The Book about Cryptocurrency № 1. Viacheslav Nosko
database; information can be simultaneously recorded on several devices.
All data in the blockchain network is recorded in blocks that are interconnected.
All transactions pass in the chain of blocks. Each transaction is recorded in a block, and it can no longer be changed. In order to form a new block, it is necessary to make certain calculations. The computer that solved the task gets its reward in bitcoins. This process is called ‘mining’ and the owners of computers that do the calculations are ‘miners’.
The more miners in the world, the faster transactions can be processed and the more stable the whole system is.
What is Bitcoin? This is, basically, the name of the network which began operating in 2009 and which the blockchain technology is used in.
To make these concepts clear, we state one more time:
Blockchain – this is a technology that can be
applied not only to cryptocurrency;
Bitcoin – is the first cryptocurrency, the progenitor of all other coins and now is the most expensive crypto.
The term “cryptocurrency” was spread in 2011 due to the publication about bitcoin in Forbes magazine. Then the term “cryptocurrency” began to denote any crypto money.
The word “bitcoin” is formed from two English words: “bit” is a unit of information and “coin”.
This is the first, the most expensive and having the largest capitalization cryptocurrency so far.
The goal of creating Bitcoin is a universal global decentralized payment system that is not controlled by banks, governments, and other intermediaries. Bitcoin, like other cryptocurrencies, helps to execute payments p2p (person to person).
Bitcoin advantages compared to traditional (fiat) currencies:
• No one will ever be able to block a Bitcoin account. It is your funds forever. Only if you follow the digital security methods. We will talk more about safety precautions. And more than once.
• Account transactions are both anonymous and transparent at the same time. The list of transactions can be traced in a public ledger. At the same time the information of who sent the money and who to is unknown.
• Unlike a traditional bank account, a cryptocurrency account is not tied to any personal data.
But everything is not so awesome. There are also bitcoin and other cryptocurrency cons:
• If you make a mistake with the wallet number (it is not difficult to make a mistake here – the ID of each wallet consists of 34 characters, including numerals, upper and lower case letters and other signs), then it will be impossible to cancel the transaction. Attention and thoroughness are the keys to success in working with cryptocurrency.
• The cryptocurrency market shows high volatility due to its rapid growth and the characteristics of the cryptocurrencies themselves. (Volatility is the level of price changes on the market. High volatility is when the price can change significantly over a short period of time.) That is why inexperienced and novice crypto traders lose money, because it is very difficult to predict how the market will behave in next months.
• If the wallet is hacked or lost, if you forget your password or passphrase (seed phrase) of the wallet, then it is impossible to return the lost funds.
Why is blockchain
Better than a database?
Matthew Chan, entrepreneur, designer, cryptocurrency enthusiast, creator of a mobile application for cryptoinvestors “MatrixPortfolio.com”, has answered this question exhaustively and succinctly.
The original article was published on Hacker Noon, its translation is on our portal https://pro-blockchain.com.
I want to convince you why blockchain is needed, why it is needed to motivate people to aim for decentralization and its benefits, and also why tokens are needed and what lies at the heart of their value. Now, when cryptocurrency market is becoming increasingly saturated, it is important for us to understand the underlying technology of digital money and the principles, since such understanding will allow you to make smart investment and separate important stuff from secondary.
In fact, blockchain borrowed a lot from game theory and motivational models. In order for the blockchain network to be valuable and / or useful, there must be participants. It will be useless if we are the only blockchain users.
Some motivation is needed to attract participants. The most common means of motivation is token reward. The more participants, the more network is decentralized.
Why could not we get along with the database? Why do projects need blockchain?
The decentralized system has several advantages over a centralized server / database:
• immutability;
• security;
• backup;
• reducing cost;
• accountability and transparency.
Immutability
When data and records are decentralized and placed in blockchain, it is almost impossible to falsify or change them. If you store data, for instance, on your personal computer, you can easily change the file before sending it to another person. And how can you be trusted in this case?
Security
Traditional servers or data are usually centralized, making them an attractive target for hack attacks. As an example, we can mention Equifax security gaps and other cyber security issues occurred lately. One server or a limited number of them can easily become victim of hackers, but decentralization with help of blockchain puts a serious obstacle on the path of intruders. The more participants and nodes are in the network, the more copies of the data exist. So, in order to change data, it is necessary to attack each individual node in the network and modify all data simultaneously. Blockchain is not only protection against theft, but virtually has no vulnerabilities. Each block in the chain contains a certain amount of data, and when this block is filled, like a USB flash drive, the data is encrypted and permanently sealed. To get entire picture, hackers need to crack not only the current block, but also each block preceding it. It is not only almost impossible technically, but also it is expensive. Thus, the incentive for criminal activity is reduced. Now I am describing the concept as a whole: different blockchains use different security measures and algorithms.
Backup
If data is distributed around the world, then you do not need to worry about the loss of one copy. Thanks to this, you can protect yourself from corporations by eliminating data falsification, server failures, etc.
Reducing cost
The decentralized nodes network that maintains the registry helps companies reduce hosting costs, security measures and maintenance. In addition, decentralization saves on IT-specialists, developers and infrastructure managers’ salaries. For example, Apple servers, in the literal sense of the word, are constantly under attack, which is why teams of specialists have to monitor those 24 hours a day, 365 days a year.
Accountability and transparency
Given the above, you can be sure that all the information recorded in blockchain is genuine. This allows you to do business in a transparent manner, freeing you from the need to trust the opposite side. You can always appeal to blockchain, letting the data and facts speak for themselves.
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