Blockchain Cheat Sheet: What Beginners Need to Know

If you have very vague or hazy ideas about blockchain, that’s not surprising at all. Because chances are, if you don’t move in IT or tech-related networks, you’ll most likely have heard of the terms blockchain and bitcoins floating around – but that’s about it. This, of course, leads to feelings of overwhelm and confusion. With all the information available, where do you even begin? That’s the downside.

The good news is that it doesn’t have to be too complicated, especially if you’re just starting out and you consider yourself a total beginner. After all, you don’t need to know fancy technical jargons right off the bat – do you? You can start with the basics: defining blockchain in simple terms and knowing how it works in a nutshell.

What is blockchain, and how does it work?

In a simple sense, blockchain is defined as a shared database managed by a network of computers around the world. The huge amount of information stored in its database is then distributed and progressively merged by the computers in the network. These computers are commonly referred to as miners, nodes, or peers. Each miner creates and maintains their blockchain by consistently validating and transferring entries. The entries, meanwhile, are the information that users publish in the network. Generally speaking, the data corresponds to the cryptocurrency’s movement from one network user to another.    

For instance, if you send some bitcoins to a friend, you are creating an entry in the bitcoin network, which will then be published. In this given example, the entry you inputted will have some restrictions. This means that the computers in your bitcoin network will make verifications in order to confirm that the data you had sent (the cryptocurrency) hasn’t been sent earlier to someone else. Once that is cleared in the affirmative, your account will be debited and the credit will be transferred to your friend’s account accordingly.

You can look at it as a way for the computers in your network to keep you from “double spending.” The issue is easily addressed because the bitcoin network requires each computer in its respective network to have a complete record of the history of every entry ever made within the network, with no exception.

How do smart contracts work?

Smart contracts, also popularly referred to as chaincode or smart properties, are codified agreements that can be found inside a blockchain. To make it easier to understand, think of it this way: smart contracts are simple “if-then” and “if-then-else” codes or statements. Hyperledger Fabric and Ethernet are two examples of popular blockchains used to create smart contracts.       

Functioning like the “double spending” idea explained previously, the blockchains have a thorough and complete record of data on their corresponding smart contracts and, consecutively, the history of every smart contract’s cryptocurrency balance and the history of all transactions made in each.      

Smart contracts contain an internal memory that has their code. The code is automatically executed when preset or predetermined conditions are met. These conditions can either be internal or external. If the code for the smart contract requires an external source to discern if the conditions are met, it will utilize an oracle or source of knowledge. An oracle can be anything that will provide data; for example, it can be a data feed providing real-time weather updates. Going by this scenario, this particular oracle would be helpful if the smart contract were executing an insurance contract intended for crops. The contract can then look something like this: “If the temperature drops below 30 degrees for more than 2 hours, release $4,000 to Alvin.”

There are several digital currencies to choose from.

What is cryptocurrency?

Also known as digital currencies, virtual currencies, or tokens, cryptocurrencies are not like U.S. dollars, Malaysian ringgit, or Indonesian rupiahs in the sense that they’re online and are not backed by any government. Instead, they are handled by their respective computer networks. They are considered restricted entries in a database and, in order to change these entries, very specific conditions must first be met. Built utilizing cryptography (the art or writing and solving codes), the entries are therefore secured using math and not with people.  

You can think of it as a special type of database that functions and is shared by a peer-to-peer network. In the given example above, when you send bitcoins to a friend, you’re essentially creating and sending a restricted entry into your bitcoin network. And, just like explained earlier, the network then makes sure you don’t send the amount twice or incorrectly to someone else – “double spending.”     

What are the basic characteristics of cryptocurrency?

One cryptocurrency is essentially a little different from another, but they do share common characteristics. Here are some of them.

They’re irreversible. Once you’ve sent a cryptocurrency and the network has already confirmed it, there’s no going back. You can’t retrieve a transaction or make changes to it. It’s very important to note that cryptocurrencies are basically done one way.  

They’re anonymous. It’s possible for anyone to open a wallet, without the need for ID. The stage or level of anonymity, however, will largely depend on which token you’re trying to utilize.  

They’re global and easily accessible. Entries are immediately broadcasted across the network, and they’re confirmed in just a few minutes.  

