Before starting investing in cryptocurrency it’s important to understand the basic terminology. On this article we’re going to talk about Blockchain, Bitcoin, Ethereum, ICOs and crytpocurrency.
Blockchain
Blockchain is a distributed ledger technology that became a trusted way to track the ownership of assets without the need for a central authority, which can speed up transactions and cut expenses while bringing down the chance of fraud.
It works like a distributed database that is used to maintain a continuously growing list of records, called blocks. Each block contains a timestamp and a link to a previous block. A blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks.
The very first advantage of blockchain is that, by design, this technology is inherently resistant to modification of the data.
Often described as the new internet, this technology can completely change voting systems, fraud detection, financial services and disrupt industries like banking, music, insurance and others.
The first blockchain was created by Satoshi Nakamoto in 2008 and implemented the next year as a center component of the digital currency bitcoin, where it serves as the public ledger for all transactions.
Bitcoin
Blockchain was born at the same time as Bitcoin. When Bitcoin was released as open source code, blockchain was wrapped up together with it in the same solution.
Bitcoin is simply the first application of blockchain, allowing users to transact directly, peer to peer, without a middle man to manage the exchange of funds.
Bitcoin is the first digital currency, created and held electronically. It’s not a printed currency, like dollars or euros. It’s produced by people, and increasingly businesses, running computers all around the world, using software that solves mathematical problems. No one controls it.
Ethereum
Ethereum came way later than Bitcoin, but represents yet another great disruption: it democratized the access to blockchain by developers and entrepreneurs.
Announced in 2014 and launched in 2015, it works as a decentralized platform for applications that run exactly as programmed without any chance of fraud, censorship or third-party interference.
Since it’s launch, it has served as a base platform for hundreds of new projects, that thanks to Ethereum can run their own crowdsales and develop their blockchain projects.
Initial Coin Offer (ICO)
An ICO is a crowdsale similar to a typical crowdfunding process (Kickstarter like), but it uses cryptographically secured blockchain tokens to fund the development and operation of the specific project.
It can be applicable to one of three types of blockchain projects:
- A platform-layer blockchain (such as ethereum or Lisk)
- An organization that operates on a blockchain (known as a decentralized autonomous organization (‘DAO’), or a centrally organized distributed entity (‘CODE’)
- A decentralized application (‘dapp’) that runs on a platform-layer blockchain.
In a typical ICO, new tokens are issued in a crowdsale in exchange for bitcoin or ether, and then, if sufficient demand exists, digital currency exchanges will make a market so they can be traded.
This new fundraising approach, while still in its infancy, is being hailed as a way to decentralize and disintermediate venture capital, creating new sources of funding for entrepreneurs and new investment opportunities for individuals.
Cryptocurrency
Cryptocurrencies are a subset of alternative currencies (altcoins) that were often generated after successful token sales.
These derivatives also use decentralized control and are in a vast majority designed to gradually decrease production of currency, placing an ultimate cap on the total amount of currency that will ever be in circulation, mimicking precious metals.
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