The definitive guide for Bitcoin: purchase, sale and mining

The cryptography industry is booming and is unlikely to slow down for a long time.

For anyone not belonging to the community, understanding the basics can be a challenge because cryptotutists tend to explain things very technically.

Here, I tried to break cryptographic concepts. So, if you want to understand the basics of cryptography, read on …

What is a Blockchain?

A blockchain consists of a growing list of records, known as "blocks". These blocks are connected to each other by encryption.

A blockchain is a decentralized public ledger. Basically, this means that it is a database that is continuously shared and synchronized on a network. If changes are made to this ledger, all changes will be copied almost instantly to all participants in the network.

There are many different blockchains. The best known blockchain is the Bitcoin blockchain, since Bitcoin was the first application of blockchain technology. However, it is important to realize that "Bitcoin" and "blockchain" are not the same things. Rather, Bitcoin was built on blockchain technology.

C / o Descriptive, Creative Commons

What is a cryptocurrency?

A cryptocurrency is a digital currency designed to be used as a medium of exchange. Use encryption to increase security.

Not all cryptocurrencies must create their own blockchain. For example, many popular cryptocurrencies are built on the Ethereum platform. These are known as "ERC-20 tokens". Examples of such tokens include Aion EOS and TRON .

"Altcoin" are essentially just "alternatives to Bitcoin". They can differ in many ways. For example, they might have a different economic model, a different method of coin distribution, a different mining protocol, or offer more privacy and scalability than Bitcoin.

What is a Smart Contract?

An intelligent contract is a self-execution of the contract by a computer code designed to implement the fulfillment of an agreement.

Ethereum is currently the most dominant smart contracting platform. However, it has some severe limitations that need to be addressed – the most important flaw is its lack of scalability. As a result, Ethereum now has several emerging competitors, such as Qtum and NEO who are now working to take their place.

Smart contracts currently have several limitations that are currently limiting their growth. For starters, they require a computer programmer to create them. They are also encrypted to increase their security, which can make them difficult to read.

Companies like SciDex aim to make smart contracts more readable and adaptive for the mainstream population.

Other companies, such as Etherparty have created intelligent contract models. It means that smart contracts can be created within minutes and the process is simple and accessible to everyone.

Extraction of Bitcoin, by the Flickr user Crypto360. c / o Creative Commons

What is Crypto Mining?

Cryptographic mining is the process by which transactions for various cryptocurrencies are verified and added to the blockchain. Anyone can extract cryptocurrencies, but success usually requires high initial hardware costs.

There are several data mining protocols that may have cryptocurrencies. The main protocols are Proof of Work (PoW) and Proof of Stake (PoS). However, more and more alternative methods are starting to appear.

  • Proof of Work (PoW) users compete to be the first to find the solution to a mathematical problem. This measure was put in place to reduce the number of denial of service and spam attacks, as it requires the user to do some work. Bitcoin uses this protocol.

  • Users Proof of Stake (PoS) extract or validate blocks and are rewarded based on how many coins they already have. The more cryptocurrency they have, the more mining power they have. This is the mining protocol for cryptocurrencies like Qtum. In the near future, Ethereum plans to move from Proof of Work to Proof of Stake in the near future.

  • Proof of Burn (PoB) – users suffer a short-term loss in exchange for long-term gains & # 39; burning & # 39; a cryptocurrency. When a user burns more coins, he has a greater chance of extracting the next block. There are many reasons for this burning of coins. It encourages the long-term commitment of a project, eliminates unsold coins and pays the transaction fees. The counterpart (XCP) is one of the best known cryptocurrencies using this protocol.

  • Proof of Assignment (PoA) – this is a relatively new data mining protocol. It stands out from other protocols because it is able to work on Internet of Things (IoT) devices and on my cryptocurrency without any added hardware and without using much power or memory of the device. IOTW uses the Proof of Assignment protocol.

What is a Crypto exchange?

Cryptographic exchanges allow users to buy and sell cryptocurrencies and digital resources. There are two main types of exchanges.

The first type of exchange is known as exchange of cards . This allows users to directly exchange their US dollars, euros and other currencies supported by the government in cryptocurrencies. The main exchanges of fiat include Coinbase and Kraken .

The second type of exchange is an encryption exchange with cryptography. These exchanges do not accept fiat currency and instead require users to exchange their cryptocurrencies directly with each other. Binance is an example of this exchange.

What is an ICO?

An ICO is an & # 39; initial coin offer & # 39;. It is a fundraising campaign where new projects can sell encrypted tokens in exchange for Bitcoin or Ethereum.

Investing in an ICO can bear fruit. For example, the price of an Ethereum token during its ICO was around $ 0.311. In January 2018 the price of a single Ethereum token broke the $ 1300 barrier. The purchase of a single token during its ICO could have led to huge gains.

However, while participation in ICOs can provide significant rewards, it is also extremely risky. For many ICOs, the idea never takes off and the tokens are made redundant.

You will need a Bitcoin fork to eat your Bitcoin. Not really, but it's a nice thought. Flickr user W uestenigel, c / o Creative Commons

What's a fork?

There are different types of fork and are activated by different events.

An accidental fork [19659013] occurs if the coin updates are incompatible and the developer is required to eliminate the bugs that cause incompatibility and to understand how to merge blockchains.

A fork occurs if developers want to make substantial changes to coin programming which will result in an incompatibility between the previous and the most recent version. If a difficult fork occurs, all the owners of the cryptocurrency are obliged to update all the applications to continue using the cryptocurrency.

The first hard fork for the Bitcoin division (BTC) occurred in August 2017. This led to the creation of Bitcoin Cash (BCH). For each BTC owned by one person, they received 1 BCH.

Ethereum has gone through a considerable number of planned and unplanned fixed forks. For example, Ethereum Classic (ETC) was created following a hard fork of Ethereum (ETH) thereafter The DAO attack in which 3.6 million Ether (valued at approximately $ $ 50 million) were taken from the accounts in The DAO and transferred to another account without consent.

What's a wallet?

A portfolio is the place where users store their cryptocurrencies. There are different types of portfolios. Each type has its pros and cons.

  • Online portfolio these are executed in the cloud and can be accessed from anywhere via an Internet connection. They are extremely affordable but they are also more vulnerable to attack, which means they require additional levels of security.

  • Mobile Wallet an application on the telephone. These even allow you to use Crypto as a payment method in stores. However, if you lose your phone, you will also lose your cryptographic wallet.

  • Wallet for desktop safer than an online wallet. However, if your computer is hacked or damaged, you may lose all your resources.

  • Hardware Portfolio users store their private keys on a hardware device, for example a USB drive. This is one of the most expensive options, but it is also one of the safest.

  • Paper wallet can be as simple as a piece of printed paper that contains your own generated public and private keys. You can withdraw and send cryptocurrencies simply by scanning the QR code in your card wallet with your phone.

Which portfolio you use depends on what you need and how much you value security. Often, it is simply a matter of assessing security with usability and choosing accordingly.

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