Blockchain & Cryptocurrency

Blockchain

• ‘blocks’ of data chained together

• new block added right after the last block in chronological order

• block contains hash of previous block for verifying if they are valid pair

• created blocks are unalterable

• all data are transparent and traceable

Cryptocurrency

• digital currency - By adopting the benefit of blockchain, monetary value added to it

• decentralized - no single entity has authority over the system and the records are distributed

• transparent - the blockchain is a shared ledger keeps mutual agreed transactions

• secured mechanism - new block are validated and verified by distributed parties with incentive Proof of Work (PoW) - create blocks when the first party solves a cryptographic puzzle/equation Proof of Stake (PoS) - confirmed by pseudo-random validators who staked token as collateral Proof of X (PoX) - a lot of other consensus variations to achieve same goal - decentralized block validation

• fast and cozy - crypto can be instantly used worldwide from any device with very low fee

• anonymous identity - not leaking real world identity but able to verify you’re the asset owner

• smart contract automation - processes can be executed by coded rules without intermediaries

💡 Incentive: parties who participate in generating new block are known as miners, whenever miners successful mine a block they can get certain chain tokens as reward to motivate them continue maintain the block generation

The ‘consensus’ of crypto’s value

It begins with the public realizes potential of crypto - fast, cheap, reliable, transparent, decentralized

• How can crypto be a new currency

  • it possesses the characteristic of ‘money’ - divisible, widely accepted, portable and durable

  • crypto can be applied to traditional financial system that removes unnecessary process and fee

  • unlike fiat, total supply and tokenomics (token issuance economy) of crypto are public

  • crypto transaction history and authenticity can be easily verified

  • it has no physical location boundaries, can be traded/sent worldwide with high liquidity

  • too fluctuate is never a problem as different tokens play different roles in the ecosystem

• Why crypto’s worth certain amount of fiat money

  • mining cost either computing power or token held for validation gives crypto its basic value

  • crypto token is like a company stock, higher adoption and demand increase its value

  • the more use cases/adoption for a token, the higher demand and so drives value up

  • comparing market cap of similar crypto products we can roughly project token’s value

  • belief and faith is somehow a key to define a token’s value - we trust its potentials

• Is crypto a ponzi scheme or ‘air token’?

  • I’d say there’re a lot, but a lot more projects are really making breakthrough innovations

  • what I’m relatively comfortable to invest in:

    • stablecoin - fully backed by fiat assets USDC, BUSD, over collateral DAI

    • genesis token - has long history with strong communities and mutual vision - Bitcoin and Ethereum

    • altcoin - building ecosystem aims at connecting real world business like Avalanche and Solana

    • fundamental financial infrastructure - healthily growing adoption like uniswap, aave, curve

    • while others with big name investors, KOLs support, crazy growth TVL with no sustainability could be just a short term ponzi/gambling, the great fall of LUNA tells

💡 Ponzi Scheme: A fraudulent investing scam promises high return with low risk, but actually money from new investors is used to pay ‘profits’ to earlier investors. People who leave late when there’s no more new investors may suffer great loss.

💡 DYOR (Do your own research) is always your good friend!