Beginner’s Guide to Bitcoin
What is Bitcoin?
Bitcoin is a peer-to-peer online currency.
This means that all transactions occur directly between participants of the network without an intermediary like a bank.
This is the first invention of a digital money supply outside the control of any government or bank.
Bitcoin is exchanged on the internet through a digital ledger (database) called a blockchain.
Bitcoin’s blockchain is verified across a network of thousands of computers, as opposed to a bank’s ledger which is centralised (control is under a single entity).
Who created Bitcoin?
In January 2009, a person or group named Satoshi Nakamoto created Bitcoin.
Satoshi’s identity has never been revealed.
How are new Bitcoins mined?
Bitcoin’s source code governs the issuance of new Bitcoins (instead of a central bank or government).
People use energy-intensive computers to mine new Bitcoins.
The protocol allows new blocks to be mined every 10 minutes with Bitcoins rewarded to the miners.
There are currently about 19 million Bitcoins in existence, and the max quantity is capped to 21 million, so there will be only 2 million left to mine.
The mining reward is halved every 4 years (known as the halving).
The Bitcoin mined every 10 minutes was reduced from 25 in 2012 to 12.5 in 2016 to 6.25 in May 2020.
Why does Bitcoin have value?
Bitcoin has characteristics which align with those that give traditional government money value: Scarcity, durability, portability, divisibility, fungibility and acceptability.
Bitcoin has an advantage against government money with some of these characteristics, in particular scarcity, portability, and divisibility.
Scarcity
Companies can issue as many stock shares as they want. Governments can issue as much currency and bonds as they want. Therefore, these assets are not scarce.
Bitcoin is scarce and it is the world’s hardest asset - a hard asset is difficult to produce relative to its existing supply.
If Bitcoin rises in price, that can’t incentivise new production like it can with gold, silver and other commodities, which are also hard assets.
There are three things certain in life: death, taxes and that there will only ever be 21 million Bitcoin!
Portability
All you need is access to the internet to be able to trade/transfer Bitcoin.
Divisibility
Bitcoin can be subdivided up to the eighth decimal place, whereas U.S dollars are divisible to pennies.
The smallest unit of currency is called a Satoshi. (1 Bitcoin = 100,000,000 Satoshis).
Beginner’s Guide to Ethereum
What is Ethereum?
Ethereum is a software platform that aims to act as a decentralised Internet as well as a decentralised app store (like a smart phone where apps can be built on).
What does decentralised mean? - This means it can’t be controlled by a single governing entity. Every single interaction happens between and is supported only by the users taking part in it, with no controlling authority being involved.
Ethereum’s platform enables users to create decentralised apps – the apps can either be entirely new ideas or decentralized reworks of already existing concepts.
Ethereum allows you to trade nonfungible tokens (NFTs), trade cryptocurrencies, play games, use social media and much more.
Many consider Ethereum to be the next step of the internet.
If Apple’s App Store represents Web 2.0, then Ethereum is like Web 3.0.
This “next-generation web” supports decentralised applications (DApps), decentralised finance (DeFi) and decentralised exchanges (DEXs).
Who created Ethereum?
Vitalik Buterin
Buterin came up with the idea of Ethereum in 2013 at 19 years old. He was then 21 when he launched Ethereum in 2015.
There were seven other founders that helped Vitalik build Ethereum.
How are new Ethereum tokens created?
Until recently, new Ethereum tokens are created in the same way as Bitcoin – this is referred to as mining through ‘Proof-of-Work’.
Ethereum miners were computers that run the software and process transactions to create blocks – they are then rewarded for this with new Ethereum.
Ethereum transitioned from ‘Proof-of-Work’ to ‘Proof-of-Stake’
‘Proof-of-Work’ is very energy intensive and leads to high fees on the Ethereum network.
Therefore, Ethereum has moved to ‘Proof-of-stake’ with Ethereum 2.0 to help reduce fees and attain a more environmentally friendly approach.
Why does Ethereum have value?
Ethereum’s platform allows you to run ‘smart contracts’ – making it a 2nd generation crypto (Bitcoin is 1st generation)
This means instead of just tracking transactions it programmes them; designed to automatically perform transactions and other specific actions within the network with parties that you don’t necessarily trust.
This lets you exchange money, property, stock without having to go through a lawyer/service provider, hence cutting out the middleman.
Smart contracts allow users to participate in DeFi (decentralised finance).
DeFi allows users to trade assets and borrow and lend directly to one another without involving banks, and also acts as a means to creatively unlock value – for payments, loans, insurance and more.
