The technical world of cryptocurrencies and their underlying technology, Blockchain, can be a daunting task for many. The cryptocurrency in its core, is a technological marvel, is achieved through the combination of advances in distributed computing and cryptography, issues that eludes the general public.
Not only that, but the subject of cryptocurrencies also involves economic, financial and commercial concepts that are required for one to understand, even before beginning to consider these currencies as an investment.
Add all the topics and you will find the field of cryptocurrencies. These layers of complexities are undoubtedly a difficult task for many of us, but it also offers a new and exciting future that we can all be part of. Blockchain is a revolutionary technology with the potential to affect many industries.
In view of the above, we have compiled the 10 main concepts and terms that are vital for you to understand in the world of cryptocurrency, which is explained through the following infographic in two special installments.
1- How Blockchain works
The underlying technology of cryptocurrencies is Blockchain, a highly complex but revolutionary breakthrough that has the potential to alter our way of life for the better. Understanding how Blockchain technology works
After overcoming this seemingly intimidating concept, you will find that Blockchain’s technology is truly fascinating. Once you have understood how it works, it will be much easier for you to understand the entire market, from the limitation of technology to the potential to break many industries.
Knowing the fundamental differences between currencies and tokens is an indication that you really understand cryptocurrencies, which is the ultimate goal in the first place.
2- Coins vs Tokens
Both terms are often used synonymously with little understanding of their correct use, and this differentiation is an elementary basis for cryptocurrencies.
Although many cryptocurrencies existed before Bitcoin, its creation marks an important milestone in the field of digital currencies, due to its distributed and decentralized nature. The creation of Bitcoin precipitated the expansion of an exuberant and more diverse ecosystem of other currencies and tokens, even when most of them do not fall within the definition of a “currency”.
3- Identification of scams
Scams in the world of cryptocurrencies are as common as trees in the forest. Protect yourself by recognizing the common features of cryptocurrency scams. Undoubtedly, knowing how to avoid scams is a vital skill established in the “wild west” of the cryptocurrency markets.
Scams, shady projects and Ponzi schemes are an extremely common phenomenon since the world of cryptocurrency is not regulated.
4- Public and private block chains
Yes, block chains can be public, private or a hybrid of both. Public Blockchain are called without permission (since no permission is required to participate in the network), while private Blockchain are authorized (only selected entities previously approved can participate). This infographic shows an image of the advantages and disadvantages of each system.
Understanding the differences between a public and private blockchain would help us understand the limitations of each system and the possible applications of the blockchain in different industries. Blockchain will not interrupt ALL industries nor be a panacea for all the problems of humanity, but it can be applied to several use cases that would make our lives much better.
5- Consensus Algorithms
Maybe it’s the most important feature of a Blockchain. A consensus mechanism allows a decentralized and distributed system, such as the Blockchain technology, to work well. Just imagine a network that is not controlled by a single entity, as an official? How can things be done ?. How can the information be verified by each participant? The consensus mechanisms answer these important questions.