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https://www.investopedia.com/terms/g/gas-ethereum.asp | Understanding Ethereum Gas Fees: Their Role and Calculation | Gas fees on the Ethereum blockchain are essential for conducting transactions and executing contracts. Priced in gwei, smaller fractions of Ethereum's cryptocurrency, ETH, these fees compensate validators for the resources expended during transaction processing. The price of gas fluctuates based on supply, demand, and network capacity, making it a competitive and dynamic component of Ethereum's operation.
Gas fees rise and fall in response to supply and demand for transactions—if the network is congested, gas prices may be high. On the other hand, they could be low if there is not much traffic.
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Initially, gas fees were determined by the gas limit and price per unit. In August 2021, changed its calculations for gas fees to use a base fee (a set fee for the transaction set by the network), units of gas required, and a priority fee. The priority fee is a tip to the validator that chooses a transaction—the more you tip, the higher the chances are that your transaction will be processed faster.
So, imagine you wanted to pay a friend 2 ETH, and you think it will require two units of gas. The base fee is 11 gwei, and you provide a tip of 3 gwei. Your gas fee would be:
Ethereum, as a platform and system, is designed to be used by others to create more use cases for and cryptocurrency. For this reason, it is commonly called the Ethereum Virtual Machine, because applications can be created that run on it. The EVM is essentially a large virtual computer, like an application in the cloud, that runs other blockchain-based applications within it.
The EVM has been used to create many , cryptocurrencies, and tokens. These require gas fees because they operate on the Ethereum blockchain. Because the Ethereum blockchain is part of the EVM, the cryptocurrencies built on that blockchain require gas fees. For example, a popular token built on Ethereum's blockchain is DAI. Because it uses the Ethereum blockchain, users need to pay gas fees in gwei to conduct transactions on the chain.
An ongoing concern for any cryptocurrency that requires transaction fees is the price users pay for the transactions. Before 2020, Ethereum's gas fees were usually just a few cents, but often spiked. After January 2020, they rose significantly, frequently exceeding $20, as more users joined.
After —the merge of the Beacon Chain and the Ethereum main chain when proof-of-stake was implemented—fees began to range from a few dollars to as high as $30. However, The Merge was not designed to address the problem of high fees. It was one of many updates that, when combined, are believed to eventually lower gas fees.
There are ways to avoid high fees. First, try timing your transactions during less busy periods on the network. EtherScan provides a gas tracker that shows the day's high, low, and average gas fees, so you can try to time your necessary transactions using its tracker or another like it. The website also provides a Chrome extension you can install to the browser that lets you see gas prices in real time.
Second, you can use Layer 2 solutions or dApps for your transactions. Taking your activity off the main chain is one of the best ways to keep your fees low.
Ethereum gas is a blockchain transaction fee paid to network validators for their services to the blockchain. Without the fees, there would be no incentive for anyone to stake their ETH and help secure the network.
The Ethereum gas fee exists to pay network validators for their work securing the blockchain and network. Without the fees, there would be few reasons to stake ETH and become a validator. The network would be at risk without validators and the work they do. So, it essentially runs on gas.
Gas fees are used on the Ethereum blockchain and network to incentivize users to stake their ETH. Staking works to secure the blockchain because it discourages dishonest behavior. For staking their ETH, owners are given small payments as a reward for helping to secure the blockchain and help it function.
Fees are determined by the amount of network traffic, the supply of validators, and the demand for transaction verification. The higher the demand and traffic, the higher the fees. When traffic and demand are lower, fees become lower.
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https://www.investopedia.com/non-fungible-tokens-nft-5115211 | Non-Fungible Token (NFT): What It Means and How It Works | Non-fungible tokens (NFTs) are assets like artworks, digital content, or videos that have been tokenized via a blockchain. Tokens are unique identification codes created from metadata via an encryption function. These tokens are then stored on a digital ledger, while the assets themselves are stored in other places. The connection between the token and the asset is what makes them unique.
NFTs can be traded and exchanged for money, cryptocurrencies, or other NFTs—it all depends on the value the market and owners have placed on them. For instance, you could draw a smiley face on a banana, take a picture of it (with metadata attached), and tokenize it on a blockchain. Whoever has the private keys to that token owns whatever rights you have assigned to it.
Cryptocurrencies share similarities with NFTs in that both are secured on blockchain networks. The key difference is that cryptocurrencies are , meaning there's no significant difference between one Bitcoin and another; no two NFTs are identical. While Crypto.com offers NFTs, most do not. NFTs can be purchased through platforms such as OpenSea or Magic Eden.
NFTs were created long before they became popular in the mainstream. The first NFT reportedly sold was "Quantum." It was designed and tokenized by Kevin McKoy in 2014 on one blockchain (Namecoin), later minted on Ethereum, and sold in 2021.
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Most NFTs on the Ethereum blockchain are built following the ERC-721 standard, which dictates the transfer of ownership and how transactions are confirmed, along with how applications handle safe transfers (among other requirements). Approved six months after ERC-721, the ERC-1155 standard lets multiple NFTs share a single contract, reducing transaction costs.
One of the earliest popular NFTs was CryptoKitties, a digital collectible game launched in November 2017. Each is a digital representation of a cat with unique "cattributes" determined from the cat's unique identifier on the Ethereum blockchain. Some features are rarer than others, leading collectors to place higher prices on them. They "reproduce" among themselves and create new offspring with other attributes and valuations compared to their "parents."
Also launched in 2017, Decentraland is a blockchain-based open world where participants can buy and sell virtual . Each "parcel" of Decentraland is associated with its geographical coordinates, with some plots commanding a higher value because of their premium location.
through a process called minting, in which the asset's information is encrypted and recorded on a blockchain. At a high level, the minting process entails a new block being created, NFT information being validated by a validator, and the block being closed. This minting process often entails incorporating smart contracts that assign ownership and manage NFT transfers.
