals ready to attack a town. They are all placed around the city and they just need to coordinate with each other to launch the attack. If at least 2/3 of the army does not attack at the same time, they will be outnumbered by the city’s army and lose the battle. The leading general sends a messenger to the general who is next to him to communicate the time of the attack and ask this general to transmit the information to the next general. But what if this general is a traitor and decides to communicate a different hour.

Cryptographic mechanisms used by decentralized networks to solve the Byzantine attack issue are different depending on if we refer to a private or a public blockchain. With public blockchain, the most famous is Proof of Work, which has been popularized by the bitcoin. Other mechanisms such as Proof of Stake or Delegated Proof of Stake are gaining traction every day. With private blockchain mechanisms such as Practical Byzantine Fault Tolerance (used by Hyperledger for instance) and the Federated Byzantine Agreement (used by Stellar and Ripple) are more developed.

The Bitcoin example

On one hand, Bitcoin protocol uses several cryptographic mechanisms to ensure that users safely detain their bitcoin (Asymmetric key encryption), that transactions are securely added to the blockchain (cryptographic hashing used to link each block and transactions) and that all the history of network transactions is impossible to change (Merkle Tree).

On the other hand cryptoeconomics through Proof of Work are used to secure the system because it makes attack too expensive to be conducted by a rational attacker.

The Bitcoin protocol makes it extremely expensive to mine bitcoin in order to avoid the “51% attack”, which implies that a miner gathers more than 50% of the network hashing power. Crossing this limit would give this miner the possibility to prevent other miners to add a block to the blockchain and undo previous blocks. But it is estimated that gathering 51% of Hashing power would require USD 6 billion in hardware and consume USD 4 million per day (, which obviously cannot be profitable just by removing a block from the blockchain. This is why we mention that the high cost of mining ensures the security of the network. This is also why these costs increase proportionally to the number of miners acting on the network. It is important to note that the “51% attack” is not simply theoretical since a mining pool reaches this threshold in 2014.

Finally, the Proof of Work mechanism is tailored to reward minors for their participation in the consensus process. Each miner who managed to add a block to the blockchain will receive 12,5 bitcoin. This way minors can repay their investments in mining material, electricity and bandwidth.

According to Elad Verbin, “Nakamoto found a clever game-theoretic solution to the classic Byzantine Generals’ Problem, by paying the generals a salary as long as they act honestly, but garnishing that salary if they are caught trying to cheat.”


Several incentive systems already exist

As we just explained, each decentralized network organized over a blockchain is an autonomous ecosystem, which uses different mechanisms to induce its members to participate in the development and/or the security of the network. Members are generally rewarded with tokens issued by the protocol.

These revenues can be very varied and depend on the problem that attempts to resolve the protocol. We can see patterns appearing and we will describe in a separate article the cryptoeconomics primitive, which have already been identified. In this article we will, however, identify three modes of recurring compensation:

– Dividend

– Buyback

– Increase in value

Cryptocurrencies 2018
Cryptocurrencies 2018


A token generates dividends when the members of the network are paid for their participation in the network. This participation may take several forms:

The provision of resources: users of a network are paid for lending to the network resources, which belong to them. These resources can be very varied:

It may be the calculation capacity of a computer installation: Mining is the most common example. As we described above, the miners of a network (bitcoin for instance) offer to the network their own computer installation calculation capabilities (hashing power), to complete the consensus mechanism (proof of work for example) and add the transactions of the network on the blockchain. Minors are therefore paid for their contribution to the network, in bitcoin created by the Protocol (and costs attached to transactions). Mining is also the only mechanism for the creation of bitcoin.

It can also be memory space: In the case of SIA, Storj, Filcoin, Madsafe, users are paid to let other members of the network dispose of a part of the memory of their computer installation.

By the production of content: Steemit is a good example. It is the first social media on which members are paid for posting articles and comments. Each member of Steemit vote for the articles that he reads and generates remuneration for the writer that is proportional to its level of involvement in the network. So as soon as you vote for an article, the protocol automatically grants remuneration. The more Steem token (token issued by the Protocol Steemit) you possess, the more your vote will make a significant remuneration to the author of the article.

The number of people who votes for your article is important because the more vote you receive the more money you receive. It is not rare to see writer be paid $500 for their articles.

Steemit is an excellent example of the way the Internet will evolve in the coming years. At the moment we provide the few platforms that we use (Facebook, Twitter, Intagram…) with all our content and personal data for free. But this period will end pretty soon. With the decentralized protocols and the new social media platforms, you no longer need to give your personal data and you are paid for the content that you add. This formula will apply very soon to all platforms who wish to survive the blockchain.

For example, I would not be surprised to see websites such as Tripadvisor compensate its users with travel tokens for any comments added on the hotels that you have visited. These tokens would grant you free nights in other hotels.


In cryptoassets universe, token redemption does not take the same form as securities redemption that we are currently experiencing. The redemption is carried out in an indirect manner by the destruction of tokens.

It is indeed important to understand that in a network where the number of tokens is limited, destroying a certain number of tokens increases the value of the remaining tokens.

Bitshares consensus mechanism (delegated Proof of stake), for example, allows “witnesses” wishing to be elected to propose to the members of the network of “burn” (“burn”) a part of tokens that they will receive from the protocol as a reward for their work of “mintage” (we talk about “mintage” for proof of stake mechanism and not of “mining”, but the meaning is the same). Instead of getting richer, they, therefore, propose to remove these tokens from the network and thus to increase the value of other tokens.


This is a common component of any investment, yet it is important to understand how and why a token gets value.


Gold Supply Chain to Be Digitally Encoded with the Blockchain


The delivery of physical gold may soon be safer thanks to a company that intends to use blockchain – the technology that powers the cryptocurrencies operations. Emergent Technology Holdings wants to use the platform in securing gold transactions.

Blockchain ledgers are like online journals that can’t be tampered with. Once something has been written on a blockchain ledger, the information stored remains available for public viewing forever.

By digitally encoding gold in blockchains, private holders and central banks will be able to account for each ounce of the metal throughout the delivery. Blockchains Expert claims that this could upend the current banking system since banks are traditionally the gatekeepers to these ledgers. The technology allows both parties in the transaction to update the data in the ledger without the need for a middleman.

Gold is one of the most important and expensive resources on Earth that has both trade and intrinsic value. Currently, FXCM details that an ounce of gold fluctuates at around $1,228 (€1,050 or £931). At the minute, central banks use a “trust” system whenever they allow foreign central banks to store gold. However, this isn’t a very reliable method for storing the precious metal. This issue was highlighted when Germany’s central bank wasn’t able to repatriate some of its precious metals from the US immediately in 2013.

With blockchain technology, storing and tracking the movement of gold should be better and more secure. If Emergent Technology becomes successful in using blockchain in digitally encoding gold delivery, the trust system may be rendered obsolete in the near future.

This isn’t the first time that a company hoped to use blockchain in track gold. Emergent Technology said, however, that their approach is “fundamentally different” because their mission is to track “responsibly-sourced gold.”

“Emergent is looking to build an ecosystem,” said Emergent Technology’s Chief Commercial Officer Mitchell Davis. By tracking responsibly sourced gold from mining operations, the company hopes to “connect all steps in the supply chain.”

Gold-backed cryptocurrencies?

Apart from digitalising gold deliveries, Emergent Technology formed a partnership with Yamana Gold to create G-coins – a cryptocurrency backed by gold. According to their plans, one G-coin will be pegged to one gram of gold’s spot price. As a blockchain-based investment, G-coins will act as digital certificates that can be used for diversifying investment portfolios or payment.

By creating a digital token that is fully backed by gold, Emergent Technology hopes for a more liquid market for trading the metal. The cryptocurrency market is one of the most popular industries today. Bitcoin, for instance, is often compared to gold as a safe haven investment. Although naysayers have a very different opinion, combining gold with digital coins is still predicted to attract even veteran investors.

Decentralized Applications Stack

Data center

The current development of public blockchains (as private ones) is very similar to what happened to the Internet at its beginning. The Internet was only constituted of intranets, i.e private networks attached to an institution or to a group of people working on the same subject. Yet these intranets were working in isolation without the possibility to communicate with each other and share information.

At the beginning of the 1970s, appeared the TCP/IP protocol which has been created to link these networks and allow inter-network communication (hence “internet”). It is the same now with the networks based on a blockchain. Even public networks, that are open to everyone such as the bitcoin network, operate independently fro m the other public networks without the possibility to communicate directly between them. In the current state of the technology, it is not possible to directly exchange bitcoins for Ether (issued by Ethereum another public blockchain). It is only possible to buy ether with bitcoins on a cryptocurrency exchange which connects buyers and sellers.

Before describing the solutions appearted until now to connect these different blockchain (II), it seems interesting to briefly describe how the Internet, as well as the applications that use it, are organized and shall communicate the information (I). This will also help us to better understand how the decentralized networks use the existing structure of the Internet to develop.



The Internet as we know it today works through several layers of a same stack that can be resumed as follows:


Each of these layers include one or several protocols which gaol is to select and prepare the information before it is sent through the Internet.

You need to follow the arrows to understand the path of the information through these layers from sending to receiption of the information. The information travels from the top of the stack which is where it is sent and goes through the different layers of the stack to reach its recipient.

The first layer is the application that represents the interface with the users. If we take the example of a mail box, an application that we all use. Writing an e-mail and clicking on the button “send” triggers the process of sending data to your recipient. Your e-mail will be sent using a protocol called SMTP (Simple Mail Transfer Protocol). A protocol is a list of rules and steps allowing a good communication between several computers. There are many types of protocols and the choice of protocol depends on the layer and the type of data sent. For clarity reasons, we will focus on the most commons protocols. At application level, the File Transfer Protocol (FTP) will be used if you send files or HyperText Transfer Protocol (HTTP) if you send a query on the web (for example a Google search).

The next layer is the transport layer which objective is to organize the transport of the message without taking into account (at this stage) the type of network to route the message. The most common protocol in the transport layer is “TCP” (for “Transmission Control Protocol”), which objective is to segment the message into multiple packets to be able to send them separately on the internet, check that all messages arrive well in order, send new packets when some are not arrived and verify that the network is not congested.

On the side of the party who receives the message, the role of the TCP protocol is to collect the packets and reassemble them to reconstitute the message.

The goal of the Internet Layer is to send the packets that we have just described through the Internet network. To do this, the Protocol “IP” (for “Internet Protocol”) performs two main actions. First, it identifies the recipient thanks to his address “IP” as well as its location. Then it sends the packets to the server the closest to the final recipient.

Finally, the lowest layer of the stack is the network which objective is to transmit the message physically, using the infrastructure of the Internet network (wifi, telephone cable, optical fiber…).

You will find below a short summary of the different protocols used according to the layer of the stack of the Internet network:


2 – The Generic stack of a Traditional Application:

We focus here on the first floor of the generic stack, the “application” layer. The three constitutive elements of an application are the storage, the treatment and the communication of the data.

  1. The storage of the data.

First it is important to différentiate the “File System” (“files system”) from the “database” (“database”). The first system is a set of programs which allows you to add and to classify folders on the hard drive of a computer while the second is a set of programs that allow you to organize and maintain a database.

A file system is less complex to the extent that it is tailored to store unstructured data, i.e all data are based on different formats. For example, some files will be in Word, others in PDF, but will not share a common structure. The idea is therefore simply to add these data in files and organize those files in order to find the data easily (through an index for example), as you would do with any computer.

It is different with a management system database in that it organizes the data with a similar structure to which we can apply a logic of organization generally in the form of tables. In other words, it is possible to create a program (based on a language like SQL for example), which will manage the automatic storage of data and all other operations necessary for the management of these data. For this reason, this type of system such as MongoDB, MySQL and Cassandra, is more complex to put in place, but very suitable when the amount of data to manage and the number of users who need to access it is important. Create logical management allows to avoid duplicate datas and strongly secures the system.

However, there is still the problem of the access and the update of these data when several applications use the database at the same time. The problem is to organize the use of the database by these different applications to ensure that they use only the last updated version and do not insert their changes in an hold version. Processes better known as “multiversion concurrency control” are essentially intended to allocate the use of a database according to the needs of such or such application and allowing its simultaneous access.

In practice, the applications send transactions to change the database. The “multiversion concurrency control” have a mission to organize these transactions and avoid any conflict. As we will see, the mechanism of consensus of a blockchain can be defined as a distributed « multiversion concurrency control ».


  1. The treatment of data

The processing of data corresponds to all operations carried out by the computer on the data. This definition covers for instance the transformation of data into information readable by the machine or the movement of data across the processors and memories.

Depending on the applications, this treatment of the data can be performed with or without registration of the state of this information. To simplify any computer is a “state machine”. This means that a computer continuously checks if a request was submitted to him by constantly operating a “state function”. Each time a query is submitted, the computer detects this change of state and action it. For example, when you press an icon to activate an application, your computer will launch the application and once completed, save that the state of the application is now “enabled” until you decide to close the application in which case the computer will record the new state relating to this application.

When a command is only operated, but the new state is not registered, we are talking about a stateless program, of an application or a protocol. The difference between the two lies in the recording or not of the action.


  1. The communication

As described earlier, the TCP and IP protocols have been imagined to connect different networks by allowing the transfer of data.

However, these protocols transmit the data in the same manner regardless of their values. The Protocol decomposes the information in packets and sends the packets until it has received the confirmation that all packets have been received and reconstituted by the recipient.


3 – The stack of a decentralised application:

The decentralized applications based on a blockchain are not totally different in their structure from traditional applications that we have just described. We have identified the various components of an application to be able to compare them with those of a decentralised application. Note that we will rely on the bitcoin protocol but also and especially on the Ethereum protocol to illustrate the different layers of a decentralised application, since this last platform has been created to develop decentralized applications.


1 – The storage of data

As already mentioned, a blockchain is a database of a new kind since it is at the same time decentralized, transparent and protected by cryptographic processes.

data storage
data storage

We have just explained what is a « multiversion concurrency control ». The role of a blockchain through the consensus mecanisms is the same, but achieved in a decentralised manner.

The primary role of a consensus mecanism is to organize the addition of the transactions to the blockchain. Networks based on a blockchain are by definition decentralized. This means that the members of the network are in charge of updating the database and not more a trusted third party. The difficulty of consensus mecanisms is to ensure that transactions are added to the blockchain only once and according to an order that is appropriate to all members of the network. It is indeed vital for the life of the network to ensure that a transaction is only added to the blockchain only once in order to avoid the problem of the « double spending ».

Imagine that the bitcoin that you receive has also been received by another person, the transfer of value over the Internet which is the main purpose of the bitcoin network would immediately be questioned.

When all the members of a network are anonymous, which is the case of the bitcoin network, a consensus mechanism is necessary to organize the addition of the transactions to the blockchain, i.e. to determine which members will have the right to add the transaction and get the reward attached to it (12.5 bitcoins at the present time – this number is programd to decrease at regular intervals).

In the databases universe, a transaction is used to change the database. This is true with bitcoin since each transactions added in blocks include a new output. This output will then be added in the input to the next transaction which will also include a new output. Each transaction therefore amends the database by adding a new output. If you want to better understand a bitcoin transaction, you can refer to the article.

This is also true with smart contracts platforms such as Ethereum. Smart contracts are saved directly on the blockchain and actioned by transactions (commands sent by external accounts to the blockchain) or messages (commands sent by other smart contracts). In other words, the state of smart contracts on the database is changed directly by a transaction or a message.

With blockchains, the program in charge of the database management is therefore the protocol which brings together all the operating rules of the network. Its role is to define the rules that will have to be respected for the transactions to be added to the blockchain (size, information required, valid output, private key corresponding to the public key…).

In its initial form (the bitcoin one), the blockchain is the only location where data are stored. The blockchain is downloaded by all complete members of the network, so there are as many databases on the network that there are complete members. Members must therefore constantly update it, to ensure that are always adding blocks to the most updated blockchain.

The technology has evolved a lot since bitcoin appearance in 2009, and today it is possible to store network information in databases that are external to the network and its blockchain. This is the case with IPFS which communicates with the blockchain thanks to smart contracts.


  1. Data processing

The bitcoin blockchain which corresponds to the most basic form of the blockchain, only proposes the decentralization of data storage, as we have just explained. The other two aspects, the processing and the communication of data, remain specific to each member of the network. In other words, these activities are not divided among the members of the network.

With the creation of Ethereum and its decentralized virtual machine, we saw the first decentralization of data processing. Unlike bitcoin network, the Ethereum protocol proposes to store transactions in each of the blocks of the blockchain, but also and especially, computer programs, the famous smart contracts. The blockchain, therefore, becomes a « smart » database because it has relatively advanced computing capacity. The blockchain became « Turing complete ».

This means that the computer programs stored in the blockchain can be operated by users (by transactions sent from external accounts) or other contracts (by messages sent from internal accounts). However, the commands are actioned by the Ethereum Virtual Machine which is composed of all the computers of the network. When a smart contract is operated, all the computers on the network are running the program simultaneously and update the new state of the Smart contract in the blockchain.

It is important to remember that with Ethereum, we passed to the second stage of decentralization in which it is possible to gather thousands of computers of people who do not know each other in order to execute the programs of a global network. It is also the reason why Ethereum is sometimes called the « first world computer ». To learn more about the operation of Ethereum, you can refer to this article.


  1. Decentralised communication

At the moment, decentralized applications are still based on the communication stack of the Internet (TCP/IP) to exchange of information, but the technological developments could change this fact in the near future.

The stack of a decentralised application could therefore be simplified this way:


In the second part of the article, we will describe inter-blockchain communication methods.

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A General Introduction to Blockchain

Blockchain Concept
Blockchain Concept

With the current noise, everyone has heard of bitcoin, but fewer are those who know the blockchain. Also known as “Decentralized Ledger Technologies”, the blockchain is a major innovation which allows the bitcoin and other crypocurrencies to operate.

You may ask why peoples are so passionate about bitcoin and the blockchain? A first response could be that this technology brings what was missing to the Internet: the possibility of transfer value directly between users without intermediary.

The transfer of value over the Internet as it currently exists is 20 years late in comparison to the transfer of the information which democratization has been permitted by the development of the Internet. In the 1990s, Internet was a network highly compartmentalized composed of sub-networks which did not correspond with each other. For example, if you were a user of AOL email, you could send e-mail messages only to users of AOL. You could not send e-mail to the users of Genie (the ancestor of Gmail). Until SMTP (Simple Mail Transfer Protocol) was created to link all these networks.

It is the same now for the transfers of funds on the Internet. All financial institutions operate independently from each other, with different systems and generally incompatible. This is the reason why, the slightest international transfer takes several days and involves a cost ridiculously high.

The Internet has enabled the transfer of the information freely, the technologies based on the blockchain allow the transfer of value just as freely, immediately, without charge, and without consideration of volume or distance.

Proof of Work
Proof of Work

What is a blockchain?

A blockchain is a database shared among all the members of a network, which increases without interruption and whose objective is the chronological record, immutable and secure transactions among the members of this network.

