Table of contents
- 0.1 Let’s start from the basics
- 0.2 What happens if there is no central bank?
- 0.3 What is Cryptocurrency?
- 0.4 What is blockchain?
- 0.5 So what’s so special about bitcoin? And why is it worth anything?
- 0.6 So, what is blockchain in the crypto world?
- 0.7 Common misconceptions about blockchain
- 0.8 So, how is this information added to the blocks?
- 0.9 Cons of crytocurrencies
- 0.10 Conclusion
- 1 Don’t miss amazing tips!
So, What is blockchain in the crypto world? There are so many aspects that could be touched on in this piece. There are just so many topics to cover. We will focus on “what is blockchain” and answer the question of “does cryptocurrency exist”. Again, there are many things that could have been discussed in this piece but these are the two big ideas I wanted to touch upon.
Let’s start from the basics
What is money?
Money is a system of tokens, created and used as a medium of exchange. Money also functions as a store of value and unit of account, allowing people to compare the exchange value of different goods and services. Most broadly, money is anything that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context.
How do banks and the government work today?
Banks issue their own money (banknotes) and indirectly create money at the central bank (money supply) by expanding the supply of loans.
When you transfer money from your account to your friend’s account, the bank transfers its own money (banknotes or electronic money). It adds the amount of your payment to your account, and at the same time subtracts the same amount from your friend’s account. This is called “creating money”.
What happens if there is no central bank?
This is where blockchain comes in. Blockchain is an emerging technology that facilitates transactions by creating a public ledger and then depositing those records on computers around the world.
“Crypto” – means they are cryptographic tokens used for online transactions. When you buy bitcoin, ethereum, litecoin etc you are buying an electronic token. These are traded openly on decentralized exchanges where they are matched against each other with no banks needed.
What is Cryptocurrency?
What is blockchain?
The word “blockchain” is a bit of a misnomer. It’s not really something that builds blocks in the sense that it’s discrete and static. Instead, “blockchain” actually refers to a networked environment made up of computers that are all sharing information across the network.
In essense crypto does not exist. Cryptocurrency is not a currency at all but more of a commodity; it’s a digital asset. And all those “crypto” coins that you see today are just commodities that have value because of something else.
So, what is the purpose of cryptocurrency? And why does it exist at all?
As stated above, crypto does not exist as a currency. It’s a commodity for most people who are involved in the space; however, if you look at bitcoin as an example of what’s going on in the markets right now, it becomes clear that bitcoin has value. It has real-world value even though it isn’t being used as a currency.
So what’s so special about bitcoin? And why is it worth anything?
The answer is simple: people are willing to pay for it. The more they want the currency, the more its value rises. That’s how real-world value comes to cryptocurrency. Without that sort of actual demand in the real world, the currency would be worth nothing. It’s only because other people want that item (cryptocurrency) that it has any value at all. This makes it a commodity.
Not being a currency means that crypto has no intrinsic value; however, there is still value in it as a commodity.
So, if that’s the case, does cryptocurrency exist? Yes and no; it doesn’t exist as a currency but all cryptocurrencies do exist. Without people willing to buy those currencies they wouldn’t exist at all. You’ll find that most of the teams working on new coins are using them as an investment for their own profit; they don’t work with them as currencies or to serve as anything other than an investment vehicle.
If that’s the case, doesn’t that mean crypto is just a Ponzi scheme? Well… Yes. In a sense; people are being given coins for free to draw in more investors. However, the value of cryptocurrency does not rely on those who actually hold the coin; it relies on the people who buy it at a later time and even those who sell it for profit. We’re dealing with a volatile market where many people can make or lose money in large amounts depending on how they play their cards.
As for crypto being fraud because of this, you’ll find that most larger companies are using this model to some extent. They are drawing in investors as well. Some of them may be able to make a profit in the short term but most won’t survive long enough to ever make a profit from crypto.
So, what is blockchain in the crypto world?
You’re reading all of this and thinking that I must have more information on this topic than anyone else. Most people don’t even know what blockchain is; they know it’s what bitcoin and other cryptocurrencies are built upon and that’s about it. So, let’s talk about it.
Blockchain is also referred to as a “distributed ledger”. It’s the same technology used for bitcoin and other cryptocurrencies. It’s a way of keeping track of records and transactions on a large network of computers that are all sharing similar information in tandem.
This is done through programming code that compiles into blocks that are processed at a fixed time interval. These blocks can be sent from computer to computer on this network, and each computer on the network will make sure the information has been updated before allowing it to be sent out again. This makes it very hard to hack or alter the data since there are so many nodes (computers) involved in the process.
This distributed ledger provides a high level of security and problem-solving ability when it comes to transactions. By using this sort of system, records can be verified in seconds instead of taking days or weeks. That means that the transfer/ trade can go through much more quickly than if you had to rely on a third party for verification. This is where the “blockchain” name comes from; the “block” refers to each time block is processed.
This article has contained a lot of information, so I’ll try to wrap it up for you. Let’s take all this information and put it into some sort of context.
The technology behind blockchain is the same technology that makes cryptocurrencies work. This is where bitcoin and other cryptocurrencies are built upon. Blocks are created every 10 minutes and these blocks make up the blockchain, which is essentially a distributed ledger for transactions. This means that each block has a list of records that date back to the beginning of time mixed with all-new records added at each block as well as records that have been verified by software on other nodes as legitimate or valid. This is called a hash.
Common misconceptions about blockchain
Blockchain is one of the most important technological innovations since the advent of the internet. It has eye-opening potential to change how governments work, how companies are run, and how individual people manage their identities, finances, health records and pretty much everything else.
But what exactly is blockchain? Blockchain author Don Tapscott calls it “the second era of the internet” that will fundamentally change society. Even President Barack Obama says it could have ” profound impacts on our lives.”
