Debunking blockchain myths part 2 by MineBest

The past few years have seen the rapid advancement and further implementation of blockchain technology. But the confusion and misunderstandings surrounding this concept still need to be cleared before the public fully embraces it. Following the first article of the series, we continue to debunk myths and clarify misconceptions surrounding blockchain.

Myth: Blockchain technology is not ready for everyday use

Due to its close association with digital currencies and the recent hype surrounding the highly volatile cryptocurrency market, there is a belief that blockchain is just a new fad among speculators and has no use in the real world.

Fact:

Blockchain technology is being implemented and used daily worldwide. Multiple businesses and industries have adopted it to streamline their operations. Each day, more people interact with platforms and structures that employ blockchain technology.

Blockchain provides solutions for many industries, in applications previously thought to be impossible. A study from the Stanford University shows that this technology has been growing exponentially and has been transforming the infrastructure of various organizations since 2013.

Funding for blockchain startup

Data source: https://www.statista.com/statistics/621207/worldwide-blockchain-startup-financing-history/

The rise in popularity of cryptocurrency services shows the potential for everyday use of blockchain technology. Digital currencies are the original use case for blockchain and although they are not the same, a certain similarity can be observed between them. The world’s most used cryptos, Bitcoin and Ethereum, touched all-time highs in transaction volume in 2020.

Services such as crypto-only online marketplaces and crypto credit cards have taken significant steps in enabling the everyday use of digital currencies. People around the world can now purchase virtually anything they want, at any time, using their digital assets.

Myth: Blockchains require large amounts of energy to run

Blockchain technology, initially implemented for cryptocurrencies, uses a consensus mechanism called Proof of Work. Its use requires expensive and energy-intensive crypto mining equipment.

The Bitcoin network currently consumes the same amount of energy as a small country. This has given birth to the myth that all blockchains require excessive and costly amounts of electricity to run.

Steaming powerplant MineBest

Fact:

It is true that large-scale blockchains like the one used for Bitcoin require huge amounts of energy. This is mainly because they are public, open-source and permissionless blockchains used to mine crypto. But companies looking to adopt blockchain technology do not have to rely on mining.

Unlike permissionless networks, only people with appropriate credentials can access permissioned and private blockchains. These blockchains can operate on the basis of principles set out by a governing body, using a mechanism to validate information called Proof of Authority. This procedure consumes very little energy, often less than the non-blockchain-based system.

Myth: Blockchain is unregulated

The association with cryptocurrencies has led to the belief that blockchain technology is hard to regulate and is risky from a legal standpoint. The majority of cryptocurrencies use public and decentralized blockchain systems, which, until recently, had no clear regulatory guidelines.

Fact:

Cryptocurrency and blockchain technologies are now heavily regulated. Authorities such as FINMA and FATF are leading the way on international blockchain regulation. They have developed government guidelines worldwide, focusing on tax regulations, banking services, transaction monitoring and anti-money laundering policies.

Additionally, blockchains don’t need to be public. Organizations seeking to incorporate this technology into their systems can use a private network set up to comply with laws and regulations, thus minimizing legal risks.

Debunking blockchain myths

Myth: Blockchain is immutable

Immutability is advertised as one of the main assets of blockchain. The feature of distributed ledger means that all transactions, once added to the blockchain, are indisputable and can never be changed.

Fact:

Large networks, such as Bitcoin and Ethereum blockchains, are considered immutable due to their enormous size. But the extent of immutability depends on the size and decentralization of a network.

Having a large user base is essential when establishing an immutable blockchain network. Simply creating a blockchain out of nothing will not automatically make it immutable. Such a feature must be developed through proper planning and infrastructure.

Myth: Blockchain only applies to finance

The financial sector is one of the main industries that can benefit from blockchain technology implementation. FinTech operations are at the forefront of blockchain adoption, with many discussions about its impact on the future of finance.