Let’s collapse this definition to better understand:

  • Database: The initial vocation of a Blockchain is to store data. The blockchain is therefore a folder. The data are stored in blocks sealed and connected to each other using a cryptographic process. In other words, each block is a folder containing information and all of these records are linked to each other.
  • In perpetual growth: new folders are created without interruption and related to other at the same rate.
  • Decentralized: The database is updated and saved by all the members of the network. Each member of the network has a copy of the blockchain and updates it each time a block is added.
  • Chronological: blocks are added one after the other without any possibility to change the order of addition. This point is essential, because the transactions must be added with certainty to avoid double spending of the coins.
  • Immutable: To be able to edit a block, the blocks which have been added after him must be changed. However, to do this it would be necessary to modify each of the blockchains recorded by each of the members.
  • Censorship Resistant: the fact that each member of the network holds a copy of the blockchain makes it resistant to censorship. In other words as long as all members of the network have not been excluded or neutralized, it is impossible to undermine the integrity of the blockchain. When you think that the bitcoin network is composed of hundreds of thousands of members in all countries of the world, you understand a little better the level of inviolability reached by the bitcoin blockchain.


What problem a blockchain really helps to solve?

The Internet has liberalized the information in facilitating its circulation. It is indeed extremely easy to send a photo or video by e-mail. But in reality, you send a copy of this video and keep the original in your records or in your mail box. The problem with the transfer of value on the Internet is that you must ensure that the original is sent and that no copy is performed. Thus it is not possible to transfer euros on the Internet as you would send photos.

The blockchain solves the problem of the “double expense”, because it helps to ensure that the EUR 20 have been transferred only once. Up to today, we were forced to use trusted intermediaries, such as banks to ensure that only the original was transferred without being retained by the transmitter.

This technology therefore has the vocation to eliminate intermediaries by allowing users to exchange directly with each other. Bitcoin enables the exchange of monetary value, but registry Decentralised ledger technologies can apply to all areas of our society. It is indeed possible to record any type of property on a blockchain, dematerialized (music, photos, video, patents, identity papers…), but also the titles representative of material goods (title of ownership, the actions/obligations…), the list is endless.

This technology is a great tool to connect directly users of the Internet who do not know each other and allow them to exchange goods of value without consideration of distance or volume. It is in fact as quick and easy to send a bitcoin to your neighbor than 10 000 to an unknown at the other end of the planet.

Perhaps do you start to understand the reasons of the popularity of this new technology and its revolutionary potential in a society as centralized as ours. All trusted intermediaries could see their monopolies called into question in a near future.

The core elements of a network based on a blockchain.

To simplify, each of these networks is based on a protocol, tokens and a community of programmers, minors and of users.

The best way to understand the organization of a network based on a blockchain is to compare it to a national economy. A national economy consists of a currency (tokens) which is used by the citizens (community) according to the rules determined by the law (the Protocol) and stored in a banking system (the blockchain).


Each project based on a blockchain is an autonmous ecosystem that does not belong to anybody and at the same time to all members of the network who have downloaded the protocol on their computer in order to get access to the network.

There are now many types of structure, but to keep it simple we continue to take the bitcoin as example. If you want to access the bitcoin network and exchange bitcoins with other members, you must start by downloading a bitcoin compatible portfolio which function will be to store your bitcoins and create transactions. But what is generally not said is that by downloading your portfolio, you download a copy of the Bitcoin Protocol which allows you to access the network.

The protocol is a computer program created by the developer members, which brings together all the operating rules of the network (Constitution of transactions, their addition to the blockchain, interaction among membres, creation and circulation of tokens…).

The tokens are generated by the minor members according to the rules established in the protocol. These tokens are used by all the members of the network to exchange the value within the network and outside through cryptocurrencies exchanges.

Each of these ecosystems goals is to solve a specific problem. The objective of the bitcoin is to transfer value on the Internet, but there is also Ripple whose objective is to connect banks in order to facilitate transfers between institutions, Ethereum which is a platform offering a developing environment for decentralized applications (” Dapps”). Each cryptocurrency tries to solve a different problem.

The type of goal that has set the ecosystem also determines the type of blockchain used.

The different types of blockchains?

There are currently three types of blockchain: public, private, and consortium.

Public blockchains

Public blockchains are open to all, without any selection. In other words, anyone can become a member of the network by downloading the protocol which is open source and accessible to any person who has an Internet connection. To obtain a decentralized network without any intermediary, it is essential to put in place a public blockchain. In the current state of the technology, this type of blockchain is however very heavy to implement because of the complexity of the consensus mechanism.

Consensus mechanism is used by the minors to determine which one will have the right to add the block to the blockchain and get the reward (currently, 12.5 blocks plus the fees paid by the users to transfer their bitcoins). It is important to understand that minors are in competition with each other. Mining bitcoins is a business like other, minors have invested in computer equipment, Internet connections and electricity for the provision of the network in the hope to add blocks and retrieve the reward.

But the system of the “Proof of work” (“Proof of work”), which is still the most used system at the present time, is very complicated to implement and limit the development of the network. This method also involves a disproportionate consumption of energy which is reflected on the growing transactions costs.

This is the price to pay to obtain a network perfectly decentralized and autonomous. Yet this type of blockchain is not suitable for all types of projects.

Private blockchain
Private blockchain

The Private blockchains and Consortium

Access to a private blockchain is limited to members pre-approved. In other words, a member must respond to the conditions pre-established by the creators of the blockchain in order to access to the network and the services offered by the blockchain. The consensus mechanism is concentrated in the hands of one entity.

The problems of security being much more simple in the case of private blockchains because membres are known, it is possible to apply a consensus mechanisms much simpler, efficient and therefore easy to deploy such that the Bizantin Fault Tolerance. You probably wonder what these private blockchains may bring in comparison to shared databases as we currently know them?

The flexibility of this type of blockchain fits a large number of industries which have the constraints of operational or regulatory types.

For example, a distribution business that wishes to follow each of the products of its stocks using a blockchain could choose to use a private blockchain for its immutability, transparency, security and flexibility properties. Such company would have no need to use a public blockchain.

Similarly, a network of bank wishing to use a blockchain to perform and record transactions would be held by regulatory obligations of confidentiality and therefore forced to use a private blockchain or at least a Consortium as did the R3 network with its Platform of Smart Contracts” Corda”.

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Asymmetric key Encryption: how your public key and private keys are created?

Clé privé clé publique
Clé privé clé publique

The encryption of asymmetric key is a central mechanism in bitcoin operations and cryptocurrencies in general. Almost all of the existing tokens are exchanged through this mechanism. The name may sound scary at first, but the mechanism is relatively simple to understand.

Symmetric key

To better understand how works a system based on asymmetric keys, it is necessary to begin by describing what is a system of a symmetric key. In this system, the key used by the party which sends and encrypts the message on the one hand, and the party who receives and decrypts it, on the other hand, is the same, hence the term symmetrical. All the challenge for the parties is, therefore, to achieve the exchange of the common key in a secured manner.

The fact that the parties use the same key necessarily implies an element of trust between the transmitter and the receiver, that is obviously not adapted to decentralized systems such as the Bitcoin in which the parties do not know each other.

Symmetric key
Symmetric key

1 – The part that sends the message uses a cryptographic key to scramble its content.

2- The message can be sent to the recipient through a channel that is not secure.

3 – In parallel the sender transmits the cryptographic key to decrypt the message to the recipient.

4 – The recipient decrypts the message using the cryptographic key.


Encryption of asymmetric keys

Unlike the system of symmetric key, the system based on the encryption of public key uses two different keys to encrypt and decrypt the message, this is the reason for why this system belongs to the category of “encryption of asymmetric keys” (“Asymmetric Key Encryption”).

The interest of this system lies in the fact that you do not have to send the key which has encrypted the message to the recipient of the message. Both participants now have a set of key mathematically related one to the other. The public key is included in the encryption of the message, and the private key is used to decrypt it.

asymmetric key
asymmetric key

Depending on the type of cryptographic system used, the public key is obtained from an encryption of the private key or vice versa.

For example, the public key that you use to transfer your bitcoins is created from the private key by applying a series of a cryptographic hash.

If we compare the payment in bitcoin to the payment by credit card, your public key corresponds to the number on your credit card which can be freely shared with anyone. Your private key corresponds to your secret code which should not be disclosed since it gives you the possibility to validate transactions and therefore to spend your bitcoins.

public and private key
public and private key

If your private key is important, it is because it is always possible to find your public key from your private key, but not the opposite. It is indeed one of the main characteristics of a cryptographic hash. So you can transfer your public key to anyone since it is impossible to guess your private key from your public key.


The limits of the asymmetric encryption.

One of the main problems with the use of encryption algorithms public key lies in its low performance. For example, a symmetric encryption algorithm allows you to decrypt 256 bytes 4000 times faster than an asymmetric algorithm.

There are many encryption algorithms for the public keys. The two main ones are the RSA system of cryptography and the Elliptic Curve Cryptography. We will focus on this last algorithm since it is the system which has been adopted by the Bitcoin Protocol.

The RSA is the first system to have been used in the framework of the public key encryption and remains today the most used. Its name is derived from its three inventors Ron Rivest, Adi Shamir and Len Adleman, all three researchers at MIT. The encryption and decryption of the RSA are based on the principles of modular arithmetic whose description is beyond the scope of this Article.


Elliptic Curve Cryptography

The mechanism of the Elliptic Curve Cryptography has been retained by the or the designers of the Bitcoin Protocol to generate a public key from the private key.

In practice, a private key is a number of 256 bits obtained in a random manner. It is also recommended the use of a sophisticated pseudo-random system to generate your private key (cryptographically secure pseudo-random number generator – “CSPRNG”) to ensure maximum security.

The private key is then used to generate the public key using a multiplication on an elliptic curve:

The private key (K) will be multiplied by a point generator (G) located on the curve and the result will correspond to the public key (K), another point on the curve (or K = K*g). Without entering into the details of the multiplication on elliptic curve, it is important to note that the point (k) can be obtained from (k) and (g), but it is impossible to obtain the point (k) from (K) and (g) and this, although (G) is constant for all generations of bitcoin key.

Elliptic Curve Cryptography
Elliptic Curve Cryptography

In other words, it is possible to generate a public key from a private key, but it is impossible to find a private key from a public key. This is the reason why it is possible to reveal its public key to any security.

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11 Steps to Analyse an ICO: the Investor view (2/3)


In the previous article, we have introduced ICO and their basic mechanisms. We will now describe how investors should analyze ICOs in order to avoid scams.


There is a growing number of ICO proposed to the public every day so it becomes difficult to evaluate the potential and the seriousness of the project.

ICO rating is a good starting point to get an idea of the seriousness of a project. The more the risk related score is high, the less information are available to evaluate the project.

Another way to deepen your understanding of the project is to make your own opinion on the site It is one of the main discussion forums on crypto-currencies. If you visit the part dedicated to the Announcements, you will be able to find your project as well as the comments of users which are generally very rich in information.

Some initiatives have also started to appear in order to guide investors (and entrepreneurs) in their search. The “ICO Charter” is one of them and will help you dig into much more details. We would like to use it to structure our guide and just insert additional information/ideas to clarify some of the concepts.

ICO Charter
ICO Charter


  • Detailed and exhaustive presentation of the ICO/ITO Project

 Every serious ICO must have a website on which you will be able to find useful information, but you will also need to do your own research. The ICO website should give you many information on the project, the business model, and the team. An ICO without a website or an incomplete one is not a good sign and should be treated as a red flag.

  • Complete White Paper

The starting point of your analysis must be to read the «whitepaper». You can normally download this document on the website of the ICO. If not, it is usually sufficient to type the name of your project followed by “Whitepaper” in your search engine to fall on a PDF version of the document.

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The whitepaper is the explanatory document of the project, its operations, and its objectives. It is therefore essential to read it correctly in order to assess the project. Yet these whitepapers are not always easy to understand, because they refer to concepts relating to cryptography, crypto-economy, Network Computing (for the consensus) or to complex mathematical concepts.

However, you do not need to be a specialist in each of these areas to understand and evaluate a project. You will still need to have a basic understanding of the way a network organized around a blockchain works.

All serious projects have a whitepaper. The absence of this document or its imprecision are indicators of the lack of seriousness or preparation of the teams behind the project.

  • Detailed information on the team, market, product and legal entity(ies) sponsoring the ICO/ITO project

This is self-explanatory and will be detailed in below sections.

  • Bylaws, articles of incorporation and shareholding structure 

These are the constitutive documents of the legal entity created to support the ICO. As described in point 11 below, this entity should be registered in a “compliant country” to ensure that you will be in a position to file legal pursuits should the ICO reveal to be a scam. 

  • Provide information used to determine target Cryptocurrency raised

The founder of the project should clarify the amount of funds/cryptocurrencies, they intend to raise during the ICO.

It is also important to know the total number of tokens that will be issued in exchange of these funds. You should also be able to determine whether the tokens available to the public are limited or not. In the absence of limitation, your investment can quickly be drowned in the increase of available tokens. Except for specific reasons inherent to the project, it is therefore essential that the total number of token is determined by the Protocol.

  • Roadmap for ICO/ITO Project

The orientation of the project, as well as the stages of its development, should appear in the whitepaper or be described on the website of the project. If the project has not yet issued a prototype that you can try (” beta preview”), it is essential to understand where the leader of the project wants to go, on which dates and with the funds raised during the ICO.

  • Bios and resumes of the key players/staff of the project doing an ICO/ITO.

You must analyze the experience of the members of the team in charge of the project. It is generally considered that the composition of the team is responsible for 50% of the success of the project.

The leaders: Have they already been involved in projects relating to the crypto-currencies before? The fact that they have failed in previous projects must not be regarded as a negative point. The website of a serious project must have a page devoted to the team and provide a summary of their experience. The absence of such information should be perceived as a negative signal. It is also important to determine if the project benefits from the support of external consultants with a recognized competence in the industry.

The developers: Even if you have no programming knowledge, it is possible to evaluate the involvement of developers on the project. For this, you can go on the Github page of the project that you are interested in by typing “Github” and the name of the project in Google. For instance, this is the page for Steemit: Https://

Then you simply click on the tab “Code” to see the number of “commits” and their history, as well as the number of ‘Contributors” who participated in the drafting of the Code. “Commits’ are the number of changes/additions which have been performed on the source code of the project.

You can also refer to the number of stars awarded to the project for judging its popularity with the community.

CoinGecko website is also excellent to evaluate the involvement of the developers in the project. They analyze several websites where developers can deposit their improvement of the protocol source code and rate the project accordingly.

This information is important because they will give you the possibility to have a clear view of the team of developers and the history of their activities.

  • Independent check of key players/Staff good standing (‘Fit and Proper’) and on the advisors’ suitability and independence.

 You should check whether all the information provided by the founders of the project have been verified and certified by an independent tierce party. The name and details of this party should be mentioned on the website and ideally, you should be able to access its report.



Any serious project will have to appoint a law firm to make sure that the ICO/ITO does not breach any financial regulation. The lawyers will be involved in the creation of the legal structure issuing the tokens and receiving the funds. They will also determine if the tokens could be classified as securities in which case they would be subject to all the financial regulations relative to IPO.



  • Underlying legal entity issuing tokens and its recent financials.

 This point has already been described above under “Bylaws, articles of incorporation and shareholding structure”. 

  • A brief description of ICO/ITO project.

If the Whitepaper is correctly drafted, anyone should be able to understand the basics of the project and what are the objectives. As mentioned above, you will need some understanding of the mechanisms underlying the functioning of a decentralized network based on a blockchain to determine how the project improves the technology. As for any investment, you do not want to put your money in a project that you do not understand.

  • Project ICO/ITO business Plan.

One of the most important things you need to understand before you buy the tokens is how this token will interact with the protocol that has created it. The business models developed by Decentralised Ledger Technologies are indeed very different from the business models we are currently familiar with.

The purpose of the protocol is to solve a problem (for instance Bitcoin propose to solve the issue of value transfer over the internet) through its community of users and developers. All the persons involved in the development of the protocol are normally rewarded with the tokens issued by the protocol. The value of the token (when exchanged on crypto exchanges) will increase if the protocol and the community are successful in solving the problem they intend to solve.

So the business model of a decentralized project will depend on the issue the protocol intends to solve, on the role of the community in the development of the protocol and on the way this community is rewarded for its implication. Tokens are the currency of the ecosystem and can be exchanged for national currencies or other cryptocurrencies on crypto exchanges. In any case, tokens must play an important role in the development of the project because the value of the protocol is impacted by the velocity (i.e the circulation) of these tokens.

You need to understand why the tokens you are about to acquire, are necessary for the development of the protocol. If this is not clear to you then search again!

  • Amount of cryptocurrency sought.

 In this section, you want to clarify how many tokens will be issued in total, when they will be issued and how of these tokens will be retained by the founders of the project.

How many tokens?

It is very important that the protocol determines a total number of tokens that will be issued so the founders of the project do not decide to issue more tokens in the future and dilute the value of the one you have acquired during the ICO.


When will tokens be issued?

Tokens can be pre-mined or mined during the life of the project. Tokens are “pre-mined,” when they are all issued at the beginning of the project. This type of issuance is generally considered negatively by the communities of enthusiasts who see it as an opportunity for developers to retain a significant part of tokens.

It is preferable if the protocol is programmed to issue tokens during the development of the network. It is the case of the Protocol Bitcoin which creates new bitcoins every time a block is added to the blockchain in order to reward the work of minors. Yet the total number of bitcoins that will be issued is determined by the Protocol itself. This is the reason why we are talking about the bitcoin as a currency which is not inflationary.

How many tokens are retained by the founders?

This was particularly the case for the developers of ripple in order to stop criticism have been forced to pledge a significant part of their tokens for 10 years.

  • Use of proceeds

This point is detailed below, but it is important that the Whitepaper describe precisely how the ICO should be conducted. A guide should be available explaining all the steps form the transfer of your private keys to the reception of the ICO tokens.

  • The technical presentation of the project

This part might go deeper in details on the technical aspects of the project and describe how it improves the technology. If the project proposes a new type of blockchain for instance (as IOTA did with Tangle), the white paper will have to explain what the difference with the existing type of blockchain is, how it will store the transactions, who will be the miners, how they will be remunerated, show that this model is secured…

It is the same if the project intends to improve the consensus methodology (as Steemit, Eos and Bitshares with Delegated Proof of Stake for instance).

It will be important to understand if the project will implement its own blockchain and issue native tokens, or be constructed on top of another protocol (Ethereum for instance) and issue non-native tokens. As we described in our article describing the cryptocurrencies revolutionary business model, these two types of tokens have different functions and their valuation will also evolve differently over time.

  • Token structure, mechanics, issuance (primary) and post ICO/ITO (secondary) features for the specific project ICO/ITO

As we just mentioned, it is essential to understand the token structure, i.e if they are native or not, and what is their role in the functioning of the project.

  • Risk disclosures/Warning and disclaimers/Legal rules and a competent court in the EEA (European Economic Area)



Smart Contract (s) or Access to code or any technical data detailing the Token delivery process, and subsequent impacts

The code must be “open source” i.e open to all. It is the basis of the development of these decentralized protocols. If the code is not open to all without obvious reasons or inherent to the project itself, then this point is according to us a problem that will frighten the community and affect the development of the ecosystem.



These are very standard checks that need to be conducted in order to identify the origins of funds invested and ensure that they are not illegal. All banks and financial institutions are subject to these checks and should also be conducted in an ICO/ITO even if the law does not yet request them. These checks are:

  • Passport, ID Card or any form of State issued ID document for a physical person.
  • Articles of incorporation of a legal entity with authorized signatory officers Tax-Residency of an investor.

You can expect to go through these checks when registering for the ICO on the project’s website.