As tokens are minted, they are assigned a unique identifier directly linked to one blockchain address. Each token has an owner, and the ownership information (i.e., the address in which the minted token resides) is publicly available. Even if 5,000 NFTs of the same exact item are minted (similar to general admission tickets to a movie), each token has a unique identifier and can be distinguished from the others.
Many blockchains can create NFTs, but they might be called something different. For instance, they are called Ordinals on the Bitcoin blockchain. Like an Ethereum-based NFT, a can be bought, sold, and traded. The difference is Ethereum creates tokens for the asset, while Ordinals have serial numbers (called identifiers) assigned to satoshis—the smallest bitcoin denomination.
Like physical money, cryptocurrencies are usually from a financial perspective, meaning that they can be traded or exchanged, one for another. For example, one is always equal in value to another bitcoin on a given exchange, similar to how every dollar bill of U.S. currency has an implicit exchange value of $1. This fungibility characteristic makes cryptocurrencies suitable as a secure medium of transaction in the digital economy.
For this reason, NFTs shift the crypto paradigm by making each token unique and irreplaceable, making it impossible for one non-fungible token to be "equal" to another. They are digital representations of assets and have been likened to digital passports because each token contains a unique, non-transferable identity to distinguish it from other tokens. They are also extensible, meaning you can combine one NFT with another to create a third, unique NFT—the cryptocurrency industry calls this "breeding."
Much of the earlier market for NFTs was centered around digital art and , but it has evolved into much more. For instance, the popular NFT marketplace OpenSea has several NFT categories:
* : Photographers can tokenize their work and offer total or partial ownership. For example, OpenSea user erubes1 has an "Ocean Intersection" collection of ocean and surfing photos with several sales and owners.
* NFTs with the main purpose to be used as a social media profile picture or avatar. Popular PFPs include Bored Ape Yacht Club and World of Women (WoW).
Perhaps the most apparent benefit of NFTs is . Tokenizing a physical asset can streamline sales processes and remove intermediaries. NFTs representing digital or physical artwork on a blockchain can eliminate the need for agents and allow sellers to connect directly with their target audiences (assuming the artists know how to host their NFTs securely).
NFTs can also streamline investing. For example, in 2019, consulting firm Ernst & Young developed an NFT solution for one of its fine wine investors, storing wine in a secure environment and using NFTs to protect provenance.
can also be tokenized by being parceled into multiple sections, each containing different characteristics. For instance, one section might be on a lakeside, while another is closer to the forest. Depending on its features, each piece of land could be unique, priced differently, and represented by an NFT. Real estate trading, a complex and bureaucratic affair, could then be simplified by incorporating relevant metadata into a unique NFT associated with only the corresponding portion of the property.
NFTs can represent ownership in a business, much like stocks—in fact, stock ownership is already tracked via ledgers that contain information such as the stockholder's name, date of issuance, certificate number, and the number of shares. A blockchain is a distributed and secured ledger, so issuing NFTs to represent shares serves the same purpose as issuing stocks. The main advantage of using NFTs and blockchain instead of a stock ledger is that smart contracts can automate ownership transfer—once an NFT share is sold, the blockchain can take care of everything else.
NFTs can also democratize investing by fractionalizing physical assets. Fractionalized ownership through tokenization can extend to many assets. For instance, a painting does not always need a single owner—tokenization allows multiple people to purchase a share of it, transferring ownership of a fraction of the physical painting to them.
The token represents ownership via hashed metadata and matching key pairs generated by your wallet. The image, video, music, or other digitized item can be copied and circulated without your permission using various techniques. It's very easy to copy an image by right-clicking on it and saving it. The person who does this to a tokenized digital asset is pirating the asset because there is established ownership. However, it is up to the owner to locate and file charges against the multitude of people who might do this.
Non-fungible tokens are also very limited by their liquidity. They attract a specific audience of collectors or buyers because they are much more specific than cryptocurrencies. If you find yourself holding an NFT you no longer want, it might be difficult to find a buyer if that type is no longer popular.
Even if you don't use cryptocurrency or blockchain technology, you may have encountered NFTs on social media. Platforms like Reddit and X have integrated NFTs as their profile pictures, and Instagram has also experimented with digital collectibles.
It depends on what the NFT represents. If it is tokenized real estate, the NFT would be exchanged for the property's market value, which, if it has appreciated, would generate a return for the seller. If the NFT were an image of a monkey in a hat, it would depend on that specific token's market value. If its price had increased since it was last purchased, a seller would earn a profit.
Non-fungible tokens can be valuable to the right person. To an investor, they might appreciate in value. To a collector, they might just be a collection they want to keep. Another person might only want to own it, yet another might consider it memorabilia of a specific moment they treasure.
A non-fungible token (NFT) is the opposite of a fungible token, which describes the interchangeability of a token. For example, say you had three notes with identical smiley faces drawn on them. When you tokenize one of them, that note becomes distinguishable from the others—it is non-fungible. The other two notes are indistinguishable, so they can each take the place of the other.
The idea behind NFTs is to create tokens that represent ownership. The token could represent anything from a digital image to partial ownership of an interstellar spaceship. In theory, because they are created using blockchain technology, they are immutable, secure, and don't require the intervention of third parties.
Non-fungible tokens are an evolution of the cryptocurrency concept. Modern finance systems consist of sophisticated trading and loan systems for different asset types, from real estate to lending contracts to artwork. By enabling digital representations of assets, NFTs are a step forward in the reinvention of this infrastructure.
