A Beginner's Guide to Understanding the Basics of Bitcoin and Altcoins
Updated: Dec 10, 2022
Cryptocurrencies are digital currencies that are decentralized and secured by cryptography. They use blockchain technology, which keeps track of transactions using a public ledger to ensure that everything is legitimate. The value of cryptocurrencies has been rising steadily in recent years, as more people adopt this new medium of exchange.
Cryptocurrencies are not controlled by any central authority, such as banks. Instead, they use blockchain technology to verify transactions and record them in a public ledger.
What is Bitcoin (BTC)?
Bitcoin (BTC) is a cryptocurrency or digital currency. It uses cryptography to secure transactions and control the creation of new units. Bitcoin was created by an unknown person or group of people under the alias Satoshi Nakamoto in 2009.
In October 2008, a link to a paper authored by Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System was posted to a cryptography mailing list.
What is Ethereum (ETH)?
Ethereum is an open-source, public, blockchain-based distributed computing platform that features smart contract functionality. It provides a decentralized virtual machine that can execute Turing-complete scripts using a cryptocurrency called Ether.
What are altcoins?
Altcoins are alternative cryptocurrencies. They are cryptocurrencies other than Bitcoin and sometimes Ethereum. There are currently over 21000 known altcoins. Popular Altcoins include Cardano, Polygon, XRP, Solana, etc
What are Consensus protocols?
Consensus protocols are the rules blockchain networks operate on which determine whether a transaction is true or false. The most widely used consensus protocols are the Proof of Work and the Proof of Stake protocols which are being used in Bitcoin and Ethereum respectively. Blockchains utilize a distributed ledger, which contains all of the transactions ever executed using that chain This makes blockchains extremely secure and tamper-proof; they cannot be altered by anyone because every transaction must be verified using complex cryptography and consensus algorithms before it's recorded on the network to prevent fraud.
Mining and Staking
Mining is the process of solving complex mathematical problems to verify transactions on a blockchain. These transactions are then added to the blockchain. Cryptocurrency mining often requires huge amounts of computing power, which can be done by individuals or groups working together in a mining pool.
Staking is the process of holding funds in a cryptocurrency wallet to support the operations of a blockchain network. Essentially, it is a form of voting and helps to keep the network secure. The more coins you stake, the more influence you have over the network.
Wallets are software programs or physical products that store or encrypt private keys used for sending or receiving cryptocurrencies such as bitcoin and altcoins, as well as public keys allowing others to send and receive funds. Wallets can be stored offline in physical devices called hardware wallets (such as Ledger), or online via web services such as Trust Wallet or MetaMask.
Bitcoin and other cryptocurrencies are innovative new forms of digital money. They offer the possibility to exchange money without involving banks or other third parties. As with any investment, there are risks involved with using cryptocurrencies—but if you understand how they work, you can minimize those risks. To learn more about cryptocurrency, schedule a consultation with us today at CryptoConsultz.