They’re constructed and designed to be very secure. Cryptocurrencies utilize the latest in cryptographic techniques and they’re generally safe. That being said, it’s still in the early stages of development and there’s generally a lot of improvement to look forward to.  

Everyone starts out at the beginning of something, and that doesn’t necessarily have to be a discouraging notion. Instead, you can use that as a good foundation to learn new things, challenge yourself, and step out of familiar territory.  

As a business owner, are you already familiar with blockchain? If you are, have you taken steps to learn more about it, or maybe even taken steps to incorporate it into your business in the foreseeable future? Share your thought and insights with us in the comments.   

References:   

https://flochip.com/2018/07/29/blockchain-101-beginners-overview-of-blockchain-technology/

https://flochip.com/2018/11/23/google-it-8-of-the-most-common-questions-about-bitcoin/

https://www.bitdegree.org/tutorials/what-is-a-smart-contract/

https://cointelegraph.com/bitcoin-for-beginners/what-are-cryptocurrencies

Note: FLOChip has repositioned itself as a software development agency. Thus, moving forward our blogs will be focusing on bitcoin, blockchain, and other tech related topics. Enjoy reading!

Google It: 8 of the Most Common Questions about Bitcoin

You need to have lived under a rock (figuratively, of course) in the past few years for you not to have heard about bitcoin at one time or another. Indeed, the word has become so popular that it reached a point that it’s being talked about by people from all around the world. But for those who do not move in tech-related circles, the big questions still remain: what exactly is bitcoin, and how does it work?

For beginners and people who are simply curious, here are some of the most common queries related to this much talked about cryptocurrency.

1.    What is bitcoin?  

To put it in a nutshell, bitcoin is recognized as the most widely known and adopted cryptocurrency today. In 2009, it was launched by an anonymous creator going by the pseudonym Satoshi Nakamoto, and has since developed and undergone changes – and still continues to evolve.

It operates on a technology called blockchain. To understand how bitcoin works, think of it as digital ledger entries that are distributed across a decentralized computer network. This network doesn’t have any central authority, nor does it have any government overseeing its operations, making everything autonomous. Utilizing sophisticated encryption, bitcoin offers a thoroughly modern way to send digital currencies independently, very much like simply wiring money to a friend.      

2.    How do you buy bitcoin?

You can use conventional currencies like USD, IDR, SGD, and MYR to buy bitcoins. But if you really want to ride the wave, so to speak, then you can purchase bitcoins with the use of other digital currencies like Ethereum. Find a reputable digital assets exchange platform to manage your bitcoins.   

3.    Where can you buy bitcoin?

The most common place to trade, buy, and sell bitcoins is via online exchange platforms. While definitely convenient, these exchanges may present a high level of risk if they’re not secured and properly regulated. That’s why it’s important to do your research before making any investment decision.A notable example of a regulated platform is BITRADX. It’s been certified by the Indonesian government with a business license to operate as an international trading platform in the country. It will also be regulated under the Commodities and Futures Trading Regulatory Agency (also referred to as Bappebti). This is to make sure that its valued investors are protected and the platform adheres to the Indonesian government’s legal terms.  

Many believe that bitcoins can create a financial revolution.

Many investors of bitcoins are firm believers that bitcoins (together with other cryptocurrencies) have the technology to create a revolutionary change in the financial world. That being said, such investors regard bitcoins as assets similar to gold, and they usually employ a long-term buy-and-hold strategy called HODL (the term was originally a typo error for ‘hold’ – and somehow stuck). If you want to have a go at HODL, you’ll need to have a safe bitcoin wallet to keep your digital currencies until you’re ready to move them around.

Not all online brokers offer bitcoin funds, but those that do offer investors with the option to buy future bitcoin contracts, meaning you can invest in bitcoins without needing to own the underlying asset.

5.    How does bitcoin actually work?

Simply put, bitcoin records each transaction that takes place in its network, located in all of the nodes across the entire network. This means that a transaction cannot be altered or deleted simply by changing a single point.

Every user in the bitcoin system is given a public-private encrypted key pair, and their public keys serve as their respective address or account number. For example, if Ana sends a bitcoin to Mary, she’ll have to send it using Mary’s public key address. The transactions are then validated and added to the blockchain ledger by means of a method referred to as “mining.” This process is also how new bitcoins are continuously added to the system.   