The recent surge of decentralized finance (DeFi) and the announced interest in blockchain technologies from financial giants such as PayPal and JP Morgan are the hottest topics at the moment. But this enthusiasm for new solutions has also led to the misconception that blockchain can only be used in the finance industry.

Fact:

There are many applications for blockchain technology outside of this sector. New use cases are being proposed and implemented daily. Some notable examples include:

Unfortunately, blockchain technology is still surrounded by myths. Debunking these misconceptions and discovering the facts is a continuing duty that we pledge to fulfil, paving the way for blockchain to revolutionize the way we interact with the digital world.

Debunking blockchain myths: part 2

Debunking blockchain myths part 2 by MineBest

The past few years have seen the rapid advancement and further implementation of blockchain technology. But the confusion and misunderstandings surrounding this concept still need to be cleared before the public fully embraces it. Following the first article of the series, we continue to debunk myths and clarify misconceptions surrounding blockchain.

Myth: Blockchain technology is not ready for everyday use

Due to its close association with digital currencies and the recent hype surrounding the highly volatile cryptocurrency market, there is a belief that blockchain is just a new fad among speculators and has no use in the real world.

Fact:

Blockchain technology is being implemented and used daily worldwide. Multiple businesses and industries have adopted it to streamline their operations. Each day, more people interact with platforms and structures that employ blockchain technology.

Blockchain provides solutions for many industries, in applications previously thought to be impossible. A study from the Stanford University shows that this technology has been growing exponentially and has been transforming the infrastructure of various organizations since 2013.

Funding for blockchain startup

Data source: https://www.statista.com/statistics/621207/worldwide-blockchain-startup-financing-history/

The rise in popularity of cryptocurrency services shows the potential for everyday use of blockchain technology. Digital currencies are the original use case for blockchain and although they are not the same, a certain similarity can be observed between them. The world’s most used cryptos, Bitcoin and Ethereum, touched all-time highs in transaction volume in 2020.

Services such as crypto-only online marketplaces and crypto credit cards have taken significant steps in enabling the everyday use of digital currencies. People around the world can now purchase virtually anything they want, at any time, using their digital assets.

Myth: Blockchains require large amounts of energy to run

Blockchain technology, initially implemented for cryptocurrencies, uses a consensus mechanism called Proof of Work. Its use requires expensive and energy-intensive crypto mining equipment.

The Bitcoin network currently consumes the same amount of energy as a small country. This has given birth to the myth that all blockchains require excessive and costly amounts of electricity to run.

Steaming powerplant MineBest

Fact:

It is true that large-scale blockchains like the one used for Bitcoin require huge amounts of energy. This is mainly because they are public, open-source and permissionless blockchains used to mine crypto. But companies looking to adopt blockchain technology do not have to rely on mining.

Unlike permissionless networks, only people with appropriate credentials can access permissioned and private blockchains. These blockchains can operate on the basis of principles set out by a governing body, using a mechanism to validate information called Proof of Authority. This procedure consumes very little energy, often less than the non-blockchain-based system.

Myth: Blockchain is unregulated

The association with cryptocurrencies has led to the belief that blockchain technology is hard to regulate and is risky from a legal standpoint. The majority of cryptocurrencies use public and decentralized blockchain systems, which, until recently, had no clear regulatory guidelines.

Fact:

Cryptocurrency and blockchain technologies are now heavily regulated. Authorities such as FINMA and FATF are leading the way on international blockchain regulation. They have developed government guidelines worldwide, focusing on tax regulations, banking services, transaction monitoring and anti-money laundering policies.

Additionally, blockchains don’t need to be public. Organizations seeking to incorporate this technology into their systems can use a private network set up to comply with laws and regulations, thus minimizing legal risks.

Debunking blockchain myths

Myth: Blockchain is immutable

Immutability is advertised as one of the main assets of blockchain. The feature of distributed ledger means that all transactions, once added to the blockchain, are indisputable and can never be changed.

