What is blockchain and why is it important?
The blockchain, or chain of blocks in Spanish, is defined as a chain that is constantly being updated, and contains information on all previous transactions. All the components that make up the network constantly validate the rest of the blocks, so that it is almost impossible to falsify the data in those chains. This concept was devised by Satoshi Nakamoto, aliases of one or possibly several people under which a whitepaper was published in 2008 that supposed the origin of the blockchain and bitcoin.
To imagine it more simply, imagine an Excel spreadsheet with data as an analogy. This sheet is present in thousands of computers that are networked with each other. That network constantly updates the data present in the spreadsheet present on all devices. This information is not stored in a single site, but rather be distributed across all teams that make up the network is public and easily verifiable; in addition to being immune to hackers by not having a single point where it can fail or be controlled by any entity.
- Without intermediaries and in blocks
This makes money transactions with cryptocurrencies without intermediaries, which implies that the transactions carried out cannot be undone. In a bank, if we send money to another person, the entity acts as an intermediary and can determine if a payment has been illegal.
All these transactions are recorded in the blocks, which in turn makes it a distributed and secure database. When a payment is sent with cryptocurrencies, it is the decentralized network that has to validate that the blocks belonging to the transaction are valid, hence when we send money with some cryptocurrencies it takes about 5, 10 or 15 minutes to reach the recipient.
Each of these transactions is anonymous. Cryptocurrency money is stored in digital wallets, which are unique addresses. These wallets can be associated with exchange portals, or allow store your keys on devices disconnected from the internet (like USB keys) to make sure money is never stolen from each wallet. Purses can be hot or cold and are so named depending on whether they are used online or not online.
Cold wallets or cold purses They are physical wallets and are a good option to save in the long term because they have less risk of uploading a hack. They are offline, they do not depend on a website or an app and it is difficult for someone to steal our data but they are more uncomfortable if we want to carry out transactions. They are made of paper, of hardware. There’s also hot purses or hot wallets that they are connected to the Internet and designed for those who want to use them frequently: desktop wallets that are PC programs, mobile applications or web pages.
- Amount of cryptocurrencies per transaction
Thus, what is actually being done in this large chain of blocks is to determine how much cryptocurrency each of these wallets has. When a transaction is made, the only thing that is done is a small accounting entry and the amount that a certain address has in its possession within the blockchain is changed. A kind of notice that the issuer of the money makes to the network, and that it registers.
Also, each transaction on the blockchain is linked to the previous one. It is possible to trace the origin of cryptocurrencies by jumping from transaction to transaction. All of them also have a date and time at which they were made.
Blockchain uses
The blockchain not only has uses related to money, but it also has advantages to use them in industry or in governments. In recent years it has become popular due to its use in cryptocurrencies such as Bitcoin but also by NFTs or Non-Fungible Tokens or non-fungible assets, digital works of art popularized in 2021. Like that of Beeple, that on March 11, Christie’s auction house held an online auction for this digital collage that was sold to a collector in Singapore for almost $ 70 million.
For example, it can be used to have secure and inviolable identification systems, or to manage databases internationally. Governments and public institutions can also use it to display data in a more transparent way, such as a property registry that is immune to fraud.
In fact, in history there have been projects such as Polys Voting, which allow have a decentralized system of votes that is totally public, transparent and immediate to avoid having elections where the votes are manipulated. It can also be used to create a new money transmission system in world banking, as it would allow public records and immediate transfer of traditional money.
Blockchain network and pools
Cryptocurrency mining is nothing more than the name given to putting a computer or an ASIC to perform mathematical calculations taking advantage of all its power. Of course, not just any computer or any device is worth mining cryptocurrencies, but we need to use good hardware when it comes to doing so so that it is able to manage all the processes. These nodes are competing with each other to see who completes a bitcoin first.
This is the reason why to mine currencies like Bitcoin it is necessary to participate in “pools”In order to have a better chance of mining a block earlier. A single PC has it almost impossible compared to the large farms that are scattered around the world, since mining is increasingly difficult. What is a pool? A mining pool is a group of participants who “work” together to find blocks. Every time we find one, the reward is divided among all of them in addition to a percentage that the pool takes, a commission that you give for letting yourself be part of it.
When looking for pools for mining we have to look at the hashrate or hash rate, unit of measurement of cryptocurrency processing power and that indicates the number of operations that the network of miners in that pool does. We also have to look at the commission, although it is always between 1% and 5% and the size of the pool, since a larger size will allow us more possibilities of finding a reward but also more users among which it is distributed.
Create new: ICO Financing
Although they were heard a lot years ago, during 2017 and 2018, you may not know what they are or the relationship they have with the blockchain or chains of blocks. ICOs, or Initial Coin Offerings (initial coin offerings), are a means of financing to create new ones. However, instead of offering shares, what is done is offering money from those new cryptocurrencies that are being created, also called tokens. For acquire those tokens, payments are normally made using Ethereum although this can vary.
The initial value of these cryptocurrencies is associated with the quality of the project, the support it has, or the future success it may have; Although this is not synonymous with the success of the currency later, it happened in the case of Ripple. However, many of them tend increase their price when they go on the market, so it is an interesting way to earn money.
The problem with these ICOs is that in many cases they can end up in a scam, with coins that are not launched, or that have little use. The ICO bubble occurred in late 2017 and late 2018, with many cryptocurrencies here to stay, while others have disappeared for having other alternatives better and have not prospered. Beyond Bitcoin, there are hundreds of cryptocurrencies that have tried to gain a foothold and not all have succeeded.