Blockchain Details and Information. This is a way for everyone in the world to conduct secure financial transactions without the need for a middle man! What does this mean for you? This means no more third party fees or charges, not to mention the added security! After all, less eyes means less risk! This is all possible with the Blockchain!
What Is a Blockchain?
Blockchain is what powers all Cryptocurrencies like Bitcoin and Ethereum. It is a system of recording information in a way that makes it practically impossible, to change, hack, or cheat! Therefore, a blockchain is essentially a digital ledger of transactions programmed to record virtually everything of value!
In other words, it’s a ledger similar to the balance sheet of a bank. It tracks all the money flowing into, out of, and through the network. But unlike a bank’s ledger, a crypto blockchain isn’t maintained by any individual or organization. Instead, it is secured by a large peer-to-peer network of computers that run open-source software. This software allows the network to constantly check and secure the accuracy of the blockchain! Therefore, your transactions are perfectly safe.
How Does The Blockchain Work?
Now that you know what the blockchain is, let’s take a look at how it works! The easiest way to explain it for me is to think about a boat’s anchor. Now imagine each link of the chain holding the anchor is a chunk of transaction data. The top of the chain contains what happened today, and as you move down the chain, the information is older and older. Therefore, if you follow the chain all the way to the anchor, you will see every single transaction since the beginning of that cryptocurrency. In addition, if anyone tries to manipulate a transaction, it will cause the link to break and the entire network will see what happened. This makes for excellent security! And the best part? It is open to anyone and everyone!
Where Does New Cryptocurrency Come From?
Now that you know what a blockchain is and how it works, let’s take a look at where it comes from! In exchange for contributing their computing power for maintaining the blockchain, participants are rewarded with a small amount of digital currency. They then use that digital currency to make purchases. A simple,mutual understanding of what the crypto is worth is all that is needed! As a result, a new cryptocurrency is born!
What Are Some Advantages of Blockchains?
Almost all of your financial life takes place online. Every single one of those transactions requires a bank, credit card company, or payment processor in the middle of it! Blockchains allow for those transactions to happen without them! And without the added costs that come with them!
- They are global: cryptocurrencies can be sent anywhere quickly and cheaply!
- They increase privacy: cryptocurrency payments do not require you to include your personal information! This protects you from having your personal information stolen!
- They’re open: anyone can examine and inspect them! Therefore, manipulation of the funds or changing the rules just does not happen!
How Do You Send,Receive, and Manage Money Over a Blockchain?
Since the blockchain is open to everyone, you should definately know how to send and receive money with it. And of course, how to manage it.
First, each user is assigned a unique “address”. Then, each “address” is made into a private key and a public key. So what is the difference between private and public? Anyone can send you money via your public key (it is similar to an email address). But, when you want to spend your money, use your private key. Therefore, your private key is how you digitally ‘sign’ transactions.
Now that you know how to send and receive money, how do you manage it? The easiest way to manage your cryptocurrency is with software called a wallet.
There are many different types of crypto wallets. The most popular ones are hosted wallets, non-custodial wallets, and hardware wallets. Which one is right for you depends on what you want to do with your crypto and what kind of safety net you want to have!
Hosted Wallets
Hosted Wallets are the most popular and easiest to set up. When you buy crypto using an app, like Coinbase, it is automatically put into a hosted wallet. Coinbase is the custodian, so there is no need to worry about forgetting your password. It is easily accessible through the app.
However, a drawback to a hosted wallet is that the app can be compromised. Therefore you are at risk and can’t access everything crypto has to offer. However, this may change as hosted wallets start to support more features.
Non-Custodial Wallets
Another type of wallet is a non-custodial wallet, like Coinbase Wallet. It puts you in control of your crypto!
Although they provide the software necessary to store your crypto, they can’t assist you should you forget or lose your private key. Additionally, should your key fall into the wrong hands, they could access and take all of your crypto! The responsibility of remembering and safeguarding your key is soley on you.
Why have a non-custodial wallet? It puts you in control of your crypto and gives you access to more advanced crypto activities. Some examples include yield farming, staking, lending, and borrowing. But if all you want to do is buy, sell, send, and receive crypto, a hosted wallet will work just fine!
With Coinbase , you have a choice of a hosted wallet or a non-custodial wallet. The Coinbase app, where you buy and sell crypto, is a hosted wallet. You can also download the standalone Coinbase Wallet app to take advantage of the benefits of a non-custodial wallet. It is perfectly ok to have both. Setting up either wallet is absolutely FREE!
Hardware Wallets
Yet another type of wallet is a hardware wallet. It is a physical device that stores the private keys to your crypto offline. Therefore, your crypto is safe even if your computer is hacked! This makes a hardware wallet the most secure option! However, most people don’t use them because of the cost associated them.
As you can see, there are many ways to store crypto! From a simple hosted wallet, to a non-custodial wallet, or even take extra precautions with a hardware wallet! You can even have multiple types of wallets! With crypto the choice is up to you!
There are thousands of Blockchains! From the ones that power Bitcoin and countless other digital currencies to ones that have absolutely nothing to do with digital money! Keep in mind, you do not need to know about the blockchain for it to be useful! Just like computers, the blockchain has been enhancing everything around us with or without our knowledge of them and how they function!
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