Fact:

Large networks, such as Bitcoin and Ethereum blockchains, are considered immutable due to their enormous size. But the extent of immutability depends on the size and decentralization of a network.

Having a large user base is essential when establishing an immutable blockchain network. Simply creating a blockchain out of nothing will not automatically make it immutable. Such a feature must be developed through proper planning and infrastructure.

Myth: Blockchain only applies to finance

The financial sector is one of the main industries that can benefit from blockchain technology implementation. FinTech operations are at the forefront of blockchain adoption, with many discussions about its impact on the future of finance.

The recent surge of decentralized finance (DeFi) and the announced interest in blockchain technologies from financial giants such as PayPal and JP Morgan are the hottest topics at the moment. But this enthusiasm for new solutions has also led to the misconception that blockchain can only be used in the finance industry.

Fact:

There are many applications for blockchain technology outside of this sector. New use cases are being proposed and implemented daily. Some notable examples include:

  • Supply chain management: Organizations use this technology to prevent counterfeiting and create a transparent source of information in their supply chains. It allows all parties to identify the chain of custody, ownership transfer and trace their products’ origin in a reliable and efficient way.
  • Maintaining health records: Healthcare providers in countries like the US, Canada and Russia have started using private blockchains to store medical records, monitor disease outbreaks and track medication shipments. Additionally, distributed ledger technology allows healthcare workers to securely and efficiently access their patients’ verified medical history.

Unfortunately, blockchain technology is still surrounded by myths. Debunking these misconceptions and discovering the facts is a continuing duty that we pledge to fulfil, paving the way for blockchain to revolutionize the way we interact with the digital world.

Debunking blockchain myths: part 1

Debunking blockchain myths

The world of cryptocurrencies is ever-expanding, but there is still a lot of confusion about what digital currencies are. With so many tall tales floating around the internet, it is not easy to distinguish between facts and fiction, especially in such a dynamic environment in which new concepts are constantly appearing.

This is the first in a series of articles dedicated to debunking some of the top myths surrounding the new tech-driven buzzword: blockchain. Today, we dive into five of the most common misconceptions regarding blockchain’s origin, uses and potential.

Myth: Blockchain and Bitcoin are the same

Since the launch of Bitcoin in 2009, there has been a widespread belief that the first cryptocurrency and blockchain technology are synonymous. Even today, many people still use these words interchangeably. Nothing could be further from the truth!

Fact: Blockchain technology was invented for Bitcoin. It did not exist before. But it is not a type of digital currency. It is an open-source system that stores information kept on different computers and is interlinked through a peer-to-peer network. In simple words, blockchain is a distributed digital ledger that records transactions that were carried out.

Blockchain stores transaction details, like the amount of cryptocurrency, date and time, type of transfer, in the so-called blocks. Each block is cryptographically connected to the previous one, creating a chronological chain of data. This structure is the reason behind the name blockchain.

It is also important to mention that blockchain used for cryptocurrencies is typically meant to be decentralized. It means that there is no central authority maintaining it. Information stored on the blockchain is distributed across a network of computers. So, it is not legitimately possible to change or remove a transaction once it is recorded on the blockchain.

Last but not least, blockchain technology aims to increase transparency. When it comes to open networks, most of the recorded information is accessible by everyone through platforms called blockchain explorers. Also, there are many analytic tools developed to have several types of in-depth macro and micro-level insights into the blockchain network. So, it is not so difficult to track all the transactions performed on any given wallet.

Myth: There is only one type of blockchain

The concept of a distributed ledger was first developed in 1991. However, most people heard about blockchain technology only after Bitcoin was born. And because it was the first cryptocurrency, many assumed that the public blockchain developed specifically for Bitcoin was the only one that existed. But that is not true!

Fact: There are hundreds of thousands of individual blockchains on the market. Most cryptocurrencies operate on a public blockchain, but there are other types out there. Soon after Bitcoin was released, banks and other private institutions developed a controlled system that required permission to join. This was the beginning of private and federated blockchains.

