Unlocking potential: Exploring a world of Digital Ownership
Unravelling the world of blockchain and cryptocurrencies: An introductory guide.
Hi Folks.
I wanted to better understand blockchain technology and cryptocurrencies and how they apply to our everyday lives. I thought I’d dive in to find out a bit more and what better way than if I were to write about it and share my findings with you, just in case you don’t have the time to do so yourself.
Technological innovations have revolutionised the way we interact, trade and secure our assets. One of the most groundbreaking developments is blockchain technology, which serves as the foundation for cryptocurrencies.
So, If you, like me, need to scratch a little deeper than the surface then come along for the ride and see how crypto impacts our everyday lives. When Bitcoin was initially launched and rose to spectacular gains, I thought that crypto was the next “tulip bubble” and would burst, until I took the time to understand what lay behind the technology. If you’re unsure about what it is or need a refresh, then join me for the next 2-3 articles while we peer a little deeper to discover what its all about.
Also feel free to forward this article to friends and foe’s in your network that may not be as tech savvy as you are.
Understanding Blockchain technology
What is blockchain?
At its core, blockchain is a decentralised and distributed ledger that records transactions across multiple computers in a way that ensures the integrity and immutability of the data. Unlike traditional centralised systems, where a single entity controls the database, blockchain relies on a network of nodes (computers) that collectively maintain and validate the ledger.
How does blockchain work?
Blockchain operates on the principle of consensus among network participants. When a new transaction is initiated, it undergoes a verification process by a group of nodes. Once verified, the transaction is added to a “block” which is then linked to the previous block, forming a chain of blocks - hence the name “blockchain”
There are 4 major components or elements of a blockchain:
Decentralisation: No single entity has control over the entire network, reducing the risk of Manipulation and fraud.
Immutability: Once a transaction is recorded on the blockchain, it cannot be altered or deleted, ensuring data integrity.
Transparency: Transactions are visible to all network participants, promoting trust and accountability.
Security: Advanced cryptographic techniques make it extremely difficult for unauthorised parties to tamper with the data.
Introduction to cryptocurrencies
Cryptocurrencies defined
Cryptocurrencies are digital or virtual currencies that use cryptographic techniques for security. It is designed to work as a medium of exchange through a computer network that is not reliant on any central authority such as a government or bank. It is a decentralized system for verifying that the parties to a transaction have the money they claim to have, eliminating the need for traditional intermediaries, such as banks, when funds are being transferred between two entities.
The first cryptocurrency was Bitcoin created in 2009 by an anonymous person or group using the pseudonym Satoshi Nakamoto. In 2008 they published their white paper that set out the principles of peer-to-peer cashless electronic payment system with a digital currency called Bitcoin.
Read more about Satoshi Nakamoto here.
How cryptocurrencies work
Cryptocurrencies function through a combination of blockchain technology and cryptographic principles. When you send or receive cryptocurrency, a transaction is initiated, recorded and validated on the blockchain.
Key aspects of cryptocurrencies:
1.Decentralization: Like blockchain, cryptocurrencies are decentralised, removing the need for intermediaries and increasing financial autonomy.
2. Digital Ownership: Owning cryptocurrency mean having a private key that allows you to control and access your digital assets securely.
3. Global Transactions: Cryptocurrencies can be sent and received across borders, making cross-border transactions faster and more cost-effective.
4. Limited Supply: Many cryptocurrencies, like Bitcoin, have a capped supply, creating scarcity and potential for value appreciation.
That’s a bit to chew on for this week. Next time we’ll have a look at mining, find out what halving is and find some applications of cryptocurrencies.
Don’t get caught in a crypto scam: read more about the Fall of the Cryptoqueen here