Introduction to Blockchains and Cryptocurrency
What is a Blockchain?
Simply put, A blockchain is a database where you can add information, but not remove it. The data stored on a blockchain can be anything, including money (such as bitcoin), insurance claims or even shares of physical property such as real estate. Instead of being stored on a single server, the database is spread out and stored on a vast network of computers known as nodes. This means that the system is distributed and that there is no central point of failure.
The ideas behind blockchain were first conceived as early as 1991, but it wasn't until Bitcoin was developed in 2009 that the technology started to receive more attention.
As the cryptocurrency space grows and blockchain-based solutions improve, learning how this innovative technology can be applied to different scenarios is very important.
This offers opportunities for improving performance and security in many industries and organizations (e.g., charity, supply chain, healthcare, Governance, Payment solutions and much more.).
How do Blockchains work?
As seen in diagram above, a blockchain, collects information together in groups, known as blocks, that hold sets of information together. These digital blocks, which are blocks just metaphorically speaking but not in the literal sense, have certain storage capacities, for example, each Bitcoin’s block is 1MB and can contain on average 2500 transactions. When a block is filled and completed, it is linked to the previous completed block in a way we’ll see shortly, effectively forming a chain of blocks containing data, known as the blockchain.
Now that we have a basic concept of what blockchains are and how they work let’s move onto Cryptocurrencies that are built upon this technology and how they offer advantages never seen before across many industries and use cases, so lets begin below
What is Cryptocurrency?
It derives from two words: cryptography and currency. Cryptography is at the basis of all cryptocurrencies as all of them depend on it to secure transaction records, with cryptography, we use advanced math to secure our funds, making sure that nobody else can spend them and it also makes it decentralized.
•A cryptocurrency is just like a digital form of cash. You can use it to pay friends for your share of the lunch, buy that new pair of shoes you've been eyeing up, or book flights and hotels for your next holiday. Because cryptocurrency is digital, it can also be sent to friends and family anywhere in the world – no middlemen required.
•To use cryptocurrency, you don't need to sign up for a website with an email address and password. You can download a wide variety of apps onto your smartphone to begin sending and receiving within minutes, such as Binance, FTX and Coinbase.
Advantages of Cryptocurrency.
•Decentralized: No one can stop you from using cryptocurrency. Centralized payment services, on the other hand, can freeze accounts or prevent transactions from being made.
•Censorship-resistant: Because of the way the network is designed, it's virtually impossible for hackers or other attackers to shut it down.
•A cheap and fast payment method: When you make a transaction to someone at the other side of the world, your money can be with them within seconds – at a fraction of the cost of an international wire transfer.
Bitcoin and other Crypto tokens
Amazingly, nobody knows who invented Bitcoin. We only know them by their screen name - Satoshi Nakamoto. Satoshi could be a single person, a group of programmers, or if you believe some of the weirder theories, a time-traveling alien or secret government team. Bitcoin provided the foundation for many other cryptocurrencies. Some were based on the same software, while others took a very different approach. Bitcoin has a set limit of 21 million coins and not a single more can be made, this makes them rare and gives them value.
Although Bitcoin is by far the largest and oldest Crypto token, there are now thousands of more with different purposes so let’s have a look at some main categories of other tokens below
Metaverse/Gamefi tokens: These tokens are used mainly as currency in their games or virtual words such as Axie Infinity (AXS and SLP) and the sandbox (SAND).
DeFi tokens: These are used for governance on DeFi platforms as well as for staking and rewards like we discussed in our DeFi topic Uniswap (UNI) and Pancakeswap (CAKE) are some examples.
Stablecoins: These are usually pegged to some currency like US dollar or British pound, they maintain the same value and are therefore used as “cash” in crypto world to buy other tokens like bitcoin or Ethereum.
Privacy coins: These allow you to keep complete privacy and no can see or track transactions made using these such as Monero (XMR).
Exchange tokens: These are issued by centralized exchanges and give users benefits such as trading fee discounts, access to presale of tokens and more, some of these have their own blockchains too and defi systems, such as Binance Coin (BNB) or Cronos (CRO).
Memecoins: These serve no fundamental purpose and are just made for fun and speculation mostly, they are very very volatile hence very risky, examples include Shiba Inu (SHIB) Floki Inu (FLOKI) and many more.
Layer 1/Smart contract tokens: These tokens represent an entire network on the Blockchain upon which all of the above-mentioned things can be made, examples include Ethereum (ETH), Solana (SOL) and Cardano (ADA).
There's a common saying in the cryptocurrency space: Do your own research (DYOR) so always remember this before investing into any project and make sure you are well aware about it.
Common Crypto terms:
Fear, Uncertainty, and Doubt (FUD): Spreading of fear and misinformation to gain an advantage.
Fear Of Missing Out (FOMO): The emotion you feel when you panic buy.
Hold onto dear life HODL: Buy and hold on to it for a long time!
BUILD: Keep your head down and build the next financial system.
Return on Investment (ROI): How much money you are making (or losing).
All-Time High (ATH): The highest price ever recorded
All-Time Low (ATL): The lowest price ever recorded.
Do Your Own Research (DYOR): Don't trust, verify.
Due Diligence (DD): Smart people make decisions based on facts.
Anti-Money Laundering (AML): Regulations that prevent criminals from hiding their money.
Know Your Customer (KYC): Regulations that make exchanges verify your identity.
Altcoin (Alts): Refers to every crypto token that is not Bitcoin.
Bull Market: When the price keeps rising.
Bear Market: When the price keeps dropping.
Moon: When a token goes extremely up in value in a short time people say it has “Mooned”.
Private Key: A string of alphabets and numbers that secures your wallet, like your password.
Address: An alphanumeric set of words which is used to receive Crypto, like your bank account number.
Diamond Hands: People who do not panic and sell and hold onto crypto for many years.
Paper Hands: People who panic and quickly sell their crypto when prices drop a little.
Whales: People with a lot of Crypto, Hundreds of millions or more.
History of Blockchains: https://academy.binance.com/en/articles/history-of-blockchain
Use cases of Blockchains: https://academy.binance.com/en/articles/blockchain-use-cases
What is Bitcoin? https://academy.binance.com/en/articles/what-is-bitcoin
What is Ethereum? https://academy.binance.com/en/articles/what-is-ethereum
How to invest in Crypto: https://academy.binance.com/en/articles/how-to-invest-in-bitcoin-and-cryptocurrencies