To be sure, the idea of digital representations of physical assets is not novel, nor is the use of unique identification. However, when these concepts are combined with the benefits of a tamper-resistant blockchain with smart contracts and automation, they become a potent force for change.
_The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our for more info. As of the date this article was written, the author owns cryptocurrency._
Did you know that 82% of Nvidia’s gains between March 2024 and February 2025 happened outside of regular Nasdaq hours?* on 100+ US shares 24 hours a day, meaning you never need to miss out when the markets move. for super-fast execution backed by dedicated support. 74-89% of retail CFD accounts lose money *Data from the Pepperstone platform.
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https://academy.binance.com/en/articles/5-common-cryptocurrency-scams-and-how-to-avoid-them | 5 Common Cryptocurrency Scams and How to Avoid Them | is an incredibly valuable asset to criminals. It’s liquid, highly portable and, once a transaction has been made, it’s almost impossible to revert it. As a result, a wave of scams (both decades-old classics and cryptocurrency-specific swindles) has flooded the digital realm.
It’s amazing, nowadays, how everyone seems so generous on the likes of Twitter and Facebook. Check the replies to a tweet with high engagement, and you’ll no doubt see that one of your favorite crypto companies or influencers is doing a giveaway. If you send them just 1 BNB/BTC/ETH, they promise to send you back 10x that amount! It seems too good to be true, doesn’t it? Unfortunately, that’s because it is. That’s a pretty good rule of thumb to apply to many of these scams.
It’s incredibly unlikely that someone is hosting a legitimate giveaway that requires you to first send your own money. On social media, you should be wary of these kinds of messages. They might come from accounts that might look identical to the ones you know and love, but this is part of the trick. As for the dozens of replies thanking said account for their generosity – they’re just fake accounts or bots deployed as part of the giveaway scam.
Suffice it to say, you should just ignore these. If you’re really convinced they are legit, take a closer look at the profiles and you’ll see the differences. You will soon realize that the Twitter handle or the Facebook profile are fake.
Pyramid and Ponzi schemes are slightly different, but we’re placing them into the same category because of their similarities. In both cases, the scam relies on a participant bringing new members with the promise of incredible returns.
In a Ponzi scheme, you might hear about an investment opportunity with guaranteed profits (this is your first red flag!). Commonly, you’ll see this scheme disguised as a portfolio management service. In reality, there’s no magical formula at work here – the “returns” received are just other investors’ money.
The organizer will take an investor’s money and add it to a pool. The only inflow of cash into the pool comes from new entrants. Older investors are paid off with newer investors’ money, a cycle that can continue as more newcomers join. The scam unravels when there isn’t any more cash coming in – unable to sustain payouts to older investors, the scheme collapses.
Consider, for instance, a service that promises 10% returns in a month. You could contribute $100. The organizer then ropes in another ‘client’, who also invests $100. Using this newly-acquired money, he can pay you $110 at the end of the month. He would then need to entice yet another client to join, in order to pay the second one. The cycle continues until the inevitable implosion of the scheme.
In a pyramid scheme, there’s a bit more work required by those involved. At the top of the pyramid is the organizer. They’ll recruit a certain number of people to work on the level beneath them, and each of those people will recruit their own number of people, etc. As a result, you end up with a massive structure that grows exponentially and ramifies as new levels are created (hence the term Pyramid).
So far, we’ve only described what could be a chart for a very large (legitimate) business. But a pyramid scheme is distinct in the way it promises revenue for recruiting new members. Take an example where the organizer gives Alice and Bob the right to enlist new members for $100 each, and takes a 50% cut on their subsequent revenue. Alice and Bob can offer the same deal to those they recruit (they’ll need at least two recruits to recover their initial investment).
For instance, if Alice sells memberships to both Carol and Dan (at $100 each), she’ll be left with $100 because half of her revenue must be passed onto the level above her. If Carol goes on to sell memberships, then we’ll see rewards trickle upwards – Alice gets half of Carol’s revenue, and the organizer gets half of Alice’s half.
As the pyramid scheme grows, the older members earn an increasing stream of revenue as the distribution costs are passed from the lower to the upper levels. But because of the exponential growth, the model is not sustainable for long.
Sometimes, participants are paying for the rights to sell a product or service. You might have heard of certain multi-level marketing (MLM) companies accused of running pyramid schemes in this manner.
It’s easy to overlook the warning signs on fake apps if you’re not careful. Typically, these scams will direct users to download malicious applications – some of which mimic popular ones.
Once the user installs a malicious app, everything might seem to work as intended. However, these apps are specifically designed to steal your cryptocurrencies. In the crypto space, there were many cases where users downloaded malicious apps whose developers masqueraded as a major crypto company.
In such a scenario, when the user is presented with an address to fund the wallet or to receive payments, they’re actually sending funds to an address owned by the fraudster. Of course, once the funds are transferred, there’s no undo button.
Another thing that makes these scams particularly effective is their ranking position. Despite being malicious apps, some can rank highly in the Apple Store or Google Play Store, giving them an air of legitimacy. To avoid falling for them, you should only download from the official website or from a link given by a trusted source. You might also want to check the publisher’s credentials when using Apple Store or Google Play Store.
. It typically involves the scammer impersonating a person or company to extract personal data from victims. It can take place across many mediums – telephone, email, fake websites or messaging apps. Messaging apps scams are particularly common in the cryptocurrency environment.
There’s no single playbook that scammers adhere to when trying to get ahold of personal information. You may get emails notifying you of something wrong with your exchange account, which requires you to follow a link to fix the problem. That link will redirect to a fake website – similar to the original one – that will prompt you to log in. This way, the attacker will steal your credentials, and possibly your cryptocurrencies.