All the following points are self-explanatory and should be clarified in the guide provide available on the ICO website:

bitcoin wallet
bitcoin wallet

  • Disclosure of different types of ‘Wallets’, real-time traceability of collected cryptocurrency (and/or Fiat currencies) for the ICO/ITO
  • Disclosure of fees in tokens paid to advisors
  • Pre-sales Mechanics/Rules and disclosure of rules to offer discounts
  • Traceability of all crypto transactions
  • Disclosure of all fees used for and during the process of the Pre-ICO/ITO and actual ICO/ITO



  • The process of cryptocurrency proceeds ‘restitution in case the ICO/ITO target amount is not reached:

This part should be clearly explained in the guide available on the ICO website. If not, you should contact the founders of the project to obtain clarification.

  • Creation of an ICO/ITO Escrow wallet for cryptocurrencies

It is important to check that an escrow wallet managed by a third party is organized to collect the tokens sent by the investors. Otherwise, if the ICO is a scam, the receiver of the tokens will have no obligation (not even legal obligation) to return the tokens.

  • Rules and conditions for release of proceeds to the ICO/ITO project



  • The ongoing presence of an IT supervisor during the ICO/ITO to monitor the ICO/ITO website, hacking and the correct Bugs
  • ISO 27001 certification recommended




As already mentioned, the website of the ICO should provide a guide detailing all the steps of the ICO and especially the post-ICO, i.e when and how your tokens will be delivered.

  • Disclose ICO/ITO process and history with outcome and results
  • Disclose marketplaces where newly issued ICO/ITO token is traded: it is important to obtain this information as early as possible if you want to sell your coins as soon as you have received them. It is also important if you want to participate to the ICO on the secondary market, i.e by buying the tokens on an exchange.
  • Sequence and means by which regular updates on the project are provided to the community



ICOs complying with this Charter shall not:

  • Be carried out by an issuer incorporated under the laws of a State listed as “non compliant” in the latest version of the «Overall Rating Following Peer Reviews against the standard of EOIR » list published by the Global Forum on Transparency and Exchange of Information for Tax Purposes of the OECD, accessible at the following address: « Non Compliant State »); or
  • Be governed by the laws of a Non-Compliant State.
  • If an ICO is carried out by an issuer incorporated under the laws of a State listed as “provisionally partially cooperative” or “partially cooperative” in the above-mentioned OECD list (a “Partially Cooperative State”), or governed by the laws of a Partially Cooperative State, the issuer shall expressly undertake, in the white paper, to answer in full transparency and cooperation to the tax information request submitted by foreign tax administrative, judicial or regulatory authorities

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Initial Coin Offering: A Complete Guide (1/3)


Certainly one of the most famous expressions at the moment, initial Coin offering or ICO, is used by reference to the initial public offering or IPO by which companies of a certain size open their capital to the public in order to raise funds. The ICO could well revolutionize the world of finance.

Note that it is also very common to use ITO for “Initial Token Offering”, because “coins” and “tokens” are generally different. On the website for instance, these two categories are identifiable by selecting “Coins” or “Tokens” at the top of the list of all tokens. “Coins” correspond to what is also called “Native tokens”, which according to the definition of the website, are “crypto-currencies which can operate independently” since they rely on their own blockchain.

By contrast, “Tokens” (or “non-native tokens”) are “crypto-currencies which are dependent on another crypto-currency as a platform for work”. This is, for example, the case of Dapps which are created on top of the Ethereum protocol (Storje, augur, Iconomi, Golem, Omnisgo…). They actually benefit from the development environment and the blockchain maintained by Ethereum.

To simplify, ICO/ITO is a decentralized way to raise capital. It is a decentralized way because it allows entrepreneurs to access investors directly through decentralized platforms (Ethereum, Wave…) without having to go through the traditional Venture Capital path. We are talking about tokens/coins and not “securities” issued by traditional companies, because depending on the projects these tokens/coins may have functions and returns on investments that are very different from traditional financial instruments.

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Method to issue tokens: there are two options to issue the tokens through an ICO. The first method is to collect the requested capital and then distribute all the tokens to the participants in proportion to their participation. This method could be compared to the Primary Market issuance we currently know.

The second method is to release the tokens on an exchange and sell them to the participants. This method could be compared to the Secondary Market.

Note that during an ICO/ITO both methods can be used, one after the other, when there is a pre-sale for instance.

ICOs are therefore a mix of IPO and crowdfunding but actually goes much further.



In this section, we will approach ICO/ITO from the perspective of an Entrepreneur (1) and from the one of an Investor (2) since both are quite different.


I had the chance to assist to a presentation by Hubert de Vauplane and Valentine Baudoin from Kramer Levin, the leading law firm for ICO in Paris, and they explained all the different steps of an ICO. Given the law firm’s experience in IPO, it was extremely interesting to better understand the difference between both processes.

One of their first points was that ICO/ITO process was similar to IPO in many instances, starting from the necessity to contract with specialists (advisors, lawyers, lending banks…) in order to complete the project. Hiring such contractors requires entrepreneurs to gather an important amount of funds upfront (around $500,000).

That’s why many entrepreneurs decide to finance the ICO through a pre-ICO where they raise funds by distributing tokens to early adopters. The funds raised will then pay for the advisor, lawyers, banks and all costs of the real ICO.

So the idea that anybody can organize a serious ICO just by paying contractors with ICO tokens is not conformed to reality. ICO relying on a serious project would normally go through the following steps:

ICO workflow
ICO workflow

We will go into details for each of these points in the third part of this article series, but for the time being, it is interesting to get an idea of the different steps:

1 – First stage: the ICO structuring

This part is conducted in parallel to the issuance or the mining of the tokens that will be sold.

  • Signature of a service agreement/mandate agreement with an arranger (also called « Global Advisor »).
  • Signature of an engagement letter with a law firm.

2 – Second stage: Product wrapping

During this part, the team focuses on the preparation of the product, by setting up a website and finalizing the Whitepaper. Most importantly they will try to motivate the community if they already have one. If not, they will need to use marketing tools, such as bounty programs and airdrops as well as the traditional method to build a community in a short period of time. It is important to mention that going through an ICO is an excellent way to start developing a community.

3 – Third stage: Pre-sale and sale

As we already mentioned, a pre-sale can be organized to raise funds from early adopters in order to pay for the ICO/ITO process. The pre-sale is generally proposed at a discount price in comparison to the ICO/ITO price that will be proposed during the sale.

4 – Fourth stage: Post ICO/ITO and Listing

Listing the Coins/Tokens on an exchange is vital to the success of the ICO/ITO. To get a Coin/Token on a well-known exchange will almost certainly ensure a higher price and an exposure to a wild range of investors.

However, this is a challenge and most exchanges have released the criteria they evaluate when considering whether to list digital currencies. The framework lists considerations such as whether the digital currency would qualify as a security under Coinbase guidelines, how much liquidity it has, and what exchanges trade the currency already.



A majority of ICO are created over the Ethereum blockchain. In practice, a smart contract is created and stored on the blockchain to manage all the ICO process: reception of tokens, payment when the funding trigger is reached or refund when the trigger is not reached. Setting-up this kind of smart contract is quite straightforward since the code is available on the Ethereum website.

If you want to take part in an ICO and are starting from scratch, you will need to go through the following steps.

1- Buy Ether or Bitcoin on an Exchange:

You will not be able to take part in an ICO with fiat currencies, so the first step is to obtain cryptocurrencies. Most of the ICO are conducted with bitcoins and ether (the Ethereum native token). As we described in this article, there are several ways to obtain cryptocurrencies, but the most common is through an exchange.

2- Set-up a local wallet:

As we explain in this article, when your cryptocurrencies are stored on an exchange you do not own your private keys. In other words, you have no control over your coins.

Portefeuille bitcoin
Portefeuille bitcoin

Each ICO utilizes its own set of rules but most of the time you would be required to send the private keys of a given coin (generally BTC or ETH) to the wallet created for the purpose of the ICO. The only way to effectively detain and transfer your private keys would be from your local portfolio.

You should never transfer your coins directly to the wallet of the ICO from an exchange because you do not detain the private keys and the ICO tokens you have purchased will not be sent to your attention.

Which wallet should you choose? Obviously, a wallet that is compatible with the ICO tokens you are looking for. Today, most ICO tokens are ERC20 compatible (i.e these tokens are compatible with the Ethereum protocol), so you would need a wallet that is able to accept this type of tokens. The most commons ones are MyEtherWallet, Metamask or Parity. It is important to bear in mind that these wallets do not provide the highest level of security and all your tokens should remain in cold storage.

3- Receiving your coins:

All ICO has a different process so you have to go on their website and follow their instruction, but most of the times, you will be asked to send Ether to a given address and receive your tokens once the ICO is completed.

Note that this is quite common to have to wait one or two days before you receive your coins.

In the next article of our series on ICO/ITO we will describe how you can analyze an ICO/ITO in detail.


If you want to take part in an ICO, you can visit the following websites which list the coming ICOs :

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Lightning Network: Enemy or Ally of the Bitcoin?

Lightning network

It is getting every day more evident that the bitcoin presents many limitations as a means of payment. Limitations on the size of the blocks (1MB maximum) and the speed of adding blocks to the blockchain (one every 10 minutes), which generates another limitation that the high costs attached to transactions and make the bitcoin a very poor competitor with regard to other means of payments. This could change with the emergence of the Lightning Network.

What is the Lightning Network?

The Lightning Network is a protocol which goal is to enable the bitcoin to extend its network by accelerating the speed of the transactions. This Protocol now applies to the whole of the blockchains and allows millions of transactions per second with extremely low fees.

The technology used by the lighting network is the so-called “channels of payments”. “Micropayments Channels” is a technology that allows you to gather several small transactions in the same transaction in order to limit the costs and not have to wait for the confirmation of each transaction.

Each party must therefore first create together a channel by issuing a transaction that they must all sign using their private key (i.e a multisig transaction). The transaction will not be broadcasted on the network and will have the vocation to block a certain sum of money.

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The Lightning Network proposes a bidirectional channel, which means that both parties can make payments through the same channel. The two parties may, therefore, block a sum of money in the multisig transaction and perform transactions through this channel.

The Lightning Network also organizes the networking of these different channels in order to make payments by interposed persons. To do this, the software will perform a series of steps that will allow Alice to transfer funds to Carol by the intermediary of Bob.

How does the lightning network actually work?

Let’s imagine that Carol wishes to transfer a bitcoin to Alice, but has no direct channel with her. The payment will, therefore, go through an intermediary, “Bob” who has an open channel with both Carol and Alice.

Lightning Network
Source: BitcoinMagazine

The steps of a transaction conducted through the lightning network are the following:

1- Alice requests Carol to create a value (for example a mixture of digit and letter), and to transfer the hash as well as her bitcoin address.

2- Alice transmits the hash to Bob and tells him that she would send him a bitcoin if he shows the value that he has received from Carol proving that it has transmitted a bitcoin to Carol.

3- Bob receives the value (which checks the hash) from Carol and transmits her a bitcoin in return.

4- Bob passes the value that he has received from Carol to Alice thus proving that it has transferred the bitcoin to Carol. Alice can, therefore, send him to turn a bitcoin safely.

As we see Alice uses the channel that Bob has put in place with Carol to transfer a bitcoin. Obviously, this scenario works with several intermediaries.

But as you may be wondering, what would happen if Alice changed her mind and decided to no longer transfer the bitcoin once she has received the value from Bob and that the latter has forwarded the bitcoin to Carol (step 4 above)?

Hash Time-Locked contract

To solve this issue, the lightning network uses a process called “Hash Time-Locked Contract” which includes both a timer (” Time-Locked”) and a secret (” hash”). If we take the example above of a transfer of bitcoin from Alice to Carol, the establishment of a Hash Time-Locked Contract is done according to the following steps:

Proof of Work

1- Alice sends the bitcoin that she wants to transfer to Carol, toward a third-party address, which requires the signature of both parties to be unlocked (multisig address).

2- Bob can recover funds by sending them to an address he controls at any time by adding his signature and the value that has been transmitted by Alice.

3- Alice can also send the funds to an address that she controls but only after a certain period (” Time-Lock”).

This mechanism is then used at network level. Alice and Bob have also put in place a hash Time-Locked Contract. In our example below, Bob receives the value of Alice before transferring the bitcoin. The two channels are linked so if Alice does not want to transfer the bitcoin, Bob will be able to insert the value that it has received from Carol in the Hash Time-Locked contract in place with Alice and thus be certain to recover it.

The Lightning Network, therefore, represents an important step for the development of the network bitcoin and can be a solution for networks of communication between machines that are presently developing.

The implementation of the lightning network could have the effect opposed to that discount

The Lightning Network seems to have been chosen as the solution to the problems of the bitcoin since it proposes a very promising architecture.

As we just described it allows the creation of channels in which users can perform as many transactions as they wish without having to add them to the blockchain each time but at the same time, benefiting from the security of a decentralized network. In other words, the operations are confirmed instantly and the costs are distributed between all the transactions carried out in the channel when it is closed and the last transaction (which is the result of the netting for what the parties owe each other) is added to the blockchain.

Lightning network
Lightning network

The only problem lies in the fact that the channels are only defined between two persons. In order to reach a person with whom you do not share a channel, you will need to use intermediate nodes or “hubs” (Bob in our example). However, these nodes could be considered by the regulatory agencies as “money transmitters” and as such be subject to requirements such as the minimum capitalization, KYC checks (…) which cannot be filled by anyone.

“FinCEN’s regulations define the term “money transmitter” as a person that provides money transmission services, or any other person engaged in the transfer of funds. The term “money transmission services” means “the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means.”

If this was the case, each node serving as an intermediary should be able to carry out checks on the origin of the funds, which implies the establishment of important system and could therefore not be carried out by financial institutions.

This is where banks and large companies such as the credit card companies could enter the game and begin to manage the bitcoin network, but only the future will confirm this scenario.

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Private Blockchain vs Public Blockchain

Blockchain privée
Blockchain privée

You cannot be a crypto investor or entrepreneur without having a real understanding of the differences between these types of blockchains as well as their implications. Even if they are based on similar principles, their operation is, in fact, different to all levels. So the tokens issued by these blockchains will not be assessed in the same manner.

What are the main differences?

A blockchain is so-called “public” (or open) when anyone can become a member of the network without conditions of admission. In other words, anyone wishing to use the service proposed by the network can download the protocol locally without having to reveal his or her identity or meet predetermined criteria. A protocol is a computer program that could be compared to a Charter in that it defines the rules of operation of a network based on a blockchain. For example, the members of the bitcoin network download the Bitcoin protocol (through the intermediary of their “wallet”) to be able to join the network and exchange bitcoins, but the only condition is to have an Internet connection.

It is different with a private blockchain (or closed) since the members of the network are selected before being able to download the protocol and therefore use the proposed service by the network. The mining capabilities and the system of consensus as a whole are centralized within the hands of the same entity. A network based on a private blockchain is therefore not decentralized in itself.

Private blockchain
Private blockchain

Finally, consortium blockchains provide many of the benefits of private blockchains without focus the mechanism of the consensus between the hands of the same entity.

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In this article, we will mostly focus on the différence between public and private blockchain.

The differences between these types of blockchains are based on the levels of trust existing among the members of the network and the resulting level of security. Indeed, the higher the level of trust between the members of the network, the lighter the consensus mechanism (which aims to add the blocks to the blockchain securely). As we will see, there is no trust between the members of a public blockchain since it is open to everyone and inversely the confidence is much stronger on the private blockchain since members are pre-selected. In networks based on a blockchain, the level of trust among the members therefore directly impacts the structure and mechanisms of the network.



A public blockchain is ideal when the network must be truly decentralized, which means that no central entity controls the entry of the members on the network and the consensus mechanism is democratic. A democratic mechanism of consensus means that all members can become a minor and that these miners are in competition to add the blocks to the blockchain (at least when the mechanism of the evidence of the work is used).

But this decentralization has a cost:

The limited size of the blocks: The number of transactions that can be added in each block is limited, which involves important limitations to the speed of adding transactions to the blockchain.

A cost per transactions which can be high: Miners only participate in the process of mining because they hope to get the reward (coinbase and fees) allocated to minors who have added a block to the blockchain. For them it is a business, this reward will finance the costs they have incurred in the process of mining (electricity, computer equipment, internet connection). Tokens that are distributed to them are directly issued by the Protocol, but the fees are supported by the users. In the case of the bitcoin, for example, minors receive 12.5 bitcoins for each block added, to which are added fees paid by the users to add their transactions to the blocks. These fees are variable and the higher the demand to add transactions, the higher the fees.

Public Blockchain
Public Blockchain

The transactions added to the blockchain are public: the whole world (Member of the network as non-members) can access transactions that are added to the blockchain. The information of the transactions is made public for the miners who do not know the other members, to check the conformity (for example that the person who has created a transaction holds enough bitcoins). These transactions are obviously not nominative, only your public key appears, but if someone knows your public key, he will be able to find all the transactions that you have created.


A consortium is a network in which the members that can participate to the consensus mechanism are pre-selected. This type of blockchain is generally regarded as partially decentralized to the extent that the identity of the minors is known and that it is possible to make public or not the transactions added to the blockchain.

This type of blockchain is implemented in the same manner as private blockchains that we describe below but the difference is that the consensus process is not concentrated into the hands of a single entity.


The consensus mechanism is centralized in the hands of a single entity which mission is to verify and add all transactions to the blockchain. A network based on a private blockchain, therefore does not need to use a mechanism such as “Proof of Work” or “Proof of Stake” which are complicated to implement and expensive. The problems of security being much more simple in the case of private blockchains, it is possible to apply the mechanisms of consensus lighter, more effective and therefore easy to deploy such that the BFT.

Such control of the consensus has several advantages:

The manipulation of the blockchain: It is indeed possible to come back at any time on the transactions that have already been added to the blockchain and therefore change the balance of the members. In a public blockchain, such operation would require that 51% of the hashing power (i.e capacity to mine) is concentrated in the hands of the same entity. This not theory anymore since it happened beginning 2014 when the cooperative of GHash minor reached the 51% threshold.

An absence of fees: the fact that the mining process is not competitive and that there are no miners to remunerate, there are no costs and rewards attached to transactions.

A consensus much faster: the fact that the consensus mechanism is centralized makes it much quicker. In fact, the term “consensus” is no longer adapted since it is rather a recording of transactions on the blockchain. Note that the entity responsible for managing the blockchain can decide to change the parameters of the blockchain and in particular to increase the size of the blocks to be able to add more transactions.

Private data: the entity in charge of the administration of the blockchain may also decide to control who can enter the network or not and if the transactions will be public or not.


You may ask what makes the private blockchain better than the shared database as we know them today?

The flexibility of this type of blockchain might be very useful to a large number of industries who face operational or regulatory constraints.

For example, a distribution company that wishes to follow each of the products of its stocks using a blockchain might choose to use a private blockchain for its properties of immutability, transparency, security, and flexibility. Such an undertaking would have no interest to use a public blockchain.

Similarly, a network of bank wishing to use a blockchain to perform and record transactions, would be subject to confidentiality obligations and therefore forced to use a private blockchain or a Consortium as did the R3 network with its Platform of Smart Contracts” Corda”.

