Module : Blockchain

HANEN IDOUDI
HANEN.IDOUDI@ENSI-UMA.TN
 Chapter 4 :
Crypto-currencies and tokens
 Cryptocurrency : Definition 3

u Form of currency that exists digitally or virtually and uses

cryptography to secure transactions.

u Cryptocurrencies don't have a central issuing or regulating

authority, instead using a decentralized system to record
transactions and issue new units.

u Units of cryptocurrency are created through a process called

mining.
u Users can also buy the currencies from brokers, then store and
spend them using cryptographic wallets.

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 Cryptocurrency : types 4

u BitCoin

u Altcoins : all other crypto : Ether, Litecoin, etc.

u StableCoins : TerraUSD (UST), USDD

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 Cryptocurrency : types 5
u StableCoins

u Motivation
u Provide more stability to the crypto market.
u Backed crypto to keep their values from fluctuating too much
u Types
u Fiat-backed stablecoins : USD Tether …

u Stablecoins backed by other crypto assets

u Stablecoins pegged to precious metals, like gold and steel

u Algorithmic stablecoins

u More stable than AtlCoins but not in practice …. !

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 Cryptocurrency : types 6

How StableCoins work ?

Are StableCoins a good investment ?
u StableCoins :
u baked with either fiat currency (US Dollar, etc) or valued metals (gold,
diamond, etc), or other Cryptos
u Used as a good/easy way for paiement : your money in a digital form !

u Cons : centralization : they are controlled by a compagny or a government

u AltCoins :
u Highly volatile

u Used rather as an investment tool

u Recommendation : diversify !! + be careful of new projects + know well

the compagny that is issuing the StableCoin

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 Cryptocurrency : Definition 7

u How to buy cryptocurrency ?

u The first step is deciding which platform to use :
u Traditional brokers. These are online brokers who offer ways to buy and
sell cryptocurrency, as well as other financial assets like stocks, bonds,
etc. These platforms tend to offer lower trading costs but fewer crypto
features.
u Cryptocurrency exchanges. There are many cryptocurrency
exchanges to choose from, each offering different cryptocurrencies,
wallet storage, interest-bearing account options, and more. Many
exchanges charge asset-based fees.
u When comparing different platforms, consider which
cryptocurrencies are on offer, what fees they charge, their security
features, storage and withdrawal options, and any educational
resources.

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 Crypto Wallets 8

How to store cryptocurrency

u Cryptocurrency is stored in crypto wallets, which are physical
devices or online software used to store the private keys to your
cryptocurrencies securely.

u Some exchanges provide wallet services, making it easy to store

directly through the platform. However, not all exchanges or
brokers automatically provide wallet services.

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 Crypto Wallets 9

u There are different wallet providers to choose from.

u Hot wallet storage: "hot wallets" refer to crypto storage that uses online
software to protect the private keys to your assets.
u Cold wallet storage: Unlike hot wallets, cold wallets (also known as
hardware wallets) rely on offline electronic devices to securely store
your private keys.

u Typically, cold wallets tend to charge fees, while hot wallets don't.

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 Activity – (30 min) 10

Are crypto safe ?

u Look for different types of cryptocurrency fraud and cryptocurrency scams
u Build a mind-map classifying those frauds and scams.

u Use : http://coggle.it/

u Some readings:
1. https://www.kaspersky.com/resource-center/definitions/cryptocurrency-
scams
2. https://www.techtarget.com/whatis/feature/Common-cryptocurrency-scams
3. https://www.coindesk.com/learn/what-is-cryptojacking-how-to-protect-
yourself-against-crypto-mining-malware/

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 Tokens 11

u In the Blockchain ecosystem, any asset that is digitally transferable

between two people is called a token.
u Tokens are issued on a blockchain, most often on Ethereum.
u These crypto tokens can take many forms, and can be programmed
with unique characteristics that expand their use cases.
u Tokenization is the process of converting something of value into a
digital token that’s usable on a blockchain application.
u Assets tokenized on the blockchain come in two forms.
u They can represent tangible assets like gold, real estate, and art,

u or intangible assets like voting rights, ownership rights, or content licensing.

u Practically anything can be tokenized if it is considered an asset that

can be owned and has value to someone, and can be incorporated
into a larger asset market.

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 Tokens 12

u Tokens can be native to a blockchain, for example the Bitcoin one,

or hosted on an existing blockchain via a smart contract.

u The interest of creating an asset “hosted” on an existing blockchain

is therefore obvious: one uses more or less free of charge the
existing infrastructure of the blockchain on which one is grafted.
Miners thus transparently validate all hosted tokens, nodes
replicate all their transactions, their portfolios are immediately
compatible.

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 Tokens 13

u The Benefits of Tokenization

u More Liquidity
u Faster, Cheaper Transactions
u Transparency and Provability

u Crypto tokens enable both information and value to be

transferred, stored, and verified in a way that is both efficient and
secure.
u Smaller investors and other individuals can benefit from more
market access and more effective ways to leverage their existing
assets.

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 Tokens on Ethereum 14

u On Ethereum, standards have emerged since 2017, allowing the

creators of these tokens to offer identical functionalities, in order to
integrate them into existing portfolios. A portfolio supporting an ERC20
token is immediately compatible with all other ERC20 tokens.

ERC20: the “fungible” tokens

u First token standard to have established itself in the Ethereum
ecosystem, the ERC20 token is managed by a smart contract that
presents a list of minimal functions: how to create new units divided
into fractions, destroy them and transfer them to another portfolio.
u Most of these tokens come from an ICO (Initial Coin Offering) and are
linked to a specific project, with its own value proposition.
u The use of ERC20s is extremely varied: exchange or value assets within
the ecosystem of a project, representation of an asset that is the
underlying, Stablecoins whose value remains fixed against a state
currency.

