Blockchain FAQs - Handbook!

In my opinion, we are still very early in the web3 and Blockchain ecosystem and to make it a mainstream technology I believe we need to make our basics very strong and clear. This newsletter can be an ultimate handbook for anyone who wants to address some of the top Blockchain and crypto FAQs.

WHAT THE FAQs? ??

What is a blockchain - A blockchain is a growing list of records, called "blocks" that are linked using cryptography (technique of securing information through the use of codes). It is a digital ledger that keeps the records of all the peer-to-peer transactions. The encrypted information can be shared across multiple providers with pseudonymous, thereby reducing the risk of a privacy breach.

What is NFT - NFT stands for Non-Fungible Tokens i.e., something that is one of its kind and also has some monetary value attached to it. Some of the examples of unique collectibles can be - artwork, ancient coins, or maybe some rear Pokemon cards.

What is Web3.0 - Web3.0 is the third generation of the world wide web. Some of the features are: Web with AI (artificial intelligence) infused which means it provides AI-enabled and machine-interpretable?metadata?of the already published data and has Decentralised Data Architecture i.e., every device is connected to the web, and the services can be used everywhere. Examples can be: Apple’s Siri and?Wolfram?Alpha.

What are the different types of blockchains - Some of the most common types are:

1. Public Blockchain - In a public Blockchain, anyone can read, send transactions, and participate in the consensus process.?It allows all nodes of the blockchain to have equal rights to access the blockchain, create and validate new blocks of data. Bitcoin and Ethereum are examples of a public blockchain. If one desires to create a completely open blockchain, similar to Bitcoin, which enables?anyone and everyone?to join and contribute to the network, they can go for a public blockchain.
2. Enterprise Blockchains (Private and Permissioned) - An type of "enterprise blockchain" can be a type of permissioned blockchain that can be used to streamline business processes at scale, such as tracking and settling global payments, etc. In a "private Blockchain", a centralized and trusted authority is in charge of granting approvals and allowing access to the ledger for authorized participants.?CBDC (Central Bank Digital Currency) can be a prime example of a private blockchain.

What are the building blocks of any Blockchain?

1. Hash Function - A hash function is a mathematical function that transforms any input into a fixed size. The output or the information generated by the hash function is unique and cannot be replicated. Thus, a Hash function meets helps to solve the blockchain computation.
2. Private key and Public Key - A private key, can be termed as a secret number and is used to encrypt information using mathematical algorithms. Also In?cryptocurrency, private keys are used to sign transactions and prove ownership of a?blockchain?address.
3. Consensus Mechanism - Consensus mechanism in simple words can be defined as a dynamic way of reaching an agreement in a group (or a blockchain). Some of the most common types of consensus used are Proof of Work, Proof of Stake, Delegated Proof of Stake, Byzantine Fault Tolerance, etc. To read a bit more about Consensus Mechanisms, and Byzantine Fault Tolerance follow - The Role of Fault Tolerance for Blockchain and Basics about Consensus Mechanism.
4. Digital Signatures - A digital signature is a mathematical technique used to validate the authenticity and integrity of a message, software, or digital document. A valid digital signature gives the recipient reason to believe that the message was created by a known sender (authentication), and the sender cannot deny having sent the message.

Who are the participants of the Blockchain - In Bitcoin and Ethereum, transactions take place between peers (P2P), identified through their public keys/ addresses, which are difficult to trace to real-world entities. Whereas, the main actors in the blockchain network are:

• Blockchain users -?Participants (typically business users) with permissions to join the blockchain network and conduct transactions with other network participants.
• Regulators -?Blockchain users with special permissions to oversee the transactions happening within the network.
• Blockchain network operators -?Individuals who have special permissions and authority to define, create, manage, and monitor the blockchain network.
• Certificate authorities -?Individuals who issue and manage the different types of certificates are required to run a permissioned blockchain.

How does Bitcoin work and What is Bitcoin mining - Firstly, each Bitcoin is a computer file, which is stored in a ‘digital wallet’ application, it can also be termed as a decentralized cryptocurrency that is powered by?blockchain. Secondly, Bitcoin mining is the process by which new bitcoins are entered into circulation.?Mining?is performed using hardware that solves extremely complex computational math problems. The first computer to find the solution to the problem is awarded the next block of Bitcoin and the process begins again.

What does a Bitcoin Blockchain’s Block contain? Who owns Bitcoin Blockchain? Bitcoin Blockchain is a publicly-owned blockchain and is open for anyone to transact, download, store, and mine. It works like a decentralized autonomous organization without an owner group. Any decisions regarding the up-gradation of the software etc, are uploaded in the form of suggestions in public portals like GitHub and voted upon by the community. Major proposals need to be adopted by over 95 % of votes for inclusion.

What is the difference between Bitcoin and Ethereum - Bitcoin is the first-ever cryptocurrency. It introduced the concept of a decentralized currency that can be exchanged peer-to-peer without the need for a central authority or other intermediaries. Whereas Ethereum is a decentralized, open-source blockchain with smart contract functionality. It allows users to create decentralized applications (dApps) on top of the Ethereum blockchain and issue their tokens. Ether is the token used to transact on the Ethereum blockchain.

What are Smart Contracts - At the most basic level, a?smart contract?is an on-chain agreement. They essentially execute assigned tasks when certain events occur - for example, as a part of EMI payment against a loan, the smart contract would send 1 ETH every month to the bank's wallet address. To make it simpler it works on a simple "Trigger and Execution" mechanism i.e., "IF" one month has passed (the trigger) "THEN" smart contract will send 1 ETH (the execution). Lastly, it can be said that smart contracts only follow one law i.e., "Law of Code", which means that if it is not in the code it won't happen.

What is the difference between Tokens and Coins - So to start with, a coin uses its blockchain to keep the track of all the data (Transactions, Dapps, etc.). Unlike coins, tokens do not have their blockchain. Instead, they operate on other crypto coins' blockchains, such as Ethereum. Some of the most commonly seen tokens on Ethereum include BAT, BNT, Tether, and stable coins like the?USDC. Additionally, another key difference is that the coin can be mined which means the crypto coins can be generated or can be created via various types of?consensus?mechanisms.

What Is Tokenomics - Tokenomics is understanding the supply and demand characteristics of cryptocurrency. It involves the complete framework explaining how the digital asset (coin or token) works i.e., from explaining how the mechanics of the asset would work to revealing the ICO (initial coin offerings) as well as the psychological or behavioral forces that could affect its value long term.

Soon I'll be addressing each of the above-mentioned topics separately and will dive deep into them.

I hope the information comes in handy for you all! ??