You can use Ethereum to earn yield in a similar way to your savings account but without an intermediary. This means you can earn lucrative rewards which can help to offset inflation.
With today’s inflation rates you are losing purchasing power every year with bank savings accounts.
Ethereum’s DeFi value reached over $100 billion in 6 years.
Together, with the accessibility of DeFi and the draw of better interest rates, more and more retail consumers will likely turn to the DeFi space. Even now, there are more than $65 billion worth of assets locked up in DeFi.
To summarise why Ethereum has value, it is due to its utility as a platform.
Differing to Bitcoin’s value stemming from acting as ‘digital gold’, as it is a store of value, Ethereum’s value stems from acting as ‘digital oil’.
This is because the world runs on oil as it is needed to operate so many physical applications, whilst Ethereum is needed to operate applications in the digital world.
Beginners guide to Polkadot
What is Polkadot?
Polkadot connects an entire network of blockchains together, allowing them to operate seamlessly at scale.
Polkadot is essentially a Layer 0 blockchain.
Ethereum is Layer 1, as you can build layer 2 applications on top of it.
Polkadot acts as a foundation layer for parachains (which are the Layer 1 blockchains in Polkadot).
All Polkadot does is give its blockchains security and allows them to connect with one another.
Polkadot is built on a framework called Substrate – an easy and advanced framework for developers to build on.
Who created Polkadot?
Gavin wood is the founder and inventor of Polkadot. He was:
Co-founder and CTO of Ethereum.
Invented Solidity, Ethereum’s programming language
Wrote the Yellowpaper that specified the Ethereum Virtual Machine – the platform on Ethereum for dapps to be built.
Has a PhD in human computer interfacing.
Founded Web 3.0, a company that supports pen-source projects through funding, advocacy, research and collaborations.
Founded Parity, a software development company.
Other co-founders:
Robert Habermeier: longtime member of the Rust community – Rust is a very fast programming language which Solana uses.
Peter Czaban: Technology director of Web 3 foundation and has a Master’s of Engineering degree from Oxford.
Is Polkadot a competitor to Ethereum?
Most smart contract platforms attempt to destroy Ethereum, but Gavin Wood (founder) insists that Polkadot is instead trying to operate with and enhance the Ethereum network.
This is by allowing Ethereum based projects to migrate to Polkadot so that when Ethereum becomes congested, transactions can be offloaded.
Rather than avoiding the Ethereum network effect, Polkadot is tapping into what already exists (Ethereum’s developer and investor base) whilst improving upon the underlying technology.
What makes Polkadot different to other blockchain ecosystems?
Scalability
One of the main issues with many blockchains is when more transactions are processed, the network becomes slow.
With Ethereum, each node (computer) is responsible for dealing with every transaction.
Polkadot solves this by something called sharding – splits up the blockchain into separate databases called shards (which are the parachains) so it can spread out the workload responsibilities across the nodes on the network.
Polkadot can currently scale to 1000 transactions/second, and announced recently that their updated roadmap will enable the blockchain to scale to 100,000-1,000,000 transactions/second (compared to Ethereum’s current 32 transactions/second).
Interoperability
‘Interoperability’ is a term used in crypto to describe the ability of a blockchain to transfer information across different chains.
One of the benefits of being built on the substrate blockchain framework is that Polkadot based blockchains can communicate and transfer data with other Substrate-based chains.
Bridges also allow the connection of external blockchains.
Beginner’s guide to Avalanche
What is Avalanche?
Avalanche is another Ethereum competitor, as its platform allows decentralised applications and blockchains to be built.
Avalanche aims to scale to Visa level throughput with sub second transaction times!
Who created Avalanche?
Avalanche was founded by Emin Gun Sirer in 2018, who has a PhD in computer science and was a professor at Cormell University.
In 2018, Emin founded the Avalanche team known as Ava labs.
Emin has a Turkish heritage and Avalanche is one of the only cryptos with a presence in Turkey, who have incredible crypto adoption with the help of the inflating Turkish Lira.
The president John Wu was CEO of Digital Assets Group which is leading cryptocurrency tech house, bringing trustworthy products and management advisory services to the people in the emerging digital asset industry.
The CFO Chris Lavry worked at Blockchain.com, a leading crypto asset platform with 42M+ users and $70B+ in transaction volume, as Executive Vice President of Financial Strategy.
The COO Kevin Sekniqi worked as a reaearcher and Software Engineer at Microsoft.
What makes Avalanche unique to other blockchain ecosystems?
Speed
Avalanche is the fastest smart contracts platform.
