Introduction to Crypto: Blockchain, Bitcoin & Ethereum for technophobes

Blockchain is a method of storing a list of entries that cannot be easily changed once they have been created. This includes the list itself. The whole works on concepts from cryptography, including digital signatures and hash functions. In most cases, the Blockchain is managed by a peer-to-peer network. All peer participants in the network use a common protocol that determines how they should communicate with each other, how a new block is created and verified. Once data is registered in any block, it can no longer be changed. Change of a given block means that all blocks following must also be changed. Depending on the protocol, this will require the agreement of most or even all network participants. Blockchains are inherently secure. Blockchain technology is used where proper record keeping is important. Its applications include medical records, identity management, food traceability and voting, among others.

Cryptocurrency is a type of currency that uses digital files as money. Typically, the files are created using the same methods as cryptography (the science of hiding information). Digital signatures can be used to secure transactions and allow others to verify that transactions are genuine. The first cryptocurrencies were intended to be independent of government-issued currencies. Cryptocurrencies use decentralized control, meaning that they are not controlled by one person or government. This differs from a centralized e-money and central banks. The control of each cryptocurrency works through a distributed ledger (a list of transactions shared by everyone), usually the Blockchain, which serves as a public database of financial transactions. Bitcoin, which was launched as open source software in 2009, is often referred to as the first decentralized cryptocurrency. Since then, more than 40,000 cryptocurrencies (sometimes called altcoins which is short for alternative coins) have been created.

Bitcoin (₿) is a digital and global cryptocurrency in the monetary system. It enables people to send or receive money online, even to someone they do not know or trust. It is the first technology of its kind to allow digital goods to be transferred over the Internet without a need to get a third party involved. Money can be sent almost anonymously. Cryptography is at the heart of Bitcoin’s security.

Ethereum is a system on the Web where people can make transactions. Ether is a type of money that uses the Ethereum system to make sure that each person gets the right amount in each transaction. Ethereum was proposed in late 2013 by Vitalik Buterin, a cryptocurrency researcher and developer. Many people donated money to support the development of the system in one of the first initial coin offerings. The system entered the network on 30 July 2015 with 72 million coins. In 2016, Ethereum split into two separate versions, Ethereum and Ethereum Classic.

In September 2022, it moved from Proof of Work to Proof of Stake as part of an update to the network known as Ethereum 2.0. Miners who lost their source of income from Ether mining and transactions verification disconnected from the main Ethereum chain and created Ethereum Proof of Work and Ethereum Fair. The future of both projects is unclear, but if Ethereum Classic is any indication then new versions of Ethereum will not be very popular and the most developed network will remain proper Ethereum based on proof of stake.

Bitcoin has become the forerunner of cryptocurrencies based on a decentralized network, inspiring the emergence of new digital currencies. Tokens, cryptocurrencies and other types of digital assets that are not Bitcoin are collectively referred to as alternative coins or Altcoins. Altcoins perform various functions in the broader cryptocurrency system. For example, Litecoin processes blocks every 2.5 minutes, making it four times faster than Bitcoin. Cardano, on the other hand, was developed to support the creation of decentralized financial applications (dApps), thus competing with Ethereum. Large increases in the Altcoin market are being referred to as the Altseason. Websites specializing in cryptocurrency market capitalization rankings, such as, for instance, report that there are tens of thousands of Altcoins in 2022.

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