Over the years, blockchain technology evolved and was adapted to suit an array of sectors and industries. The first-generation public blockchain had several deficiencies like scalability, efficiency, so other blockchains came into existence to overcome these drawbacks. There are currently four types of blockchain networks: public, private, hybrid and federate.

Myth: Blockchain technology can only be used for cryptocurrencies

Blockchain was indeed introduced because of Bitcoin. Since then, it has been widely used in the cryptocurrency industry. But this innovative technology has other applications beyond the cash and payments system.

Fact: Blockchain is a system of recording information and digital assets in a distributed way. It has been developed to solve the problem of double-spending in a decentralized system. But there are other FinTech applications and services developed based on blockchain technology.

Blockchain-based applications, commonly referred to as DeFi, which stands for decentralized finances, provide services similar to conventional financial operations, but without the involvement of third parties or centralized financial institutions. The developments in this space have come a long way. There are DEXs, stable coins, money markets, insurance solutions, financial contracts, and many others that operate exclusively on the fundamentals of blockchain technology.

The beginning of 2021 saw the total value of assets locked within DeFi applications reach a staggering USD 40+ billion.

Myth: Blockchains are cloud-based ledgers

One of the most common blockchain myths implies that they are just cloud-based databases. But even though all network participants have access to the blockchain, the information it contains is not stored in the cloud.

Fact: Blockchains need to be downloaded and run on computers connected to the internet in a peer-to-peer network. Each computer is called a node, and the better the connection of each node, the stronger the whole network. Another difference between blockchain and a cloud database is that it doesn’t store files in a specific format. Blockchain keeps records with a Proof of Existence service that shows evidence that a file exists without actually showing it.

Now, it is important to point out that some cloud service providers have come up with a solution called BaaS (Blockchain-as-a-Service). The idea behind it was to support the development and management of cloud-based networks for companies that develop blockchain applications.

BaaS is very similar to SaaS (Software-as-a-Service) and allows its users to develop, build, host, and operate blockchain apps on the cloud. This technology helps to boost the future blockchain adoption.

Myth: Blockchain can power up the global economy

It is less a myth and more a widespread perception. Many people believe that blockchain is a massive global network, but in fact it is about the size of NASDAQ’s network. It is not equipped to handle as many transactions as most small global financial institutions deal with.

Fact: According to Gartner’s study conducted in 2019, blockchain technology is still about a decade away from the transformational impact. The report states that this technology is not advanced enough to enable a digital revolution across the business ecosystems. There is still time for it to become fully scalable both technically and operationally.

Currently, the most popular blockchain networks like Bitcoin’s are not designed to handle a huge number of transactions made by financial institutions, so it will not take over any time soon.

Busting the myths helps to understand what blockchain is, how it works and see its limitations. Getting familiar with the technology can increase confidence of its users and support the mass adoption of both blockchain and cryptocurrencies.

Bitcoin scalability issue: dare to dream bigger

As revolutionary as Bitcoin was in 2009, it was created with a bottleneck. BTC’s role as a peer-to-peer electronic cash system has a finite lifetime. This became clear after the mass adoption of cryptocurrencies and blockchain technology. Its popularity exposed problems with high levels of traffic. In the world of cryptocurrency, this is known as Bitcoin scalability problem.

A victim of its success

It all comes down to popularity. Think of a start-up with a modest budget, like a bakery. This bakery has a website that displays a menu and a gallery full of gooey goodness. The bakery is prepared to serve its community. But then, one day, a celebrity drops by for a donut. The snack is so good that the celebrity shares a photo on social media. Millions of followers then flood the bakery’s website and cause the server to crash. This is essentially what is happening to Bitcoin. But exactly what is the Bitcoin scalability problem?

