It is very normal to feel confused on what to do next when one hears about the word Crypto Currency that is if they are curious about this technology and also want to know more about it, as it continues to grow into a widely used medium of exchange, so it is advised that we take things slow and steady because that is what wins the race.
First thing to do is to know what exactly this technology is all about and today this article would basically be on everything a beginner needs to know before venturing into the World of Crypto, so let’s get started.
Know what Crypto Currency is!
Crypto Currency can be said to be an online asset or an internet property that has transactions that are recorded by a Decentralized Blockchain System by using a Cryptographic technique. Cryptocurrency is also said to be a decentralized digital currency that can be used to purchase goods and services, just like fiat or paper money. The word “Cryptocurrency” comes from the Encryption Method that is usually used to secure the network.
Currently the most Popularly known Crypto Currency is called Bitcoin which is the first Crypto currency that is usually known as the King of all Cryptocurrency, you can learn more about Bitcoin by reading the book called The-Book-Of-Satoshi.
According to buybitcoinworldwide there are currently 109Million people holding Bitcoin (BTC) and about 400,000 people trading it on daily bases.
Cryptocurrency is a decentralized virtual currency that can be used to purchase items and even services, just the same way paper cash or money is used. The word “cryptocurrency” comes from the encryption strategies used to comfy and protect the network.
Have the primary knowledge of what a blockchain technology is.
As we all know, the world is gradually moving into a digital system and everything is leaving the analogue system little by little, from communication down to finance and even keeping records and more. This new accounting system is what we call “Blockchain Technology”.
The Blockchain Technology is a decentralised distribution of leger that is used to record transactions. Each transaction you make is recorded as a leger on the Blockchain and each node (_a node is a computer that can validate transactions on a network_)always has a shared distribution of that transaction, hence this means that the Blockchain is transparent and everyone can see any transaction that takes place. This is also the reason why it is deemed secured by the mass.
Having known blockchain the new accounting system. Cryptocurrency uses this accounting system to record transactions on their network.
With this, you can see that the blockchain has taken over the bank workers job of keeping financial records of our transactions.
or nodes to be able to validate these transactions that is beings recorded on the blockchain they will need to agree who will validate a particular transaction.
This brings us to what is known a a *consensus mechanism
Know what a Consensus mechanism is!
The English dictionary, defines the word *”consensus”* as “a general agreement”.
This is the same in cryptocurrency *consensus* as it is the process by which groups of nodes determines which transactions is valid and which is not.
A consensus mechanism simply means any method or system used to achieve agreement, trust, and security across a decentralized computer network.
You need to know about the different types of Consensus mechanism.
There are many types of consensus mechanisms, depending on the blockchain and its application. While they differ in their energy usage, security, and scalability, they all share one purpose: to ensure that records are true and honest. Here’s an overview of some of the best known types of consensus mechanisms used by distributed systems to reach consensus.
The three types of consensus mechanism we would be looking into today despite the number that we have hence the three types of Consensus mechanism are ;
♻️proof-of-work(POW)
♻️proof-of-stake(Pos)
♻️Delegated proof of stake (DPoS)
What is proof-of-work (Pow)?
Proof of work is a consensus mechanism whereby *miners* with *high computing power* compete to guess a mathematical problem *(the higher computing power you have, the higher chances of guesses you can make )*, if a miner gets it correctly he shares the answer to the other nodes in order to reach a consensus, then the winner gets the opportunity to validate the next block and by doing this the miner gets rewarded.
Bitcoin use this Pow consensus mechanism that’s why mining of bitcoin consumes lots of electricity.
Proof of stake (Pos)
In Proof-of-stake consensus mechanism the system randomly selects *validators* to validate the transaction and forge the next block.
Who’s a validator?
A validator is a person that validate transactions on the blockchain using a node.
In *Pos*, the validator stake some percentage of coins in order to be selected *(the higher your stake the higher chances of being selected)* and they can be penalized by loosing their staked coins if they validate a wrong transaction.
This way you will be using less energy consumption than POW.
What is delegated proof of stake(DPoS)?
According to the English dictionary the word “delegate “means;
*a person sent or authorized to represent others, in particular an elected representative sent to a conference.*
Or
*entrust (a task or responsibility) to another person, typically one who is less senior than oneself.*
You may ask;
What is staking in crypto?.
Staking is when you lock crypto assets for a set period of time to help support the operation of a blockchain.
Now, having known what proof of stake is, it’s much more easier in understanding DPoS.
Just as the English dictionary said “to entrust a person with a task”. Now in this case, instead of running a node ourselves and validating transactions on the blockchain users vote a validator that will validate the next transaction by *entrusting the validator with some percentage of their coins*(that is called *delegating*).
Now after the validator validates the transaction and gets rewarded he then distributes the block rewards to those who voted for him.
This is the point which we must pay attention to.
This was why we wanted to also teach what DPoS is before we learn how to delegate .
Remember after December 12 i.e 61 days from now the mobile mining will end and the only way to earn Satoshi-Core is by delegating your core or by running a node yourself.
We shall be learning how to delegate Tcore in our next article
