By the end of this article, you will understand Blockchain Technology – Cryptocurrency and the other necessary factors that are connected to this ecosystem. You will also know topics that are very important for any beginner or pro who is interested in Blockchain and Cryptocurrency
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Blockchain! A Term that is surfacing on the Internet, Social media, News and grabbing high volume attention globally for more than a decade now.
2020 has been a year for blockchain industry, New technological use cases, Smart contracts, DeFi, Organisations adoptions and the aggressively growing Interest of millennials.
Is Blockchain, Bitcoin, Cryptocurrency on your mind? Are you struggling to understand how Blockchain operates? Are you looking for core information about this ecosystem that will help your investment ideas? You’ve been on the right Page and at the right time.
Blockchain & It’s Working
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Blockchain technology is referred to as ‘Distributed Ledger Technology’ or ‘DLT’ is a technology that allows digital information to be distributed but not copied. In this technology, the digital information is transferred in the form of ‘Blocks’ which is stored in the public database called ‘Chain’.
Blocks in the blockchain are specifically made up of digital information like transaction date, participant details, etc. Each block stores a unique code called ‘Hash’ which distinguishes each block from one another.
How does the blockchain Operate?
Consider a spreadsheet that can be easily shared with a network of computers where-in thousands of duplicates can be created. You update any data in your spreadsheet and it gets updated on all the computers within the network. Blockchain works similarly.
Whenever a new transaction is requested on the blockchain network, a new block is created with the details of the transaction. This block is given a unique Id called ‘Hash’. The block is sent to all nodes in the network for the confirmation of the transaction.
The nodes validate the transaction and share their Proof-of-Work. Nodes receive a reward for a successful proof-of-work. The transaction is completed by adding the block to the existing chain.
Why is Blockchain Untampered and Untraceable?
Every block contains three main information: – Data, Previous Hash value, and current Hash value.
When a person called A has to transfer $100 to a person B. A block is created with the details of the transaction and a unique hash value. Further, if person B transfers $50 to person C, a new block is created with the previous hash value and the new hash value is calculated and stored.
As we can see, every new block carries the Hash value of the previous block. And for this reason, the possibilities of any illegal activities would be nullified. If in any case the transaction is altered, the hash values are not replaced but the new block is created with a new hash value.
Find it Interesting -> Read more about the Blockchain technology features, applications, drawbacks, Recent updates, the future, and much more.
Blockchain technology revolutionized the banking and finance markets, cybersecurity space, supply chain management, artificial intelligence, etc. It has been seen that since after its launch it began disrupting many industries through its technological features.
Among all such Use cases of Blockchain Technology, Cryptocurrency (Finance) is the First and Majorly used domain.
Let’s Read about
The First Cryptocurrency – Bitcoin, Built on Blockchain Technology
Bitcoin is the first-ever invented Cryptocurrency built on Blockchain Technology. It operates in a decentralized, Peer-to-peer network system with no central authority or bank to manage funds or transactions. BTC is the Symbol of Bitcoin identification.
Bitcoin was created in 2008 by an anonymous person whose identity remains a mystery over a decade. It is rumored that a Pseudonym named “Satoshi Nakamoto” ( A person or group of people) is believed to be the creator.
It was officially released in 2009 with a Whitepaper( A Document contains structural, functional, and organizational details) as an alternative to the existing fiat money banking system.
There are only 21 Million Bitcoins (21,000,000) ever created, so this is the Maximum supply of bitcoin. Bitcoin transactions are processed using a method called “Bitcoin Mining” wherein a global network of computers use complex mathematical algorithms to verify each BTC transactions to execute the blocks and are rewarded for successful mining.
Today, We have over 7.1 million active Bitcoin users globally who are able to easily store and exchange it easily in multiple forms over multiple platforms under the ecosystem. Just like and more than the normal Fiat currency does.
Bitcoin today is trading at : $10,000 / BTC
Bitcoin is not a complex term to understand, it’s Simple and Worth. Read more about Bitcoin working, history, purpose, advantages / Disadvantages.
As of 2020, we record more than 6000 + active cryptocurrencies like bitcoin, which may have different technical setup but all function the same way.
These different cryptocurrencies other bitcoin are called Altcoins ( alternate coins) and are built on Standard blockchain or a blockchain ledger system of their own.
Some of the Popular altcoins are Etheruem(ETH), Ripple(XRP), Litecoin(LTC)……. Altcoins built on Ethereum
Now If you feel you want to invest or buy some Bitcoins, you have a handful of Cryptocurrency exchange platforms ( Just like a stock exchange ) available.
Here is a guide to factors to check before investing in any Cryptocurrency or take a quick tour of Exchanges.
Cryptocurrency Exchanges
Cryptocurrency exchanges are online platforms just like the stock market trading sites where buyers and sellers are connected to exchange Cryptocurrencies for other Cryptocurrencies or regular fiat currencies with the current market price.
Cryptocurrencies are the hot topic of this century and quite an intimidating and intrigued topic that everyone wants to learn about. Now if you are a beginner then it is strictly advised that do not perform any kind of trading or exchanges without having complete knowledge about the exchanges.