6.    What is bitcoin mining?

As stated earlier, bitcoin mining is the procedure of adding new bitcoins into the system, as well as a way to validate and confirm transactions.  

Mining requires someone to solve a particularly challenging cryptographic puzzle. Imagine playing a big game of Keno (a lottery-like gambling game) wherein the winner is decided by chance and solely determined by probability; that’s how bitcoin mining is. The participant in the network who solves the puzzle first is entitled to claim newly minted bitcoins as their reward, together with the accumulated transaction fees that their block acquired.    

7.    How do you actually mine for bitcoins?

Because bitcoin is an open system, it allows anybody to join the network and become a miner.   

It is important to take note, however, that mining is not easy. In fact, it’s far from it. To begin with, miners need to have specific hardware that’s designed to be able to solve cryptographic mining puzzles utilizing dedicated microchips (popularly called ASICS); or have the capacity to rig a series of graphics processing unit (GPUs), which are known to solve cryptocurrency  mining puzzles considerably better than the usual CPUs.

And the hardware is just the beginning. Once you have acquired it, it might make sense for you to join a mining pool to collaborate your efforts with those of other miners from different parts of the world. If your pool solves a mining puzzle, every member in it is entitled to a pro-rated amount that matches the effort they contributed in the mining power.    

8.    How many bitcoins are there?

Bitcoin has a very interesting and unique feature: it is limited to 21 million coins to ever be mined. Currently, about 17 million have already been produced. That’s almost 80% of the total supply allocated for it.  

Another thing to note is that the rate of new bitcoins created is set at an average of a block (currently at 12.5 BTC) every 10 minutes. This spells out that the “block reward” likewise decreases over time; about every four years, the number of bitcoins that can be found in a block is slashed in half. When bitcoins were first released, there were 50 BTC for every block; in 2020, there will only be 6.25 BTC per block.     

You may not be familiar with bitcoins, but most people start from the ground up. And this list of questions should be able to give you at least a basic understanding of this thoroughly modern digital currency.

What are your thoughts and insights on bitcoin? Share with us in the comments.

References:   

https://flochip.com/2018/09/03/beginners-bitcoin-a-basic-guide-to-bitcoin/

https://flochip.com/2018/07/29/blockchain-101-beginners-overview-of-blockchain-technology/

https://www.bitradx.com/

Click to access BITRADX_whitepaper_en.pdf

Note: FLOChip has repositioned itself as a software development agency. Thus, moving forward our blogs will be focusing on bitcoin, blockchain, and other tech related topics. Enjoy reading! 

Beginner’s Bitcoin: A Basic Guide to Bitcoin

It’s not uncommon to treat something new and unfamiliar almost like a fictional story. After all, you’re not quite sure what to make of it, and you don’t understand enough to operate beyond guesswork. For a lot of beginners, that’s exactly what bitcoin seems to be – something along the lines of fiction. But – and this is worth taking note of – the fact that it’s the most widely known form of digital currency today is a clear sign that bitcoin has crossed the realm of the real world. Factor in the point that it’s used and accepted for many transactions around the world makes it deserving of the attention it has gathered so far.

If you’re a beginner to bitcoin, this quick overview will help you wrap your head around it. What bitcoin is, what it actually does, and how people earn from it.    

Going Down History Lane

Bitcoin is regarded as the first established cryptocurrency; that is, it’s a digital asset that’s secured with cryptography and can be exchanged like one does a normal currency. There were other cryptocurrency versions that were launched prior to bitcoin being released to the public in 2009, but none that was fully developed. The inventor is credited only with the pseudonym Satoshi Nakamoto, and whether it was an individual or a group of people remains unknown until today, because the identity has been anonymous from the start.

Nakamoto, nevertheless, stated that the goal of bitcoin is actually simple and straightforward: to create a “new electronic cash system” that is “completely decentralized with no server or central authority.”  