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Blockchain Impact on the Financial Industry

In this article, we will analyze which areas of financial institutions will be mainly impacted by blockchain technologies. We believe that in the near future, blockchain technology will have the same effects on our financial organization, than the internet did on the Information industry. It will totally reorganize it.

Decentralised Ledger Technologies have created the “internet of value” by enabling peer to peer, easy, immediate and almost free exchanges of value over the internet. This role was until now banks monopoly. We will analyze how this nascent technology will challenge banks on their field and give birth to formidable competitors. On the other side banks and financial institutions in general, have always been at the forefront of technologies evolution and it is also very interesting to describe how they are currently preparing for battle.

We will separate this study into two different articles. One dedicated to retail banks, i.e the banks that are dealing with our day to day operations (I) and the other to investment banks involved in capital markets and corporate banking (II).


Banks as we know they are involved in very diversified activities. From money supply to real estate management, banks are present in every step of our economy. But it has not always been the case. At the beginning, banks were only storing gold on behalf of their customers for security reasons. In exchange, customers were receiving a receipt that was a proof of ownership for a given amount of gold. For obvious convenience reasons, these receipts were then progressively exchanged for goods and services because they were backed by gold. Fiat currencies were born.

But then, since peoples were only exchanging these receipts, banks realized that all the gold that was sleeping in their safes could be loaned and this is how began the history which evolved up to the exotics derivatives products that most of the population discovered in 2008.

This (very) brief history of banks reminds us that the core functions of a bank are to update a ledger in order to organize payments and incidentally to offer loans. And this is still the case today. When you buy something with your credit card, your bank updates its ledger by removing the spent amount from your account and adds it to the account of the seller (through the seller’s bank if needed). So your account is just a number on the ledger of the bank showing the amount that you have deposited and that the bank owes you. In the same way, when a bank grants you a loan, a line is created on the debit side of your account and diminished every time you make a repayment.

So in the current economic system, banks are playing the role of trusted intermediaries, because peoples are not able to exchange value with each other without these intermediaries. Will blockchain change this? After all, a blockchain is also a ledger, but the difference relies on the fact that no trusted intermediaries are needed since all the members of the network update it in a decentralized manner. In theory, the blockchain could connect each participant to an economic system so that they could interact with each other directly using a blockchain to record all transactions.


Banks are trusted intermediaries

According to a report issued by Credit Suisse, market leaders of the payment card industry such as Visa and MasterCard, are not directly concerned by the technological evolution based Decentralized Ledger Technologies because of the significant investments made in this area. The achievement of domestic payments (in the same country) is generally regarded as efficient and fast by the users due to the significant number of terminals of payments and points of cash withdrawals.

The crypto purist would say that it is not more difficult to pay by scanning a QR code or send coin from a Ledger Nano S. The only difference relies on the massive investments that have been raised to equip every single shop with card payment machines and replacing them with secured bitcoin payments terminals will take time.


bitcoin payment system
bitcoin payment system

Direct payment with bitcoins or any cryptocurrencies should not be mixed-up with crypto-cards such as the one proposed by Xapo, TenX, CryptoPay, Bitpay, Bitwalaand Wirex which are debit cards prepaid with cryptocurrencies. We cannot consider them as bitcoin/cryptocurrencies payments since Credit Card companies still control their right to issue debit cards.

However, there are still areas where the payment system as we know it is far from being efficient and where crypto payments will surely prove to be formidable competitors: internet payments (1), international transfers (2) and providing financial services to the unbanked (3).


1 – Internet payments

We generally forget that credit cards were created before internet appeared. So they have been tailored for physical payments and not internet payments. Credit cards present three main issues. First, they require high processing fees. This is the way credit cards operators are remunerated and these fees can be composed of a fixed rate (typically 0.30 euros) and of a variable. These fees are manageable for day to day transactions on e-commerce platforms but certainly not for the micropayment world we are entering where machines are completing billions of microtransactions with each other. Fraud is the second main weakness of credit cards payments. Despite all the efforts of banks and credit cards operators to protect these transactions, fraud resulted in losses amounting to $21billion in 2015. Last but not least, security is a major concern with credit card payments over the internet.

At the same time, Alfred Kelly, CEO of VISA the world largest credit card issuer, mentioned during an interview to CNBC, “I don’t view bitcoin as a payment system player”. In the current state of the Bitcoin protocol, he might be right. As we already mentioned in our article on the Internet of Things, Bitcoins are a very safe medium of value transfer over the internet, but it is also very limited, for several reasons:

  • The Bitcoin protocol is slow: the Bitcoin protocol is programmed to add a block every 10 minutes. The difficulty of Proof of Work is indeed always adjusted to the number of miners acting on the network (i.e the amount of hashing power used on the network) so the time frame between two blocks will always be 10 minutes. It is also generally considered that 6 more blocks should be added to the blockchain for a transaction to be considered irrevocable. In practice, it means that we need to wait 60 minutes to confirm a transaction, which is far too long for commercial applications.


  • Bitcoin does not scale: Due to the limited number of transactions that can be added to the blockchain, it is actually difficult to apply the blockchain to a network with an exponential increase where transactions made among members of the network (either physical persons or not) will also increase exponentially. The size of each blockchain blocks is 1MB and it is not sufficient to process all the transactions made on the bitcoin network. It is indeed considered that 250,000 transactions are permanently waiting to be processed.


  • Bitcoins fees are very high: A direct consequence of the previous point is that at the moment, the demand for adding transactions to the blockchain is so important in comparison to the space available, that fees charged by minors to users can reach peaks of up to 25 dollars. Here again, these fees are not suitable for commercial uses of the bitcoin.

A way to solve these issue (temporarily), would be to extend the block size in order to procede more transactions at the same time and reduce the fees charged by minors. This was the purpose of the implementation of SEGWIT 2X. The cancellation of the SEGWIT fork clearly states that Bitcoin protocol developers have opted for another solution.

Lightning network
Lightning network

The Lightning Network (described in details in our article “Internet of Things: Blockchain, Lightning Network and Tangle“) seems to have been chosen as an alternative because it proposes a very promising architecture. It allows the creation of off-chain channels in which users can realize as many transactions as they want without having to add them to the blockchain every time but still benefiting from the security of a decentralized ledger network. In other words, transactions are instantly confirmed and fees are spread among all transactions of the channel when this one is closed and the last transaction (the result of the netting of what parties owe each other) is added to the blockchain.

The only problem this that channels are only set between two persons. In order to reach a person with which you do not share a channel, you will have to use intermediaries nodes or “hubs”. However, these nodes and hubs might be considered by regulators as “money transmitters” and be subject to heavy requirements such as minimum capitalization, Know you consumers (KYC checks) (…) which cannot be completed by any given person.

“FinCEN’s regulations define the term “money transmitter” as a person that provides money transmission services, or any other person engaged in the transfer of funds. The term “money transmission services” means “the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means.””

This is where banks and major corporations such as credit card companies, might come into play and start managing the bitcoin network, but only the future will confirm this scenario. This video sums-up the issue pretty well:


Tangle, an alternative to Lightning Network

Tangle is the second example of innovation that could dramatically increase the speed and security of payments online. This a new type of network based on a DAG (Directed Acyclic Graph) which has been designed with the Internet of Things in mind. Tangle is no longer really a blockchain properly speaking since there is no longer a “block” or a “chain”. Tangle is actually a second generation blockchain that does not rely on an architecture of blocks connected to each other by cryptographic hashes, but retains some of the fundamentals of the current blockchain:

– A peer-to-peer network

– A decentralized database

– A consensus mechanism to validate transactions

The transactions are directly stored in the DAG which means that every single node is a miner and there are no fees. For these reasons, systems based on Tangle should scale very well, be very fast and cheap.


International Payments

The system of value transfer on the Internet is 20 years late in comparison to the information systems. The system of international payments is currently very similar to what was the system of communication by e-mail in the 80s:  a closed and compartmentalized system. If you were a user of the Genie messaging system, you could only send e-mails to users of GEnie, but not to users of CompuServe or AOL. SMTP is the protocol that linked all these independent networks and quickly became the reference protocol.

The consequences of these divisions are multiple. The international payments generally take more than a day, can be achieved only during the opening hours of banking agencies and generate significant costs. The reason is that before reaching its destination your funds will likely transit through several banks that have their own processes and systems.

All these steps significantly increase the work of cross-checking data which increase the duration of the transfer, costs and the risk of mistakes.

The remarks of Chris Larsen, Chairman, and co-founder of ripple, required during a session of Q&A on Quora on 1 December 2016, summarize the situation very well: Global transactional demands are changing, and the current financial system is woefully inadequate to meet tomorrow’s payment needs and opportunities. This is especially true with regards to low-value payments, which are unprofitable for banks and too costly for customers. Companies of all sizes are increasingly global from day one and need to provide on-demand delivery of services. From the Fortune 500 to the tech industry and beyond, we call these the “new corporates,” and includes companies like Uber, which needs to pay its drivers in over 70 countries, and Amazon, which ships around 1 billion items behalf of merchants in 100+ countries to customers in 185 countries. New corporates want their bank to enable them to send low-value payments instantly and with full transaction visibility. Banks of all sizes want to serve these customers and offer new products like micro-payments to businesses as well as consumers for retail remittances.”

We mentioned earlier that credit card companies might not be impacted by the development of cryptocurrencies in the short to middle term, but it might go differently for the companies organizing international transfers of funds, such as SWIFT or Western Union. The services proposed by these companies are slow, expensive and generally relying on outdated technological systems. As we have already mentioned, it is possible today thanks to blockchain technology to transfer large sums to the other end of the world, instantly and for a ridiculous price. The World Economic Forum goes further and says that the power is disturbing for DLT comes from the simple fact that “The technology is available and this fact makes it superfluous the banks, providers of payments and the credit card companies”.


Ripple: banks answer to the threat

Ripple is an Internet protocol which purpose is to facilitate funds supply among its members (a growing community only composed of banks and corporations). In the same way as Simple Mail Transfer Protocol (SMTP) has defined the rules organizing e-mails exchanges, RTXP (ripple Transaction Protocol) defined a set of rules to perform transactions on the Internet instantly and free of charge, in any currency, cryptocurrency, material (gold for example) or any other unity of value.

Ripple and banks
Ripple and banks

Ripple’s goal is to link all the existent and incompatible banking systems in order to make international funds transfers among institutions immediate and almost free. For more information on Ripple’s functioning you can read our article “Ripple: the protocol that connects banks



Decentralized Ledger Technologies will give the opportunity to the person who cannot open a bank account, to have access to banking services from their smartphone. According to a report issued by McKinsey, nearly 2.5 billion adults (almost half of the world adult population) have no access to banking services for borrow, store or transfer money.

However, a significant part of these adults is now equipped with a smartphone that could grant them direct access to microcredit or receive payments from relatives working abroad without using expensive intermediaries. According to the Overseas Development Institute (ODI), “these excessive fees cost the African continent $1.8 billion per year, enough money to pay for education in the primary school of 14 million children in this region. It is because the workers paid on average 12% in fees for transferring money to their relatives based in sub-Saharan Africa. To give you an idea, a worker sending $200 for the education of his family would bear a $25 fee.”



BitPesa is a start-up based in Kenya that provides services of payments by allowing its users to exchange bitcoins for Kenyan shillings and send them directly to their mobile phone portfolios.

Having a portfolio on his mobile phone and use it to make payments is more and more common in Africa and this service existed in Kenya before the arrival of BitPesa. Safaricom holds M-Pesa, the undisputed leader of the transfers and payments by mobile phone (a tier of the GDP of the country would go through its system). BitPesa initially relied on Safaricom networks to ensure its development.

But in offering the same service than M-Pesa at a much lower cost, BitPesa was actually in direct competition with Safaricom and the latter decided to terminate its contract and therefore become unable to propose its services on the African continent.

A new agreement with Airtel money has subsequently helped BitPesa to return and to ensure a high growth in the last two years.



We also wanted to mention Abra, a start-up founded in 2014 and which object is to organize free and instant international currency transfers. This application also uses the Bitcoin protocol to achieve the transfers, but the difference with Bitpesa is that users do not buy the bitcoins themselves. As the said Bill Barhydt, the founder and CEO of Abra, during the conference “American Banker’s Blockchain and digital currencies” in July 2016, “Users do not even realize that they have a bitcoin portfolio. From their point of view, they hold the local money“. This application is interesting because it proposes to manage the important risk of volatility of the bitcoin.

According to Bill Barhydt, putting in place smart contracts with institutional bitcoin investors who constantly hold significant quantities of bitcoin carries out the stability of portfolios. These contracts operate a little as “Contracts for Difference” (“CFD”), i.e a contract by which the parties agree on the value of a property in the future (here the bitcoin) and conduct of bilateral payments according to that the fluctuation of this value at the end of the contract.

We can imagine that Abra manages to balance its portfolios by performing a combination of opposite CFD so that the gains generated by a contract would compensate for the loss of the other contract.


Stellar proposes a framework of payment based on a decentralized ledger which operates in the same way that the system developed by Ripple. The founders of stellar, Jed McCaleb (also creator of the famous MtGox) and Joyce Kim, were also among the founders of Ripple before leaving the project to create Stellar. The idea of the founders of stellar is to offer to people who do not have access to banking services, mainly the inhabitants of developing countries, payments facility from their mobile phones as well as solutions of immediate and almost free international transfers.



Concretely, Stellar provides the platform to develop applications from its API (“Horizon”) and to interact with the entire network by the intermediary of “stellar core” whose function is to validate the transactions through the system of consensus that we have described above. Once connected to the network, so it is easy, immediate and almost free to exchange any value from one end of the planet to the other.




Fintech start-ups relying on blockchain technology are also very active in the loan industry. Two players could be mentioned as the solution they propose are really promising: SALT and Jibrel Network.

Both startups use the same mechanism. Users will record some of their assets on the blockchain as collateral of the loan they will receive from other users of the network. For each assets registered, a token is issued and transferred to the lender until he received the full repayment of his loan. During the life of the loan lenders are allowed to exchange these tokens and obtain interests.

The loan granted by these cryptolenders are very flexible because no pre-payments are requested from borrowers, interests are mutually agreed and the credit checks are replaced with cryptocurrencies and real assets collateral.

We could obviously question the legal validity of the assets recording and their acceleration by the lender if the borrower does not repay the full amount, but when you see that French regulator recently recognized the legal value of titles recorded on a blockchain, you can really feel the wind of change.



Even if the technology is still at a very early stage, it is obvious that the trend is here to stay and change the financial industry as Internet did to the information industry. Bank a fully aware of this threat and are almost all financing fintech startups incubator to remain on top of this disruptive technology.

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Decoding a Revolutionary Business Model




Despite all the noise around cryptocurrencies, the medias too often evade the real interest that these projects bring: a new business model. The organization of each of these projects is very different from what we have known up to now. All our corporate models and securities valuation are not applicable to these new entities and their tokens.

This articles series aims to understand what are the differences between these two models, “centralized” vs “decentralized”. The articles will be distributed as follows:

Part I – The differences with the traditional model.

Part II – How to assess ecosystems that issue Currency tokens?

Part III – How to assess the ecosystems that issue Platform & Utility tokens?



First, it is important to describe what each of these projects really is.

Each of these projects based on a blockchain can be defined as a standalone ecosystem which is created around a new protocol, animated by a community of developers and users, who are paid with tokens created by the protocol for their participation in the development of the project. Let’s break down this sentence to analyze each of its components.

By protocol we mean a computer program which brings together all the operational rules of an application. All cryptocurrencies are protocols. The Bitcoin Protocol is the program which brings together all the operation rules of the bitcoin. The protocol determines the rules of mining, the conditions of validation of transactions, the remuneration of miners, the difficulty of the “Proof of work”. Each of these cryptocurrency is based on a protocol that defines its operation and also the creation of the tokens as well as their interaction with the rest of the application.

It is important to note that these protocols can be constructed on top of other protocols. There are indeed many protocols that are built on top of the Bitcoin Protocol to benefit from a decentralized and secured structure without having to manage the cryptoeconomy and network parts that we describe below.

Protocols can also be included in the Smart Contracts and benefit in the same manner from the features of the blockchain on which they are hosted. It is precisely the type of service that Ethereum offers by proving developers with the environment necessary to develop protocols or decentralized applications.


Ethereum goes further than the bitcoin in that it allows developers to take advantage of a decentralised environment based on a blockchain (including protocols for crypto-economy and network), but also of a virtual machine able to execute commands more or less complex from the contracts stored on the blockchain. This Ethereum Virtual Machine is composed of all the members of the network Ethereum.



When you hold a cryptocurrency token, you do not have a share of the Protocol which created it, as you would when you own the shares of a traditional company. A protocol is inherently decentralized and belongs to each members of the network. For example, if you owned 51% of the bitcoins currently in circulation, you would not have more influence on the evolution of the network or the changes to the Protocol than if you had 0.1%. It would be different if you held 51% of the mining capacity (hashing power) since in theory you would have the power to choose the blocks that should be added or not to blockchain.

In other words, a cryptocurrency is a certificate used to exchange the perceived value of the protocol on cryptocurrencies exchanges. This business model cannot be compared to traditional companies where securities give you a right to dividends proportional to the profits made by the company. The incomes generated by these protocols are of very different nature and are created in the form of tokens to pay users who participated to the development of the network. It is important to remember that these tokens are generated by the Protocol from thin air.

These tokens gain value (or not) when they are traded on crypto-currencies exchanges, if purchasing demand is greater than number of tokens available. This demand is generated by the value created by the Protocol and the network by solving a particular problem. As will be describe in parts II and III of this article series, the value of tokens is influenced by many other factors that must be taken into account to determine their present and future value. In any case each protocol is created to solve problem more or less important:

Bitoin: instant transfer of value on the internet, regardless of distance or volumes.

Ripple: connect banking networks that are currently independent and do not communicate with each other’s easily.

Ethereum, Neo, Wave, Bitshares: provides a decentralized application development platform.

Siacoin, Storj, Filcoin, Madsafe: allows member of a network to access free memory space of the other members of the network in a secured and decentralized manner. All of these services have a perceived value that corresponds to the reality or not. Even if there is a significant part of speculation, this value is reflected in the resale price of the tokens on the cryptocurrencies Exchange.

internet of things
internet of things

DIFFERENT TYPES OF PROTOCOLS/TOKENS Many articles have been written to propose a classification of the tokens:

  • William Mougayar offers a particularly interesting Utility Tokens analytical grid. After analyzing many ICO, he has identified 6 different roles that tokens can play.
  • Alex Kruger considers that it is possible to organize token in accordance to whether they are native or not (as described below)
  • Lou Kerner identifies three types of Tokens: the cryptocurrencies, Utility Tokens and Asset Tokens.

To simplify, we decided to classify the tokens in three categories:

Currency Protocols/Tokens: Currency tokens are only used to transfer value among the members of the network and outside through exchanges of crypto-currencies. The most famous of them is the bitcoin. Other tokens have the same function but generally propose an improvement compared to the bitcoin: for example Litcoin adds transactions to the blockchain faster; Zcash, Monero, dash, focus on the anonymity of their users.

Platform Protocols/Tokens: Platform tokens are issued by the protocols which purpose is to provide an environment for Dapps development. “Ethereum” is the most famous of these platforms and “Ether” is the token used by the network. There are other platforms such as “Lisk” dedicated to applications written in JavaScript, “EOS” for applications written in Webassembly, “Stratis” for applications in C# and “NEO” which is the Chinese clone of Ethereum.

