MINING AND INCENTIVE MODELS
Mining
It refers to the process of verifying and adding transactions in a blockchain. Mining involves solving complex mathematical problems using supercomputers. Miners compete with each other to find a solution and the first one to find the solution is rewarded with newly minted cryptocurrency coins.
Incentive Models
Incentive models are mechanisms designed to motivate participants in a blockchain network to act in the best interest of the system. These models are made to encourage mining, staking and validating transactions.
Some of the incentive models:
Proof of Work
Miners compete to solve various mathematical puzzles. The one who solves it first receives a reward. The Proof of Work model is designed to secure the blockchain.
Proof of Stake
In Proof of Stake, participants hold a certain number of coins in a wallet, which are used as "stake" to validate transactions and create new blocks. Validators are chosen based on their stake, and the chances of being selected are proportional to the amount of stake they hold.
Proof of Authority
Proof of Authority is a consensus mechanism where a limited number of approved nodes, usually trusted entities or organizations, are granted the authority to validate transactions and create blocks.
BLOCKCHAIN FORKING
Blockchain forking refers to the creation of a new branch or a new version of an existing blockchain.
There are two main types of forks
Hard Fork
A hard fork occurs when there is a permanent divergence in the blockchain's protocol, resulting in two separate and incompatible versions of the blockchain. This typically happens when there is a fundamental change or upgrade in the blockchain's rules.
Miners have to adopt the new rules for mining and validating transactions.
Soft Fork
A soft fork is a backward-compatible upgrade to the blockchain's protocol. In this case, the changes made to the blockchain's rules are compatible with the existing protocol, allowing nodes that have not upgraded to continue participating in the network.
CRYPTOWALLETS
Cryptocurrency wallets, also known as crypto wallets or digital wallets, are software applications or hardware devices that enable users to securely store, manage, and interact with their cryptocurrencies.
Types of cryptowallets
Software Wallets
These wallets are stored on desktops or mobile apps.
Hardware Wallets
Hardware wallets are physical devices specifically designed to store cryptocurrencies. They add an extra layer of security by keeping the private keys offline.
Paper Wallets
Paper wallets involve printing public and private keys on a physical piece of paper.
Online Wallets
Some crypto platforms offer built-in cryptowallets so that users can store their cryptocurrencies.
CRYPTOGRAPHY
Cryptography is the practice and study of techniques used to secure communication, data, and information from unauthorized access or modification. It involves the use of mathematical algorithms to encrypt the information.
BLOCKCHAIN INTEROPERABILITY
Blockchain interoperability refers to the ability of different blockchain networks or platforms to communicate, exchange data, and interoperate with each other seamlessly.
Interoperability has several crucial reasons
Asset Transfer
Interoperability allows the transfer of assets like cryptocurrencies between different blockchain networks.
Cross-Chain communication
Interoperability allows blockchain networks to communicate and share data. Interoperability encourages collaboration and cooperation between different blockchain communities and projects.
Collaboration
Interoperability encourages collaboration and cooperation between different blockchain communities and projects.