These exchanges are generally owned by a team or a person, but they also come Decentralized exchanges that operate without any central authority in a decentralized peer-to-peer system.
The Exchange platform offers multiple methods of exchanging cryptocurrencies. Types of Crypto Exchange Methods are :
Cryptocurrency – Fiat Currency Exchange
This method of exchange allows users to buy & sell cryptocurrencies for any fiat money ( Government authorized currency like, Dollars, Euros, Rupee.. etc).
It is a hassle-free process and so is best for the beginners to start buying or selling Cryptocurrency of their choice directly with their national currency,
But, the issue with this method is the choice of Coins. Preferably most of the exchange platforms offer bitcoin and few others.
Cryptocurrency – Cryptocurrency Exchange
This method is for users who are familiar with Exchange platforms, It allows users to Buy and Sell cryptocurrencies for other Cryptocurrencies.
To start, these users have to first buy Cryptocurrency of choice from Fiat-Crypto platforms, transfer that crypto to the wallet and then place exchange orders in Crypto-Crypto exchange.
These Exchanges are best suitable if you think to do some earning with Crypto trading.
Peer to Peer ( P2P) Exchange
This is a freestyle exchange method, the platform matches the Buyers and Sellers to Share the payment information and then complete the trade out of the system.
It’s a popular method of changing Fiat-Crypto as it includes buyers and sellers to form native regions and so of native currency. This is also one of the fastest ways to buy cryptocurrencies for Beginners as well as Experts.
The issue with this the choice of Cryptocurrencies to exchange with.
Broker exchange
Trade without Owning the Asset.
This is a traditional method of Earning on trading assets, You will have to place your bid of coin price on a CFD product which will channel and manage all your records of investment.
These platforms are quite risky if they are not regulated or licensed.
Uniswap – Swap Tokens
Uniswap is a Protocol for a new form of Decentralized Exchange, allows users to swap ERC-20 tokens. Uniswap swaps tokens to increase the liquidity of the token and hence increase the demand, the traditional Decentralized exchange would face this issue of liquidity.
Founded by Hayden Adams, uniswap adds a unique upgrade to its pricing mechanism called “Constant Product Market Maker Model” and an Open-source environment for anyone to build a project of their own.
After the evolution of DeFi in 2020 May, the Uniswap Protocol has rapidly grown and new projects based on Uniswap protocol are also seen emerging on the surface.
Cryptocurrency Wallet
A cryptocurrency wallet is a virtual device (online account ) or physical medium that is used to store and secure cryptocurrencies, the same way we store files in USB. The Wallets also allow you to Send and Receive coins to a similar address.
Crypto wallets function on Cryptographically encrypted Public and Private keys that Identify, store, and protect your assets. A wallet can support multiple currencies, each identified by their Unique address.
Generally divided into Hot Wallet and Cold Wallet: Hot wallets are all connected to the Internet and these are Online, Mobile, and Desktop wallets whereas Cold wallets are internet free, referred to as Cold storage which includes hardware and paper wallets.
Cryptocurrency mining
Cryptocurrency mining is a process of verifying the transactions on the blockchain and adding it to the ledger. This is done by programmed computers(miners) by solving some complex equations.
Each transaction initiated on the blockchain must be verified by multiple computers in the mining network to complete the transaction and then add these records to Blockchain ledger called Proof-of-Work ( POW).
The mining process is basically new coins in exponential value which is the reward for miners on each successful verification.
Bitcoin mining, altcoin mining or Cryptocurrency mining has been a very popular term since the time of invention of bitcoin, it involves interesting factors like halving, Pool, Schemes..
Follow our detailed guide in Cryptocurrency mining to understand more about mining and how to start your own mining setup
What are Smart Contracts and Its Working?
You must have certainly heard of Ethereum (ETH) – The world’s 2nd largest cryptocurrency next to bitcoin.
Smart Contract is an open source protocol ( software) provided by the Ethereum team and built on Blockchain technology. A smart contract acts as a virtual agreement between 2 parties and can be processed only if the agreement conditions are matched.
The Platform allows users to develop their own Cryptocurrency token that can be accessed on Ethereum-Blockchain just like bitcoin.
Smart Contracts are not only used to develop decentralized applications and currencies but also used in Financial agreements, insurance agreements and places where records must remain untampered and real-time.
Understand more about Smart Contracts to join the upcoming defi and other decentralization projects.
What is Defi – The Decentralized Finance
DeFi – Decentralized finance, is a body of Decentralized financial applications that are backed with Crypto payments. Generally built on Smart Contracts – Blockchain, DeFI module can be used to develop a decentralized alternative to any existing financial services like Loan, insurance, banking,lending, staking..etc.
DeFI has emerged to be the most prominent use case of blockchain technology, as all the financial services can now have easy access to decentralize themselves for an untampered, no-hackable, Wide, and high return generating revenue model.
Defi is going to trend the market for the next 4 Years and you should read about it to know the Opportunities it can offer,
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That has been a Good time! and I believe it is worth reading.
The Article Keeps adding all the latest information about this category in a more friendly and convenient way.
So by now, you have understood the necessary information you need to have before beginning with Blockchain-Cryptocurrency.