Presented to the College of Business

De La Salle University - Manila

In partial fulfillment
of the course
In GEMATMW Y10

GEMATMW Individual Project

Submitted by:

Submitted to:
Mr. Isagani Jos

May 4 , 2021
The Sudden Boom Of Cryptocurrency

Lately, there has been a sudden rise in the popularity of different cryptocurrencies.

Almost anywhere, from the dining tables to our social media feed; more often than not, there is

a person sharing about his/her cryptocurrency updates and how they are winning from them.

Some of the most popular ones include Bitcoin, Ethereum, and Litecoin but according to

Conway (2021), there are more than 4,000 cryptocurrencies as of January 2021. Despite only

gaining more attention recently, cryptocurrencies have existed since 2009. It was believed that

bitcoin is the original digital currency and it was founded by Satoshi Nakamoto (pseudonym)

(Rieff, 2021). This proves that many people are taking interest in these cryptocurrencies but for

some people, the idea of digital currencies remain unclear and vague. Do we really know how it

works? This paper aims to provide a simpler explanation of the relation of cryptocurrencies and

cryptography, as well as its other life applications.

Cryptocurrency, Defined

Cryptocurrencies are known for their decentralized system that is composed of digital

assets that are usually in the form of coins or tokens. These currencies are intangible, meaning

they aren’t like the usual bills, coins, and cards we have that we can physically hold on. These

virtual currencies are stored in digital wallets with the use of hardware or website, and a person

can only access those digital assets and transact with it if he/she has the private keys.

Transactions with cryptocurrencies are recorded through blockchains which ensures

their integrity and serves as an online ledger. Moreover, cryptocurrencies aren’t regulated by

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the government allowing users to make transactions anonymously without the intervention of a

third party like banks. Though this can be used as an advantage with its capability to allow

people to conduct discrete transactions, the anonymity can also be a medium for illegal

activities to take place (Frankenfield, 2021).

Compared to other investments such as stocks, the volatility of cryptocurrencies makes

it difficult to predict, therefore when investing, there are higher risks in exchange for the higher

return of investment. Through “mining” or selling the crypto at a higher price, investors can

make profit from these virtual currencies.

Examples of Cryptocurrency

Bitcoin has jump-started the attention of investors towards cryptocurrency, but there are

also other cryptocurrencies besides BTC. Some of the famous ones include Ethereum, a

decentralized system like Bitcoin that doesn’t have a third party intervention like the

government. The goal of this cryptocurrency is to offer financial products to anyone regardless

of someone’s demographics. Through this, individuals with no identification can still have access

to financial products like loans. This can be a good thing, but on the other perspective, this can

be susceptible to illegal activities because of the lack of information required.

Another one is Litecoin, which is similar to Bitcoin in the sense that they are both

decentralized but this has a faster block generation rate which means transactions can be done

quicker. It uses a different algorithm as well, called Scrypt while Bitcoin uses a SHA-256

algorithm. Again, there are more than 4,000 cryptocurrencies existing, but these are just some

of the most commonly known (Conway, 2021).

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Advantages of Cryptocurrency

We know that in conventional financial institutions, the individual screening of

applicants before they receive any financial products are strict. With cryptocurrencies, any

individual has access to financial products and also can skip out on the processing fees that are

usually given to third parties. In addition to that, the privacy of information is more defined in

crypto. Additionally, it is believed that by investing in cryptocurrencies, one can protect his or

her assets from natural economic occurrences like inflation and deflation, therefore keeping the

value of one's money (Bonheur, 2019)

Downside of Cryptocurrency

The volatility of the prices of cryptocurrencies in the market makes it difficult for the

public to accept it as a formal payment in day-to-day transactions. Without the intervention of a

third party like the government, it is difficult to regulate the legality of the transactions. The

anonymity and secrecy that the currencies like Bitcoin have is also questionable.

The founder of Bitcoin whose alias we only know, further increases the doubt on the

who really controls the said asset. Moreover, without the capability of paying regular

transactions like purchasing food, like a normal monetary unit, the purpose of these digital

assets are suspected. Finally, the use of energy in maintaining constantly-running computers can

be deemed an inefficient way of consumption of resources (Bonheur, 2019).

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More on Cryptography

Figure 1.

As previously stated, one of cryptocurrencies’ foundations is within cryptography , hence

the name crypto. According to Nocon R., and Nocon E. (2018), cryptography involves the

process of encryption and decryption where a regular message is first encrypted into a certain

key then sent to the receiver. The encrypted message then gets decrypted to send the original

message of the sender. When the original message or the plain text is encrypted, it becomes a

cipher text. This cryptosystem gives way for confidentiality, integrity, authenticity, and

non-repudiation throughout the process and in the case of cryptocurrencies, allows anonymity

in the transactions.

There are several methods of cryptography. The simplest one is the symmetric

encryption, where the sender and receiver use a certain key to decipher the message. Here,

numbers and letters are used in replacement of the other; a letter corresponds to a certain

number and vice versa. The public key is quite common which can hinder the security of the

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message because someone else can decrypt the message as long as they know the method

used.

For example, the method agreed is that every letter refers to a number: letter A is

equivalent to 01, “B” is equal to 02, and so on. If the sender wishes to send a “Good Day”

message, the cipher text would be “07151504 040125”. A visual model is shown below to better

explain the method. This is only an example, there are other kinds of symmetric cryptography

that can be used according to their needs.

Figure 2.

A B C D E F G H I J K L M N O P Q R S T

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

U V W X Y Z

21 22 23 24 25 26
Figure 3.

Another method is the Asymmetric encryption. Compared to the former, this one

utilizes public and private keys. Plain text is first encrypted in public keys but it must be

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decrypted in the private key by the receiver. This means that only the sender and receiver

knows the private keys making it more difficult to hack. It also ensures that the message is only

decrypted by the rightful person, the intended receiver.