A common Telegram scam sees the scammer lurking in official groups for crypto wallets or exchanges. When a user reports a problem in this group, the scammer will reach out to the user privately, impersonating customer support or team members. From there, they’ll urge the user to share their personal information and
If someone learns your seed words, they’ll have access to your funds. Under no circumstances should they be revealed to anyone, not even legitimate companies. Troubleshooting issues with wallets does not require knowledge of your seed, so it’s safe to assume that anyone asking for it is a scammer.
With regards to exchange accounts, Binance will never ask for your password, either. The same is true of most other services. The most prudent course of action if you receive an unsolicited communication is not to engage, but rather to reach out to the company via the contact details listed on their official site.
When it comes to investing, you should never take someone’s word for granted on what cryptocurrencies or tokens to purchase. You never know their true motives. They may be paid to promote a particular or have a large investment of their own. This goes for random strangers all the way to popular influencers and personalities. No project is guaranteed to succeed. In fact, many will fail.
To be able to assess a project objectively, you should be looking at a combination of factors. Everyone has their own approach to researching prospective investments. Here are some general questions to get started:
Malicious actors have no shortage of techniques for siphoning funds from unsuspecting cryptocurrency users. To steer clear of the most common scams, you need to remain constantly vigilant and aware of the schemes used by these parties. Always check that you’re using official websites/applications, and remember: if an investment sounds too good to be true, it probably is. | 1,378 | 0 | academy.binance.com | [] |
https://academy.binance.com/en/articles/what-are-smart-contracts | What Are Smart Contracts and How Do They Work? | is a self-executing digital agreement written in code and stored on a blockchain. It can operate without the need for intermediaries, leveraging blockchain technology for increased security and transparency, providing users with a way to enforce agreements and streamline various processes.
Smart contracts are particularly useful for two parties to transact directly with each other without needing to engage a third party to ensure the contract is honored by the buyer and seller. Let’s say you’re in the market for a piece of digital art. Traditionally, this transaction might require an art gallery to act as the intermediary.
Instead of relying on this middleman, a smart contract uses computer code to execute and enforce the terms of the agreement. You can think of it as a virtual "if-then" statement. For example,
Smart contracts have applications that go beyond simple transactions. They can increase blockchain's potential for mainstream adoption by enabling new use cases that traditional systems cannot support. Current use cases include:
As discussed, smart contracts in crypto can be used for automated and secure financial transactions, such as transferring digital currencies, making payments, and executing more complex financial agreements in a peer-to-peer manner.
Smart contracts can simplify insurance processes by automating claims processing, verifying eligibility, and facilitating payouts based on predefined conditions. This can reduce paperwork, improve efficiency, and enhance transparency in the insurance industry.
Smart contracts can track and verify the movement of goods throughout the supply chain, ensuring transparency, traceability, and reducing fraud. They can automate supply chain management processes such as order fulfillment, payment settlement, and quality control.
Smart contracts, often through NFTs, can manage the ownership and distribution of intellectual property, such as music, art, or written content. Smart contracts allow creators to define licensing terms, automate royalty payments, and ensure fair distribution of digital assets.
Smart contracts can facilitate secure and transparent voting systems by ensuring the integrity of votes, preventing fraud, and enabling instant tabulation of results. This can help increase trust and transparency in democratic processes.
The smart contract contains code that defines the terms, rules, and conditions of a specific agreement, program, or transaction. These terms can be as simple as a single payment or as complex as a multi-step process with many participants and data point requirements.
Once deployed, anyone with access to the blockchain can invoke the smart contract by interacting with it. Invoking a smart contract typically involves calling specific functions within the contract and providing the necessary inputs.
When a smart contract is invoked, the transaction will be verified and validated by the blockchain network. If the conditions specified in the contract are met, the task is automatically executed.
Once the conditions are validated and the transaction is confirmed, it’s recorded as an immutable entry on the blockchain database. Typically, this entry includes all the relevant details of the transaction, making it transparent, auditable, and verifiable.
The execution of a smart contract is final and cannot be reversed, as it's stored on a decentralized and tamper-resistant database (the blockchain ledger). This ensures the transaction's integrity and security, reducing the risk of fraud or unauthorized modifications.
* : BSC’s programming language is similar to Ethereum’s, making it popular for developers who might want to migrate their projects from one platform to another. Its fees are also relatively low.
, to retrieve information from the outside world. While smart contracts themselves are tamper-proof, these oracles can introduce potential vulnerabilities or inaccuracies because they may be centralized, susceptible to manipulation, or even subject to outages
Smart contract code, like any software, may contain vulnerabilities or bugs that can be exploited by malicious actors. Errors in code implementation or design can lead to security vulnerabilities that may result in financial loss or other negative consequences. Smart contracts need to undergo rigorous testing before being deployed to avoid exposing users to these dangers.
Scalability and performance issues may arise if blockchain networks grow in size and usage. The limitations of blockchain networks can impact the speed and efficiency of smart contract execution, particularly in high-demand scenarios.
The immutability of smart contracts is a double-edged sword. Once deployed and executed, a smart contract cannot be modified or reversed. While it can enhance security, it can also be problematic if there are errors or bugs in the code or if the contract needs to be updated due to changing circumstances.
Many crypto platforms run bug bounty programs with large rewards to encourage white hat hackers, developers, and researchers to identify and report vulnerabilities in smart contract code before they can be exploited. Programs like these can strengthen smart contract security by promoting the disclosure of vulnerabilities responsibly.
firms that offer services to conduct thorough security audits to identify and remediate vulnerabilities in smart contracts. Their goal is to follow best practices to ensure secure coding standards, including testing, code reviews, and
Furthermore, there’s a common goal among developers to create tools, frameworks, and standards to improve smart contract development practices. One way to do this is through standardization efforts aimed at establishing common interfaces, protocols, and formats for smart contracts.
