Wouldn’t you just love to understand the mechanics behind blockchain, a cryptocurrency exchange, and Bitcoin?
It would be great if you can read all about it without the hype and technical jargon that often accompanies articles related to this topic.
Make no mistake, blockchains, Bitcoin, and crypto exchange platforms are all fascinating elements that are not always easy to understand. All too often, you can find yourself sucked into a rabbit hole where you will have more questions for every answer that comes your way.
No doubt, if you get some insight coming from the likes of scientists, historians, politicians, or other influential folks, you are likely to end up none the wiser, and find yourself wondering if you may actually need a degree to make head or tail off everything that these people tried to explain to you.
What are the basics surrounding terms such as ‘Bitcoin and Ether.”?
Well, both of these are digital items or assets, created by software, with no private issuer, company or other entity to back them. You will come across no terms of service or guarantees to back these either. Just like gold, these cryptocurrencies just exist. They are formed or created in line with set rules that are embedded in the code to govern them. These have a specific value assigned to them that enables the user to trade or exchange Bitcoin or Ether for other crypto coins, dollars, or FIAT currencies.
The value of such digital currencies is determined by exchange platforms where buyers and sellers would congregate to trade at a mutually agreed price.
Units of cryptocurrencies can aptly be described as digital assets. The ownership of these can quickly be passed onto another user or from account to account. These are also referred to as addresses.
Once these digital assets are transferred, they will then be recorded on various databases that are known as blockchains. Not to confuse anybody right now, but as a point of interest, digital assets are also tokens. This is why cryptocurrencies, as well as tokens, are secured digitally and known as crypto assets.
Having said that, just to be clear, tokens have different characteristics as opposed to cryptocurrencies. Tokens can either be fungible (where a given token can be replaced by another) or non-fungible (where each one would represent something unique).
Unlike other digital currencies, tokens are typically issued by users who firmly stand behind them, and these would be represented through legal agreements such as financial assets, physical assets like gold, or provide future access to various services and products. You may want to think of it as a cloakroom ticket where you can use the item to claim your coat. Therefore, tokens are often referred to as DDRs (Digital Depositary Receipts).
This brings us to another question – what do crypto coins and tokens have in common?
Any transactions related to them, which include the creation, change of ownership, destruction, and other future changes, are all recorded on blockchains. The latter records the golden source that would represent all the units of a given digital asset.
The blockchain used for Bitcoin happens to be an ever growing list of every transaction that ever took place, right from when Bitcoin saw the day of light during January 2009, until such time that one of the most recent payments or transfers happened.
On the other hand, Ethereum’s blockchain would include a list of transactions to do with its cryptocurrency, Ether. Everything would fall under the Ethereum umbrella. As you would have noticed, different blockchains would represent different characteristics to such an extent that one can easily make an incorrect statement about a given blockchain.
For instance, did you know that Ethereum and Bitcoin blockchains are permissionless? This means that their individual transaction lists can be written to by anyone, with no intervention by any gatekeeper to reject or approve parties who are keen to create blocks or have a part in the bookkeeping process. Neither is self-identification required to validate transactions or create blocks.
As you may have noticed, there is quite a bit of information that must be covered to gain a more in-depth knowledge of either Bitcoin or Ether? In this regard, it is better to liaise with the experts in such matters, as a prominent cryptocurrency exchange.