As revolutionary as Bitcoin was in 2009, it was created with a bottleneck. BTC’s role as a peer-to-peer electronic cash system has a finite lifetime. This became clear after the mass adoption of cryptocurrencies and blockchain technology. Its popularity exposed problems with high levels of traffic. In the world of cryptocurrency, this is known as Bitcoin’s scalability problem PoW blockchain

The scalability problem

Scalability refers to a network’s ability to increase its operational capacity. In Bitcoin’s case, transaction traffic is the root of the issue. More Bitcoin users means more transactions per minute. In December 2020, Bitcoin handled around 330,000 daily transactions. With so much competition for quicker transactions, miners now ask for higher transaction fees. Users who are willing to pay the fees get rapid results. Those who cannot or do not want to pay the fees simply have to wait. In short, the network cannot process all the transactions within a reasonable time while keeping transaction fees low.

Proof of work (PoW) blockchains like Bitcoin were created with a fixed network capacity and a number of problematic protocol rules. BTC’s blockchain transaction typically holds around 250 bytes of data. But Satoshi Nakamoto limited the size of each Bitcoin block to 1 MB. As a result, one block can only include a limited number of transactions. And since new Bitcoin blocks are created approximately every ten minutes, queues of pending transactions are now common. Currently, the only way to bypass the queue is to pay higher transaction fees. But since every user wants the same thing, the fees soon become astronomical.

At present, Bitcoin users must sacrifice speed for affordability and vice versa. It is a compromise that is making expansion slower. But some experts believe these trade-offs are an inseparable part of the blockchain’s DNA.

The trilemma

The industry’s greatest minds see scalability as a significant issue. But one expert has gone a step further, defining a combination of three factors. Vitalik Buterin, the co-founder of Ethereum, formulated the theoretical concept known as the Scalability Trilemma. The theory describes how difficult it is to achieve the three pillars of blockchain sustainability.

  • Decentralization
  • Security
  • Scalability

Buterin believes there will always be a compromise between these three aspects of blockchain protocol. Some blockchains are fast and secure but achieve this by being more centralized. Bitcoin’s blockchain is highly secure and decentralized, but less scalable. At present, there is no perfect solution to the trilemma. But there are some interesting concepts in development.

Solving scalability

As with every problem, there are various scalability solutions currently being explored. Some of these rely on internal changes to the blockchain protocol. Others require integration from the moment of inception. There are also special Layer 2 and sidechain fixes in the works.

  • Segregated Witness

Segregated Witness is a protocol edit implemented to Bitcoin. It removes a certain amount of data from each transaction. This leads to more transactions being included in one block.

  • Masternodes

Due to increased costs and technical complexity, full nodes are declining. Masternodes are an attempt to fill that void. Acting as full nodes, their operators are rewarded for their work. This is much like miners being rewarded on PoW blockchains. The difference is that masternodes are fully dedicated to processing transactions.

  • Sidechains

A sidechain is a secondary blockchain connected to the main one via a two-way peg. Put simply, the two chains are interoperable, meaning that assets can flow freely from one to the other.

Bitcoin solutions

  • Increased block size

Initial solutions for Bitcoin were simple. Due to the 1 MB size limitation, only a limited number of transactions can be included in one block. The obvious thing to do was to increase the size of the block. This was the solution chosen by Bitcoin Cash, which was a Bitcoin fork (a change in the blockchain’s protocol that the software uses to decide whether a transaction is valid or not). For Bitcoin Cash, the block size was increased first to 8 MB and then 32 MB.

However, this solution had one fundamental flaw. The problem would eventually reappear with the future increase in network usage. So, expanding the size of the block is only a temporary solution. Additionally, there are unwanted consequences to increasing the size of the block. This is because bigger blocks make it more difficult to download the blockchain. The general public might find it impossible to run the Bitcoin software in their own homes, which could lead to less decentralization.

  • Shorter confirmation time

Another alternative would be decreasing block confirmation time. However, this idea could make it difficult to confirm that a new block is valid. If confirmation takes too long, it could undermine Bitcoin’s security. This is the solution implemented by Litecoin, Bitcoin’s 2011 fork. New blocks are created within 2.5 minutes, which is four times faster than Bitcoin. But some solutions have an indirect effect on block size and confirmation time.