Efforts such as ERC (Ethereum Request for Comments) standards help establish widely accepted interfaces for smart contracts and thus can improve interoperability between different blockchain platforms, making it easier to integrate smart contracts with other protocols and enabling seamless interactions.
are Layer-2 solutions that may address such concerns. Layer-2 solutions operate on top of Layer-1 chains like Ethereum. They process transactions off the main chain, thus reducing congestion and increasing transaction throughput.
scripting language allows for the creation of simple smart contracts, but its capabilities are more limited than those of programmable smart contract blockchains like Ethereum. Bitcoin’s programming language, Script, allows users to set rules and conditions for spending their BTC, but it's not designed for more complex smart contract functionalities.
The potential that smart contracts provide to automate processes and reduce reliance on intermediaries is undeniable. However, they also present a few challenges, including security flaws and scalability. As such, the crypto community and individual protocols are actively working to address these drawbacks through continuous testing, security measures, and ongoing development efforts.
_Disclaimer: This article is for educational purposes only. This content is presented to you on an “as is” basis for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Products mentioned in this article may not be available in your region. Where the article is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Please read our full disclaimer_ _for further details. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. This material should not be construed as financial, legal or other professional advice. For more information, see our_ | 1,203 | 0 | academy.binance.com | [] |
https://www.coinbase.com/learn/crypto-basics/what-is-a-crypto-wallet | What is a crypto wallet? | Coinbase | Crypto wallets are designed to store your private key, keeping your crypto accessible at all times. They also allow you to send, receive, and spend cryptocurrencies like Bitcoin and Ethereum.
Unlike a normal wallet, which can hold actual cash, crypto wallets technically don’t store your crypto. Your holdings live on the blockchain, but can only be accessed using a private key. Your keys prove your ownership of your digital money and allow you to make transactions. If you lose your private keys, you lose access to your money. That’s why it’s important to keep your hardware wallet safe.
* Keys are written on a physical medium like paper and stored in a safe place. This of course makes using your crypto harder, because as digital money it can only be used on the internet.
* Keys are stored in a thumb-drive device that is kept in a safe place and only connected to a computer when you want to use your crypto. The idea is to try to balance security and convenience.
Each type has its tradeoffs. Paper and hardware wallets are harder for malicious users to access because they are stored offline, but they are limited in function and risk being lost or destroyed. Online wallets offered by a major exchange like Coinbase are one way to get started in crypto and offer security features such as entry via a passcode. However, it is essential to be aware of the risks associated with using online wallets. Because your private information is stored online, your protection against hackers is only as strong as your wallet provider's security measures. Therefore, it's crucial to look for features like two-factor authentication. Additionally, being online, these wallets are more susceptible to phishing attacks and other forms of cybercrime. To mitigate these risks, it's advisable to enable all available security features, stay vigilant against suspicious activity, and consider storing larger amounts of cryptocurrency in offline hardware wallets.
* The main Coinbase app (or Coinbase.com) allows you to buy and sell crypto or exchange it for fiat currency and transfer it to a bank account. If you just want to invest in or another digital currency it’s all you need. The Coinbase app will manage the rights to your private keys.
* Coinbase Wallet is a separate app that allows you to store your private keys and to send, receive, and spend digital money; browse and use DeFi applications, and more. You don’t need a Coinbase account to use Coinbase Wallet.
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https://www.investopedia.com/terms/a/altcoin.asp | Understanding Altcoins: Types, Benefits, and Market Potential | Altcoins represent all cryptocurrencies and tokens that are not Bitcoin, with some interpretations excluding Ethereum from this category. They're crafted by developers with unique visions, often using distinct consensus mechanisms. These digital currencies attempt to build on the limitations of Bitcoin or craft new functionalities. While Bitcoin remains the most popular cryptocurrency, altcoins like Ethereum (ETH) and XRP have positioned themselves as pivotal players with distinct roles. Learn what defines altcoins and explore their various types, benefits, and considerations for the future
"Altcoin" is a combination of the two words "alternative" and "coin." The term generally includes all cryptocurrencies and tokens that are not Bitcoin. Altcoins belong to the blockchains for which they were explicitly designed. Many are forks—creating a blockchain from another chain—from Bitcoin and Ethereum. These forks generally have more than one reason for occurring. Most of the time, a group of developers disagrees with others and leaves to make their own coin.
Many altcoins serve specific purposes within their blockchains, like ether, which pays for transaction fees in Ethereum. Some developers created Bitcoin forks, such as , to compete as a payment method.
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, the popular , was created as somewhat of a joke. It was forked from , which itself was forked from Bitcoin in 2011. Whatever the intent behind its creation, it was still designed to be a digital payment method.
Altcoins aim to overcome the limitations of the cryptocurrencies they derive from or compete against. The first altcoin was Litecoin, forked from the Bitcoin blockchain in 2011. Litecoin uses a different proof-of-work (PoW) consensus mechanism than Bitcoin, called Scrypt (pronounced ess-crypt), which is less energy-intensive and quicker than Bitcoin's SHA-256 PoW consensus mechanism.
is another altcoin. However, it did not fork from Bitcoin. It was designed by Vitalik Buterin, Dr. Gavin Wood, and a few others to be used in Ethereum, the world's largest blockchain-based virtual machine. Ether (ETH) is used to pay network participants for the transaction validation work their machines do. It is also used as collateral (called staking) for the privilege of becoming a validator and block proposer.
Cryptocurrency trading and use have been marked by since its launch. Stablecoins aim to reduce this overall volatility by pegging value to another asset. This is accomplished by holding assets in reserve. Some of the assets held by stablecoin creators are , precious metals, or investment assets. Price fluctuations for stablecoins are not meant to exceed a very narrow range.