Bitcoin in Simple Terms

Simply put, bitcoin is a digital currency. That means that there’s no need to mint coins or print bills when using it. It’s decentralized, meaning that it’s not controlled by any particular authority, government, or even financial institution – the way regular currencies are. It’s also completely anonymous; the owners of bitcoins are not identified with anything that will connect them to their digital assets: no name, no account number, and no social security number. Instead, bitcoin makes use of blockchain technology and encryption keys to link buyers with sellers. And, similar with gold or diamonds, bitcoins can also get “mined.”

Mining Bitcoins

People use energy-intense and very powerful computers to “mine” bitcoins and make more of them. To date, there are approximately 16 million bitcoins around. That leaves only 5 more million available for mining because bitcoin developers had decided to make the ceiling quantity at 21 million. Now, this is the anatomy of a bitcoin. Every bitcoin can be divided into smaller parts; the smallest fraction is equivalent to one hundred millionth of a bitcoin referred to as a “Satoshi,” after the name of its credited inventor Nakamoto.   

And what does the mining entail? The process actually involves computers solving a very challenging mathematical problem that only gets more difficult progressively. When a problem is solved, it allows one block of a bitcoin to be processed and the miner is then rewarded with his new bitcoin. All users must establish a bitcoin address in order to claim the bitcoins they were able to mine. Think of the address sort of like a digital mailbox with a series of letters and 27-34 numbers. But contrary to a regular mailbox, though, there’s no user’s identity that’s linked to it.

On Using Bitcoins

While mining is quite popular to get your hands on bitcoins, there are other ways to acquire these digital coins. First off, you can transact with bitcoins and utilize them as a means to pay for products or services. For that you need to set up your bitcoin wallet, but doing so is actually surprisingly simple. If you have a PayPal account, then you have an idea that having your own virtual wallet would be on the same range – easy to set up and wouldn’t require a lot of your time. Then just choose a notable digital assets exchange platform and you’re good to go. You’re now ready to buy, sell, and manage your digital assets.

You may also look into websites that pays in bitcoins for completing particular tasks. Once you have your bitcoins, you can opt to lend them out and, in turn, earn interest. A good exchange platform will also allow you to trade your regular currency (USD, MYR, SGD, EUR, CNY, and AUD, for instance) for bitcoins. It might likewise be interesting to keep a tab on merchants that accept bitcoin payment for a wide range of merchandise – from gift vouchers all the way to pizza.

Dealing with Risks

Like with most things that are new and still in the process of being developed, bitcoin presents a fair amount of opportunities as well as risks. While its complete anonymity and lack of regulation may pose glitches every now and then, it also presents a lot of advantages for those who lean more on the inquisitive side and are willing to learn about this digital currency.    

It remains to be seen whether or not bitcoin can actually replace government-controlled, centralized currency. But one thing’s for sure: the technology is certainly growing and evolving, so it won’t hurt in the least to be familiar with bitcoins.   

As an entrepreneur, you owe it to yourself, your business, and your customers to always be on the lookout for ways to improve. That means actively scouting for opportunities to make things easier, to build a more efficient system, and to serve your customers better. The fact that bitcoin is now accepted by over 100,000 establishments around the world definitely means something, so it’s worth your time and effort to at least have a basic understanding of it – regardless of what industry your business is in.  

Have you tried using bitcoins? If so, how was your experience with it? And perhaps just as interesting to note: how do you think digital currencies will affect businesses in the succeeding years? We’d love to know your insights; share us your thoughts in the comments section.

References:   

https://www.cnet.com/how-to/what-is-bitcoin/

https://flochip.com/2018/07/29/blockchain-101-beginners-overview-of-blockchain-technology/

https://www.digitaltrends.com/computing/how-to-mine-bitcoin/

https://bitradx.com/

Beginner’s Overview: Blockchain 101 Technology

Even if you’re not a programmer or developer, you may have heard of the term ‘blockchain’ circulating around the internet, particularly in the last few years. It has created such a buzz, in fact, that it’s hard not to have heard of it at least a couple of times in passing.  

Nevertheless, if you’re not a tech fanatic, or you’re not directly involved with the tech team of your company, there’s a very high chance that you’ve not taken the time to familiarize yourself with it. So amidst all the excitement and speculation, the primary question likely running through your mind is this: what on earth is blockchain?