  • Segregated Witness

Bitcoin attempted to improve scalability by indirectly altering the size of the blocks. It successfully implemented Segregated Witness (SegWit). Together with a soft fork, SegWit increased the size of the blocks by removing signature data from the transactions recorded there. However, the upgrade has not solved the issue.

  • Lightning Network

Special payment channels are another popular attempt at improving scalability. The Lightning Network uses smart contract functionality in the blockchain to enable instant payments across a network of participants. These payments are off-chain transactions. But, again, this solution is far from perfect. For instance, the network requires users to meet certain conditions to use it, such as having a lightning node.

  • Proof of stake

For some time, Proof of Stake (PoS) blockchains have shown promising results. They are already tackling the main scalability issues that PoW faces. Soon, they may bring about the end of PoW dominance. This would profoundly change the industry, since PoS networks require no mining.

Bitcoin scalability issue MineBest 4

Key takeaways

There are many interesting solutions to the scalability issue. The vast majority are fixes to the existing infrastructure. However, the scalability problem exists because the protocol is like a living organism. As the world changes over time, the protocol needs to adapt and evolve. But adaptability only gets you so far.

With this in mind, the best solutions to scalability are always going to be the networks created to overcome the problem. Today’s youth are more technologically proficient than older generations. Likewise, future networks will be more scalable than those created years ago. They will be created to overcome the problem.

Bitcoin scalability issue MineBest 5

This knowledge is a direct result of Nakamoto’s innovation. But pioneers rarely achieve perfection. They signpost a new direction and expose the pitfalls along the way, giving followers the chance to achieve even more. Bitcoin followers can learn from its mistakes. This is the value of the scalability issue – it is the mother of numerous innovations.

What’s hidden in Bitcoin block transactions?

One of the fundamental concepts behind cryptocurrencies is that transactions are recorded in blocks stored on the blockchain digital ledger. But what else is hidden inside those registers? Let’s find out.

Thanks to the public nature of blockchain technology, every user can check all transactions ever made with cryptocurrencies like Bitcoin. But when you go to the blockchain explorer, open a random block and scroll down to the block transactions section, you may get a bit lost with all the confusing names and terms. Concepts such as coinbase transaction, hash, transaction fee, public address and multiple confirmations will be covered in this article.

bitcoin block transactions

The meaning behind the data

A blockchain explorer might not be the most obvious thing for newcomers. So, what is the meaning of the information presented in a transaction block?

Starting from the top, the first thing you see when entering a block is a coinbase transaction, which is the first transaction of every block. It is a special type of transaction generated when that block is created. It contains the block reward in the form of newly created coins and transaction fees distributed as compensation to the miner that has successfully established the block.

bitcoin block transactions

Example of a coinbase transaction, Source: click

The interesting fact about coinbase transactions is that they contain no other inputs commonly found with regular transactions.

There is only one coinbase transaction in every block.

Below the coinbase transaction, there are many other regular transactions that were included in a block. And each transaction has its unique transaction hash (TxHash). Also known as transaction ID (TXID), it is a unique identifier that serves as a reference for localizing specific transactions in the blockchain ledger.

TxHash is an alphanumeric code, and every single on-chain transaction has its unique transaction hash. This allows it to be distinguished from other blockchain transactions.

Below is the hash from the first-ever transfer, where BTC was sent from one user to another – from Satoshi Nakamoto, the anonymous creator of Bitcoin, to Hall Finley, an early developer of Bitcoin:

f4184fc596403b9d638783cf57adfe4c75c605f6356fbc91338530e9831e9e16

Pasting it into the Bitcoin explorer will redirect you to that specific transaction with all its details.

bitcoin block transactions

Source: click

As you may notice, the component next to the amount of BTC being sent is the public address.

