Bitcoin, Altcoin, Blockchain, Mining바카라�The Nuts And Bolts Of Cryptocurrency

The chatter on the wires is quite breathless, and rising to a crescendo. There바카라�s quite a large, swinging crowd of millennials who have taken to it like ducks to water바카라�in fact, those below 30 form the bulk of the user base of WazirX, the largest crypto exchange in India. Indeed, the platform also saw a surge of users aged over 45 between February and April바카라�a 337 per cent rise, according to The Economic Times. From among both segments, you have the usual lottery winners. Like Richi Sood (32), who betted over 10 lakh on Bitcoin, Dogecoin and Ethereum, and, thanks to her timing, laughed all the way to the bank when Bitcoin hit $50,000 in February. Wait바카라�bank? You must be Jurassic. If there바카라�s money that바카라�s not quite money, can you bank on a bank?

Everyone knows something is going on, but hey바카라�what ­exactly? Do not be afraid to ask. This is where most people are when it comes to cryptocurrency바카라�a zone of befuddlement바카라�and it바카라�s most natural. Because what we have here is not just a system that바카라�s outside the system, the idea of a non-material currency that바카라�s not backed by an asset is so far out that it shakes up our very circuits of knowledge. So very few can read the present바카라�and even those who can may not hazard a guess about the future. But we do know a few things for sure. Here are some easy clues to crack the cryptic crossword puzzle. At the heart of these digital transactions is blockchain technology바카라�that바카라�s the orbit on which the crypto galaxy moves. But before we get to the underlying technology, let바카라�s look at the basics.

ALSO READ:

The Alpha and Omega: For the new initiate, think of cryptocurrency as a new form of cash. Except, it doesn바카라�t have a physical existence. These are virtual 바카라�coins바카라� that exist only in the sense that they are stored online, in the form of digital files. These files, containing all their transaction rec­ords, are stored on a network and shared across multiple computers. The records are stored in the form of 바카라�blocks바카라� that are connected via a chain바카라�hence the name 바카라�blockchain바카라� for the technology that forms the backbone of most cryptocurrencies, which does the job of recording the transactions. These blockchains are further secured by cryptographic techniques that help you make secure payments online바카라�that is, if the receiver accepts that form of abstract payment. Hence the name 바카라�crypto (hidden) currency바카라�.

ALSO READ:

The blockchain data could be public, private, or what바카라�s called 바카라�permission바카라� data. While the public blockchain is truly decentralised and independent of any central authority, staying anonymous on these networks can be difficult and the chances of your data being exposed are high. Bitcoin, Ethereum and Litecoin are some examples of ­cryptocurrencies that use a public blockchain. One can also opt for a private blockchain that allows entry only through verified invitations. In private blockchains, only the owner has the right to make any changes to the entries바카라�thus, it바카라�s the opposite of decentralised. Ripple (XRP) and Hyperledger are some examples of popular private blockchain-­based payment systems.

ALSO READ:

The 바카라�permissioned바카라� blockchain is a mix of public and ­private blockchains that allows anyone to join the network after their identity is completely verified. But on condition that the new entrant performs only those activities that are permitted. Some examples of cryptocurrencies that run on 바카라�public permissioned바카라� networks: Stellar and Sovrin. Hyperledger Fabric or R3바카라�s Cordaare are, by contrast, ­powered by 바카라�private permissioned바카라� ledgers.

A transaction record is a series of interconnected 바카라�blocks바카라�, each of which contains the relevant data and is appended with a unique hash. As one goes along the series, each­subsequent block is also marked by the previous block바카라�s unique hash바카라�hence forming a chain. A typical blockchain could look something like this:

Block 1 = 100 Bitcoins from Ajay and Reema (data) + 20AB (unique hash)

Block 2 = 50 Bitcoins from Reema to Sohail (data) + 17KL (unique hash) + 20AB (hash from Block 1)

Block 3 = 20 Bitcoins from Sohail to Meena (data) + 23CQ (unique hash) + 17KL (hash Block 2)

And so on...

The blockchain thus records all the data relating to ­transactions of a given set of cryptocurrency units in a ­public ledger secured using cryptography. Crypto means 바카라�hidden바카라�; graphy relates to 바카라�writing바카라�. This means your blockchain data바카라�transaction + participant details바카라�is secured with hidden writing, metaphorically speaking. Cryptography secures the data with hashing, a mathematical operation that creates a unique marker, one that바카라�s a lot like a fingerprint or signature. The hashing technique helps transform the data (transaction + participant details) into a unique text sequence. For example, when you want to create a new email account, you must provide your desired email address and password. However, the email provider, say Gmail or Yahoo, cannot save your password in the same ­format. They must encrypt it to keep the data protected even from internal access바카라�that바카라�s where the hashing function typically came in before cryptocurrency harnessed it for its own needs. Now the latter has become one of the major applications of hashing, which makes it impossible for hackers to break into the data and make any changes.