In addition to these methods, there is also a cryptography method called Hashing.

Through this method, the individual’s blockchain data and account address are being utilized to

verify the authenticity of the transactions. Digital signatures are also used in this encryption.

More importantly, this secures the information between the parties involved (Seth, 2020).

Public Key Cryptography

RSA Cryptosystem

The RSA or the Rivest–Shamir–Adleman algorithm makes use of both a public key and a

private key. The steps in key generation and encryption are as follows:

(1) Key generation

● First, we select two large prime numbers and denote it as our p and q.

For this example, we would have p= 19 and q=23

● Next, we calculate n by multiplying p and q; n = pq

n= 19*23 = 437

● We then find a number e that is less than n and (p-1)(q-1)

e= 7; since (19-1) (23-1) = 396

● Generate a number for d using the formula [1 + k ( p -1) (q - 1)] / e, where in k is

and integer.

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 d = [ 1 + 5 ( 19-1) (23 - 1)] / 7

d = [ 1 + 5 (396) ] / 7

d = [ 1+ 1980] / 7

d = 1981 / 7

d = 283

● The public key would be (n, e) while the private key would be (n, d)

In this example, the public key would be (437, 7) while the private key would be (437,

283).

(2) Encryption

● We then translate the message in the form of integers, and group the integers

together.

For this example, we would use the method in figure 3 to say “Hello”

● Next, we are going to change the initial integer M to the cipher text or the

encrypted version C using the equation C = Me (mod n)

● So, the sender’s message will then be encrypted as 0302 0058

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Elliptic Curve Cryptography

The Elliptic curve cryptography is known for its horizontal symmetry, where if you

choose a point in the upper graph, that point will have a mirrored equivalent on the lower part

of the graph, and vice versa. Another key property of this is that when a non-vertical line is

drawn across the graph, the line will have an intersection in at least 3 points in the curve. In

addition to that, this graph also has a non-singularity characteristic, which means the curve will

not intersect on its own point. The equation for the elliptic curve is y2 = x3 + ax + b (Nocon, R.,

and Nocon. E., 2018).

The figure above shows a simplified version of the graph.

Figure 4. Source: https://avinetworks.com/glossary/elliptic-curve-cryptography/

Compared to the RSA Cryptosystem, the Elliptic Curve Cryptography is more advanced

and secure. It also gives smaller key sizes which would be useful in terms of storage space in a

person’s digital wallet.

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Other uses of Cryptography

Facebook Account Verification

Cryptography is not just used in cryptocurrencies. There are numerous situations around

us where cryptography is applied, one of these is the facebook account authentication.

Whenever we forget our password for our account, Facebook would ask us to input our email

address or mobile number, this is then used to send the verification code that they will provide.

If the person really owns the account, he/she most probably has access to that email address or

mobile number to get the verification code. After that person typed in the verification code sent

by facebook, the user will now be allowed to change his/her password.

Although it is not a hundred percent free from hackers, this limits the chances of some

random person to hack your account and help ensure that the key to change the password of

the account is only accessible to those who genuinely own the account.

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The HTTPS

The HTTP or the HyperText Transfer Protocol is very common on the internet. The http in

every website address serves as a plain text that helps disseminate information on the world

wide web. Knowing that there are tons of data on the internet, it is hard to eliminate every

suspicious website. Therefore, the https or the Secured HyperText Transfer Protocol is created

to keep information within websites safe. This is particularly important on business websites

where personal information and even credit card details are present (Ninel, n.d.)

Conclusion

With the high gains from cryptocurrencies, comes the higher risks that are brought in by

different factors but mainly the unpredictability of the market. As the fame grows, the number

of people trying to catch on benefits increases, but so do the security issues that can happen.

The methods such as RSA and ECC are known to be secure but time will only tell until when this

security will be intact hence, in every decision, one has to conduct a comprehensive research

and possibly consult professional opinions. Though this doesn’t eliminate the risks fully, it can

make someone create educated decisions which is essential in cryptocurrencies and even in

daily situations.

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References

Bonheur, K. (2019, April 13). Advantages and Disadvantages of Cryptocurrency. Retrieved from
https://www.profolus.com/topics/advantages-and-disadvantages-of-cryptocurrency/

Conway, L. (2021). The 10 Most Important Cryptocurrencies Other Than Bitcoin. Retrieved from
https://www.investopedia.com/tech/most-important-cryptocurrencies-other-than-bitcoi
n/#:~:text=One%20reason%20for%20this%20is,communities%20of%20backers%20and%
20investors.

Frankenfield, J. (2021, March 7). Cryptocurrency. Retrieved from https://www.investopedia.com

Ninel. (n.d.). Cryptography in Our Daily Usage. Retrieved from https://berty.tech/blog/

Nocon, R, and Nocon E. (2018). Essential Mathematics for the Modern World. Page 157. C&E
Publishing.

Reiff, N. (2021, April 23). Were There Cryptocurrencies Before Bitcoin?.Retrieved from
https://www.investopedia.com/tech/were-there-cryptocurrencies-bitcoin/#:~:text=Man
y%20investors%20consider%20bitcoin%20to,technology%20and%20decentralized%20di
gital%20currencies.

Seth, S. (2020, January 25). Explaining the Crypto in Cryptocurrency. Retrieved from
https://www.investopedia.com/tech/explaining-crypto-cryptocurrency/#:~:text=Cryptog
raphy%20is%20the%20mathematical%20and,the%20purpose%20of%20%22mining.%22

Disclaimer
This paper is only for academic purposes and should not be taken as a professional
advice.

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