Four Basic Cryptocurrency Concepts For Beginners
To begin to understand how it is that cryptocurrency works, you will need to first get introduced to a few basic cryptocurrency concepts. Here's a few to get you started:
Public Ledgers
All transactions that are confirmed from the start of a cryptocurrency’s creation are stored in what is called a public ledger. The bitcoin ledger for example is available at blockchain.info and transactions can be tracked by inputing the desired bitcoin wallet address into the explorer.
Although a person can see the inputs and outputs of most cryptocurrency wallets, the actual identities of the coins owners are encrypted, and at the moment, considered anonymous. Digital wallets are given a spendable balance based on the public ledger and new transactions are checked to make sure that output transactions only use coins that are in the possession of the spender.
Transactions
Transferring coins between two cryptocurrency wallets is considered a transaction.
Every input and output transaction from a digital wallet gets submitted to the coins public ledger to wait for confirmation from miners. Security and authenticity of a wallets transaction is provided through the use a encrypted cryptographic signature when a transaction is made. It also provides the necessary mathematical proof-of-work that confirms who a transaction wallet owner is.
The confirmation process varies depending on the coin. Bitcoin for example can take anything from 10-30 minutes for a transaction to be confirmed while others are adjusted for quicker transactions and can confirm and send in seconds/minutes. An important thing about transactions is that they are IRREVERSIBLE and PERMANENT. Mining provides the power for the required proof-of-work to confirm transactions and add them to the public ledger.
Cryptocurrency Mining
Cryptocurrency mining is the process of confirming transactions and adding them to a public ledger. To add a transaction to the ledger, miners must first find a transaction block (a series of unrelated transactions batched together) and then solve it by providing the necessary proof-of-work. Proof-of-work is attained by solving an ever increasingly (or decreasingly) complex mathematical problem.
Mining is an open source activity so anyone can download the necessary software and begin to confirm transactions. This decentralized way in which transactions, blocks, and the public blockchain ledger work together attempts to create a system where no individual(s) can disrupt the network. However, 51% attacks are still possible and do happen. This is where one miner takes control of over half of a cryptocurrencies hashing rate, allowing the hacker to produce blocks faster than the original ledger, and thus allowing them to double-spend their coins.
Adaptive Scaling With Cryptocurrency
Adaptive scaling means that cryptocurrencies can be and are being built with automatic readjustments that ensure they will work in both large and small scales.
Examples include:
♦ Decreasing available coin supply
♦ Increasing available coin supply
♦ Miner reward re-adjustments
♦ Network difficult re-adjustments
Want To Learn More About Cryptocurrency?
I get that this information can be confusing, it takes time getting started. Making yourself familiar and building a deeper understanding of cryptocurrency concepts can be difficult.The best way to get started is by actually getting involved.
Start by learning about more in-depth cryptocurrency concepts, browsing around a few exchanges, watch some in-depth explanation videos, participate in airdrop campaigns, or even simply claim some free cryptocurrency from a faucet. Eventually your understanding will broaden and these beginner concepts will be nothing! If you are interested in getting started heres:
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