It can reach finality (transactions being completed) in under 1 second!
Compatibility with Ethereum
Avalanche is compatible with Solidity (which is Ethereum’s programming language).
It is therefore very easy for developers who can use Ethereum to use the Avalanche blockchain.
Ethereum bridge
A bridge has been built allowing Ethereum projects to easily migrate over to Avalanche.
Scalability
Avalanche can process up to 4500 transactions per second
Validator nodes gossip with each other about transactions occurring within the network.
With the speed that gossiped information can spread, validators can come to agreement on the network within 1 second and process 4500 transactions per second.
What are the main goals of Avalanche?
DeFi
Avalanche is fully compatible with Ethereum assets, whilst bringing faster speeds, higher throughput, and lower fees – why wouldn’t an Ethereum project migrate over to Avalanche?
Insitutions and governments
Avalanche CEO says the main goal is to provide a platform for the tokenisation of assets on the blockchain – they have formed a partnership with Roche Cyrulnik Freedman LLP, and Republic Advisory Services to bring litigation financing (a multibillion dollar asset class) to retail on the Avalanche blockchain.
Avalanche CEO claims to be working with a dozen central banks in order to facilitate the implementation of Central Bank Digital Currencies.
NFTs
Avalanche allows smart contracts to be run from any blockchain, which is a great deal for the NFT market
NFTs on Ethereum blockchain and other blockchains can coexist on a blockchain without the challenge of huge fees, throughput, and consequently speed of transactions.
It will be possible to have a game that will accept NFTs from Ethereum, Solana, etc. on Avalanche.
Beginner’s Guide to Cardano
What is Cardano?
Cardano is a third-generation cryptocurrency – Bitcoin is 1st generation, Ethereum is 2nd generation.
Cardano aims to take the lessons learned from Bitcoin and Ethereum concepts and improves upon their shortcomings.
Cardano was first to have a PoS (Proof-of-Stake) protocol – it’s called Ouroboros.
Bitcoin uses PoW (Proof-of-Work) and Ethereum has just transitioned to PoS (Proof-of-Stake).
PoS is much more energy efficient and cost effective.
Who created Cardano?
CEO - Charles Hoskinson (one of the smartest men in crypto, co-founder of Ethereum and mathematician)
Jeremy Wood (former Ethereum co-worker)
The project is now run by 3 organisations:
Cardano foundation - not for profit regulated entity who promote and protect the protocol
IOG (Input Output Global) – research and development Company. Received funding from and works with European Union (part of Horizon 2020 research and innovation program)
Emurgo – Japanese tech company which provides funding for IOHK.
What makes Cardano different to other blockchains?
Research-first driven approach.
The development team consists of a large global collective of expert engineers and researchers.
The research team of IOG has published 130+ research papers across a host of topics, underpinning Cardano’s design principles.
Providing financial services and digital identity to the less-developed nations
Cardano aims to help the estimated 2 billion to 3 billion people in the world that don’t currently have access to financial services and digital identity (initially focusing on Africa).
University Partnerships:
Stanford University
In September 2022, IOG announced that they are funding a new $4.5m ‘Blockchain Research Hub’ at Stanford University.
University of Edinburgh
After a long-lasting partnership with the University of Edinburgh Input Output Global (IOG) has funded a $4.5 million research hub at the University of Edinburgh.
These investments will help foster Haskell development – Haskell is Cardano’s programming language.
Government Partnerships:
Ethiopia
IOG partnered with Ethiopia’s Ministry of Education to provide 5 million students and 750,000 teachers with decentralized identity and blockchain-based educational records
This allowed them to verify grades digitally and more-efficiently track educational performance.
Zanzibar
IOG announced a long-term partnership with World Mobile to work with the government of Zanzibar
IOG aims to maximize the potential of the region’s Blue Economy, that is, “the sustainable use of ocean resources for economic growth, livelihood and careers”.
Beginner's Guide to Cosmos
What is Cosmos?
Cosmos is a rapidly growing ecosystem of independent blockchains that connect to each other.
Cosmos aims to be the internet of blockchains.
Most blockchains operate in isolation, which means that their economies are confined to their own chains.
This is why the value in DeFi is mainly limited to just Ethereum.
Moving between blockchains proves to be a very frustrating process and currently there many immature solutions.
Therefore, enabling value to transfer across different blockchains is one of the largest opportunities in the crypto industry.
Cosmos attempts to do exactly that – connecting blockchains to achieve the full potential of different cryptos.
Who created Cosmos?
Cosmos is supported by the Interchain Foundation.