Application Protocols/Tokens (or utility tokens): These are the most common. The object of these tokens is always to connect users to a decentralized application, but the role of these tokens may be very different from one application to another.


We could also add the “asset Tokens”, which purpose is to represent a tangible asset or not, fungible or not, recorded on the blockchain. This type of token does not bring major innovation to the extent that this mechanism already exists under the name of “Securitization”. The innovation lies only on the fact that titles are registered on a blockchain.

It is important to note that each of these types of tokens can be divided into two sub-categories: “Natives Tokens” and “Non-Native Tokens”.

Indeed, an additional difference can be carried out tokens are issued by a protocol with a view to coordinate its operation or if the token coordinates the operation of a decentralised application (Dapp) based on an existing protocol. In this last case, one could say to simplify that the protocol (and therefore the native token) takes charge of the mechanical issues of a decentralized network: consensus between members of the network to add the blocks, validation of transactions, communication between the members of the network. The non-native token would only deal with the Dapp operations.

As stated by William Warren, the functions of protocols can be regrouped into two groups. On the one hand, the rules of the protocol which cover the issues of crypto-economy and on the other, the rules of the protocol which manage the interactivity of the network.

– The rules related to the crypto-economy: the word crypto-economy is composed of two words, cryptography and economy. It is therefore cryptographic rules designed to secure the network (private/public key, hashing , proof of work, Merkle tree…). Yet these cryptographic mechanisms are activated by the members of the network for a fee. The protocol also governs this economic part in defining to what extent the members are paid for their participation in the network. For instance in the bitcoin network, the protocol defines both the level of difficulty of the proof of the work and the number of tokens that will be allocated to minors for each block added to the blockchain.

– The rules related to the management of the network: these are all of the rules that govern the communication between the different members of the network, such as sending transactions or communications of the proof of work by minors to the rest of the network for approval.

Then there are the many applicationd (decentralised applications or DAPP) which are built on top of these protocols for developers to concentrate on the problem that they wish to resolve while benefiting from the advantage of a decentralized network and delegating the logistics.

These Dapp also issue their tokens so that users can interact with them. These are the non-native tokens. Thus the two types of tokens are necessary for the operation of the DAPP, but do not have the same function.

This is for example the case of Dapps which are created on top of the Ethereum protocol (Storje, augur, Iconomi, Golem, Omnisgo…). They actually benefit from the development environment and the blockchain maintained by Ethereum. These Dapps are Smart Contracts i.e. programs that are recorded on the Ethereum blockchain. These programs manage the operation of the application and the way we can interact with it. The interaction is done through tokens which are themselves created by the Smart Contract. To learn more about the operation of Ethereum I invite you to read our article “Ethereum: The computer world”.

At the same time, the developers of the DAPP will use Ethers (Native token of the Ethereum blockchain) to store the Smart contract including the program of the DAPP on the blockchain and interact with it. But this Smart Contract will also issue its own tokens (token of non-native).

On the site, these two categories of tokens are quite identifiable by selecting “Coins” or “Tokens” at the top of the list of all tokens. The “Coins” correspond to what we have called the “Native tokens”, that is to say according to the definition of the website,” crypto-currencies which can operate independently” since they have their own blockchain.

The “Tokens” tokens (non-native) By contrast, is a “crypto-currency which is dependent on another crypto-currency as platform for work”.

You can also see that the 10 tokens benefiting from the “marketcap “the most important, are all of the corners and non-tokens, but it is a point on which we will come back to in the Part II and III of this article series.



The revenues provided by tokens are also of a different nature from those of the traditional securities.

The revenues generated by a token can be very varied and depend on the problem that attempts to resolve the protocol. We can however identify three modes of recurring compensation:

– a dividend

– a buyback

– an increase in the value



A token generates dividends where the members of the network are paid for their participation in the network. This participation may take several forms:

The provision of resources: users of a network are paid for lending to the network resources which belong to them. These resources can be very varied:

  • It may be the calculation capacity of a computer installation: Mining is the most common example. In other words, the miners of a network (bitcoin for instance) put at the disposal of the network their own computer installation calculation capabilities (hashing power), to complete the consensus mechanism (proof of work for example) and add the transactions of the network on the blockchain. Minors are therefore paid for their contribution to the network, in bitcoin created by the Protocol (and costs attached to transactions). Mining is also the only mechanism for the creation of bitcoin.


  • It can also be memory space: In the case of SIA, Storj, Filcoin, Madsafe, users are paid to let other members of the network dispose of a part of the memory of their computer installation.

– By the production of content: Steemit is a good example. It is the first social media on which members are paid for posting articles and comments. Each member of Steemit vote for the articles that he reads and generates a remuneration for the writer that is proportional to its level of involvement in the network. So as soon as you vote for an article, the protocol automatically grants remuneration. The more Steem token (token issued by the Protocol Steemit) you possess, the more your vote will make a significant remuneration to the author of the article.

The number of person who votes for your article is important, because the more vote you receive the more money you receive. It is not rare to see writer be paid $500 for their articles.

Steemit is an excellent example of the way the Internet will evolve in the coming years. At the moment we provide the few platforms that we use (Facebook, Twitter, Intagram…) with all our content and personal data for free. But this period will end pretty soon. With the decentralized protocols and the new social media platforms, you no longer need to give your personal data and you are paid for the content that you add. This formula will apply very soon to all platforms who wish to survive the blockchain.

For example, I would not be surprised to see websites such as Tripadvisor compensate its users with travel tokens for any comments added on the hotels that you have visited. These tokens would grant you free nights in other hotels.



In cryptoassets universe, token redemption does not take the same form as securities redemption that we are currently experiencing. The redemption is carried out in an indirect manner by the destruction of tokens.

It is indeed important to understand that in a network where the number of token is limited, destroying a certain number of tokens increases the value of the remaining tokens.

Bitshares consensus mechanism (delegated Proof of stake), for example, allows “witnesses” wishing to be elected to propose to the members of the network of “burn” (“burn”) a part of tokens that they will receive from the protocol as a reward for their work of “mintage” (we talk about “mintage” for proof of stake mechanism and not of “mining”, but the meaning is the same). Instead of getting richer, they therefore propose to remove these tokens from the network and thus to increase the value of other tokens.



This is a common component of any investment, yet it is important to understand how and why a token gets value.

We respond to this question in Part II dedicated to the valuation of Crypto Tokens and Part III dedicated to the valuation of Platform and Utility Tokens.

The table below is a summary of what has been discussed above and should give you a better understanding of the main differences between the existing tokens:

tableau recap
tableau recap





Are Smart Contracts Ready for Mass Adoption?

Nick Szabo, the father of the Smart Contract, used to compare smart contracts to a vending machine because of their automaticity. When you put the right amount of coins in the machine you receive your soda can no matter what. Once initial parameters have been set, Smart Contract will also execute regardless of external events or changing intention of the parties.

The definition given on Monax website is more accurate: “Script hosted on a blockchain which represents a unilateral promise to provide an execution determined based on transactions which are sent to the script. » Let’s break down this definition to better understand the different aspects of smart contracts:

–       A Smart Contract is a script

Basically, a smart contract is a computer program in the same way as any other program. The programming language used depends on the platform or rather, on the blockchain that hosts the Smart Contract. At the moment, the most popular Smart Contracts platform is Ethereum and Solidity its most commonly used language.

–       …hosted on a blockchain

Once the program is finalized, it is deployed (or compiled) and stored in the blockchain. An address (in hexadecimal) is then issued for this Smart Contract. This is the address where transactions will be sent to activate the contract.

It is important to remember that the blockchains developed since the creation of bitcoin can execute the code contained in Smart Contract. Blockchains are no longer simply decentralized records (as the bitcoin blockchain), they are also “Turing complete”, which means that they are able to execute more complex programs (those of smart contracts for example).

– …and activated by transactions.

Without entering into too many details, the program of the Smart Contract contains one or several functions, which will be activated by transactions sent from user’s accounts. The functions are commands, or “determined execution” as per the Monax definition, which can be operated automatically or by external transactions.

These two definitions shed light on the technological aspects of smart contracts, as well as on the automatic and inexorable character of their execution, but they do not make any reference to their interactions with the real world and the practical legal consequences.

Contracts between humans as we currently know them are extremely complex in their execution. Many events unforeseeable at the time of signing of the contract cannot be incorporated in contracts. This is the reason why we have court and judges whose roles are to interpret the contract and try to deduct the initial intentions of the parties in the light of new elements.

"Code is Law" - source: Shutterstock
“Code is Law” – source: Shutterstock

It is impossible to code unforeseeable events in a Smart Contract at the time of the creation of the contract. But smart contracts will automatically execute the terms, independently of the intention of the parties, which leaves no place to the interpretation of a judge. That is why it is often considered that the « Code is Law », i.e the code of the contract is the only law applicable to the contract, even when this code is flawed and does not reflect the intention of the parties.

But since smart contracts are implemented in a (constantly evolving) national and international legal framework, code cannot be the only law applicable to contract organizing human relationships. For this reason, smart contract will need to become adaptable or updatable.

Let’s compare traditional contracts with Smart Contract to better understand the main differences:

smart contracts
smart contracts

As we can see from the above table, Smart Contract are improving many features of our good hold paper contracts, but two main points remain problematic for the application of these smart contracts to human daily relationships:

  • The difficult readability of smart contracts.
  • The impossibility to adapt the contracts to external events due to their immediate and irrevocable execution.

We will discuss these two points and describe the solutions that are currently tested to allow mass adoption of smart contracts.



Clark, Bakshi and Braine in their essay entitled “Smart Contract Templates: foundations, design landscape and Research Directions” have been the first to define Smart contracts by differentiating the technological and the legal aspects of smart contracts. In other words, they believe that the code that is executed and stored on the blockchain which they call “smart contract code”, and the legal implementation of this technology, which are called “smart legal contracts”, should be analyzed separately.


The Smart Contract Code refers exclusively to the computer program that is the smart contract.

The purpose of this article is obviously not to enter into the details of the programming language. However, it seems interesting to give you an overview of what is actually a Smart Contract. If we take the example of the creation of a token on the Ethereum blockchain, the language used is solidity, which is the most commonly used language to program on this platform.

This example is an excerpt from one of the tutorials offered on the Ethereum website and corresponds to a very simplified version of the creation of a token.


Source: Ethereum
Source: Ethereum

As you can see, the name of the Smart contract is “MyToken” and it is constituted of two functions. The function “MyToken” (which has the same name as the contract, also called “Constructor”) is used only once during the creation of the Smart Contract to initialize the terms, i.e. for instance to determine the number of tokens that will be put into circulation and to store them in the memory space created on the blockchain.

The second function is called “Transfer” and when triggered will initiate the transfer of tokens from one user to another. These functions are activated through transactions sent by users from their external accounts. This memory space where the information of Smart Contract is stored is created by the “mapping”.

Note that even if solidity (derived from Javascript) is by far the language most used for programming Smart Contracts on Ethereum, it is also possible to encode in other languages such as Snake (derived from Python), LLL or XML.



The expression “smart legal contracts” refers to the legal environment in which evolves the Smart Contract and therefore is directly linked to the concept of Ricardian contract developed by Ian Grigg. The idea behind a Ricardian contract is to combine a traditional contract with a software to easily manage both the execution and the interpretation stages (1). By extension, the concept of Smart Legal Contract refers above all to Smart Contract Templates which objective are the same as Ricardian contracts, but also includes the automatic execution of Smart contracts (2).

(1) Ricardian Contracts

Ian Crigg defines a Ricardian contract as “a single document which is a) a contract offered by any issuer to a beneficiary, (b) for a title of value held by the beneficiary and managed by the issuer, c) easy to read by a person (such as a paper contract), (d) readable by a program (such as a database), (e) digitally executed, F) incorporating cryptographic key and information on a server, and g) linked to a single secured identifier”.

In short, this is a standard contract on a PDF document written in English, but some of the terms of this contract (the name of the parties, the address, the prices for instance) are variables that are changeable and directly linked to a database through a cryptographic process. You surely came across these contracts even without knowing it.

Ricardian Contracts present several interests:

1 – An automatic extraction and storage of data from the contract: As shown in the diagram below, the document and the data are extracted and submitted to a cryptographic hash (such as SHA-1) from which the information are organized and stored. The principle of the hash used in the framework of the Ricardian contracts is the same than the one used in the Proof of Work process and therefore the terms concluded in the contract cannot be changed without completely change the hash is initially obtained.

2 – Security: Ricardian contracts include the cryptographic signature of the issuer of the document. This signature is incorporated in the hash and therefore cannot be amended without producing a different hash.

3 – Negotiable by humans: you do not have to understand the cryptographic part behind the contract to use the contract. It can be negotiated by lawyer and your clients. Since its execution is not automatic, it is not a Smart Contract, the parties can also re-negotiate the contract and adapt it to new events.

Ricardian Contracts
Source: This picture is licensed under the Creative Commons Attribution-Share Alike 4.0 International license.



OpenBazaar is a decentralized and open source e-commerce website. The difference between OpenBazaar and the traditional e-commerce platforms that we are currently using (Amazon, E-Bay, Leboncoin…), is that Openbazaar does not fit between a buyer and a seller by taking a commission on each transaction. Instead of visiting a Web site, you will download and install a software (the Openbazaar protocol) that grants you access to a network of peers who have the same objective as you, buy or sell. Trades and payments are completed directly between members of the network without going through an e-commerce platform for the implementation or a credit card company/PayPal for the payment. As for most decentralized applications, you do not have to disclose your personal information.

We are mentioning OpenBazaar here because they are using Ricardian Contracts to connect the members of the network.

By downloading the software, the OpenBazaar protocol, you will be able to create an ad describing the property that you want to sell and propose a price, as you would on any traditional e-commerce website. This ad is then sent on the network so that each member can access it by a simple keyword search. If two members agree on a price, the software creates a Ricardian Contract including the cryptographic signature of the two parties and sends it to a third party member of the network, the moderator, whose mission will be to check the contract and create a multisig bitcoin account.

Source: Openbazaar

The difference with Smart contracts is that this contract does not apply automatically, the parties are free not to buy or sell. Its execution always depends on the willingness of the parties who sign it (Cryptographically) and of the moderator of the relationship, which leads us to the last concept: Smart Contract Template.


(2) Smart Contract Template

The concept of Smart Contracts template is described in the second part of the paper written by Clark, Bakshi and Braine, in these terms: “Smart Contract templates are based on the triple architecture of Grigg’s Ricardian Contract which are the text, the settings and the Code. In this architecture, key operational settings (…) are collected from the legal text and transferred the code of the Smart contract which provides an automated execution.”

According to the same report, five conditions must be met for a Smart Contract template to exist:

  1. A method to create and edit legal documents, including the legal text and parameters specific to each legal situation. These methods already exist and go from simple Word or PDF documents to software more developed such as contract Express (developed by Thomson Reuters).
  2. A standard format for the storage, access and the transmission of the legal documents. This condition intends to allow the transfer of contracts between counterparties in a format that is acceptable to all, such as JSON, XML or Markdown.
  3. Protocols to execute Smart contracts (with or without signature).
  4. Methods for linking the Smart legal contracts (the legal text) to the Smart Contract Code (the computer language of the Smart Contract), to create a contract that can fit the legal environment in which it is created. A solution could like the one used by Ricardian Contracts, i.e. achieve a cryptographic hash of the Smart legal contract that would be stored in the Smart Contract Code.
  5. Methods to make Smart Contracts accessible and in a form acceptable by the laws of the jurisdictions in which they apply. This is exactly the challenges that are currently trying to raise CommonAccord, Common Language for Augmented Contract Knowledge (Clack) or Legalese.



All these elements seem to have been gathered by the R3 Corda “fabric” which intends to use Smart Contract Template to connect banks and considerably speed-up transactions processes.

During a presentation organized by Barclays, Lee Brain, one of the main creators of Smart Contract Template, was describing R3 Corda “fabric” with these words:

“They provide an elegant way to connect the text within legal agreements to the corresponding business logic. I emphasize to you that legal documentation processes can be lengthy, cumbersome and manual. Smart Contract Templates could simplify all of that and, because they are templates designed for reuse, they could drive the industry’s adoption of standards that are legally enforceable”(…)”This has huge potential to enable banks to mutualize costs across the industry by using common components – the potential for a paradigm shift in a field where there are billions of pages of legal agreements.”

Source: Corda
Source: Corda

R3’s idea is to build a closed network of banks relying on one or several blockchains that would store all the transactions, but also the legal contracts.

The ultimate goal would be to remove from the transactions circuits all the back/middle offices, depositaries, CSD and CCPs which have become extremely cumbersome following the enactment of the financial regulations (MIFID, EMIR, BASEL…) decided by the G20 after the 2008 crisis.

These Smart Contract Templates work because the contracts they replace are highly standardized and also because all the legal terms have been pre-negotiated at the network level. This kind of set-up is only possible when the parties are able to discuss the other terms upstream.

For this reason, Smart Contract Templates are well suited for consortium blockchains, which are closed blockchains where all participants are known and selected. So Corda is the platform where all the members of the R3 Consortium are able to exchange Smart Contracts to conclude transactions. But all the legal terms of the ISDA Master Agreement (contract negotiated by bank to trade financial derivatives that banks want to replace by Smart Contracts Templates) they used to negotiate bilaterally, have been pre-agreed at industry level.



Beyond the implementation of Smart Contract Templates, using closed blockchains present several advantages. It gives its members the possibility to tailor access to the contracts on the blockchain and even update them when needed. Such features would not be possible for Smart Contracts stored on a public/open blockchain, even if some solutions exist.

The problematic is indeed different for Smart Contracts that are hosted on public ledgers such as Ethereum, because it is impossible to amend the terms of a contract that has been deployed, i.e compiled by the Ethereum Virtual Machine.

The only way to introduce some flexibility in such Smart Contract is to separate the data form the logic of the contract either by creating a different contracts for each of them or by using libraries for outsourcing the logic. But either option can be complicated to implement and would not be sufficient to cover all legal specificity of complex legal contracts or solve the confidentiality issue of contracts freely accessible on the blockchain.


This is why initiatives such as “CommonAccord” try to find alternative solutions to simplify the use of smart contracts. If we summarize the terms of one of its inventors, James Hazard, “CommonAccord can be described as a community of legal documents, a kind of a civil code 3.0, on GitHub and compatible with the systems of decentralized transactions based on a blockchain”.

More precisely, “CommonAccord is a programming language oriented object which supports the creation of a comprehensive system of legal texts which are codified. The aim of CommonAccord is to render the documents so flexible that a significant part of the text disappears, leaving only to the parties the negotiation of specific points and a very clear relationship. These relationships can at any time be translated into a legal document to perform audits or to sign it.”

The ambition of CommonAccord is therefore to create standardized legal texts recognized by all and stored in databases freely accessible, like Github for the software or Incoterms for commercial transactions. It would open a world where lawyer and everyone, would draft a contract (and smart contracts) by assembling pre-written text, like programmers currently do with code. Lawyers should all start learning a programming language because the “Uberization” of their profession is coming fast.



Smart Contracts are already a reality but only for very standardized industry specific contracts exchanged within a closed network. We are far from mainstream adoption and application of these contracts in our day to day lives, but things are moving fast and we should get ready for this inevitable revolution.