Notable stablecoins include Tether's , MakerDAO's DAI, and the (USDC). In March 2021, payment processing giant Visa Inc. () announced that it would begin settling some transactions on its network in USDC over the Ethereum , with plans to roll out further settlement solutions.
Security tokens are tokens that represent fundraising efforts or ownership. . Tokenization is the transfer of value from an asset to a token. Any asset can be tokenized, such as real estate or stocks. For this to work, the asset must be transparently secured and held. Otherwise, the tokens are worthless because they wouldn't represent anything. Security tokens are regulated by the Securities and Exchange Commission because they are designed to act as securities.
In 2021, the Bitcoin wallet firm Exodus successfully completed a Securities and Exchange Commission-qualified Reg A+ token offering, allowing for $75 million shares of common stock to be converted to tokens on the Algorand blockchain. This historic event was the first digital asset security to offer equity in a United States-based issuer.
Utility tokens enable services within a network, like purchasing services, paying fees, or redeeming rewards. Filecoin, which is used to buy storage space on a network and secure the information, is an example of a utility token.
Ether (ETH) is also a utility token. It is designed to be used in the and virtual machine to pay for transactions. The former stablecoin USTerra used utility tokens to attempt to maintain its peg to the dollar—which it lost on May 11, 2022—by minting and burning two utility tokens to create downward or upward pressure on its price.
Many refer to the sharp run-up in this type of altcoins during April and May 2021 as "meme coin season," with hundreds of these cryptocurrencies posting enormous percentage gains based on pure .
An initial coin offering (ICO) is the cryptocurrency industry's equivalent of an (IPO). A company looking to raise money to create a new coin, app, or service launches an ICO to raise funds.
Governance tokens allow holders certain rights within a blockchain, such as voting for changes to protocols or having a say in the decisions of a decentralized autonomous organization (DAO). Because they are generally native to a private blockchain and used for blockchain purposes, they are utility tokens but have come to be accepted as a separate type because of their purpose.
Local banks were also issuing currency, sometimes backed by fictitious reserves. That diversity of currencies and financial instruments parallels the current situation in altcoin markets. Thousands of altcoins exist today, each claiming unique purposes and targeting different markets.
The current state of affairs in the altcoin market indicates that it will unlikely consolidate into a single cryptocurrency. However, it is likely that most of the thousands of altcoins listed in crypto markets will not survive. The altcoin market will probably coalesce around a few altcoins—those with strong utility, use cases, and a solid blockchain purpose—which will dominate the markets.
For diversification, altcoins often provide a cheaper alternative to Bitcoin in the cryptocurrency market. However, the cryptocurrency market, regardless of the type of coin, is young and volatile. Cryptocurrency is still finding its role in the global economy, so it's best to approach all cryptocurrencies cautiously.
Which altcoin will take off in 2024 is anyone's guess. There might not be any changes in the market, or a new one could be introduced that attracts a whirlwind of investors.
Altcoins are any cryptocurrency that is not Bitcoin (or Ethereum). There are thousands of altcoins on the market, so it is difficult to tell which might be legitimate and which are not. It's best to read all the documentation behind whichever cryptocurrency piques your interest.
If there is a purpose for the blockchain and token, it might be worth watching—if not, consider other coins or investments. If you're unsure, talk to a financial advisor familiar with cryptocurrencies to help you decide if they are suitable for your portfolio.
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https://www.investopedia.com/terms/c/cold-storage.asp | Cold Storage: What It Is, How It Works, Theft Protection | A "cold wallet" is a device or method for storing cryptocurrency private keys offline. Private keys are transferred from a device with an internet connection to a device without one. Businesses, governments, and individuals have used this data security technique for several decades to keep data inaccessible or save it for later use. In most cases, it is called cold storage, but cryptocurrency fans and users prefer to call a device that stores keys offline a cold wallet.
Cold storage methods are useful for individual investors and users, but some of the and companies involved in the crypto space also make use of this type of storage.
When your checking, savings, or account with a traditional bank has been compromised, the bank can refund the lost or stolen money back to you. Banks can find out where money has gone because the transactions are digital and can be tracked using account numbers and names. Money can be moved back into your account, and the thieves can be dealt with.
However, if your wallet has been compromised and your tokens have been stolen, you're unable to recover your coins or otherwise be reimbursed. First, they are not insured or backed by a government or institution. Second, this is due to the way blockchains are designed. Wallet addresses are publicly available, but no names or personal information is stored or is publicly available—and because of the way information is chained on a blockchain, transactions cannot be reversed.
A cryptocurrency is assigned a key that serves as its address, much like an email address. This key does not need to be securely stored anywhere, but keeping it private ensures anonymity.
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are the alphanumeric codes used to access cryptocurrency—this is what thieves are after. All cryptocurrency storage methods involve protecting these private keys because they provide access to the tokens. Private keys are similar to the password or PIN you use to access your bank account app—if someone steals that, they can wreak havoc on your finances.
Private keys stored on a wallet connected to the internet are vulnerable to network-based theft. All the functions required to complete a transaction are made from a single online device—thus, connected wallets are one of the weak links in a network. This is because they are devices that use software which hackers can alter.
Cold storage reduces the chances of private key theft by removing them from an online environment. In most cases, transferring private keys to cold storage is not as complicated as it might seem.
There are many ways of storing cryptocurrencies, and many of the methods you read about on the internet have changed over time—so it's worth discussing storage types. There are two general types of storage. One is where someone else holds your keys for you, called . The other is where you hold your keys, called non-custodial storage.
The subtypes are the methods you might read about—paper, software, hardware, cold, and hot. So, you could give your keys to your exchange to hold for you in its enterprise security-level vault, which would be a custodial cold storage hardware method.
