Many do not understand
what is these hype all about, of Bitcoin, Ledger and stuff like that and even
worse, in the 21st century, even financial institutions are adopting
the Blockchain technologies that come with it. So here is the brief run down
for everyone to be up to speed.
Cryptography is the
method of ENCRYPTING or shuffling of data into a scrambled piece of information
that only the sender and receiver can understand. Something like the Nazi
Germany’s Enigma machines during WW2. It contains a cipher text and a Private
Key which is needed to unlock or decode the message. Crypto Coins are tokens or
coins in a casino minted off a factory called a Mine which the limit is defined
in the initial definitions or Contract, something like the Constitution. There
is a limit to how many can be mined and / or circulated.
Coins or Tokens are
what these assets are called and in the defined currency. Usually we will hear
BITCOIN , ETHEREUM or tokens and the currency code will be like BTC , ETH or
others. They are minted by means of a REWARD SYSTEM or MINING where each block
they mined, they get a certain number of coins + the mining fees.
What is a Miner and
Mining Fees. To pay for a transaction or send a message, you need to pay some
sort of fee, like electricity tariffs to the producer. The Miners will mine the
block, encode and sign the ledger collectively and share the rewards and
finders fee. Think of it as the Postman who collects your checks for the bank
to process and gets a fee on the postage stuck to the envelopes. Whoever pays
higher fees gets their transactions through first and the cheapest will take
the last priority, mainly there is a limit to the size of the queue.
A Block is a group of
transactions , bound together as a collective and at the end of the specified
block, defined as either by size of the block or time is signed at the end of
the block and encoded to the chain. Think of your class homework is checked by
the teacher , signed off and results *(Hash of the Transactions) is recorded
into the Report Book and the report book is signed by the headmaster. So before
next year starts, your headmaster checks the report book signed by the teacher,
add that to the start of the next year report and it goes on and on. That is
called a Chain.
Because it’s been
signed off by the Headmaster, the results cannot be changed on your homework or
test results because everyone can have a copy of the report books. That is
called the Ledger. The ledger sits on the block chain.
There are some coins
that piggy back on some other infrastructure. It may be sitting on the XCP
CounterParty network which rides on Bitcoin BTC network or Ethereum based ERC-20
for Tokens or ERC-721 for non-fungible tokens *(more like a fantasy coin or
other uses). The coin or token require a smart contract to create and issue the
coins and some due diligence is needed. A transaction fee of satoshis *(about
USD7 worth of BTC at current time) or Ether Gas *(called wei ~ approx. 25c in
fees) are needed to encode the message into the chain.
DAX or commonly known
as Digital Asset eXchange is an exchanger of assets. Think of it as a stock
market where you trade your money for future contracts like Oil etc or Forex
like USD-GBP-JPY etc. A DAX sometimes sell you assets in your local currency
and at times allow you to trade in different pairs such as USDT-BTC-ETH or
other major pairs.
Note that USDT is a
TEETHER where the asset is pegged against USD safely kept in a custodian.
Do check and do a proper full due diligence. Think of them as Promissory Notes by the
Central Banks. There are stable coins for currencies like the Singapore Dollar xSGD
which are acceptable by exchangers such as Cryto.com, CoinHako, Luno and
others.