IOTA – A structure for the Internet of Things



Creation Date: 2017


Protocol: TANGLE

Cryptocurrency: IOTA

Total number of tokens:

Where to buy IOTA: Bitfinex, Binance.



10 new connected objects appear daily, in our homes (smart thermostats, smart lights, smart locks), in our cars, our cities…in fact, anywhere we are. And this is only the beginning. Gartner, the famous research company in computer technology, considers that the number of these objects could reach $13.5 billion by 2020. However, this movement, also called the Internet of Things, raises important questions starting from security ones.

As evidenced during an attack conducted in the United States and France in October 2016 against the access provider Dyn, it is possible to take control over every kind of connected objects such as webcams, routers and even Baby phone in order to conduct DDOS attacks. Securing the networks and the communications of these objects is now a priority.

IOTA has been created in this context and with the ambition to meet the expectations of an Internet of Things industry in full expansion. IOTA proposes a structure for networks that could support billions of members/objects. Actually, the more members, the more secure the network is. With IOTA, all these nodes could communicate and transact (through microtransactions) with each other in a secure manner.


IOTA lies on Tangle an important innovation since the creation of blockchain.

Tangle is a new type of network based on a DAG (directed acyclic graph), which brings together many of the attributes of the blockchain technology but without a blockchain. It is still a decentralized database, updated by its members through a consensus system based on the proof of work.

For more information on the functioning of the proof of work, you can refer to our article « A simple explanation of the proof of work ».

Yet, there are many differences between Tangle and a system based on a blockchain.

There is no blockchain…: transactions are no longer stored in blocks but in the network itself, in the DAG. So without blocks, no need for minors anymore and then no fees are charged on transactions. For instance, the fees charged by minors to users the bitcoin blockchain currently runs around $2 for each transaction added to the blockchain but can reach peaks of up to 8.5 dollars.


…So there are no assigned minors…: there are no assigned minors because each member of the Network participates in the mining of the transactions. To be able to issue a transaction each member must first validate two already existing transactions. Therefore at the time of submission of this transaction, a member will be allocated two other new transactions, selected randomly by an algorithm. It will check the validity of each of these transactions and use the same mechanism as the one used by bitcoin minors, i.e the proof of work. Obviously, the level of difficulty is much lower than the one practiced on the bitcoin network so that even the objects connected with limited capacity will be able to participate in the mining process.

For more information on the functioning of Tangle, you can read our article on the « Internet of Things: blockchain, Lightning Network, and Tangle ».

…Which is essential to scale the network of billion nodes: the fact that each member participates in the mining of the transactions, answers the scaling issue that faces most of the blockchain networks. The current problem of the bitcoin network is that the number of participants increases, but not the size of blocks to store transactions. The bitcoin protocol cannot really cope with the increase in the numbers of transactions. It is estimated that approximately 250 000 transactions are continually waiting to be added to the bitcoin blockchain.


The consensus mechanism also works offline. It is another important difference with a system based on a blockchain. Members of a network running with tangle can continue to communicate and transact with each other in closed networks without being connected to the rest of the network or to the internet. They then update when they return online. This option is essential for applications of the Internet of Things.

It is important to bear in mind that IOTA is still in beta, which means that the final version of the project is not yet in circulation. To our knowledge, IOTA is not used in a concrete project at the present time.

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CryptoCurrencies VS Local Currencies

Monnaie locale
Monnaie locale

Cryptocurrencies attract a lot of attention at the moment and yet they are not the only ones to be in expansions. Local currencies are also experiencing a real boom.

The way Cryptocurrencies work is not that different from their cousins the Local Currencies and comparing them will help you understand what really is a cryptocurrency (and a Local Currency).


The objective of Local Currencies is to promote the development of local activities by creating a parallel economy where goods and services corresponding to a certain charter are exchanged against a unit of local currency. It has been demonstrated that 98% of the value created locally and paid in national currency (in euros for example) is recovered by Financial markets and markets speculation without benefiting to the inhabitants who have created it. By putting in place a local currency, the inhabitants of a locality (city or villages) decide to create an ecosystem separated from to the national economy which will retain the value created locally.

A protocol is a charter

To obtain tokens of these local currencies which are created from thin air (such as 90% of our national currency created by the private banks through credit), you must adhere to an association and sign the charter of this association. Local currencies typically propose charters that are oriented toward an economy respectful of individuals and the environment.

The process is the same to obtain cryptocurrencies, with the difference that instead of joining an association and a charter, you must download a software (the Protocol) on your computer.

We assume that the association is organised as a direct democracy which means  that all members may take part to the decision-making process and that decisions are taken at absolute majority. We are doing this digression because that is the way blockchain based systems operate. For more information on the subject  you can read our articles on decentralised networks consensus.

As a charter, a protocol is a set of rules that intend to govern the operation of the network of participants. For example a charter of local currency will state that only organic products can be purchased with the local currency. In the same way, a protocol will determine how many tokens the members of the network should receive for participating to the development of the network.

The bitcoin protocol for instance provides that minors will receive 12.5 bitcoins in addition to the fees attached to transactions for each blocks they have added to the blockchain. This compensation is justified by the fact that these minors have allocated the computing capacity of their computer installation to complete the mechanism of the proof of work and add blocks to the blockchain.

The blogger who is paid to post a quality article on Steem or a user of Augur that receives a dividend for his correct predictions, are similar exemples.


Each protocol is different and adapted to the economy developed by the network. Being open source, it can also be improved, completed or duplicated by anyone.

The purpose of a charter and a protocol is the same, that is to create an ecosystem with specific rules, its own currency and the purpose to resolve a problem. This protocol as this charter can be applied to any problem and organized freely. However the objectives of a local currency and a cryptocurrency are not necessarily the same.

Different objectives

The objective of a local currency is to develop the local economy according to rules that are not dictated by markets. In other words, the goal is not to increase the value of the local currency.

This is the reason why the value of local currencies is generally correlated to national currencies. One token of the local currency will be equivalent to one euros for example.

The objective of these currencies is however to attract a maximum of people who will exchange Euros against tokens of local currency as well as producers and resellers of products to supply the ecosystem. These persons are adhering  to the association by conviction and generally do not have personal interests to do it, except a small incentive during the conversion of national currencies (a euros and often exchanged for 1.20 tokens).

The philosophy is different with the crypto-currencies, because the value of each token can increase (or decrease) compared to national currencies. The value of cryptocurrencies will therefore depend on the supply and demand rules on the cryptocurrencies exchanges. The value of that currency will depend on its perceived value (also called the “Current Utility Value”) and also speculation.

Users of crypto-ecosystems also adhere to the network by conviction, but also (and especially) because they are paid to do so. As we has seen they receive tokens for participating to the development of the network and they hope that their contribution will benefit the protocol and increase the value of the token they have received. These incentives in protocol development (also called “cryptoeconomics) is a real innovation and possibly a brand new business model.

At the moment we are paying to use internet with the content we post and our personal datas. But internet of money is changing all this and being paid to post content or use a platform will soon be the rule. Be prepared to see an exponential increase of the pace of development of protocols.

The velocity, a common problem


The purpose is different but these ecosystems are both seeking the same result which is the movement of their tokens. Without this exchange of values, an ecosystem cannot survive. In other words the goal of these ecosystems is to increase velocity (i.e circulation) of their tokens.

local market
local market

Many local currencies which have decided that the value of their tokens should decrease if they are not spent within 3 months. The same goes with cryptocurrencies. If we take Steemit for instance, the members are paying others for their posts by a system of vote. Every time you vote, you grant the other member a certain amount of token. This amount is proportionate to the number of token you hold. So you are incentivized to participate to the network by transferring tokens.
It has been found that the value exchanged on the network corresponds to the valuation of the network. Willy Woo has even deducted the Network value to transaction ratio (“NVT ratio “) which determines if the value of a cryptocurrency is disproportionate in comparison to the development of the network. We now better understand why the circulation of cryptocurrencies is vital for the development of the Protocol.
Perhaps we could find a way to apply these new methods to local currencies without opening the door to speculation?

4 simple steps to understand a bitcoin transaction


In this guide, we will go through a first technical description of a bitcoin transaction from the creation of the portfolio to the addition of the transaction to the blockchain. Understanding these different stages is essential to then understand the way other crypto-currencies work.


The first step is to create a bitcoin address to be able to send and receive bitcoins.

This address is obtained from your public key through a process of a cryptographic hash. To understand how the protocol Bitcoin works, it is essential to have an idea of what represents the hash cryptographic and its functioning. This system is central since it is used at several levels of a bitcoin transaction: To obtain an address, in the bitcoin script and in the “proof of work” performed by minors.

As you can see in the diagram below, the address bitcoin is the outcome of a public key that it the same outcome of the private key.


bitcoin transaction
bitcoin transaction


But before going into the detail of the creation of our keys, it is important to bear in mind that the public key allows you to receive bitcoins, while the private key allows you to spend them. If one compares the payment with bitcoins to the payment by credit card in a store, the public key corresponds to your bank card number, which identifies you and that you can transmit without too many risks, and the private key corresponds to your secret code, which allows you to validate the payment and that you must not disclose.

When you download a portfolio to keep your bitcoins, public and private keys do not appear but they are generated automatically by the portfolio, same for your address bitcoin. You will only see and transfer your address Bitcoin. As shown in the schema 1 above, your address Bitcoin is obtained by applying a double hashing (SHA256 and RIPEMD160) to the public key to obtain what is called the “Public Key hash” (20bytes/160bit). The latter is then encrypted using a Base58check system to obtain a  Bitcoin address.

To go further: What is a hashing algorithm? It is a mathematical formula that is applied to a variable number of data (the “input”) in order to transform them into a fixed number of data corresponding to the digital borrows data (“output”). In the case of the algorithm SHA256, the size of the code is always 256 bits. The system of the hash is used in many other areas that the bitcoin to check easily as the initial data (“input”) have not been changed. In fact, two different input may not give an output identical.

For example, if we submit the phrase “Bitcoin is a currency of the future” has the algorithm SHA256 We are going to get a code of 256 bits, which will look like the following code: “0F7becfd3bcd1a82E06663C97176ADD89E7DEE0268of46F94e7e11BC3863E148”. Now if we add a point to the sentence and re-submit to the algorithm, the code obtained will be completely different (even if it will always be 256-bit). In other words, it is impossible to find two different inputs which would give the same output.

It is also important to remember that the hash algorithm only works in one direction and that it is impossible to find the input from the output.

hashing algorithm
hashing algorithm

In a very schematic manner, we could compare the hashing mechanism to a press that would reduce one or several elements of different nature (numbers, letters, symbols) and length (input) into a single code of 256 bits (output).

If you want to learn more on this concept, you can make on our article cryptographic hash – The guide to understanding everything.



Imagine a transaction where Alice wants to transfer a bitcoin to Bob. At this stage, Alice and Bob both have a Portfolio and therefore each a set of key private/public and a bitcoin address.

Bob sends to Alice his public key encoded in the form of an address Bitcoin. This address Bitcoin can be transmitted to anyone by any means, either by mail or by QR code.

Upon receipt, Alice (or rather her portfolio) will include the information of this address in the transaction that it will create so that Bob can then prove with its private key that the transaction was well intended.

As shown in schema 2 below, the transactions are linked to each other in the blockchain. The output of a transaction, which included the amount that Alice wants to transfer to Bob and the address information of Bob (in the PubkeyScript) is included in the input to the next transaction.

And it is logical because a bitcoin is, in fact, a right to spend which can be activated with a private key. It is therefore always advisable to keep your private key security because losing a private key, is to lose the unique evidence that you have the right to spend a bitcoin, or rather the output of the transaction that has been created for you by using a lock (the signature script) that only your private key can open.

transaction bitcoin
transaction bitcoin

It is important to note that your portfolio has the ability to combine the amount of several transactions that you have received in the past in order to send the exact amount you want to send.

To go further – in practice, the portfolio of Alice re-transform the Bitcoin Address in “Public Key hash” to create its transaction. Remember that this “Public Key Hash” has been initially created by Bob and therefore contains the information of its public key and its private key. This is essential because Bob will use its private key to obtain the payment.

Alice will use Bob’s “Public Key Hash” to create a “Pubkeyscript”. You can understand the “Pubkeyscript” as a lock with a code that you can open only by aligning the 3 or 4 good numbers. This combination is contained in what is called the “Signature Script” which is designed from the private and public keys that Bob will provide for spending (i.e to create a new transaction) the Bitcoins that he will have received from Alice.

Alice will, therefore, constitute a transaction from an existing transaction (version 1) in the following steps:

1 – by using its own private key and public, her portfolio created a “Signature Script” in the input of the transaction version (2) and thus unlocks the output of the transaction Version 1. In other words, the “Signature Script” (the version 2) is the code required by the “PubKey Script” (the version 1), which had been created from her Bitcoin address.

2 – Creation of a new “output” by Alice: she can now include the amount of bitcoin present in the output of the transaction version (1), in the output of the transaction version (2) and close it with the lock “Pubkey Script” created from the Bitcoin Address of Bob. Thus only Bob will be able to open the lock and spend the output, in turn, creating a transaction by following exactly the same process.

3 – The transaction is then sent on the bitcoin network and miner members will determine whether the code used by Alice (her “Signature Script”) allows her to open the lock of the previous output (the “Pubkey script” of the transaction version 1). If this is the case, the transaction will be added to the Blockchain so Bob can access it.


The mining of bitcoin is central to the operation of the system. A new block is added to the blockchain every 10 minutes.

For each block the Minors:

– Verify if the transactions sent on the network are correct,
– add it to a block,
– calculate the hashing of the “header” of this block by realizing the “Proof of work
– if it is accepted by the rest of the network, it is added to the blockchain,
– the minor obtains the reward that corresponds (coinbase and fees added to each transactions).

The steps are the following:

1. Verification of the validity of the transactions he receives and gathering of these transactions into the same lot (“memory pool”) until there are enough to add them in a block. These checks are intended to determine if the transactions have been constituted in accordance with the rules of the Bitcoin Protocol, such as the existence of an output sufficient to constitute the transaction, an unlocking script corresponding to the locking script, or even more simply that the syntax of the transactions is correct.

The “Memory Pool” must not be mixed with the “Mining pools” which are groups of individual minors which add their computing power to try to win the race for the creation of blocks of transactions.

2. At the same time, the juvenile will constitute a block which is composed of two parts: a “Header” in which are stored information concerning the block in constitution and a “Body”, including all the transactions of the block on the form of a “Merkle tree” (literally a tree of Merkle”). To understand how the blockchain is organised, it is important to understand each of its compostantes described in the “header” and the “body” of each block:

blockchain block
blockchain block

MERKLE TREE: The purpose of a Merkle Tree is to structure data in order to access it more easily and to check its veracity faster. As you would have understood, the name comes from the fact that this method organizes the data by grouping them by two, thus giving the shape of an inverted tree. The transactions are grouped by two, a hash is then applied to this group. The groups is then submitted to the same process with another group until you obtain a single group (the “Merkle Root”) which hashing is added as a reference in the “Header” of the block.

This organization of transactions within a block allows the minors during the verification of new transactions, to go back very quickly to the last transactions concerned and to verify if there is an output of an amount greater than the amount that must be spent in the new transaction (see diagram above).


As we explain in our article “A simple explanation of proof of work“, in a decentralized network such as those based on a blockchain, the difficulty is to have all members to agree on the order of transactions which must be added. It is the whole question of the Consensus between members of the network. Proof of work is one of the mechanisms that allow the members to reach this agreement while ensuring the security of the network. Everyone must not be able to add blocks to the blockchain and get the reward. the members/minors must first demonstrate their involvement by putting at the disposal of the members of the network the computing capacity of its computer (today a computer is no longer sufficient to undermine the bitcoin, only the farms of minages and mining pools may still participate).

The mechanism of “proof of work” can be explained in terms relatively simple: it is the fact for a participant of the network (in the case of the bitcoin, a minor) to submit to the other members of the network, the result of the calculations he has done. The operations to be carried out are not in themselves complicated but must be carried out such an important number of times that the minor must incur significant computing capacity (CPU). The minor must indeed find a random figure (the “Nonce”). For this, he will try his luck until he finds it. It will apply the hashing algorithm to the same group of data (the hash of the previous block) until it obtains the result that it seeks.

If it is the first to discover the Nonce and to transmit it to the rest of the network, the minor win the right to add the block to the blockchain and get the reward in bitcoins and the fees attached to transactions.

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Hashing Algorithm: the complete guide to understand

Algorythm de hachage

A hashING algorithm organizes the implementation of a hash function as a set of digital values.

This introduction may seem difficult to understand, yet the concept is not difficult to get. Of course we are not going to enter into the details of the functioning of the algorithm, but we will describe what it is to be used.

In the framework of the Decentralized Ledger Technologies (i.e blockchain technologies), the hash function (which is applied by the algorithm) has for main object to compare groups of important data and determine if their content has been corrupted or not. In fact, the hash of a group of data will always be the same as long as this group of data is not changed. By contrast, if a small change is made to this group of data, the hash of the new group will be totally different.

As its name indicates, a hashing algorithm cut the data to produce a new group of data completely different

Generally speaking, a hashing algorithm is a program to apply the hash function to “data of entries”. Concretely, a hash function is a mathematical function that allows you to convert a numeric value of a certain size in a numeric value of a different size. One could compare the hash function to a press in which is inserted an object, which once compressed exits with a smaller size, but always the same, regardless of the size of the inserted object.

hashing algorithm
hashing algorithm

In the above example, the hash algorithm is SHA256, which is the one used by the Protocol Bitcoin. The object to which is applies the function (“input”) is a numeric value whose size can vary according to the algorithm. Here the input are pieces of sentences, but it is possible to imagine any type of data (Figures, letters, signs…) having a different size.

The size corresponds to the number of characters which composed the group of data. The three inputs are therefore submitted together to the hash algorithm and the numerical value that results in (“output”) is however always of fixed size (between 160 and 512 bits according to the type of function). In the case of SHA256, the size of the output is always 256bits, or 256 characters…logic.

Hash functions propose many other features, that it is important to note:

  • “Compression”: The input value (“input”) is generally greater than the value of output (“output”). In this case it is considered that the Hash Function compresses the data that are submitted to it.
  • “Resistant to collisions”: two values of different inputs may not lead to a value of identical output. From this point of view the hash functions are Collision resistant. It should be noted that even a minimal variation between two values of inputs (a comma for instance) can lead to two values of outputs completely different.
    The reverse is also true. The same value of entry may not lead to two different outputs.
  • “Pre-image resistance”: it is impossible to find an input value from the output. The only way to find the input value is to apply a method of “brute force”, which means that the only way is to try all the input values possible until you find the good one. It is essential to understand this peculiarity in the framework of the crypto-currencies because the mode of consensus of the “Proof of the works” (“Proof of Work”) is based precisely on this concept.

A hash algorithm determines the way in which is going to be used the hash function. It is therefore important to differentiate between the algorithm and the function.

As mentioned, a hashing algorithm is a program to apply the hash function to an input, according to several successive sequences whose number may vary according to the algorithms. All of the sequences of hash form a series. During each steps of the series, two blocks of data whose size varies according to the algorithms (usually between 128-bit has 512-bit), are subject to the hash function with a view to obtain a “Output value” (“output”).

A frequency of the series of hash:

hashing algorithm
hashing algorithm

The output value is then one of the two blocks of data in the following sequence. The other block does generally constitute the data from the most recent block of data. This mechanism is repeated until the entire message has been submitted to the hash function. This is the reason for which it is often made reference to a “snowball effect”.