The public address is a long string of letters and numbers used to receive crypto assets. It is a unique identifier that serves as a Bitcoin bank account number and can be freely shared with anyone.

This is an example of a Bitcoin public address:

1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa

That specific public address belongs to Satoshi Nakamoto. Its first received transaction was 50 BTC as a coinbase transaction from Bitcoin’s first block, also known as the genesis block. The term is used for the block number zero of a particular blockchain.

Keep in mind that while sharing your public address, the whole transaction history can be navigated. For this reason, those who want their identity to remain confidential must avoid linking public addresses with their real-world identity.

bitcoin block transactions

All about transaction fees

The next component that may stand out in a blockchain transaction is the transaction fee. It refers to a small payment to the miner that processed it.

Bitcoin has no intermediaries and transactions are added into the blockchain through the mining process. So, to perform any transaction, a small fee needs to be paid to the miner that will include the data in the block. It is a reward for the miner’s contribution and resources.

Think of transaction fees as a small tip to the miner. And as in the case of tipping, the customer is the one who decides how much it will be. The greater the incentive, the higher the chances that the said transaction will be included in the next block. In simple terms, if you want your transaction to be processed faster, it is going to cost you more.

Transaction costs may depend on network usage. When the demand for transaction processing is high, the fee may increase significantly. As a result, offering a low transaction fee may not be the best solution as it could take a lot of time to get it confirmed and included in the block.

bitcoin block transactions

Tracking a transaction

The last component is the transaction status. It tracks the current status of a transaction, determining whether it has been included in the block.

In every completed block visible on the blockchain explorer, the status is followed by a number of confirmations. The exact amount depends on how many other blocks were created afterwards.

bitcoin block transactions

The example above means that three additional blocks were created after the one in which the specific transaction was finalized.

Platforms such as exchanges or wallets may have different requirements regarding the number of confirmations before the crypto assets are visible.

It is possible to navigate the blockchain explorer using the TxID and check its status. If it says “pending”, it means that the transaction has not been included in the block. This may be caused by the transaction fee being too low.

Terminology related to Bitcoin transactions may be confusing, but hopefully it’s easier to understand now. Be sure to follow our series where we will explain the meaning of other terms related to mining and crypto block terms.

7 surprising facts about cryptocurrencies

facts about cryptocurrencies

The cryptocurrency sector is expanding rapidly. Many people are familiar with names like Bitcoin or Ethereum, but few know anything beyond the basics of how they work. We cannot go deep into this world in a single article, but here you will find some of the top surprising facts about cryptocurrencies that you probably haven’t heard of before.

1. It is estimated that 4 million Bitcoins have been lost

What would you do if you had a stash of Bitcoins that you could not access because you have lost the keys, damaged your hardware or sent it to a so-called burn address?

Well, guess what? An estimated 4 million Bitcoins have been lost forever. The number is significant, considering that only 21 million BTCs will ever be mined. Experts believe that over 20 percent of the lost coins cannot be retrieved.

Scary, right? How does something like this happen?

The BTC blockchain is immutable and irreversible. This means that once a transaction is completed, it cannot be canceled or reverted. If you send your crypto assets to the wrong wallet, they are gone.

The cryptography used to secure these coins has no empathy. It doesn’t care if you are on the verge of having a heart attack. If you do not use the correct key, you will not access the wallet. Maybe a quantum computer could crack a private key, but decades may pass before it happens. Besides, it may not be possible even with the next generation of computers because developers are already working on creating quantum-proof solutions.

2. There was life in crypto before Bitcoin

The concept of a peer-to-peer digital currency that could not be tracked was created back in 1983 by David Chaum, an American IT expert. The same year he published his theory about cryptographic digital cash in a scientific journal and by the end of 1989, he founded the company Digicash.