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 Tokens on Ethereum 15

ERC1411 : the “Security tokens”

u Based once again on the ERC20, security tokens include assets that
require compliance with financial law. They represent financial
products in the traditional sense, such as shares, bonds, debts or
property titles.
u Subject to the same rules as traditional products, investment or trading
in these assets is limited to the so-called “qualified” investors.
u The particularity of ERC1411 tokens is that they cannot be freely
transferred like traditional ERC20 tokens: a third party is responsible for
authorising or not the transfer of these digital objects in order to
comply with the laws and state regulations managing the underlying
assets they represent.
u This authorisation is managed by the smart contract through which
these assets were generated. Digital assets thus adapt to existing law
and it is likely that Security tokens will benefit most quickly from a legal
framework, their existence representing only a simple technical
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evolution of traditional financial products.
 Tokens on Ethereum 16

ERC721 : the “non-fungible” tokens

u Popularised by CryptoKitties, the ERC721s are built on the basis of
ERC20 and take all its technical characteristics, with one
fundamental difference: they are non-fungible tokens that
represent a digital object with unique characteristics: a serial
number, a name, character characteristics or game objects.
u The term “crypto-collectible” is also used, very popular in the field
of video games or property. ERC721s are always unique and
cannot be replicated or subdivided into token fractions. We can
only have an entire unit of it.

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 Non Fungible Tokens : NFT 17

u Irreplacable and unique tokens

u Give ownership of artwork, music, videos and other online
collectibles.
u They are created (minted) and stored on blockchains

u They are sold and bought on NFT trading plateforms or

marketplaces

u NFT market has climbed to more than $40 billion in value in 2021.

u https://www.youtube.com/watch?v=zpROwouRo_M

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 18

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 List of the most expensive NFTs sold in the
19
world
1. The Merge (2021) – $91 800 000
2. Beeple Collection _ Every day: The First
Five Thousand Days – $69 346 250
3. Clock – $52 740 000

4. Human One – $28 985 000

5. CryptoPunk #5822 – $23 700 000
6. CryptoPunk #7523 – $11 800 000
7. CryptoPunk #4156 – $10 350 000

8. CryptoPunk # 7804 – $7 560 000

9. CryptoPunk # 3100 – $7 510 000
Hanen IDOUDI 10. Right-click and Save As guy – $7 090 000
 Non Fungible Tokens : NFT 20

Minting an NFT
u To mint an NFT : to record data that comprises a new NFT in a new
block that is added to a blockchain.

u Refers to the process of creating new NFTs on a blockchain, most

commonly Ethereum.

u Minting an NFT typically comes with fees. For NFT systems that use
the Ethereum blockchain, this cost is paid in gas, a crypto token
used to perform functions on the Ethereum blockchain.

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 Non Fungible Tokens : NFT 21

u NFT market has climbed to more than $44 billion in value in 2021.

u OpenSea is considered the largest and the most important NFT

Marketplace. It is also the most used of all.
u The commercial value of OpenSea is estimated at less than $90
million every month or so.

u The fastest growing NFT market segment is collectibles, such as with

Cryptopunks, Bored Ape Yatch Club, Mutant Ape Yatch Club,
Clone-X, etc.

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 Non Fungible Tokens : NFT 22

u NFT sales General sales statistics for 2021-2022

• More than 50% of NFT sales do not reach $200.
• NFT’s weekly sales volume has gone from 100 sales in 2017 to 15,000 or
even 50,000 in 2022.
• In one month in 2021, over 1.5 million NFT art sales were recorded.
• On the Nifty Gateway platform, sales exceeded $250 million for 2021.
Monthly sales were estimated at around $500,000.
• NFTs have generated an expenditure of approximately $41 billion in
cryptocurrency for the year 2021.
• The Play-to-earn model which is a trend in the NFT market reaches a
revenue of $776 million in the 3rd quarter of 2021.
• The NBA Top Shot records a transaction volume of more than $700
million.
• A LeBron James NFT have been sold for more than $21.6 million.
• 5 of the 20 biggest NFTs were sold in Cryptopunks.
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 Non Fungible Tokens : NFT 23

An increase in users number on NFT marketplaces

u The OpenSea platform has at least 250,000 monthly active
users selling and buying NFTs.
u Between 2020 and 2021, there has been a 450% increase in the
number of unique NFT buyers. It went from a monthly volume of
10,000 buyers to 40,000.
u Singaporeans, Chinese and Venezuelans are respectively the
populations the most involved in NFT trading.
u 23% of millennials in the US are NFT collectors.
u 30% of women versus 23% of men in Thailand collect NFTs.

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 Non Fungible Tokens : NFT 24

Ecological cost of NFTs

u The Ethereum blockchain is very energy intensive. For a transaction carried out
on this blockchain, the energy consumption is around 77 Kwh.
u For one year, the electricity consumption of the Blockchain Ethereum is
estimated at more than $6 billion.
u The Ethereum blockchain alone releases almost 22 tons of carbon
dioxide annually.
u Ethereum 2.0 technology wants to drastically reduce its energy consumption
by 99%.
u The carbon footprint of an NFT transaction is equivalent to that of the average
monthly electricity consumption of an individual in Europe.

u On the other hand, the Solana blockchain is much less energy intensive than
Ethereum, with each transaction consuming approximately 0.00051 kWh.

u The Blockchain Polkadot is on a very reasonable energy consumption of 0.8

kWh per year.
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 Activity 25

How to create and sell an NFT step by step ?

Watch this video and summarize shortly the different steps

https://www.youtube.com/watch?v=bBKUU2_0uh4&t=123s

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