Welcome to this info-packed three-part series - “Unlocking the World of Cryptocurrency and Blockchains.”
Crypto is a fast-moving space with no signs of stopping.
With a focused objective of imparting complete knowledge on this mesmerizing arena, we bring you a series that will equip you with knowledge of various aspects of the crypto space. This will be a good starting point for you to take your crypto journey ahead.
We aim to let you build your arsenal with everything - basics of cryptocurrency, its characteristics and history, applications of blockchains, tips for effective trading and investing, trading strategies, the impact of government policies, compliance regulations, and more. There’s a lot to gain and turn yourself into a fintech, in particular, a crypto fiend.
Here we go!
At its most basic, cryptocurrency or crypto is a form of digital or virtual currency that uses cryptography techniques to make payments secure. Cryptocurrency allows anyone to send and receive payments online through a computer without physically transferring the money. In addition, all the transactions taking place between the parties are stored in a publicly distributed ledger.
They use cryptographic codes and a private key only known to the owner. No one can access the private key except one who owns it.
Once initiated, these transactions take place, and no one can do anything to stop them in between.
These are permissionless and do not depend on any third parties or middlemen to complete them. This eliminates the need for banks or other financial authorities.
These transactions are super-quick and get executed in just a few minutes.
As these are digital currencies, they don’t require knowledge of the physical locations of the parties involved. Anyone can send or receive cryptos from anywhere in the world.
Cryptocurrency initially emerged with the evolution of Bitcoin in 2009 by a pseudonymous group named Satoshi Nakamoto, who developed a whitepaper. From 2010 to 2014, Bitcoin prices soared, and other coins known as altcoins also emerged. While Bitcoin flourished and attracted huge investors, certain incidents, like the crash of the bitcoin exchange Mt.Gox in 2014 when it got exposed to hackers.
Later, in 2015, Ethereum was launched, which led to the inception of automated smart contracts, paving the way for new concepts in fintech - decentralized finance, decentralized apps, and non-fungible tokens (NFTs). In 2020, El Salvador made Bitcoin its legal tender, steering the move toward crypto adoption.
Blockchain: Blockchain is a distributed, secure, tamper-proof, and decentralized public ledger that records all the transactions in a network and stores them as blocks wherein each block consists of a set of data.
Decentralized Ledger: In a blockchain environment, all data at any time is shared across all the nodes in the network in the form of a decentralized ledger. Any alterations by anyone can be viewed by the rest.
Digital tokens: Tokens are digitally represented units in a blockchain that support various initiatives like governance, security, or other functionalities.
While there are various technologies in fintech, the most commonly used are blockchain-based cryptocurrencies. Blockchain is a publicly distributed online ledger where all transactions between the parties connected to that computer network are securely recorded. These platforms are tamper-proof and do not allow anyone to modify or edit transactions without others knowing.
The whole idea of blockchain-based cryptocurrency is to turn the process of transacting permissionless and decentralized, obviating the need for intermediaries like banks or financial institutions.
Some blockchain-based cryptocurrencies are - bitcoin, Ethereum, ripple, cardano, avalanche, polkadot, and more.
Blockchain works on the public distributed ledger technology and verifies the transactions by forming “blocks”. In simple terminology, it consists of:
These actions occur in near real-time and are very quick. In the case of Bitcoin transactions, the nodes are called miners, and the process is referred to as mining. The validation and confirmation of blocks occur through protocols based on cryptography.
Bitcoin uses the Proof-of-work protocol or consensus algorithm. Here, a complex mathematical puzzle is given to the nodes, and the one that solves it first is validated. Once its correctness is confirmed by a majority of nodes, it is rewarded in bitcoins. This process is computation heavy and requires advanced computers to solve the cryptographic puzzles.
Another consensus algorithm is Proof-of-Stake (PoS) on which for example, Ethereum is based. Here, the users can stake their assets, and depending on the proportion of their holdings, the validators are selected. This avoids the problem of expending a lot of energy in computing puzzles and thus is environment-friendly.
Blockchains are not merely restricted to the emergence of cryptocurrencies. There are a lot of useful applications of blockchains across industries.
In the supply chain, blockchains play a significant role in tracking the provenance of materials as they travel through the different stages from production to end-customer delivery. At each stage, a timestamp is created and stored, which lets the stakeholders stay aware of the details. It increases the accuracy and visibility in tracking and detects issues like counterfeit goods, delays, and waste.
In the case of the voting process, blockchains ensure each vote cast is recorded in a publicly distributed ledger, and there are no possibilities of any vote uncertainty or alterations.
In the healthcare space, blockchains grant security, ensuring data protection and privacy of patient-related records or other therapeutic information. Besides, they aid in the supply chain tracking of medical equipment, gadgets, or certain drugs.
Founded in 2009 by a group with the pseudonym Satoshi Nakamoto, Bitcoin has garnered a lot of attention and remains the most popular. It was the first blockchain-based cryptocurrency that started with the aim of decentralizing financial transactions using the Proof-of-Work consensus algorithm.
Launched in 2015, Ethereum led to the emergence of tokens, which later led to decentralized apps (Dapps), decentralized finance (DeFi), Non-fungible tokens (NFTs), and other interesting use cases.
It works on the Proof-of-Stake(PoS) protocol, and its native coin/token is Ether (ETH).
Founded in 2012, Ripple is a blockchain-based cryptocurrency supporting various transactions besides crypto. Its native currency is XRP.
Bitcoin - It was founded in 2009 by a pseudonymous person or group known as Satoshi Nakamoto.
Ethereum - Co-founded by Vitalik Buterin, who is considered the maestro; other team members include Gavin Wood, Charles Hoskinson, Anthony Di Lorio, Amir Chetit, Jeffery Wilcke, Joseph Lubin, and Mihai Alisie.
Ripple - Ryan Fugger, along with Chris Laren and Jed McCaleb, form Ripple’s core team.
As per today’s stats, Bitcoin stands at a market cap of $857.25B, Ethereum is 287.86B, and Ripple is 33.253B.
Bitcoin enjoys the highest rate of adoption, with 56 countries investing in it. El Salvador and the Central African Republic (CAR) have adopted it as their legal tender.
Ethereum ranks next to Bitcoin by market cap and has 14 million ETH owners worldwide.
Ripple has grown tremendously since Oct 2018 and is popular in places like Dubai and Georgia where its cross-border payment solution, Ripple Payments is widely in use.
We covered cryptocurrency characteristics, history, popular cryptocurrencies, their market adoption, unique features, blockchain consensus protocols, and more in this part of our three-part series. Join us next week for part-two as we continue our investigation into the world of cryptocurrency and the blockchain.