The basics of Crypto
Don’t make the mistake of thinking that the first steps with Bitcoin is buying some. Instead, start with becoming informed. We created this growing wiki to kick-start your learning inside in the big wide world of Crypto and enable you to make better choices right from the start.
A blockchain is a constantly growing ledger that keeps a permanent record of all the transactions that have taken place, in a secure, chronological and immutable way.
Texting, video calling or sending images/files to another person over the internet is called Peer 2 Peer.
Sending a file to someone creates a copy of the original, meaning that both the receiver and sender now has this file. If this was done with money, you would be able to copy money.
Thus the double spend problem. Currently the way this is resolved is by using a 3rd party like a Bank, to act as a middle man, to control and verify the database and each transaction.
Is made up from thousands (if not more) of computers, across the world, all connected with a special type of decentralized ledger technology (Blockchain).
It keeps a record of all the transactions that have ever taken place, and information is captured securely using Math and cryptography to protect it.
The data is recorded, stored and verified across the entire network which prevents the same transactions happening more than once, thus going some way to resolve the double spend problem.
A miners role is to process and confirm transactions. As each transaction needs to be cryptographically encoded to ensure that no-one can tamper with the data.
They use typically very powerful computers to solve complex mathematical problems on the Bitcoin network.
For this task, a miner is rewarded in Bitcoin
Each transaction on the Blockchain is turned into a very secure "Hash"
A cryptographic Hash is a a digest, or a digital fingerprint of a certain amount of data. The best way to learn about Hash is to create your own. You can generate your own examples of hash here: https://demoblockchain.org/hash
Type anything in the top box, and you can see it being securely turned in a length of code, called a Hash. By adding just 1 new character, you can see it complete changes the hash code.
SHA256 - Stands for Secure Hash Algorithm, which was created by the NSA (the National security agency). A hashes are 1 way directional, there is no way to decrypt the Hash to find the original data.
Getting started with Bitcoin
A full and informative blog that can be found here
Wallets allow you to send, store and receive Crypto.
Wallets can be created on your mobile or computer. They will enable you to get a public and private addresses. (See keys).
There are several types of wallets, some are below.
- Mobile wallets
- Desktop wallets
- Hardware wallets
- Web wallets
There are pros and cons for each of these wallet types, however remember you are not limited to having only 1 wallet. Diversity is key.
Good first steps would be to choose 1, learn about it, test how to set up, send, receive and store.
For large portfolios, we recommend a cold storage wallet - you can read below for more information.
A public key, like the name suggests, is a key you can share, typically for receiving transactions from others. Think of this as something similar to an Email address.
The Private key, is also a similar alphanumeric sequence, but this one is unique only to you, and must be kept private, for you to remain in control over your wallets.
Think of your private key as something similar to a very secure password.
Remember: Never share your private key with anyone… ever
Without the ability to send and receive Bitcoins, a Bitcoin would be worthless.
If you wish to send some Bitcoin first you would need a wallet, which gives you both public and private keys. And you would have already purchased, earned of received a gift of a Bitcoin to your PUBLIC key. You also need to know the public key of the person/persons who you wish to send the Bitcoin too.
Bitcoin addresses are typically between 26-35 characters and as it stands now, always begins with a number. It can be copied and pasted, or often most wallets give you a QR for easy sharing. Remember your welcome to share your public key with whoever you like.
You would hit send in your wallet, add the amount and type in (copy + paste much better) the public address of the person who you wish to send it too. Here you will do the usual verification (each wallet will be different) and this will create a transaction into the network, and the miners begin to mine these blocks.
There is no such thing as being 100% safe.
Bitcoin is a digital technology and anyone with Bitcoin becomes a target for hackers. Things like keyloggers or malware can target you and your devices, so hackers can get access to your Private keys. Ransomware is also very common.
TIPS for safety.
1. Keep the devices you use to store your Bitcoin clean.
Run regular anti-virus and anti-malware software. The safest possible way to do this is to use a completely separate device, but of course that's not always possible.