A hash serie:

hashing algorithm
hashing algorithm

There are many types of hashing algorithm such as Message Digest (MD, MD2, MD4, MD5 and MD6), RIPEMD (RIPEND, RIPEMD-128, and RIPEMD-160), Whirlpool (Whirlpool-0, Whirlpool-T, and Whirlpool) or Secure Hash Function (SHA-0, SHA-1, SHA-2, and SHA-3). In the universe of the cryptocurrencies, the most used hashing algorithms are SHA-256 and X11.


The algorithm SHA-256,

SHA-256 (“Secured Hash Algorithm 256″) is the algorithm which has been chosen by the designers of the Protocol Bitcoin. It is used during the creation of the public key from the private key, but also for the realization of the process of proof of work. This algorithm has been developed by the NSA (” United States National Security Agency”) in 2001 and continues to be used by many financial institutions and governments for the encryption of their data.

The success of the bitcoin however, poses an important problem concerning the use of the algorithm SHA-256. As we have already seen, each new bitcoin created returns to the miner who has carried out and submitted to the network the “Proof of work” the first. However, the likelihood for a minor to provide the “Proof of work” in the first position is directly proportional to the capacity of calculation that it is able to deploy on the network, i.e the hashing power.

On the other hand, the Protocol Bitcoin has been programed to add a block to the blockchain all 8-10 minutes, no more but no less. The Protocol Bitcoin adjusts therefore automatically to the hashing power of miners on the network by increasing or decreasing the difficulty of the “Proof of work”.

The popularity of the bitcoin has led to a rapid increase in the number of miners, thus we have seen a real race to the equipment of minors whose capacity of calculation and so hashing power, have literally exploded in recent years.

In a few years, we moved form the first miners who in 2009 could mine bitcoins on their laptops (Central Processing Unit mining – the “CPU”) or by improving its capacity with a graphics card (Graphic Processing Unit mining – “GPU”), to mining farms only using  “Application Specific Integrated Circuits (ASIC). The ASIC are integrated circuits with a single function (for example mine bitcoin) and not a general vocation. So ASIC can mine hundreds of thousands times more rapidly than the CPU and GPU, for a fraction of their energy consumption and thus the cost, while producing less heat and noise.

The investments in the ASICs have rapidly increased thereby excluding all individual miners. The only way today for individuals to compete with the mining farms is to be part Mining pools, i.e huge groups of individual miners. Yet these groups occasionally reach worrying sizes for the bitcoin network to the extent that certain are in a position to exceed the fateful limit of 51% of the hashing power (“Hashrate”) and are thus potentially able to take control of the network. In practice, if a member gather more hashing power than the rest of the network, it has the ability to come back unilaterally on the blocks already added to the blockchain (see “The attack of 51%”). This was the case of the GHash mining pool which exceeded the threshold of 51% beginning 2014.

This concentration of hashing power which ended up in a race for the equipment of miners is the main problem of the use of the algorithm SHA-256 (with the disastrous ecological effects it generates), since it threatens the philosophy of the bitcoin. This algorithm is indeed likely to question the decentralized aspect the bitcoin.

Proof of Work
Proof of Work

The Algorithm X11

it is in this context that appeared the Algorithm X11 at the end of 2014. This algorithm which has been designed for crypto-currencies, is still more secure than the algorithm SHA-256 and presents the advantage of not being able to be used by “Application Specific Integrated Circuits”. It is currently being used in several crypto-currencies, the most famous being DASHCOIN.

X11 organizes a chain of 11 different hash algorithms: Blake, BMW, groestl, JH, keccak, skein, Luffa, cubehash, shavite, SIMD, and echo. To fail, the whole 11 hashing algorithms must default simultaneously. It is estimated that the probability of such a situation is close to zero.

On the other hand, as we have seen above, the ASICs can only be programed for one function, i.e SHA-256. Yet an ASIC will cannot be programed to proceed with the hash of two (or more) different algorithms simultaneously. This is the reason why ASICs cannot be used to perform the Algorithm X11 since it included 11 different algorithms.

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How to securely store your coins: the ultimate guide

portefeuilles bitcoin
portefeuilles bitcoin

It seems important to begin by clarifying that the word “Keychain” could be more appropriate than “portfolio” to the extent that the portfolios do not store any bitcoin, only public and private keys that allow the transfer. A portfolio is a software that will give you access to the bitcoin network and manage for you the purchase and sale operations . This software can be downloaded on your computer or used directly on the Internet. Obviously the security conditions will vary from one type of portfolio to another.


If you compare the payment with bitcoins to the payment by credit card in a store, the public key corresponds to your credit card number, which identifies you and that you can transmit without too many risks, and the private key corresponds to your secret code, which allows you to validate the payment and that you must not disclose.

The term bitcoin portfolio refers both to the folder that contains your private key, but also the programs that generate public keys in order to create transactions, a little like your banker assigns you a credit card number and a secret code.

As you can imagine, the purpose of the portfolio is to retain bitcoins or Satoshi (1 satoahi = 0.00000001 bitcoins) but also to allow their expenditure. To do this, the portfolio enable its owner to distribute the public keys (to receive the bitcoins) and a program of signature of transactions with the help of private keys (for spending the bitcoins). To better understand a bitcoin transaction process you can read our article “4 simple steps to understand a bitcoin transaction“.

The Portfolio must then be able to communicate such information to the bitcoin network  and has therefore a third program in relationship with the network. The first two programs are not necessarily directly related to the last one. In other words, it is possible to generate public keys and sign transactions indirectly, without being connected to the bitcoin network, and to transmit them in a second time. There are many combinations of these transactions.


The most common portfolio types are online portfolios. These applications are based on the Internet and can be downloaded on your smartphone and computer. they are great for small payments of everyday life by using QR codes for instance. The QR code is just a way to encode your public key so that you can scan it from your smartphone. If you do not know what to do with your bitcoins do not hesitate to use my QR code to get rid of them:

QR code
QR code

Smartphones are considered less secure than the Portfolios located on a laptop, it is therefore recommended not to keep all your bitcoins on your mobile portfolio, but rather in a software downloaded locally on your computer and even better in “Cold storage” (see below).

With this type of portfolio, your private and public keys are stored on the website of a service provider. In other words, the three programs that we mentioned above are concentrated on a same platform in the hands of the same person. In other word you generally do not control your private keys, which is a risk because it means that you need to trust the company that manages the portfolio. The main advantage however is that you can access your portfolio from anywhere in the world.


A more secure way to keep your cryptocurrencies is to download a portfolio directly on your computer. You therefore become master of your private key and you are much better protected against attacks, provided of course that your computer does not contain any virus such as spyware programed to collect your keys.

The ideal solution remains to save your private key out of the Internet on a USB keys secure, also called “physical portfolios” (or “Cold Storage”).

Ledger is a French start-up which proposes a portfolio that you can download on your computer or smartphone, but whose data are stored on a key that you insert into the USB port of your computer. All information relating to your bitcoins are therefore not in contact with the Internet. The models proposed by ledger now allow you to store not only your bitcoins, but also the main altcoins: Ether, XRP, dash, litecoin, Dogecoin, Zcash.


Other brands such as KeepKey or Trezor wallets are also very effective.

It is possible if not recommended to use both types of storage for your bitcoins, a little as you would do with your current account and your savings account. You can indeed keep only the bitcoins/Satoshi you need on your hot storage (portfolio online) and regularly transfer the surplus on your cold storage.

Another way not to expose its private key to the Internet and use a portfolio HD.


Despite its barbaric qualifier, the hierarchical portfolio is today the most effective way to protect your bitcoins (with portfolios in cold storage). It is a little technical can, but concretely, a HD portfolio contains an initial Seed from which it will be possible to create many keys drifting all from each other and organized in trees in the following way:

This process has the huge advantage of being able to create an almost unlimited number of keys starting only of the initial seed, so it is much more secure since it is now sufficient to retain the initial seed in security (in cold storage for example) to be able to recreate, transfer or import the whole portfolio.



  • Encrypt your portfolio: it is important to use a password strong enough. Choose a good password is a necessary solution, but not sufficient, which should be combined with other means of protection such as those proposed below.
  • Use all the means of protections proposed by the Portfolio: today almost all portfolios available offer an option of double authentication. It is in fact a additional protection that is to send on your mobile phone a message including a code that you must include on the home page of the portfolio to be able to access it.
  • Keep the control of your private key: it is important not to entrust to a portfolio the care to manage your private key because it returns àleur entrust the safety of your bitcoins. It is therefore recommended to use only of portfolios with which you will keep the hand on your private key and keep a major part in “Cold Storage”.
  • Do not reuse the same addresses: For reasons of security, it is advised to use a new address for each new transactions. Many are the portfolios which today allows to create an address by transaction (portefeuilleHD)

You can compare the different portfolios available on the market in the below chart:



A simple explanation of “Proof of Work”

Proof of Work
Proof of Work

PROOF OF WORK did not appear with the Bitcoin. Its main purpose is to secure the network while it membres find an agreement on the order of the transactions that will be added to the blockchain.

The concept of “proof of work” exists since a long time. The first modern application, submitted in 1996 by Adam back under the name of “Hashcash”, used a mechanism of “proof of work” based on the algorithm SHA256 (such as the one used by the protocol Bitcoin), as an anti-spam by associating the reception of an email to a mechanism of proof-of work. As we will see, one of the main features of proof-of-work is its cost, due to the operations that must be realized and therefore of computing capacity and energy sectors which are required.

In a decentralized network such as those based on a blockchain, the difficulty is to find an agreement among membres on the order of transactions which must be added. It is the whole question of the Conensus on the network. Proof of work is one of the mechanisms that allows to reach this agreement while ensuring the security of the network. And for this no matter which must not be able to add blocks to the blockchain as he hears and get the reward. It must first demonstrate its involvement by putting at the disposal of the members of the network the computing capacity of its computer (today a computer is no longer sufficient to undermine the bitcoin, only the farms of minages and mining pools may still participate).

The proof of work allows the minors to say to the rest of the network, “Look I have used a lot of capacity of calculation (CPU), lots of equipment and lots of energy at the service of the network, I went through the POW process and I have the evidence that I finished first, so now I can add the block and receive the reward who is going to pay for all these costs.”

It is generally considered that the bitcoin network consumes as much energy as a country like Ireland, but what is not being said enough, is that this energy is used to run the machines for an absurd exercise, the proof of work, which just serves to determine which of the minors will have the right to add the block to the blockchain. This is also why many new systems of consensus have recently appeared such that the proof of stake or the delegated Proof of stake in view to limit this consumption of energy.

Try to define the mechanism of the POW

The mechanism of “proof of work” can be explained in relatively simple terms: it is the fact for a participant of the network (in the case of the bitcoin, a minor) to submit to all other members of the network, the result of the calculations that he has done. The operations to be carried out are not in themselves complicated, but must be carried out such an important number of times that the minor must incur significant computing capacity (CPU). The minor must indeed find a random figure. For this he will try its chance until he find the number. It will apply the hashing algorithm on a same group of data until he obtains the result that it seeks.

What is an hashing algorithm? It is a mathematical formula which is applied to a variable number of data (the “input”) in order to transform them into a fixed number of data corresponding to the digital borrows data (“output”). In the case of the algorithm SHA256 the size of the code is always 256 bits. The hashing system is used in many other areas that bitcoin to check that the initial data (“input”) have not been changed. In fact two different input may not give an identical output identical. For example if we submit the phrase “Bitcoin is a currency of the future” to the algorithm SHA256, we will get a code of 256 bits, which will look like the following code: “0F7becfd3bcd1a82E06663C97176ADD89E7DEE0268of46F94e7e11BC3863E148”. Now if we add a point to the sentence and the re-submit it to the algorithm, the code obtained will be completely different (even if it will always be 256-bit). In other words, it is impossible to find two different inputs which would give the same output. It is also important to remember that the algorithm of hash only works in one direction and that it is impossible to find the input from the output.

More zero in the result means increased difficulty

More concretely the minor must find a result starting with a number of zero. The greater the number of zero, the more difficult it is for the minor to find the result and the more it will have to try his luck before finding it.

Yet the number of zero (and therefore the difficulty) is adjusted to the number of minors on the network (and their computer capacity or hashing power) to be sure that it will take an average of 10 minutes to find the solution. Once it has found this figure, the other members of the network can instantly check the solution.

How a minor manages to find the result of a hash containing a number of zero, if he does not know the input data that must be submitted to the hash? Since the minor may not find the Input data (“input”) from the result (“output”), he is going to try his luck until he located the Input data enabling him to obtain the output data corresponding to the objective of difficulty required, which is the number starting with a number of zero sufficient to be validated by the Protocol Bitcoin and thus be added to the blockchain.

To do this it will always use the same data to which he will add a “Nonce”, which will change in each test, until he locates the Nonce allowing him to find the good result.

If we take the example mentioned above, the minor shall compute as follows:

Bitcoin is a currency of the future1 = 0FDG155sd1fgsd5133D5fgdfgdbtnnjd3x5g4m3f5H4GZS3Dg5….

Bitcoin is a currency of the future2 = 0wnjsbfd4yj35zs4EGN35Y4bzs3E5F43ZN57has3d5nx3t5b73…..

Bitcoin is a currency of the future3 = 00asefnjj574DM3dm5y4MH3d54d3DMH43d54GDF35H4S486…


Bitcoin is a currency of the future4635445614 = 000sdrgf7n3a547sd3BA5s4nj3S54FB3a54a3a45……

in yellow this are the “Nonce” applied by the minor to the same input data (“Bitcoin is a currency for the Future”). The minor test them one by one. In Green, it is the number of zero in the result of the hashing algorithm, required to validate the block. If the level of difficulty required by the Protocol Bitcoin is three zero, then the minor tries the “Nonce” randomly until he obtains a result with three zero. It is important to note that the level of difficulty is constantly adjusted to the number of minors present on the network and their level of sophistication to ensure that a nonce is found all the 10 minutes.

Proof of Work
Proof of Work

Once the minor has found the nonce of the block to validate this block, the latter shall transmit to the other minors for validation. The latter who now have the complete input data will be able to check instantly that the minor has carried out the research work of the Nonce and thus validate the block.

To give an order of idea, at present time, taking into account the level of difficulty, it is necessary to count up to 150 000 billion of attempts to find the correct input. This represents 600 trillons of calculation of the algorithm SHA256 made every second around the world. We are far from the beginning where the level of difficulty allowed to mine bitcoin from a laptop, minors are now data center dedicated solely to this activity.

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Internet of Things: Blockchain, Lightning Network and Tangle

internet of things
internet of things

Internet of things is already a reality. You have of course heard about connected objects that are invading every day a little more our life. These are all the sensors installed in our cars, our houses, our smartphones, our towns…everywhere. And this is just the beginning.

For instance, several new hardware have recently appeared in our homes: Smart thermostats that regulate the temperature in accordance with our habits and weather data collected on the net, smart lights that ignite only when someone is in the room, the fridge that make orders online what is missing and get them delivered, or the Smart locks that close your house automatically, are all sensors that are now part of our environment.

These sensors are called intelligent because they are equipped with processors powerful enough to activate an algorithm able to learn our habits and combine them with information available on the net in order to update its setting accordingly.

Smart thermostats for instance, record the setting we are manually doing during the first two weeks and use weather forecasts available online to optimize energy savings. These devices can obviously interact with the other sensors of their environment. You can for instance program a smart thermostat to start increase the temperature of your home and turn the light on when your smart lock is opening the door. You can even do that when you are on your way home through your localization app on your smartphone.

We are just at the beginning of a new industrial revolution and Gartner, the famous IT and technology research company, estimates that the number of these connected objects might reach 13.5 billion in 2020. But this revolution raises many questions and especially security ones.

internet of things
internet of things

As shown during the attack organized in October 2016 against Internet Service Provider company Dyn, it is now possible to take control of thousands of connected objects such as webcams, routers, and even baby phones, to support a large scale DDos attack.

All these objects are organized in networks, so they will communicate with each other and realize transactions, billions of micro-transactions to be accurate. So it is paramount for all these transactions and communication to be conducted securely. These sensors are still not very smart, i.e their memory and processing capacity are still limited by the requirements of size and access to energy in their environments. Even if according to Moor’s Law, this situation will evolve sharply, it is necessary to find today a system able to secure these networks while understanding the requirements of the Internet of Things.


A system based on the blockchain could appear at first sight as a good solution. A blockchain indeed allows a network of nodes or connected objects to communicate and transact in a secured and decentralized way.

However, in its current state of development, the bitcoin blockchain (that we are taking as an example here) has several inconvenient to be applicable to an important number of connected objects:

  • not good for Scaling:

Due to the limited number of transactions that can be added to the blockchain, it is actually difficult apply the blockchain to a network with an exponential increase where transactions made among members of the network (either physical persons or not) will also increase exponentially. The size of each blockchain blocks is 1MB and even an increase of this size through SEGWIT 2X for instance, is not sufficient to process all the transactions made on the bitcoin network. It is indeed considered that 250,000 transactions are always waiting to be processed.

  • A protocol very slow

This bottleneck is largely due to the speed of the bitcoin protocol which programmed to only add a block every 10 minutes. The difficulty of Proof of Work is indeed always adjusted to the number of miners acting on the network (i.e the amount of hashing power used on the network) so the time frame between two block will always be 10 minutes. It is easy to understand that such system which is already difficult to apply to commercial solutions, is not adapted to a universe where billions of machines exchanges with each other.

  • high Fees

The presence of minors that must be paid for their validation work and adding blocks to the blockchain, is also a big disadvantage. At the present time, the fees charged by minors to users for each transactions added to the blockchain are around $2, but can reach of the peaks of up to 8.5 dollars. Here again the principle of the mining which aims to operate the network in a decentralized and secure manner, is particularly unsuited to micro-transactions that will explode around us in the near future.

  • Heavy weight of the blockchain

Finally the size of the blockchain may also prove to be a major disadvantage. Even if it is not necessary to download a blockchain integrally to interact with it and send transactions, it still needs to be stored in a same place by all members (minors or nodes) of the network. This system is obviously unsuited to a world where billions of transactions will be carried out each day.





Lightning network
Lightning network

The Lightning Network is a protocol designed with the initial objective to enable the bitcoin to extend its network by accelerating the speed of the transactions.

This Protocol now applies to the whole of the blockchains and allows millions of transactions per second, instantly and with fees extremely low.

The technology used by the lighting network is that of channels of payments. The micropayments Channels are a technology that allows you to group several small transactions in a same transaction in order to limit the costs and not have to wait for the confirmation for each transaction.

Each party must therefore first create together a channel by issuing a transaction that they must all sign using their private key, which will not be broadcasted on the network and will block a certain sum of money.

The Lightning Network goes further and proposes a bidirectional channel, that is to say that the two parties can make payments through the same channel. The two parties may therefore block a sum of money in the mulit-sig initial transaction and perform transactions through this channel.

The Lightning Network goes further and proposes a bidirectional channel, that is to say that the two parties can make payments through the same channel. The two parties may therefore block a sum of money in the mulit-sig initial transaction and perform transactions through this channel.

The Lightning Network also organizes the networking of these different channels so as to enable the achievement of payments by interposed persons. To do this, the software will perform a series of steps that will allow Alice to transfer funds to Carol by the intermediary of Bob.

