At its core, cryptocurrency is typically decentralized digital money designed to be used over the internet. Bitcoin, which launched in 2008, was the first cryptocurrency, and it remains by far the biggest, most influential, and best-known. In the decade since, Bitcoin and other cryptocurrencies like Ethereum have grown as digital alternatives to money issued by governments.
The most popular cryptocurrencies, by market capitalization, are Bitcoin(BTC), Ethereum(ETH), Binance coin (BNB) and Cardano (ADA). Some are similar to Bitcoin, others are based on different technologies, or have new features that allow them to do more than transfer value, new innovative technologies such as Massa about to hit the market allow for high speed transactions, greater security, great scalability and low commissions
Crypto makes it possible to transfer value online without the need for a middleman like a bank or payment processor, allowing value to transfer globally, near-instantly, 24/7, for low fees.
Cryptocurrencies are usually not issued or controlled by any government or other central authority. They’re managed by peer-to-peer networks of computers running free, open-source software. Generally, anyone who wants to participate is able to.
If a bank or government isn’t involved, how is crypto secure? It’s secure because all transactions are vetted by a technology called a blockchain.
A cryptocurrency blockchain is similar to a bank’s balance sheet or ledger. Each currency has its own blockchain, which is an ongoing, constantly re-verified record of every single transaction ever made using that currency.
Unlike a bank’s ledger, a crypto blockchain is distributed across participants of the digital currency’s entire network
No company, country, or third party is in control of it; and anyone can participate. A blockchain is a breakthrough technology only recently made possible through decades of computer science and mathematical innovations.
- Privacy
When paying with cryptocurrencies, you do not need to provide unnecessary personal information to the merchant. Which means your financial information is protected from being shared with third parties such as banks, payment services, advertisers and credit rating agencies. And because there’s no need to send sensitive information over the Internet, there’s very little risk of your financial information being compromised or your identity stolen.
- Safety
Almost all cryptocurrencies including Bitcoin, Ethereum, Cardano, Solana, Massa are protected by a technology called blockchain, which is constantly monitored and verified by a huge amount of computing power.
- Portability
Because your cryptocurrency holdings are not tied to a financial institution or government, they are available to you no matter where you are in the world or what happens to any of the major intermediaries in the global financial system.
- Transparency
Every transaction on the Bitcoin, Ethereum, Cardano and Solana networks is published publicly, without exception. This means there is no room for transaction manipulation, changing the money supply, or tweaking the rules mid-game.
- Irreversibility in payments
Unlike a credit card payment, cryptocurrency payments are irreversible. For merchants, this greatly reduces the likelihood of being scammed. For customers, it has the potential to make trading cheaper by removing one of the main arguments credit card companies use for their high processing fees.
- Security
The network that powers Bitcoin has never been hacked. And the fundamental ideas behind cryptocurrencies help keep them secure: the systems are permissionless and the core software is open source, meaning countless computer scientists and cryptographers have been able to examine all aspects of networks and their security.
Cryptocurrencies are the future of finance
Cryptocurrencies are the first alternative to the traditional banking system and have powerful advantages over previous payment methods and traditional asset classes. Think of it as the new currency, a new type of cash that is native to the internet, giving it the potential to be the fastest, easiest, cheapest, most secure and most universal way to exchange value the world has ever seen.
Cryptocurrencies can be used to purchase goods or services or held as part of an investment strategy, but cannot be manipulated by any central authority, simply because there isn’t one. No matter what happens to a government, your cryptocurrency will remain safe.
Cryptocurrencies provide equal opportunities regardless of where you were born or where you live. As long as you have a smartphone or other device connected to the internet, you have the same access to cryptocurrencies as anyone else.
What is a blockchain?
Almost all cryptocurrencies, including Bitcoin and Ethereum, are protected through blockchain networks. Which means its accuracy is constantly being verified by a huge amount of computing power.
The list of transactions contained in the blockchain is essential for most cryptocurrencies because it allows secure payments between people who do not know each other without having to go through a third-party verifier such as a bank.
Due to the cryptographic nature of these networks, payments via blockchain can be more secure than standard debit/credit card transactions. When making a Bitcoin payment, for example, you do not need to provide any sensitive information. That means there’s almost zero risk of your financial information being compromised or your identity stolen.
Blockchain technology is also exciting because it has many uses beyond cryptocurrencies. Blockchains are used to explore medical research, improve the accuracy of health care records, optimize supply chains, track vision tests for ads, and much more…
How does a blockchain work?
To visualize the idea of blockchain, we have to imagine a ledger where all money inflows and outflows are recorded. This book is made up of a chain of blocks, which contain information about a transaction on the network. Being linked, they allow data transfers where there is no need for a third party to certify the information. Once the information is entered, the items that have been modified or added appear immutably in the global transaction log, without the possibility of deleting those records.
To arrive at an attack-proof and effective chain, it is divided into several phases:
Every time a transaction is made, it stays in the “transaction pool”, and when there are enough transactions in that pool, a block of data is formed. This, in turn, can record the information that is selected, such as what, when, etc.
Each block is connected to the one before and the one after. The set forms a chain of data that is joined securely, confirming the exact time and sequence of transactions.
These transactions make up blocks that come together and form an irreversible chain (a change in any one block would alter the validation of all successive blocks), which we call the blockchain. At this point, each additional block reinforces the verification of the previous one, and continues, also reinforcing the entire chain of blocks. This ensures that said chain is tamper-proof, ensuring a reliable space.
