Basics of Cryptocurrency & Blockchain

Read Time: 3 mins

We all have heard of Bitcoin and many other cryptocurrencies over the past few years. So let's have a look at what cryptocurrency is, what blockchain is, how does blockchain links to cryptocurrency! Let's dive straight into cryptocurrency and see what it is!

By definition "A cryptocurrency is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets."

The easy one: "A cryptocurrency is a digital currency that is created and managed through the use of advanced encryption techniques."

A few keywords that you need to know when talking about cryptocurrency are as follows:

• Wallet
• A place to store your cryptocurrency credentials: namely your private key 
• Private key
• A 256-bit number expressed as a hexadecimal 
• Eg: 9873D79C6D87DC0FB6A5778633389F4453213303DA61F20BD67FC233AA3326

NOTE: 

• When people say that they have lost their cryptocurrency(say Bitcoin), they mean that they lost the private key. 
• Private keys are generated using cryptography 

We are well aware of Bitcoin but here are a few others which might be of interest to you alongside their present rates(Prices as on 7/7/2020):

• 1 Bitcoin:    $9297.85
• 1 Ether:       $239.36
• 1 Litecoin:  $43.84

FunFact: Higher Price of Cryptocurrency doesn't directly link to the profitability of that particular cryptocurrency over the other. So a Bitcoin is no superior to Ether only because it is 40 times the price of Ether. A perfect analogy for this would be the price of Microsoft & Netflix
Microsoft net worth is around $1.2 trillion with share price trading around $220 per share
Netflix net worth is around $194 billion with its share trading at $490 per share

It's not complicated to understand this, just look at this formula:

Total worth = Share price * Number of shares

The Number of shares is what makes the difference, alongside the share price. Imagine selling 1 candy at $10 & 5 candies at $4 each, so linking the total worth with only the candy price is not smart and same is for the cryptocurrencies.

Now, as we know the basics of cryptocurrency let's see how dive into the technology which makes cryptocurrency a reality - Blockchain.

What is Blockchain?

We again look at 2 definitions for Blockchain, one from Wikipedia and the easy one.

Wikipedia defines Blockchain as " It is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for inter-node communication and validating new blocks."

The easy one: It's a linked list. For all the non-tech people this is how a linked list looks.

The lexicon update for Blockchain is as follows:

• Linked list
• A linear collection of data elements such that each element contains a pointer that points to the next
• Pointer
• A language object that stores the memory address of another value located in computer memory
• Hash Function
• Takes an input of (virtually) any size and returns an output of a fixed size 
• Encrypted via SHA256 – output is 256-bit / 32 byte
• Hash Pointer
• A hash pointer is the hash function applied to the previous entry when it was created

For now, that's all for the Cryptocurrency and Blockchain part. In the next blog, I'll add more on the Blockchain side - how it works, what is bitcoin mining, what are the kind of attacks such as The Double Spent Attack, what is the proof of work and much more.