If you want to hold the keys yourself, you can place them on a USB device designed for crypto key storage. This would be a non-custodial storage method that would transition between hot and cold as you connected it to and disconnected it from your computer. You could also write or type your keys on a piece of paper, delete them from your wallet app, and place the paper in a safe—this is also non-custodial cold storage.
The most basic form of cold storage is a . A paper wallet is simply a document that has public and private keys written on it. In the case of a bitcoin paper wallet, you can print the document with a wired printer. You can also use a generator and print it on the paper so that it can easily be scanned and signed to make a transaction. However, this requires exposing your keys to more software, which can increase the risk of theft.
Another drawback to this medium is that if the paper is lost, rendered illegible, or destroyed, you'll never be able to access your funds. If you choose this method, be sure to have a safe box or another secure storage method for the paper wallet itself and make backups.
Another form of cold storage is a hardware wallet that uses an offline device or smart card to generate private keys offline. The Ledger USB Wallet is an example of a that uses a smart card to secure private keys. Two other popular hardware wallets are TREZOR and KeepKey. The device looks and functions like a USB drive; a computer and a Chrome-based app are required to store the private keys offline. You can use anything from a standard USB storage drive to an advanced device with a battery, Bluetooth, software, and other features. Like a paper wallet, it is essential to store this USB device and smart card in a safe place, as any damage or loss could terminate access to your cryptocurrency.
Air-gapped devices have no connection ability and are more secure than ones that can connect wirelessly. You can buy commercial hardware wallets from retailers and merchants; many are waterproof and virus-proof—some even support ("multi-sig") transactions. Multi-sig is a cryptocurrency signature method that requires more than one user to approve a transaction using private keys.
Software wallets are applications that run on a device, such as a smartphone, tablet, or personal computer. Because these devices are generally connected or can connect to the internet, they are usually and should not be used to store private keys.
Users looking for cold storage options can also opt for offline software wallets, which are quite similar to hardware wallets but are a more complex process for less technical users. An offline software wallet splits a wallet into two accessible platforms—an offline wallet that contains the private keys and an online wallet that has the public keys stored.
The online wallet generates new, unsigned transactions and sends the user's address to the receiver or sender on the other end of the transaction. The unsigned transaction is moved to the offline wallet and signed with the private key. The signed transaction is then moved back to the online wallet, which broadcasts it to the network. Because the offline wallet never connects to the internet, its stored private keys remain secure. Electrum and Armory are often quoted as the best offline software wallets in the crypto economy.
Sound wallets are an obscure, expensive, and time-consuming way to store and access your keys, depending on your chosen medium. Sound wallets involve encrypting and recording your private keys in sound files on products such as CDs or removable USB drives. The code hidden in these audio files can be deciphered using a spectroscope application or high-resolution spectroscope.
Placing your hardware wallet in your safe is secure, but it isn't considered deep cold storage because it is easy for you to access. Deep cold storage is any method that is very inconvenient and requires time and effort to retrieve your keys. This could be anything from placing your hardware wallet in a waterproof container and burying it six feet down in your garden to using a third-party service that stores your cryptocurrency keys in a vault that requires multiple steps to access.
Burying your keys deep in the garden has several drawbacks, including lots of digging and remembering where you buried them, but so does the ultra-secure vault service. Vault services generally require your identity, proof of address, or other means of identification. Additionally, it can take hours or days to access your keys, depending on where they are physically stored, so if you prefer to be able to access your cryptocurrency quickly, this might not be an option.
Cold storage, called cold wallets by cryptocurrency users, is the most secure way to store your cryptocurrency's private keys. It involves transferring the keys to a device or medium that is not connected to the internet. There are various choices for the best wallet based on experience, security, and integration.
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https://academy.binance.com/en/articles/a-guide-to-crypto-collectibles-and-non-fungible-tokens-nfts | What Is An NFT? | * NFTs are stored on the blockchain, which means they can't be easily edited, copied or duplicated. There, they can act as a publicly verifiable proof of ownership on a decentralized database.
The term “non-fungible” refers to the irreplaceable nature of an item. A non-fungible item cannot be directly exchanged for another item of the same value because both items have different characteristics. This means non-fungible items cannot be traded on a standardized scale as their value is derived from their uniqueness and the subjective value that buyers place on them.
Fungible assets such as currency are easily exchanged because of their uniformity. In contrast, non-fungible assets are distinct and irreplaceable, which can appeal to collectors who want to acquire something truly unique.
An NFT is a cryptographic token hosted on a blockchain and it can be used to represent a digital asset. The non-fungibility of NFTs defines them as digital assets that represent ownership of one-of-a-kind items such as artwork, video game items, trading cards, virtual real estate, and other digital goods.
, which provides a decentralized ledger that records transactions and ownership details. Its transparent and immutable nature allows the ownership history of an NFT to be clearly traced. This verifies the authenticity and legitimacy of the NFT as it changes hands over time.
A critical aspect of NFTs is the implementation of token standards. They ensure interoperability and consistency across different platforms by defining rules and functions for creating, managing, and transferring NFTs. For example, the most widely adopted token standards for NFTs are
The NFT creation process is typically referred to as minting. Using smart contracts, minting converts digital files into digital assets on a blockchain. When purchasing an NFT, you essentially acquire ownership of the unique identifier (or token ID) associated with that specific digital asset. As a result, the code owner possesses the exclusive rights to use, display, and interact with that asset.
NFT art offers artists a new way to monetize their work. By tokenizing their art, creators can sell unique digital copies, preserving the originality and scarcity of each piece. NFT art also allows collectors to showcase their pieces in virtual galleries, trade them, or even lend them to others.
