Welcome to our Intermediate Guide! We're on a mission to educate the masses on the transformative potential of cryptocurrency and blockchain technology.
What is a wallet or account?
Accounts on a blockchain are characterized by a unique address, a balance (in the native token) and a nonce. The unique address is the same as the public key associated with the private key used to generate and access the account. It is often referred to as a “wallet”, because it has an associated token balance, which means it “has money” in it.
Nonce comes from “number once” and starts at 0. Every time a transaction is initiated from an account, this nonce is increased by 1.
An example of an eGold wallet or account address is: erd16rp9ur5crj6lcjyttr0ftft8vspmcgq3kk00wmzkv6p7lnqg3v8quhqhh5
What is a private key?
Blockchain cryptography uses pairs of private and public keys. The keys themselves are strings of characters that are cryptographically intertwined, meaning a private key will always be associated to the same public key and vice versa. The public key can be deducted from the private key, but not the other way around.
The private key enables unrestricted control over funds stored in the associated wallet - also referred to as account - and should therefore be kept safe. The public key is used as an address to identify a wallet. A simple comparison would be with a mobile phone, where the private key is the SIM card and the public key is the telephone number.
What is a protocol?
A blockchain protocol is the set of rules that govern a decentralized network and the tasks performed by its Validators. It is implemented by installing a certain piece of software on computers, who then connect to one another over the internet and act in accordance with the rules described in the protocol.
These rules tell Validators how to send and receive transactions from other Validators, how to verify and store the included information and other aspects that jointly make up how a blockchain works.
What is staking?
Staking means locking cryptocurrencies to secure the underlying blockchain network and receive rewards. It is an essential part of the Proof of Stake (PoS) consensus mechanism, which is a much more energy efficient alternative to Proof of Work mining.
Consensus happens when all computers on the network agree on the account balances and transactions happening between them. For processing network messages and verifying them until consensus is reached, the computers - called Validators - are rewarded by the protocol.
What is market cap?
Market capitalization - market cap for short - measures the total market value of a cryptocurrency. It is calculated by multiplying the token supply with its current price.
Because different projects have different amounts of tokens (supply) and different prices, the market cap is used to measure a project’s overall value in comparable terms.
What is token supply?
Each blockchain project has its own economy that is based on the blockchain’s underlying token. Depending on their respective designs, projects can have a smaller or larger number of tokens, some of which may be locked or to be issued at a later time.
The number of tokens that are issued and not locked is called “circulating supply”. The circulating supply + the locked tokens are the total supply. The total number of tokens that can exist is called a maximum supply. Bitcoin and eGold have a maximum supply and are therefore scarce, while other projects do not and continuously release tokens into circulation via an issuance mechanism.
What is issuance?
Issuance (sometimes referred to as “inflation” in blockchain lingo) represents the process of adding new coins to the existing circulating supply. This can be done programmatically via predefined formulae, or ad hoc via “minting”, the process of creating new tokens.
Blockchains employ issuance to reward participants for processing transactions on the network, protecting it against attack vectors or fulfilling other processes required by their respective economies.
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