Crypto Basics

Hey guys, I am excited to announce that I will be starting a new article series: Crypto Basics. I will cover common concepts in the crypto-world which may confuse newcomers. I will try to explain these concepts in the simplest way possible whilst trying my best to provide examples. If you have a topic that you would like me to cover, please comment down below and let me know. I think it would be a good idea to start off with the technology that makes cryptocurrencies possible: blockchain technology.  

A Shared Public Ledger

A cryptocurrency network, such as the Bitcoin network, consists of a large collection of nodes forming a decentralised network. Anyone can download and run a Bitcoin node using software such as Bitcore: https://bitcore.io/. Every node on the network contains an exact copy of the public Bitcoin ledger and the ledger updates as new transactions occur.  In the cryptocurrency world, a ledger is simply a list containing transaction information. All of the transactions that occur on the Bitcoin network are recorded in the public Bitcoin ledger. The ledger is separated into blocks, each block can hold a finite number of transactions. The implementation of a public ledger distributed across all of the nodes in the network is referred to as a blockchain.   

Advantages of Blockchain Technology

• No need for intermediaries: blockchain technology eliminates the need for an intermediary (such as a bank) when sending and receiving money. This reduces transaction fees, increases transaction speed and eliminates the risk of an unreliable intermediary.   
• Direct control of your money: blockchain technology allows you to control your funds directly. There is no risk of a third party freezing or losing your funds.   
• Accessibility: blockchain data is transparent, up-to-date, complete and easily accessible.  
• Immutable: due to the decentralised nature of blockchain technology, all transactions are immutable. It is impossible to hack/alter a transaction on the blockchain as all of the ledgers containing the transaction on the blockchain must be altered individually. This would require an impossible amount of computer power. Furthermore, transaction data cannot be lost by hacking or technical problems as there is no central point in the network to attack. If one node goes down there are thousands of others containing an exact copy of the public ledger.

There are many other applications of blockchain technology 

Cryptocurrencies are only one application of blockchain technology. Blockchain technology is currently being used to deploy smart contracts, create digital assets, identity verification and the list goes on. New applications for blockchain technology are being developed everyday, our imagination is the limit! In the next Crypto Basics article I will be covering smart contracts; what they do and how they work. Follow me if you don’t want to miss it! 

Please leave your thoughts down in the comments below.