The Interchain Foundation (ICF) is a Swiss non-profit foundation that was formed to support the development of Cosmos and the ecosystem that will contribute to the Cosmos Network.
Tendermint Inc. developed the Cosmos Network.
Tendermint Inc. is a software development company contracted by the ICF.
Initial software development was started in 2014 by Tendermint.
Over the years, development has grown to include many contributing teams.
What protocol does Cosmos use?
Cosmos uses the Proof-of-Stake protocol
This allows transactions of 7 seconds, with fees of around a cent.
How many blockchain applications use Cosmos?
There are currently more than 250 blockchain apps in the Cosmos network. Some of the biggest cryptocurrencies were built using Cosmos, including:
Terra (LUNA,) Binance Chain (BNB), Crypto.com (CRO), OKEx Chain (OKEx)and Thorchain (RUNE).
Cosmos has around $65 billion of digital assets under management.
What makes Cosmos unique?
Interoperability
This crypto buzz word refers to the ability of a blockchain to connect to other blockchains.
Instead of using bridges, which is the solution for some, Cosmos uses hubs. This allows one to transfer tokens between blockchains frictionlessly – normally you can’t move tokens between more than 2 blockchains at a time.
The IBC (inter blockchain communication) is the Cosmos protocol for blockchain interoperability, which went live in 2021.
With IBC enabled, people can travel back and forth between blockchains on Cosmos seamlessly to utilise the best aspects of each one!
Cosmos are working on ‘cross-chain composability’.
Beyond interoperability within the Cosmos ecosystem, work is being done to connect other blockchain ecosystems like Ethererum and Bitcoin.
This will allow you to, as an example, borrow from Aave (an Ethereum-based DeFi application) and then lend it on Polkadot.
Autonomy
When building on Cosmos, projects can launch their own sovereign blockchains
This means that they are not subject to the rules of any layer 1 protocol (which is the case with applications built on top of a blockchain like Ethereum, which is like being a tenant in someone else’s building).
This means that blockchains can transfer value without experiencing the issues with some of the largest blockchains, such as Ethereum and its high fees.
Projects built on Cosmos can grow at their own pace and design their own economic model with low transaction fees.
Beginner's Guide to Chainlink
What is Chainlink?
A global network of computers aiming to bring real world data to the blockchain, which is an essential use case for the cryptocurrency industry to succeed.
There are 1,658 integrations in the Chainlink ecosystem (across 1,427 projects).
This makes Chainlink one of, if not THE, most widely integrated service in all of Web3. You could say that betting against Chainlink is like betting against all of DeFi & Web3.
Chainlink provides off-chain data to cryptocurrency blockchains, particularly the price of various coins and tokens. Without this data, most decentralised applications would not work.
What problem is Chainlink trying to solve?
Smart contracts (computer programmes on the blockchain) are unable to access external data.
If we used centralised data feeds to access this real-world data, this would take away the decentralised aspect of the smart contract, as it means there is a single, centralised point of failure.
Why execute a multi-billion dollar application on a decentralised blockchain if it is based on a data input from a single oracle node?
What is Chainlink’s solution?
Chainlink provides a decentralised data set provided by dozens of trusted entities
These entities are given economic incentives to fetch the data being requested by a smart contract.
What are some of Chainlink’s key use cases?
Market and Data feeds
Chainlink delivers accurate, aggregated data to blockchains to enable DeFi, sports, weather and other applications.
E.g. Crop insurance - Chainlink has partnered with U.S. meteorology forecasting provider AccuWeather to further bolster its suite of real-world data feeds.
E.g. Real estate data providers - ProspectNow supplies detailed information for every property on record in the United States, including over 100 million residential properties and 42 million commercial properties across all 50 states. Developers can call the ProspectNow Chainlink node to obtain data for the average price per square foot of residential real estate for the last quarter, given a specific ZIP Code.
Any API
Chainlink connects smart contracts to any external API, ranging from traditional payments to IoT devices (internet of things device e.g. smart phone) and Cloud networks.
E.g. Chainlink are an official cloud partner of Google - place all of its big queries on a blockchain by using a Chainlink oracle.
Proof of Reserve
Chainlink audits the reserves backing tokenised assets to verify their full collateralisation.
E.g. In October 2020, Bitgo, the company which issues WBTC, the largest wrapped Bitcoin token on Ethereum, partnered with Chainlink to audit their reserves.
VRF (Verifiable Random Function) in gaming projects
Chainlink can be used to generate a verifiable source of randomness for gaming and NFT applications that any user can prove is fair and temper proof.
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