Cryptography thus protects your transactions, manages the currency units, authenticates the transfers of digital ­assets and tokens, and keeps you from double-spending. Moreover, since blockchain technology is decentralised (not controlled by a single person or group or central authority), it makes the data unalterable. According to MIT Technology Review, 바카라�The whole point of using a blockchain is to let ­people바카라�in particular, people who don바카라�t trust one another바카라�share valuable data in a secure, tamper-proof way.바카라�

Digital vs Crypto? Let바카라�s clear one key confusion that바카라�s gaining ground: cryptocurrency is NOT the same as a ­digital currency. Digital currency is merely what you call the online transaction of physical money between ­parties바카라�for example, fund transfer from one bank to ­another, or transactions made through digital wallets. They are, ultimately, backed somewhere by dollars, rupees et al바카라�the trail always leads back to the old physical money. Cryptocurrencies, on the other hand, do not. They are ­virtual currencies stored in the form of a value online and secured by encryption. The only link individual cryptocurrency units have with physical money is in their valuation, which reflects in the fluctuating stock prices. So don바카라�t be fooled by cryptos being called 바카라�digital coins바카라�바카라�that바카라�s just a casual nickname.

Another term you바카라�d have come across on the subject of cryptocurrency is 바카라�mining바카라�. Taken along with the frequently expressed concern that crypto mining is energy-intensive바카라�and that it바카라�s the harbinger of a future environmental ­catastrophe바카라�the metaphor conjures up images of a physical process, as if an ore is actually extracted from the ground. But we are in a decidedly digital space here, and that바카라�s merely a metaphor. So what exactly is crypto mining?

In short, it바카라�s a way of creating units of cryptocurrency using technology. Well, to be clear, you do not need to be a miner to come to own crypto tokens. Most individuals ­purchase and trade units of cryptocurrency the old-fashioned way. You can buy tokens of cryptocurrency with fiat currency, trade them on an exchange like Bitstamp with ­another cryptocurrency (for example, Ethereum or NEO to buy Bitcoin), or earn them by shopping, writing blog posts on platforms that pay users in crypto, or even setting up ­interest-earning crypto accounts. But it is also possible to 바카라�mine바카라� tokens using your computer바카라�this way, you actually bring new 바카라�coins바카라� into existence, so to speak. Indeed, the promise of getting paid in cryptocurrency is a major lure for those who play this niche nerd game. For, mining involves solving cryptographic equations with the use of high-power computers. The solving process comprises verifying data blocks and adding transaction records to a blockchain ledger secured by applying complex encryption techniques.

As we said, since cryptocurrencies use a distributed method of storage, they rely on cryptographic algorithms for the transactions and their verification. To get new coins on the ledger involves solving complicated mathematical puzzles that assist in verifying virtual currency transactions and then updating them on the decentralised blockchain ledger. As the outcome of this work, the miners receive pay with cryptocurrency. This method is called mining as it ­allows new coins into circulation. Even a conservative ­nation like Iran is betting heavily on crypto mining. That, along with El Salvador바카라�s lead and the fact that Honduras has launched the first cryptocurrency ATM, it바카라�s clear that a global trend is here. Is it just speculative play? Or will it ­sustain? Fred Ehrsam of cryptocurrency investment firm Paradigm says 바카라�everything will be tokenised and connected by a blockchain one day바카라�. Consider the technological leap and ask: can we de-invent the wheel?

***

Crypto Glossary

ALTCOINS: Altcoins are alternative cryptocurrencies that were launched after Bitcoin바카라�s success. They generally project themselves as better replacements for Bitcoin.

MINING: Each time a cryptocurrency transaction is made, a miner is responsible for ensuring the authenticity of information and updating the blockchain with the transaction.

SHILLING: Shilling is creating hype and buzz about a coin to promote and increase its price. In crypto world, someone who promotes a coin so that they can personally benefit are called shills!

WHALE: Whales are individuals or companies who hold large amounts of bitcoins. Their buy/sell activity has the power to move the market. When markets are highly volatile, big players, referred to as whales, are usually considered as the source behind the market volatility.

AIRDROP: An event where coins or tokens are sent to selected users' digital wallets. It is a famous marketing stunt to create a buzz about a new token.

(This appeared in the print edition as "Cryptic Nuts and Bolts")

(With inputs from Harsh Kumar)