Why use blockchain technology?
Many times, operations require a lot of effort when it comes to record keeping and third party validation. In addition, they are sensitive to fraud and cyber attacks, so it is necessary to incorporate technology such as blockchain that speeds up the process and verifies it.
This technology is revolutionary, innovative and disruptive, as it is changing (and will do so even more in the coming years) existing business processes thanks to its efficiency, reliability and security. It has already transformed processes in various economic or scientific sectors, but its applications have only just begun.
Blockchain Benefits
Blockchain offers great business advantages that help companies in many ways:
Gives more trust between the parties involved by offering reliable and shared data
Reduces the need for external intermediaries
It offers greater security, since all members of the network must reach an agreement on the accuracy of the data and the validated transactions are unalterable
Create a tamper-proof registry in real time
Provides greater efficiency by eliminating time wasted on record reconciliation actions
Allows you to track and locate goods or services throughout the supply chain.
What is a token
A token is a physical or digital object that has value in a certain context or for a certain community, although its own materiality does not contain that value itself.
Casino chips, for example, are just pieces of plastic in different colors, but they represent amounts of money. Some, up to millions of dollars, although manufacturing one of them costs just pennies.
That is what tokens do: they represent something else, they are in their place. Why? There are many reasons: comfort, safety, ease of transport or transfer.
In the crypto world, tokens are generated from pieces of programming code, in the form of smart contracts that run on the blockchain. The smart contract describes how each token works. The database keeps track of how many each person has. And users can send them to each other as a way to transfer value.
Tokens and cryptocurrencies
In 2009, when it was created by Satoshi Nakamoto, Bitcoin became the first cryptocurrency. Immediately, many other enthusiasts of digital security, new economies and technological developments launched their own.
One of them was Ethereum, created by the young Russian programmer Vitalik Buterin, a network designed so that different people, organizations or companies could create their own cryptocurrencies, their own tokens, their own ways of measuring value on the network. It was then that the token became a popular concept in the crypto world.
What are Smart Contracts?
Smart contracts or Smart Contracts are agreements between two or more parties that are executed within a Blockchain and follow rules accepted by all the members or participants of the Blockchain. Unlike verbal or paper contracts, smart contracts cannot be subject to interpretation, since they are made up of immutable codes (programming language). For this reason, Smart Contracts “start up” automatically without the need for external agents and meet a series of programmed conditions or If-Then, which is an instruction or group of them that can be executed or not depending on the value of a condition.
What are Smart Contracts used for? What use do they have?
Today there are many doubts about the concept of Smart Contracts and their application in the real world, which is why countless questions arise such as: What are Smart Contracts for? How can they possibly run on their own? What platforms do they use? What type of companies or sectors use or can use Smart Contracts?
The world of smart contracts has many possibilities, since Blockchain gives people the opportunity to make contracts without the need for a physical intermediary until then impossible. After all, a Token or an ICO are Smart Contracts and their function lies in automating processes such as a payment, a bet or the collection of an inheritance.
Therefore, it can be said that the insurance, financial, banking, legal, transport and supply sectors or the health and pharmaceutical sectors can benefit from the application of Smart Contracts, but there are many more areas that can take advantage of the use. of these smart contracts.
As explained above, Smart Contracts work with conditions, that is, if A and B meet a series of characteristics, C can be self-executed. Despite this, a smart contract needs Blockchain Oracles to be able to fulfill its function, since they are fundamental parts within the gear.
The Blockchain Oracle
The Oracle is a tool that allows you to monitor the activity of a network to verify and fulfill the commitments of the parties without the need for intervention. Its functions vary from verifying the results of a betting website or locating an object anywhere in the world with the help of geolocation technology combined with Internet services, to stock market prices.
For example, within the world of insurance, a Smart Contract is very useful, since if a user misses a flight due to a delay of X minutes, a reward payment could be “activated” to that person in an automated way. And who supplies the information to the smart contract about the delay of said flight? The Blockchain Oracle.
What is cryptocurrency mining?
Most cryptocurrencies are “mined” through a decentralized computer network (also known as peer-to-peer). But mining doesn’t just make more bitcoin or Ethereum, it’s also the mechanism that updates and protects the network by constantly checking the public blockchain ledger and adding new transactions.
Technically, anyone with a computer and an Internet connection can become a miner. But before you get too excited, it’s worth noting that mining isn’t always profitable. Depending on the cryptocurrency you are mining, the speed of your computer, and the cost of electricity in your area, you may end up spending more on mining than you earn in crypto.
As a result, most crypto mining today is done by companies that specialize in it, or large groups of people who contribute their computing power.
How does the network encourage miners to participate in the maintenance of the blockchain? Again, taking Bitcoin as an example, the network holds a lottery in which all mining rigs around the world compete to become the first to solve a mathematical problem, which also verifies and updates the blockchain with new transactions. Each winner receives a new bitcoin, which can then make its way into the wider market.
Proof of Work vs. Proof-of-Stake
- Proof of Work is a common consensus algorithm that relies on computing power and complex math like bitcoin or ethereum.
- Proof of Stake is another consensus mechanism that uses the number of coins to validate transactions and generate new blocks like Cardano or Massa.
In another post we will talk in depth about POW vs POS.
