Blockchain Made Simple

Blockchain is one of the hottest sectors in the market, yet few investors really understand what the blockchain is, and how it works. This is why DMG Blockchain Solutions is presenting Blockchain Made Simple. Hosted by Dan Reitzik, Blockchain expert and CEO of DMG Blockchain Solutions; Blockchain made Simple is a series of fun, easy to digest videos, answering questions like What is Cryptomining? What is Bitcoin? and How are Bitcoins created and earned?

What is Bitcoin?

Everyone’s heard of it but what is Bitcoin, and is it legal? Bitcoin is the first widely adopted use of blockchain technology. Bitcoin is a type of digital money or cryptocurrency and yes it’s perfectly legal. Bitcoin first appeared in 2009, created by a developer named Satoshi Nakamoto. Like any type of currency system, Bitcoin’s value is based on what others are willing to pay for it, and there are several market exchanges where Bitcoin is traded. One of the advantages of Bitcoin is that no one group ‘owns’ or controls Bitcoin, and therefore there is no need for central banks to move or store it– so there are no traditional bank fees involved in using or sending Bitcoin.

So what is the Blockchain?

The blockchain can be compared to an accounting ledger that is digital and viewable by all and is widely used by cryptocurrencies. The blockchain describes a set of transactions, blocks like a financial trade or an asset like a Bitcoin all linked together in a chain so that any attempt to alter one block will be immediately recognized by all the other blocks. This entire blockchain is distributed and stored on multiple computers called nodes all over the world so that not a single authority can control it. Each node verifies and stores its own copy of the entire blockchain so hacking is impossible. Using blockchain ensures that no data can ever be altered.

How Are Bitcoins Created & Earned?

The only way to earn new Bitcoins from scratch is to ‘mine’ them. To become a bitcoin miner, you need a very fast computer and the right software to solve a specific math puzzle using what is called a hash function — Solving that puzzle entitles the miner to add a new block to the chain of existing blocks — or blockchain, which is a digital ledger that keeps the entire transaction history of every bitcoin ever mined or transacted. Because modern bitcoin mining is most optimally performed at an industrial scale, companies are more suited to profitably mine than individuals.

How Do I Buy Bitcoin?

There are 4 ways to buy bitcoin. Most people buy and trade existing bitcoins on a stock market-like exchange, such as Coinbase. A second option is to earn or to ‘mine’ new Bitcoins from scratch by solving a series of difficult math puzzles. This requires dedicated computer hardware and software that you run yourself or is hosted by a professional mining service. A third way is to buy with cash from one of the many ‘bitcoin ATM’ machines. A fourth option started just last December, is Bitcoin Futures. These are standardized contracts to buy or sell a predetermined quantity of Bitcoin at a set price, on a set date in the future. Brought to you by DMG Blockchain Solutions.

What can I buy using Cryptocurrency?

In Japan, bitcoin is widely accepted as payment, as it is regulated as a currency and can be used for buying practically anything. In North America roughly 100,000 merchants accept bitcoin payments, including brand-names like Microsoft and Expedia. Some high-end car dealers and jewelry stores are accepting Bitcoin. You can buy money-value gift cards via Gyft. Several hotels and restaurants in Las Vegas accept bitcoin. Even the owner of the Dallas Mavericks basketball team began accepting bitcoin for future season ticket purchases. There is even a Burger King in the Netherlands and a bar in Australia that let you pay with bitcoin.

What is blockchain used for?

Blockchain is the underlying technology that allows Bitcoin and cryptocurrencies to exist. The blockchain can be compared to an accounting ledger that is digital and viewable by anyone. However, the blockchain revolution extends beyond currency. Using blockchain ensures that no data can ever be altered. The contents of each transaction can describe an asset like the Deed of Trust to your house, the copyright to a piece of music, the origin of a diamond, or any other valuable item or idea. As bitcoin was the first ‘thing’ to ever be recorded using blockchain technology, Bitcoin and Blockchain are commonly thought of together.

How is blockchain used in retail?

Starbucks and Walmart are already using blockchain. Blockchain is simply a technology – like a digital accounting ledger – that securely tracks many types of transactions. Blockchain technology ensures that no data can ever be altered. In retail, that tracking guarantees quality at every step in the production and distribution of goods from the source all the way to the consumer. Starbucks implemented a program with farmers in countries like Colombia, to track coffee from “bean to cup,” by sharing real time information at every step along the supply chain. Walmart’s food safety group is using blockchain technology to track the farm where pork is raised, factory processing data, expiration dates, storage temperature and shipping details.

What is an ICO?

An Initial Coin Offering, also commonly referred to as an ICO, is a fundraising mechanism in which new
a new business, Bob’s Co.,  sells a digital “Bob’s Co coin” in exchange for cryptocurrency or cash. It’s similar to an Initial Public Offering, or IPO, in which investors purchase shares of a company but doesn’t get you an ownership stake in the company; instead you are betting that the underlying “Bob’s Co. coins” will be used in high volume and will increase in value. Investing in ICOs can be risky because the vast majority of them are not regulated.

What is Cryptomining?

Cryptomining is the process used to digitally create bitcoins and other cryptocurrencies. The process involves computers solving a very difficult math puzzle in exchange for the right to declare the existence of new coins. Mining provides a reward to miners, paid out in cryptocurrency. In the early days of Bitcoin, one could use ordinary computer hardware and software to solve the hash functions. But the difficulty level of the math now requires highly optimized computers called mining rigs to compete successfully. The electricity demands to run the mining rigs are massive so many investors host their mining rigs at industrial scale mining companies.

If I send money using Bitcoin or using PayPal, what’s the difference?

Both systems will transfer money or value. But PayPal is a single central authority and will take out fees for making the transfer — those fees go to solely to PayPal. Bitcoin is transferred on the network through a digital wallet. There is a very small transaction fee for coin transfers over the network, and those fees go to the miners, who are ensuring the security of that network. The possibilities of bitcoin and other cryptocurrencies are that banks may become unnecessary for holding and transferring currency and that transaction costs will go down substantially.

How Can Blockchain Be Used in Banking?

Using blockchain technology ensures that no data can ever be altered. Banks like Deutsche Bank and HSBC are using blockchain for international payments. PWC is recording audit compliance using blockchain. Blockchain is simply a technology – like a digital accounting ledger– that brings total transparency and security to many types of transactions. In banking, that means; reduced fraud costs, reduced risks to making loans and therefore cheaper interest rates, faster and cheaper international wire payments and better ways to protect your online identity. Blockchain technology runs on a worldwide network of computers that no single bank or organization controls.

Why is everyone saying Blockchain is so revolutionary?

Blockchain is the underlying technology that allows Bitcoin and cryptocurrency to exist. It can be compared to an accounting ledger that is digital and viewable by anyone.The revolution enabled by blockchain technology is the result of the combination of the following;

  1. Security – the blockchain transaction records cannot be altered, the security of all blocks which were mined before increases with each new block.
  2. Transparency – the blockchain contents can be viewed by anyone.
  3. Timestamped – each blockchain transaction has a sequence number that makes it unique and every subsequent entry depends on the first entry.