These steps are the following:

1- Alice requests Carol to create a value (for example a mixture of digit and letters), and to transfer to her the hash of this value as well as its address bitcoin.

2- Alice transmits the hash to Bob and tell him that she would send him a bitcoin if he shows the value that it has received from Carol proving that it has transmitted a bitcoin to Carol.

3- Bob receives the value (which checks the hash) on the part of Carol and transmits her a bitcoin in return.

4- Bob passes the value that it has received from Carol to Alice thus proving that it has transferred the bitcoin to Carol. Alice can therefore send him to turn a bitcoin safely.

Lightning Network
Lightning Network

As we can see, Alice uses the channel that Bob has put in place with Carol to transfer a bitcoin to the latter without knowing her. Obviously this scenario works with several intermediaries.

But as you may be wondering, what would happen if Alice changed her mind and decided no longer to transfer the bitcoin once she has received the value from Bob and that the latter has forwarded the bitcoin to Carol (step 4 above)?

This is where Hash Time-Locked contract come into action.

The lightning network uses a process called “Hash Time-Locked Contract” which includes both a timer (” Time-Locked”) and a secret (” hash”). If we take the example above of a transfer of bitcoin from Alice to Carol (directly, without including Bob to facilitate the explanation), the establishment of a Hash Time-Locked Contract is done according to the following steps:

1- Alice sends the bitcoin that she wants to transfer to Carol, toward a third-party address which requires the signature of both parties to be used (multisig address).

2- Bob can recover funds by sending them to an address that he controls at any time by adding its signature and the value that has been transmitted by Alice.

3- Alice can also send the funds to an address that it controls but only after a certain period (” Time-Lock”).

This mechanism is then used at the level of the network. So Alice and Bob have also put in place a hash Time-Locked Contract. In our example above, Bob receives the value of Alice before transferring the bitcoin. The two channels are linked so if Alice does not want to transfer the bitcoin, Bob will be able to insert the value that it has received from Carol in the Hash Time-Locked contract in place with Alice and thus be certain to recover it.

As you can see the lightning network represents a significant advance in the development of the bitcoin network and can be a solution for networks of communication between machines that are currently developing. Although many of the prototypes of networks based on a blockchain are currently in development, we would like to stop on one of the most promising, in any case the Internet of Objects, the Tangle.


TANGLE : all the advantages of the blockchain, without the blockchain.



Used by the IOTA project, Tangle is a new type of network based on a DAG (Directed Acyclic Graph) which has been designed with the Internet of Things in mind.

Tangle is no longer really a blockchain properly speaking, since there is no longer a “block” or a “chain”. Tangle is actually a second generation blockchain that does not rely on an architecture of blocks connected to each other by cryptographic hashes, but retains some of the fundamentals of the current blockchain:


– A peer-to-peer network

– A decentralized database

– A consensus mechanism to validate transactions

One of the first consequences of the absence of blocks is the absence of minors. To be precise and as we shall see, there are no members of the network who are exclusively minors on behalf of the network. All members are a little bit. A network based on Tangle does not charge fees to validate transactions. This is one of the major differences with the blockchain as we know it today. Transactions even for small amounts are therefore possible on this type of network, which is particularly well suited to the Internet of objects.

An improved consensus system applied to a revolutionary structure

The consensus mode is also different from the one we currently know since it is not done in sequence, 10 minutes for the bitcoin protocol for example, but continuously and in parallel.
TANGLE is also called a DAG or DIRECTED ACYCLIC GRAPH. “Directed” means that it only goes in a sense, “Acyclic” means that it is not circular and “Graph” that the network itself is the equivalent of the blockchain to store transactions.

As with current networks, each network member (or “node”) is a computer that sends transactions for validation to other members with whom it is connected. In the case of Tangle, these transactions are referred to as “Site”.


The rule is that any new transaction, called “tips” (in gray above), must approve two existing transactions. Each chain of transactions is called a branch. The longer the branch on which a transaction is based, that is to say there is more new transactions after it, the more its weight is important. By “weight”, it is necessary to understand the amount of work that has been invested in the transaction by the Member transmitter. The weight of a “tip” can also be calculated in accordance with the weight of all transactions that are included on the same branch.


We then speak of accumulated weight. In the example above, the accumulated weight of A is 9, that is to say its weight (1), plus the weight of the transactions to which it points, or (b), (d), (f) and (G). The greater the weight of a site, the lesser it will be possible to revert on this transaction. It is important to see that all transactions in green in the above diagram are indirectly pointed by all new transactions in grey, which is not the case of the transactions in red. The objective of any transaction is to become green.

The two transactions that must validate each new transaction are randomly selected by an algorithm called “Markov chain Monte Carlo” and intends to avoid that Members choose to validate only their transactions. As you can see, each member of the network plays the role of a minor by validating two transactions for the Siena is accepted by the network.

How do you know the degree of reliability of a transaction?

By simply activating the algorithm “Markov chain Monte Carlo” to determine the number of times that a Tip chooses led to your transaction. If you activate the algorithm 100 times and that your transaction is reached 50 times then the rate of validation is of 50%.

Once a member has verified that the two transactions selected by the algorithm are not conflicting, the principle used to validate transactions is the same as that used by the blockchain of bitcoin, i.e. proof of work. Each Member reproduced the same cryptographic hash until it discovers the Nonce which allows you to validate the transaction. The big difference with the POW used for the bitcoin lies in the fact that there is no race between the different minors anymore and therefore the difficulty to find the Nonce does not increase. It is therefore possible to participate in the mining of the transactions of a network based on the tangle technology from its smartphone or its PC. Tangle is in fact designed so that the mining is done by objects connected with low capacities. It is therefore perfectly adapted to the Internet of Objects.


It is essential to understand that the type of mining that we have just described is carried out simultaneously by all the members of the network and not more in cadence, all 10 minutes as is the case with the bitcoin. Therefore the more Members present on the network, the more secure the network is. This option is made possible because the transactions are no longer added to blocks whose size is limited, but are saved directly in the DAG or directed acyclic graph.


Another crucial element for its use in the Internet of objects is that the members of the network can participate in the mining without being continuously connected to the Internet network. When we apprehend the issues of communication of the sensors to a network in the real world, it is apparent that this option is indispensable. For practical reasons, it is in fact impossible that all connected objects are permanently connected to the Internet, even indirectly through a gateway.

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Proof of Work vs Proof of Stake

Proof of work
Proof of work

The goal of consensus system in a decentralized network relying on a blockchain is to allow the members of the network to find an agreement among these members on the current state of the blockchain. The difficulty is to attain such result without knowing the identity of the members and without any centralized authority that plays the role of confident intermediary.In the article we will compare Proof of Work vs Proof of Stake which are two options to solve this issue

In other word, consensus are mechanisms that allows a decentralized network that share a common ledger (the blockchain), to agree on the validity and the order of the transactions realized among the members of the network.

Before the creation of the Bitcoin, this process was not possible and centralized entity were needed to play the role confident intermediary. The purpose of a bank for instance is initially to update a ledger (your account) to show the movements in and out according to the payments that are made among the members or the banking system.

Proof of Work

“Proof of work” (“POW”) is currently the most famous consensus system due to the development of the bitcoin. This mechanism relies on a reward of the entities participating to the consensus process for validating the transactions and adding them to the blockchain. Until now, the bitcoin has largely shown it reliability and resistance to attacks. It is important to note the successful hack were most of the time against exchanges that did not provide solutions secured enough to for the private keys, but the Bitcoin protocol in itself has never been breached to date.

The success of POW relies on different elements:

First POW is the first consensus algorithms for which the management of the identity of its members is fully decentralized. In other words anyone can mine bitcoin without having to show its identity. This is the reason why POW is well suited for “public” or “permission less” blockchains that are open to anyone.

In practice in a system applying POW, each miner tries to solve a mathematical problem and the first one is allowed to constitute the block and add it to the blockchain which will open the right to a reward paid in bitcoin. Without entering in too much detail, the solution to the mathematical problem cannot be found by deduction, but only by trying solution until the miner find the one that is the answer. So the more calculating power you have the attempt you can make on the problem and the more probability you have to find the answer. It is also important to flag that the difficulty of the problem grows with the number of miners trying to solve it (the amount of calculating power or “hashing power” used on the network) so that it will always take 10 min to find to mine a block.

This is the reason why POW always leads to a run on calculating power, which is a constant increase of the calculating power of the network. It is far the time when, everyone could mine bitcoin on his PC. Now only a handful of mining farm and mining pools (gathering thousands of PC) are able to compete to add blocks to the blockchain. This run also has absurd ecological effects. It is generally considered that the bitcoin network consumes as many electricity as a country like Ireland.

Proof of Work
Proof of Work

All these reasons have led developers to imagine new consensus mechanisms that would reach the same results without having this run on the CPU, that would be faster (than one block each 10mins) and easy to scale. Proof of Stake is one of these new consensus systems.



As you can understand from its name, Proof of Stake does rely on the stakes you have in the network, i.e the number of token that you own, and not on your calculating power.

So where the size of your installation is determinant in the POW system, in the Proof of Stake system the most important is the amount of token that you own. Indeed the more token you have, the more opportunity you will have to mint (we talk about “minter” for POS instead of miner for POW). The mechanism rely on the idea that the person who have the most interest to have a consensus system that works perfectly are the one that have the most interest in the system, because if the consensus does not work the price of the token will fall and their wealth too.

The other rational behind this mechanism is that the price of the attack would be so high that it would discourage any attacker. To succeed an attacker would have to buy an important amount of token.

In practice, the minter combines the identification of the last block that has been mined with their public key to generate a random number. This number is them multiplied by the number of token that is own by the minter and the time in second since the last block added. If this number is higher than a predetermined threshold then the minter is authorized to add the next block.




Proof of work
Proof of work

Both POW and POS are not perfect and could be improved.

POW for instance is very slow. A block containing a limited number of transactions can only be added to the blockchain every 10 minutes. Given the risk of 51% attack we have described above, it is generally considered that it is impossible to come back on a block once 6 blocks have been added to the blockchain after the one in which our transaction is stored. Even if projects like the Lightning Project and Sidechain try to solve these issues, this time frame makes the uses of bitcoin for commercial purposes very difficult.

This problem is increased by the fact that POW does not provide finality of the consensus. This means that once a block is added to the blockchain it is not 100% that the next block will be added on this block. It sometimes happens that two miners had blocks at the same time and realize what is called a “fork”. There is collision between two blocks and the network will have to choose the block on which the next block will be added. It is admitted by the miners that the blocks should be added on the chain showing the highest rate of difficulty. This collision among blocks is another reason why you need to wait 6 blocks before you can considered that your transactions has definitely been added to the blockchain.

Even if several methods have been invented to make bitcoin transactions faster (again Lightning Project or SideChain for instance), the question of the size of the block and the number of transactions that can be added to each blocks, remain an important point of conflict in the bitcoin community despite the adoption of SEGWIT 2X in August 2017. The issue of the size of the blocks is directly linked to the pace at which blocks can be added to the blockchain (“Block frequency”). The more transaction you can add to each blocks, the more time it takes to validate these transactions and add the blocks. As Marco Vukolic, researcher at IBM, pointed out, this is when the validation times grows that risks of forks increase and so attacks too.

The system of the POS is not perfect too and could also be a victim of its simplicity.

Blockchain network
Blockchain network

It is sometime considered that the value of the tokens mined under the POW system, comes from all the means (CPU/electricity) that have been used to mine the tokens. In other words, the price of the tokens should at least reflect the investment made by the miners. This is not the case for the tokens that have been minted through the processes of POS since it not involve any investment apart from the buying price of the tokens.

This is precisely what is at the roots of one of the main attack of the POS consensus system which is called the nothing at stake attack.

This is an attack by which an attacker would intentionally divide (fork) the blockhain, by creating a longer blockchain without any additional costs for him. If we come back to the explanation of the POS system, imagine that two minters have obtain the right to mint a block at the same time, they would create two separate and competitive blockchains . As for the POW mechanism, such forks are normally solved by the miners choosing the chain with the most difficulty and abandon the other one. The transactions contained in the abandoned chain would be added in the next blocks.

With POW, miners have to choose the chain correctly because mining prices are so high that they cannot afford to mine without adding blocks, but this is not the case with POS. Minters can indeed keep mining intentionally on the wrong chain just to obtain the rewards. This attack would normally come from a group of minters who would consult in order to invalidate a certain number of transactions and allow double spending for the minter own account. Again this king of attack would be very risky for the linter as the price of their token could fall if the network becomes aware of such attack.

These issues of the size and frequency of blocks, the finality of mining and the concentration of mining capacity all constitute challenges the current developers try to solve through experimental systems such as Delegated Proof of Stake, Byzantine Fault Tolerant systems or Tangle that we will describe in different articles

Delegated Proof of Stake: the crypto-democracy

Delegated Proof of Stake

The main difficulty in a decentralised network is to make all the membres agree on the validity and the order of the transactions realised among these members.

The purpose of the conensus systems is precisely to solve these issues. Since the creation of Bitcoin and its Proof of Work system, several other mechanisms have been imagined to introduce speed, scalability and “democracy” in members conensus.

Proof of Work systems are working very well but also have limitations

The issue of a system that rely on a POW consensus method is that it inevitably leads to a CPU race, because the difficulty of adding blocks to the blockchain is proportional to the number of Miners acting  on the network. In other words, the more active miners, the more difficult it is to add blocks to the blockchain. So only the miners who are able to increase the calculation capacity of their computers can expect to remain in the race of mining block and obtain the reward that will allow them to finance their material. This is the reason why the Bitcoin blockchain is only mined by minning farms or huge mining pools and the consequence is that most of the CPU and the hashing power (i.e the power to mine blocks) remains in the hand of a small group of persons. This concentration constitutes a risk of collusion which could lead to an attack of the 51%.

Proof of Stake systems also work well, but also have inconvenients

With the Proof of Stake consensus system, each person who detain a token of the given cryptocurrency, can participate to the “mintage” process (with POS we talk about “mintage” and not “minage”) and be rewarded for adding blocks to the blockchain. In practice, only the members who detain the most token are likely to add block which also involves a risk of concentration of the mintage power among few participants. The rational behind POS is that the persons who have an important amount of token should be involved in priority in the mintage process because their interest is that the consensus works perfectly as otherwise the price of the tokens will fall.

You can follow this link to learn more about the differences between Proof of Work and Proof of Stake.

Delegated Proof of Stake tries to propose inovative solutions

The Delegate Proof of Stake system intend to solve these concentration issue while ensure high speed and scalability of the network. Indeed, detaining some tokens of a network using DPOS only gives you the right to vote for the Delegates (101 in the initial version of the system) who have the mission of validating the blocks and adding them to the blockchain. They are the miners of the network.

Let’s take an example to better understand the functioning of DPOS. If the network using DPOS as consensus methodology was a democracy, each members of the network who detain a token (a shareholder) would be a citizen with a voting right. Each citizen votes for a list of representatives (the Delegates) who are in charge of the good functioning of the democracy (validation and addition of the blocks to the blockchain). 

In the last version of the protocol developed by Bitshares (Bitshares 2.0), several improvements have been added to the DPOS system. A new class of Delegates has been created, the “Witnesses” who are in charge of the tasks initially dedicated to the Delegates, i.e validate and mint the blocks. The Delegates still exist but their role is now to look after the protocol of the network and make the updates that are requested.

So in our crypto-democracy, the citizens would elect the Delegates whose mission is to create the laws of the society (the code of the protocol). The mayors (the Witness) who are also elected would implement these rules and make sure that they are respected (validation of the blocks and mintage).

It is important to clarify that even if the Delegates have the hand on changes that need to be done to the protocol, the shareholders of the network still have the final work. So in the marvelous world of crypto-democracy, the MPs always submit their work to the referendum of the shareholders.

Delegates election
Delegates election

THE ELECTION: each member of the network can vote for Delegates who will take care of the consensus, but the more stake you have in the network the more important your influence will be

The election system allows the shareholders to keep control on the Delegates that are elected while ensuring that all power is not entirely concentrated in the hand of few.

In practice, if you detain 10 tokens, you can vote for the 101 delegates and witnesses with a weight of 10 token for each of your votes. As for the Proof of Stake system, the more token you detain, the more power you have on the network. The only difference is that with Delegated Proof of Stake, you the power you have is on the election so it is indirectly on the network.

Now, if you own one million tokens for instance, the delegates you will have chosen will have a huge support and are very likely to be elected. The possibility for the most important token owners to abuse of their position and dictate the delegates what they have to do is a reality. According to the creators of the DPOS, such attack is not imaginable since the important token owner would have too much to lose.

In any case, this is the reason why some systems like Ark have decided to adapt the DPOS system by reducing the number of Delegates to 51 and grant a declining vote.

In other words, the shareholder with one million token will have to spread this million among all Delegates which reduces immensely its power on the election.

In traditional DPOS, all the Delegates are added on a list. All of them are technically equipped to review the transactions, create blocks and them to the blockchain. They are selected in accordance with the number of vote that they have gathered. Only the first 101 Delegates are selected. This is reason why most of the delegates are campaigning to obtain the vote of the shareholders.

They will for instance convince the shareholders that they have all the technical ability to complete the minting process without any issue. Somme will also propose to retain only a percentage of the reward and give the rest to the shareholders. They would do this by burning (i.e eliminating) a certain amount of the tokens they have received as a reward for the minting of the blocks.  By reducing the number of tokens available on the network, these Delegates would normally increase the value of all other tokens still circulating and this way reverse a dividend to the shareholders.

It is finally important to note that the vote will be done automatically by the client you have chosen except if you decide to do it yourself. In this case you can vote for or against Delegates. Negative votes are a very good way to remove Delegates who do not behave well from the list of Delegates. If a Delegates is not in the first 200 on the list, it will be possible to replace him.


THE CONSENSUS is also inovative in that it grant each Delegates a slot during which he must add its block.

Each of the selected delegates is assigned a time slot for 3 seconds during which he must add a block to the blockchain.

It is considered that up to 1/3 of delegates can be malicious since if for each block added by a minority on a concurrent chain two other will be added to the main chain. The blocks are added according to the same principle as that of the blockchain bitcoin, i.e to the longer, it is impossible for a 1/3 or less of delegates to lead an attack against the network.

The Benefits

The benefits are that in delegating the validation of transactions, the participants of the network do not need to be complete nodes (“full nodes”), they have not therefore the obligation to download the entire blockchain but have yet cost and speed of transaction confirmation particularly interesting. This point is important for all members for which the mining of transactions under the POS is not cost effective due to the insufficient number of chips they have or all simply because they do not possible to maintain a computer connects 24/7.

Bitshare 2.0 proposes an updated version of the DPOS process which needs to be mentioned;

The last version of the Protocol developed by Bishare brings some interesting improvements to DPOS. A new class of delegates appears, this are the “witnesses”, who perform the tasks originally dedicated to the delegates, i.e. validate transactions and mint the blocks. The delegates them still exist, but will now manage the network and change the settings when it is necessary.

If we are resuming our example of the crypto-democracy, citizens elect Members of Parliament (Delegates) who create and keep updated the laws of democracy (the code for the Protocol). The Mayors (the “witnesses”), also elected, have the mission to ensure the practical application of the Rules (the validation of transactions and the creation of blocks). The process of the election of the witnesses and of delegates is the same as in the previous version (described above).

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