Blockchain Basics, Part 2
Welcome to the second installment of our Blockchain Basics Crypto Witch Club Guide!
By Crypto Witch Club
This Crypto Witch Guide is for you if:
👉You’re just getting started on your crypto journey and looking for information on trusted projects to invest in
👉You know a little but want to have a better understanding of the blockchain and web3 ecosystem
👉You’re deep into crypto already but want to brush up on your protocols and terminology
If you haven’t read the first installment of this guide, check it out here before proceeding!
What’s a protocol? And how does it relate to blockchain and cryptocurrency?
Protocols are a set of systems (codes) that tell a blockchain how to operate. Think of protocols as a blockchain’s parents / guardians that make sure the blockchain functions as it should.
Some common protocols are …
Proof-of-work (PoW) is based on cryptography — a form of mathematics. (Hence, the name cryptocurrencies!) Cryptography uses mathematical equations that are complicated and require powerful computers to solve. Due to that, it can result in extremely high energy consumption
Proof-of-stake (PoS) came after PoW — as an alternative to high energy usage and (sometimes) slow transaction times. Using PoS, miners can validate block transactions based on how many coins they themselves hold. This diminishes the need for large amounts of energy required to complete a transaction — as no complicated mathematical work is required to execute
Proof-of-authority (PoA) is a protocol where transactions are validated by approved accounts (validators). This is an automated process that does not require validators to be engaging, however, candidates are responsible for keeping their node/s safe. A node is a system connected to the cryptocurrency network that can execute specific functions
What’s the difference between crypto mining and crypto minting?
Crypto MINING is: a process where new proof-of-work tokens are entered into circulation. Mining is the process of solving complex mathematical equations that are complicated and require powerful computers to solve. (Hence, why you often hear of high energy consumption in relation to proof-of-work.) Miners (those who invest in equipment and energy to solve these problems) are rewarded with crypto tokens. You can earn crypto through mining; however, it is not the only way to earn crypto — and we do not suggest for beginners due to high start-up costs and skills required. (First time? Purchase on an exchange).
Crypto MINTING is: similar to crypto mining (the process of validating information + creating a new block). However, rather than solving complex mathematical equations, proof-of-stake has ‘validators’ that forge each new block. These validators earn crypto through staking rewards.
What is a crypto exchange and how do I sign up?
A crypto exchange is a trading platform — where you can purchase, trade, deposit, and withdraw cryptocurrency. Crypto exchanges are similar (in basic format) to a stock-related trading platforms such as eToro or Etrade On crypto exchanges, you can manage your portfolio, set recurring buys (if you’re feeling hands-off), transfer crypto to your software or hardware wallet, or convert to USDC (or your national currency).
We like COINBASE + GEMINI for beginners. It’s easy to link your bank account or debit card and quickly purchase crypto. Both allow you to set reoccurring purchases, referral rewards, and COINBASE offers ‘crypto lessons’ in exchange for free crypto. (Make sure to verify your ID to have access to all the features)
For harder to find coins, we personally prefer Binance. Again, make sure to verify your ID and have withdraw capabilities before you purchase
After you make a purchase, it’s always best to move your cryptocurrency to a wallet, as opposed to letting it stay on-exchange (where it is less safe — as it’s held by the exchange and not you personally)
Craving more?
Download our FREE Blockchain Basics Guide on our website to read the next segments or stay tuned here for the third installment of Blockchain Basics from Crypto Witch Club.