Blockchain, originally intended for bitcoin, is an invention of a person (or group of people) going only by the pseudonym Satoshi Nakamoto. It’s a technology that allows the distribution – but not copying – of digital information, paving the way for a new and revolutionary type of internet. The tech community, however, is discovering other potential uses for it.

In order not to be confused, it’s important to note foremost the difference between bitcoin and blockchain. Bitcoin is a digital currency, also referred to as “digital gold” – and for a very good reason. The total value of the currency to date is a whopping U$9 billion, and you can find both established and new trading platforms for the crypto currency. Blockchain, on the other hand, is a technology by which bitcoin operates. And as a technology, it can also create other kinds of digital value. Fortunately, you don’t have to know the detailed nuances on how blockchain works; you just need to have a basic understanding of it.       

Blockchain in a Nutshell

Simply put, Don and Alex Tapscott, authors of the notable book Blockchain Technology in 2016, defined it this way: “The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”  

Using a ledger as an analogy for blockchain makes for a strong comparison. After all, it’s quite easy to picture blockchain as a spreadsheet that’s copied thousands of times across a network of computers. The computer network is designed to regularly and frequently update the spreadsheet. Information on a blockchain is a shared – and continuously updated – database, which comes with considerable benefits. For instance, the database isn’t stored in any single given location; this spells out that the records are kept public and can easily be verified. And because it is hosted by millions of computers at the same time, the data is accessible to anyone with an internet connection.

Comparing Blockchain with Google Docs

Venture advisor, entrepreneur, marketer, strategist, and blockchain specialist William Mougayar nails it down beautifully when he compares blockchain with Google docs. This is how he puts it. “The traditional way of sharing documents with collaboration is to send a Microsoft Word document to another recipient, and ask them to make revisions to it. The problem with that scenario is that you need to wait until receiving a return copy before you can see or make other changes because you are locked out of editing until the other person is done with it. That’s how databases work today. Two owners can’t be messing with the same at once. That’ how banks maintain money balances and transfers; they briefly lock access (or decrease the balance) while they make a transfer, then update the other side, then re-open access (or update again).”

“With Google docs (or Google sheets), both parties have access to the same document at the same time, and the single version of that document is always visible to both of them. It is like a shared ledger, but it is a shared document. The distributed part comes into play when sharing involves a number of people. Imagine the number of legal documents that should be used that way. Instead of passing them to each other, losing track of versions, and not being in sync with the other version, why can’t *all* business documents become shared instead of transferred back and forth? So many types of legal contracts would be ideal for that kind of workflow. You don’t need a blockchain to share documents, but the shared documents analogy is a powerful one.”

Durability and Strength

Blockchain technology is similar with the internet in that both of them have a built-in strength or robustness in them. Because identical blocks of information are stored across it network, blockchain is noted for two amazing features: (1) it cannot be controlled by a single entity, (2) and it doesn’t have a single point of failure.   

Since it was invented, blockchain has run without any considerable function. And until now, all problems associated with bitcoin have been linked to mismanagement or hacking. In short, such issues are the result of either human error or bad intention (or both), not errors found in the concept of the system. The internet has proven itself to be more than durable since it started a few decades ago; blockchain holds similar potential as it continues to evolve and develop.   

TEDx Speaker Ian Khan concludes with these words to ponder: “As revolutionary as in sounds, blockchain truly is a mechanism to bring everyone to the highest degree of accountability. No more missed transactions, human or machine errors, or even an exchange that was not done with the consent of the parties involved. Above anything else, the most critical area where blockchain helps is to guarantee the validity of a transaction by recording it not only on a main register but a connected distributed system of registers, all of which are connected through a secure validation mechanism.”

What are your thoughts on blockchain technology, especially if you’re a business owner? Are you well versed about it and can easily share your insights on the topic, or are you just getting acquainted with it? Share us your thoughts in the comments section; we would love to hear from you.

References:   

https://www.computerworld.com/article/3191077/security/what-is-blockchain-the-most-disruptive-tech-in-decades.html

https://money.cnn.com/infographic/technology/what-is-bitcoin/

https://www.theguardian.com/books/2016/jul/06/blockchain-revolution-how-technology-behind-bitcoin-changing-money-business-don-alex-tapscott-review

http://startupmanagement.org/2016/09/06/explaining-the-blockchain-via-a-google-docs-analogy/