Chaum created Digicash hoping that enough people would support the idea, thus convincing sellers to accept the new payment method. Unlike today’s cryptocurrencies, the concept was that users would buy the digital currency from Chaum’s bank operating as a central entity. The bank would have information that funds were acquired, but no information on how they were used. The coin was created to ensure online transaction safety. This was made possible thanks to blind signatures to ensure that the transactions were anonymous.

Digicash didn’t do too well. By 1996 the company filed for bankruptcy. At that time, few other digital currencies were launched. Ecash, e-gold and b-money did comparatively better than their predecessor.

Later, the boom in e-commerce catalyzed the development of digital cash and payment methods, making it popular despite Chaum’s failure with Digicash. Digital money was around long before BTC, and Satoshi Nakamoto even referenced some previous projects in the Bitcoin whitepaper.

3. HODL was born in a moment of desperation

HODL is one of the most peculiar cryptocurrency jargon terms. It was coined by a Bitcoin enthusiast who responded to the so-called crypto experts who mocked him for not selling his coins. On the forum, he wrote: “I AM HODLING.”

Although this was an apparent typo, it soon got popular and was used to describe the strategy adopted by beginners who don’t know how to trade crypto but still believe in cryptocurrencies.

Today, hodling is a common strategy in crypto trading across the globe. The original typo is also known as an acronym for the phrase “hold on for dear life.”

4. Satoshi Nakamoto is a hodler

In 2013, Sergio Demian Lerner, known in the crypto world as the designer of the smart contract platform RSK, pointed out that there are still over one million Bitcoins in what is assumed to be Satoshi Nakamoto’s wallet.

According to Lerner’s findings, between January 2009 and January 2010, there was one dominant BTC miner before others joined the bandwagon. This person used a single rig to mine thousands of blocks, which amounted to over one million Bitcoins. To date, Satoshi has not moved the coins from the wallet, causing speculation as to why he or she has never touched that handsome stash. If exchanged for fiat currency, the wallet would make Satoshi one of the top 50 richest persons in the world.

5. Bitcoin has been forked over a hundred times

Believe it or not, Bitcoin has been forked over 100 times. And it does not mean poking by the devil’s trident. “Forked” means that its source code has been copied to create new features, functions and, in some cases, even new coins. Bitcoin, as most cryptocurrencies, was built with an open-source code, allowing it to be easily copied and modified according to the developer’s needs.

There are two types of forks: the hard fork and the soft fork.

A soft fork is generally used to implement changes and upgrades on the blockchain, while a hard fork is commonly used for significant security upgrades or to create a new coin. The main difference between the two is that a soft fork is backward-compatible, meaning that old versions of the coin can also be updated with new features. Hard forks are not backward-compatible and are only used in cases where major security upgrades are required or to create a new coin using the same blockchain algorithm.

6. Crypto wallets do not store your crypto

Contrary to popular belief, cryptocurrencies are not stored in crypto wallets. The only things that are stored there are the private and public keys. The funds are recorded on the blockchain and can only be accessed by someone with the correct public and private key.

Public keys are like bank account numbers, which are shared with people in order to receive transfers. Private keys are like your debit card pin code, allowing you to get into the account and make transactions. Without these keys, there is no way any transaction can be carried out.

7. There are nearly 2,000 dead coins

In just over a decade, many cryptocurrency projects have failed.

Coinopsy, a website that tracks dead coins, shows that there were 1,854 deceased cryptocurrencies at the time of writing this article, and this number is expected to rise.

But what exactly are these dead coins?

These are cryptocurrency projects that were abandoned, have no nodes, stopped being developed, turned out to be scams, have low volume or their website is down.

MineBest | CryptoFest2019

MineBest was a proud Platinum Sponsor of Crypto Fest 2019, a global crypto festival on September 7th 2019 at Shimmy Beach Club in Cape Town, South Africa!

Catch Senior VP Global Business Development at MineBest, Piotr Tylczynski, on stage in the ‘Gold VS Crypto’ panel discussion, the MineBest team speaking to guests and fellow industry experts at the official exhibit, and even more in this video summary of the event!

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