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The ten essential concepts in cryptocurrency (beginner’s guide)

The ten essential concepts in cryptocurrency for beginners is what you are going to learn today in this brief but knowledgeable article.The ten essential concepts in cryptocurrency (beginner's guide)

1. Blockchain

A blockchain is a digital book in which transactions are recorded. This register is publicly visible. Each user can have a copy of this ledger. There are hundreds of different blockchains.

Example: the Bitcoin blockchain has existed since 2009.

2. Block

The blockchain is cut into blocks one after the other. Each block can contain a limited number of transactions. When a block is full, transactions are stored in the next block.

Example: we add a block every 10 minutes or so to the Bitcoin blockchain.

3. Knot

A node is a computer (also called a server) that has a copy of the blockchain. All the nodes are connected to each other to keep the large register up to date. They form a network.

Example: thousands of nodes make up the Bitcoin network.

4. Minor

A minor is a node whose role is to secure the blockchain. Minors check that the transactions in the register are valid and that the account book is not falsified. When a block is validated by all miners, they add it to the blockchain.

Example: To be able to write a transaction on the Bitcoin blockchain, it must be verified by a minor.

5. Consensus rules

Consensus rules are the mechanism by which miners agree among themselves to determine whether a block is valid or not. If a minor does not respect them, he is excluded from the network by other minors. These rules allow all the nodes to synchronize with the state of the registry.

Example: the consensus rules for Bitcoin are called “Proof of Work Consensus”. There are others for other cryptocurrencies.

6. Token

A token (also called a token) is the unit of exchange used in the blockchain registry. A token can materialize a value, a property, an identity, …

Example: Ether is the token of the Ethereum blockchain.

7.  Smart contracts

In addition to transactions, the blockchain may contain other information. You can enter lines of code, contracts and computer algorithms, detailing their trigger conditions. These instructions are called “smart contracts”.

Example: “Paul gives Alice 5 Ethers if Alice gives Luc 1 Ethers” is a smart contract.

8.  Decentralized application

A decentralized application is a service that works thanks to the smart contracts of a blockchain. It is decentralized because its operation is monitored by the network of nodes, and not by a central institution.

Example: an insurance system where contracts are registered on the blockchain is a decentralized application.

9. Scalability

Scalability refers to the ability of the blockchain to accommodate a large number of transactions or smart contracts on its register, which can be handled by many users.

Example: Bitcoin is limited to around 7 transactions per second. It is necessary to improve its scalability.

10. Fork

A fork is a modification of the consensus rules. It is an update of the computer protocol that governs the network of nodes maintaining the registry. Sometimes we can use the code of a blockchain to create another, with some modifications. It is a fork.

Example: Bitcoin Cash is a fork of Bitcoin.

Definition

A cryptocurrency is an electronic money supported by a decentralized computer network (peer to peer) and whose transactions and issuance are based on cryptographic algorithms.

The number of units in circulation and the maximum money supply are defined in advance and visible to all. Until proven otherwise, a cryptocurrency cannot be counterfeited or usurped.

It does not depend on a central bank or a state.

Blockchain technology

A Blockchain is a secure public registry. All transactions are recorded there. This database is fed and monitored collectively without trusted third parties (state, institution, bank).

The architecture of the register takes the form of a succession of blocks containing the transactions carried out over a determined period: we speak of a chain of blocks.

Each cryptocurrency is powered by a consensus of “miners” who operate the network: they execute a common and open-source computer protocol (available to everyone).

Thus, a minor wishing to modify the protocol cannot do it alone. Cryptocurrency is therefore based on an agreement between all of its users.

Cryptocurrencies work through a computer technology called Blockchain.

Use

Each Blockchain is associated with a cryptocurrency (also called a token ). This allows the exchange of value whose transactions are registered on this blockchain.

However, a cryptocurrency does not necessarily aim to provide a payment system between users. It can allow the remuneration or the exchange of internal services to the blockchain protocol: decentralized cloud, decentralized computer, execution of smart contracts etc.

By Bobvalla

Bobvalla Lesly Fomantum is a Cameroonian from the Northwest part of the country. He is a medical student and the founder of Camertalks.com which is a health and fitness website. Bobvalla is kind, humble, hospitable, curious to safe lives. Being a medical doctor for him is not a profession nor a job but the passion he has for the field.

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