- Bitcoin & Blockchain Basics
Mining, private keys, smart contracts etc… The world of blockchain and cryptocurrencies is pretty complicated for newcomers looking to go down the rabbit hole. Below, we give a high-level overview of the most basic terms that will help you better understand what the hype is all about.
What is a blockchain?
Each blockchain consists of a chain of data records that are managed and verified by all computers in a global network. A copy of all previously created data records will be stored on each connected computer. Thus, a falsification or even deletion of the data is no longer de facto possible. In this way, bitcoins, for example, can be saved and transferred quickly and securely.
What is a node?
A blockchain consists of a large number of networked computers/clients. Each of them is called a node. Each node stores the entire blockchain, checks each transaction and forwards it to the network if everything is correct. The more nodes that belong to a blockchain, the safer and faster it works.
What is Bitcoin?
Bitcoin is a virtual, cryptographically secured currency. The currency reached the public in 2008 via a mailing list for cryptography. Under the pseudonym Satoshi Nakomoto, a whitepaper was published describing a payment system based on the blockchain technology.
What is a private key?
The private key is generated during the first installation of a digital wallet and is something like the master key. It provides access to the cryptographic currencies stored in the wallet and should always be kept securely (i.e. on paper, onan encrypted USB stick, or preferably both). Those who lose the private key to the wallet lose their cryptocurrencies, as there is no way to restore a forgotten private key.
What is mining?
Bitcoins and other cryptocurrencies are not generated by central banks, but by mining. In this process, miners try to generate individual dataset blocks with hardware and complicated calculations.In return, miners receive cryptocurrency as a reward. Bitcoin, for example, creates a newblock every ten minutes, which automatically pays a fixed number of bitcoins to its creator. The resulting block then contains all verified transactions that have been carried out with Bitcoins since the previous block was created.
What is Ethereum?
Ethereum itself is not a cryptocurrency, but a platform for the creation of decentralized applications and smart contracts (see below). To make this possible, however, Ethereum has its own cryptocurrency called Ether.
What are smart contracts?
Smart contracts have nothing to do with contracts in the classical sense. Rather, it is used to designate applications or digital processes which, after verification between two (or more) parties, are executed automatically via the blockchain and without middlemen. For example, such an application can be created to automatically send a digital key to an Airbnb flat upon receipt of the payment without requiring a central institution to confirm the payment.
What are Dapps?
Dapps are decentralized applications made possible by the network principle of blockchain. Each dapp consists of self-executing code, so-called Smart Contracts, that define the functionality of the application.
What is an ICO?
ICO (based on IPO) stands for Initial Coin Offering and describes a new form of corporate financing. Investors can use an ICO to acquire shares, profit-sharing rights or rights for future products/services in a company using a virtual cryptocurrency. Technically, the process is based on blockchain technology.
What are tokens?
Tokens are obtained from an ICO in exchange for a certain amount of a cryptocurrency. Each token is comparable to a digital coupon, which entitles the holder to participate in a dapp, for example. If the decentralized application gains value and demand increases in the future, the value of the token increases (similar to a share).
What is Argon Group?
The Argon Group is an investment bank with a focus on digital finance — the emerging cryptocurrency and token-based capital markets. The Argon Group provides a wide array of world-class strategic investment banking and financial advisory services to our clients in this new emerging and exciting space of ICOs.
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- Date of publication:
- Thu, 02/22/2018 - 03:35
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