And yet there are still some misconceptions about blockchain. Let’s start by dispelling three common misconceptions associated with this radical new technology…
Misconception #1: Blockchain is Bitcoin
Actually, Bitcoin is just one application of blockchain technology. Blockchain allows people to exchange any asset in a secure, verifiable way without requiring a middleman or centralized authority.
For example, a country with a poor financial infrastructure could create a digital currency that citizens can use to pay each other. Or an international payment system could be built on the same infrastructure, with transactions secured by the blockchain. These applications have been explored by organizations such as Ripple , which is currently working on a blockchain-based remittance system called Ripple Transaction Protocol.
Misconception #2: Everyone is running their own blockchain
In fact, there’s no “one true blockchain.” There are many different blockchains existing at the same time. Some currencies run their own blockchains, some banks run theirs, and some businesses may run theirs too.
A single blockchain can be used to store and process different kinds of data, multiple blockchains can be linked together to create a distributed system, and different blockchains can be linked on the same network.
Think of it like this in terms of the internet – Does everyone have their own internet browser? Different people are using their own browser and platform and different people prefer different browsers based on their preferences or need.
Misconception #3: Blockchain is an all inclusive antidote to everything
Deleting anything from a blockchain would be almost impossible and running multiple blockchains at the same time could lead to some problems. So, while blockchain is extremely powerful and revolutionary, we’ll need to work out how to use it in our everyday lives.
Misconception #4 Cryptocurrency is the only application of blockchain technology
Cryptocurrencies such as Bitcoin are just one application of blockchain technology. So far, most cryptocurrencies have been driven by speculation on the price of Bitcoin. But there are plenty more use cases for blockchain beyond currencies such as gold or diamonds that aren’t driven by price speculation . One of the most exciting uses for blockchain in the future is in authenticating identities and verifying ownership. Identity management company for example could use blockchain based technology to authenticate identities and build a decentralized verification system.
Misconception #5: Blockchain is just a fad
While many people will be aware of Bitcoin’s meteoric rise, the same can’t be said for all cryptocurrencies. Over the past couple of years, we’ve seen dozens of cryptocurrencies hit the market. But there is clear evidence that both Bitcoin and cryptocurrency is here to stay and around the governments around the world are starting to get involved.
Misconception #6: Blockchain is just about finance
Many people think of blockchain technology as something that’s only used for financial transactions such as cryptocurrencies. But the potential applications of blockchain tech go way beyond this.
Blockchain isn’t a fad, it’s a transformational technology
These misconceptions about blockchain extend beyond the financial sector and cryptocurrency. In reality, blockchain can be used for so much more than just cryptocurrencies, from managing identities to storing medical records. Blockchain is a powerful tool that will have an impact on everything from finance to energy consumption to health care.
When something is verified as legitimate, it’s placed into the block and then processed through each node on the network before being sent out again at the next block. Each of these nodes has a copy of all of the previously validated blocks up until that point as well as all-new blocks. As time goes on and new blocks are added, more information is added to each individual block in that ledger. The more blocks that are added over time means that each node continues to get larger with more information which makes each new block take longer to process.
So, how is this information added to the blocks?
The answer is usually found in the blockchain code for each cryptocurrency.
Blockchain code is a series of instructions that are programmed into each block. This code creates a new block that contains records of old transactions as well as any new transactions from the last block. These records are automatically validated by a network of nodes (computers) which helps to keep the entire system running smoothly and ensures that data isn’t changed or tampered with.
Once all nodes have processed this new block and confirmed it, they begin working on creating another one using similar instructions and then send this out to be processed by other nodes… and so on.
The entire network works together like this to keep the blockchain running smoothly and ensure as quickly as possible that there are no bugs or issues that make it hard for any records to be validated. This allows blocks and records to be confirmed instantly and without the need for a third party. That means that you can verify a transaction immediately, without having to wait days or weeks while waiting for some third-party organization to verify the information.
This is how blockchain provides such high levels of security while still being able to process transactions almost instantaneously; blockchains make use of this distributed network of nodes through software code built in each new block.
Cons of crytocurrencies
Cryptocurrencies have become increasingly volatile – New crypto coins and tokens are popping up all the time and watching for them on exchanges. Many people will tell you that the best way to invest in cryptocurrencies is through cryptocurrency trading, but with so many coins and tokens, it can be hard to track over 200 markets closely over a 10-minute trade window before risking your capital.
– Not widely accepted
Cryptocurrency is not widely accepted – most banks do not allow their customers to buy cryptocurrencies, which means that dealers have to find a bank willing to enter a trade. It is very hard for the banks to get the traders comfortable with cryptocurrency. If you have questions about using your bank at all, see another alternative option.
– Trading fees can be high
There are brokerage fees – The initial cost of buying a cryptocurrency is usually high. In order for them to gain acceptance in the market, they need funds from large cryptocurrency exchanges which would accrue transaction fees and other kinds of commissions. These commissions might change over time based on the market price. These transactions fees can also rise dramatically in value during times of high volatility or in a bear market because traders often sell their coins in anticipation of losing money.
– Environmental concerns
Cryptocurrency has become an environmental concern – The electricity used for mining Bitcoin and other cryptocurrencies is huge – the cryptocurrency itself is an environmental issue. Mining cryptocurrency can require millions of dollars worth of equipment to reach the high hash rates, especially in the case of Bitcoin mining, which has become so competitive that it attracts supercomputers.
Blockchain technology is still in its infancy but it’s already making huge waves in the world of cryptocurrency and we’ll probably see a lot more of cryptocurrency coming online as people try to make use of this new distributed ledger technology.
All the best of luck out there on your crypto investment!
To learn more about NFTs, see this article.