Understanding Cryptocurrency: An Introduction to Blockchain 🪙
Disclaimer: I’m not a crypto expert, just an enthusiast. I am only writing this to prove to my Supervisor that I took a course and maybe get the reward in the end. But then, a couple of people have shown interest in understanding cryptocurrency. These people often do not know where to start, so I created this short review to help them make sense of cryptocurrency
Everyone seems to be getting onto the train of the crypto fad, but one danger a lot of people fall into is getting into cryptocurrency without understanding the core fundamentals of what makes this industry important
This will help you understand, at least make sense of terms you come across on sites like blockchain.com, coinmarketcap, or coingecko. However, we have to truly understand what blockchain means in the first place;
What is a BlockChain: According to wikipedia.org, a blockchain is a decentralized, distributed public digital ledger that is used to record transactions across various networks.
Decentralised. Distributed. Digital Ledger? 🤔 What do all of these terms even mean? That’s the same thing I thought when I read this. So let’s break down these terms;
Blockchain is decentralised: This simply means that there is no single server where data is stored. There is no central authority that vets what goes in and come out. We can imagine that a bank has a central network, that holds the data of all bank accounts and transactions.
However, the blockchain is different, data is stored in several computers called nodes, and nothing can be changed in the system without changing it in each individual node.
Blockchain is Distributed: A blockchain is a type of distributed ledger where each computer (called nodes) in the network have copies of whatever transaction occurs.
Blockchain is a Digital Ledger: A ledger is a book for recording financial transactions. A blockchain stores transactions very much like your accounting ledger. Each line here can represent a bitcoin transaction. When a page is completed, it is verified to form a block.
Each page represents a block that is attached to a previous block ( the next page)/ Each block bears its unique hash like this ledger would bear a unique account name, number and page number.
How Blockchain Works: Understanding the concept of BlockChain begins by breaking down the compound word= Block + Chain
Since the Blockchain is a form of storing data when used in cryptocurrency, each block represents a set of bitcoin transactions, once a transaction is confirmed, a block ledger is completed.
It joins the previous block before it to form a “Blockchain”. This new block joins the previous block which joins the one before it to form a chain. Hence the word: BlockChain
The unique characteristics of the blockchain make it the right system to build decentralised finance on. It eliminates the need for third parties and makes transactions more transparent.
What is cryptocurrency
Cryptocurrency is a type of digital money that can be transferred from one person to another in a decentralised way. That is, there is no need for a third party such as a bank.
Cryptocurrencies are majorly divided into coins and tokens. Examples of coins include Bitcoin, Ethereum, DOGE coin, Binance Cash. Cryptocurrencies are bought in exchange platforms and stored in wallet platforms like Roqqu.
What is Bitcoin
Bitcoin is the first cryptocurrency to be created. It was invented in 2009, by a pseudonym called Satoshi Nakamoto.
Built on the principles of the blockchain, the founders of Bitcoin visualised a world where people can use bitcoin as a form of payment or hold it as a form of value without the interference of a third party.
Now that you are familiar with the major terms, let’s talk about some technical details that describe how bitcoin works. Kindly note that since
Bitcoin is the first use case of the blockchain, all other coins & tokens largely follow after it and bear almost the same characteristics in varying degrees. To learn more about bitcoin visit blockchain.org
Making Sense of Coins…
Now that you understand how bitcoin came to be, you might be asking yourself,
“How do I understand the concept of the coins I want to invest in”
Think of each coin as a company listed in the stock market. Before you buy a stock of the company, you would do basic research of the company, its mode of operation, its history and investor’s projection of its profit-making in future.
In a typical Crypto Chart, the following terms will help you understand a coin and make decisions toward investment
Coin Price: The coin price is the current price at which a coin is sold or bought in a crypto exchange or platform. The price of cryptocurrency is volatile and may change drastically in a short time
Maximum Supply: The maximum supply of a cryptocurrency refers to the maximum number of coins or tokens that will be ever created. This means that once the maximum supply is reached, there won’t be any new coins mined, minted or produced in any other way.
Circulating supply: Circulating supply is the total coin available to be bought, sold, sent or received. The is the total number of coin that is publicly available to be traded. The most important thing to note about a coin’s circulating supply is that it can never be more than a coin’s maximum supply
Coin Market Cap: market capitalization (or market cap) is the total value of all the coins that have been mined. It’s calculated by multiplying the number of coins in circulation by the current market price of a single coin.
Coin Market Cap is determined by = Circulating Supply X Coin Price
Now you know enough to join in a conversation when bitcoin is being discussed. I am sure you do not want to stop there. This information is surface-level knowledge about cryptocurrency.
If you are looking to know enough to invest, there are online resources that can help you get more in-depth knowledge. If you are registered on Roqqu, you can read about different coins, why they were created, and you can see their characteristics in real-time. You can sign up here
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Links & Resources
These resources both online and physical helped me get a clearer understanding of this subject, and I credit the knowledge here to them
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