2. Keep your firewalls on, always.
3. Don't login your Crypto/banking screens on Public access WI-FI, these are very easy to track what your doing.
4. Open multiple wallets, offline (cold storage) wallets are much safer for larger amounts.
It's good practice to open multiple wallets, and cold storage wallets are arguably the safest, as they are offline and thus harder for hackers.
Each comes with multiple pros and cons.
At bitaddress.org you can generate your own public/private key using a long passphrase that you come up with (your own unique list of words). The advantages of this being that only you have this passphrase, saved securely inside your mind. Just don't forget it.
Very similar to above, but instead a random phrase is created for you, as a result you would print and need to store the physical piece of paper/code yourself. This also brings its own pros and cons should you lose your piece of paper there is no way to access your funds.
Once again, you successfully taken it from your computer and removed access from hackers getting at it, but as with paper, if you misplace or break your USB drive, you can also say goodbye to your funds.
Hardware wallet (such as Ledger X/Trezor)
Hardware wallets have huge advantages over everything above, as you can still remove your funds offline, but the hardware wallets, create their own seed (or passphrase). So you can actually lose this wallet, but providing you remember the passphrase you can get back into your wallet. Think of this as double protection. Just don’t lose your passphrase AND your hardware wallet.
It’s not mandatory but its always a good idea to generate a new public key each time you wish to receive some Crypto. Your public address is on the public domain, so you lose some privacy each time you receive. Its possible that someone else is monitoring your public key, and would know exactly how much that address was receiving each time. By generating a new key, it would not be known.
A Bitcoin is a type of digit currency, a digital asset, which can be purchase, sold or simply transferred between 2 parties. It's a form of storing value, much like Gold or Silver.
There are no physical coins, or paper bills.
You do not need to use a credit card, bank or 3rd party to help you.
There is a set limit on how many will ever be available.
Costs are much lower, large values can be sent anywhere in the world, and above all transactions are entirely private.
A fork takes place when a blockchain splits into two different paths moving forward.
There are 2 types of forks
Hard fork – introduces a change that forces everyone to upgrade. (Example: Bitcoin Cash)
Soft fork – introduces a change that is backwards compatible, doesn’t need to be upgraded. (Example: Segwit)
Segregated Witness (Segwit) is a protocol upgrade. It improves the scale-ability without increasing the block size. It also addresses the Transaction Malleability.
A Bitcoin transaction has 3 main components, Input, Amount, Output. Each transaction can only happen once it has a digital signature added, this is where your private key comes in.
In a Segwit transaction, the digital signature is pulled into an extended block, it takes out 60-63% of the data meaning the original blocks can be freed up to do more in the future, whilst hopefully reducing transaction fees.
Alt coins at a glance
Ethereum is a decentralized, open source, and distributed computing platform that enables the creation of smart contracts and decentralized applications, also known as dapps.
Smart contracts are computer protocols that facilitate, verify, or enforce the negotiation and performance of some sort of agreement.
Ripple is a real-time gross settlement system, currency exchange and remittance network created by Ripple Labs Inc.
XRP is a token used for representing the transfer of value across the Ripple Network. The main purpose of XRP is to be a mediator for other - both cryptocurrencies and fiat - exchanges. If you want to exchange dollars to euro, it can be dollar with dollars and euro with euros to minimize the commission. Transaction costs are super low.
Cardano describes itself as a 3rd generation platform and wants to significantly improve those things that have been identified as shortcomings in blockchains like Ethereum.
Cardano is the world's first peer-reviewed blockchain. The nonprofit foundation responsible for Cardano assembled a network of academics and scientists from various universities, including the University of Edinburgh and Tokyo Institute of Technology, to review its protocols before they are released
Stellar makes it possible to create, send, and trade digital representations of all forms of money: dollars, pesos, bitcoin, pretty much anything. It's designed so all the world's financial systems can work together on a single network