NFT games incorporate NFTs as digital collectibles, such as in-game items and characters. NFTs can also represent virtual real estate that players can trade. This has the potential to create a gaming ecosystem where players can monetize their in-game achievements and assets and create a secondary market.
NFT staking allows users to earn rewards by staking their NFTs as collateral. This can already be done on certain decentralized finance (DeFi) platforms, enabling NFT holders to earn interest while retaining ownership of their NFTs.
NFTs can be useful for ticket management. For example, event organizers can issue NFTs as tickets that provide immutable proof of ownership and attendance. In addition, NFT tickets can be transferred and resold without involving third parties. NFT tickets can also come with exclusive benefits, such as access to VIP areas, exclusive merchandise, or special digital content.
is one of the earliest and most iconic NFT projects. It was launched in 2017 and consists of 10,000 unique, algorithmically generated 8-bit pixel art characters. Each CryptoPunk character has different traits and attributes, which makes them attractive to collectors.
You may have even seen celebrities using these characters as their social media avatars. The success of the project has set the stage for a new era of digital art and collectibles.
is a collection of 10,000 unique, hand-drawn cartoon ape characters, each with varying features. These digital artworks serve as collectibles and give their owners access to exclusive events and virtual spaces. As such, these NFTs blur the lines between digital art and experiential offerings.
is a virtual reality (VR) platform built on the Ethereum blockchain. It features a decentralized marketplace for NFTs that allows users to trade virtual plots of land and various in-game items. Decentraland is at the forefront of virtual real estate and the metaverse.
As we have learned, NFTs inherit the security features of their underlying blockchains. However, there is still the risk of fraud and scams attached to them. This can include phishing attempts or hackers exploiting smart contract vulnerabilities. There is also the possibility of counterfeit NFTs and unauthorized reproductions of copyrighted material.
Another aspect to consider is the long-term value of NFTs. While some NFTs have attained astronomical prices, the market can be volatile and speculative. As with any investment, long-term stability is not guaranteed.
At the same time, an NFT’s security can be influenced by the blockchain on which it is minted. As some blockchains may have better developed ecosystems and more robust security than others, NFT security tends to vary.
are digital assets that use blockchain technology, they have different purposes and characteristics. Cryptocurrencies are often designed to facilitate transactions. They are also fungible, meaning each unit is exchangeable for another unit of the same currency. For example, you can exchange one bitcoin for another without there being any difference in value.
NFTs, on the other hand, are unique digital assets. They are non-fungible, meaning each has unique characteristics and cannot be directly exchanged for another NFT on a one-to-one basis. In short, NFTs derive their value from their uniqueness and scarcity.
NFTs are unique blockchain-based digital assets that establish the ownership and verify the authenticity of the items they represent. They have gained popularity in the form of a variety of applications, offering creators new ways to monetize their work and collectors the opportunity to own and display unique assets.
However, NFTs also come with potential risks, such as fraud and market volatility. Although they share some similarities with cryptocurrencies, NFTs are distinguished by their non-fungible nature, which allows them to offer unique digital opportunities.
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https://www.coinbase.com/learn/crypto-basics/what-is-proof-of-work-or-proof-of-stake | What is "proof of work" or "proof of stake"? | Coinbase | “Proof of work” and “proof of stake” are the two major consensus mechanisms cryptocurrencies use to verify new transactions, add them to the blockchain, and create new tokens. Proof of work, first pioneered by Bitcoin, uses mining to achieve those goals. Proof of stake — which is employed by Cardano, the ETH2 blockchain, and others — uses staking to achieve the same things.
Decentralized cryptocurrency networks need to make sure that nobody spends the same money twice without a central authority like Visa or PayPal in the middle. To accomplish this, networks use something called a “consensus mechanism,” which is a system that allows all the computers in a crypto network to agree about which transactions are legitimate.
There are two major consensus mechanisms used by most cryptocurrencies today. is the older of the two, used by , 1.0, and many others. The newer consensus mechanism is called , and it powers 2.0, , Tezos and other (generally newer) cryptocurrencies. To understand proof of stake, it’s helpful to first understand proof of work, so we’ve paired them in this explainer.
Proof of work is the original crypto consensus mechanism, first used by . Proof of work and are closely related ideas. The reason it’s called “proof of work” is because the network requires a huge amount of processing power. Proof-of-work blockchains are secured and verified by virtual miners around the world racing to be the first to solve a math puzzle. The winner gets to update the blockchain with the latest verified transactions and is rewarded by the network with a predetermined amount of crypto.
Proof of work has some powerful advantages, especially for a relatively simple but hugely valuable cryptocurrency like (). It’s a proven, robust way of maintaining a secure decentralized blockchain. As the value of a cryptocurrency grows, more miners are incentivized to join the network, increasing its power and security. Because of the amount of processing power involved, it becomes impractical for any individual or group to meddle with a valuable cryptocurrency’s blockchain.
On the flip side, it’s an energy-intensive process that can have trouble scaling to accommodate the vast number of transactions compatible blockchains like can generate. And so alternatives have been developed, the most popular of which is called proof of stake.
’s developers understood from the beginning that proof of work would present limitations in scalability that would eventually need to be overcome — and, indeed, as Ethereum-powered protocols have surged in popularity, the blockchain has struggled to keep up, causing fees to spike.
While the Bitcoin blockchain mostly just has to process incoming and outgoing bitcoin transactions, much like a vast checkbook, Ethereum’s blockchain also has to process a vast array of DeFi transactions, smart contracts, minting and sales, and whatever innovations developers come up with in the future.
Their solution has been to build an entirely new blockchain — which began rolling out in December 2020 and should be finished in 2022. The upgraded version of Ethereum will employ a faster and less resource intensive consensus mechanism called proof of stake. Cryptocurrencies including , Tezos, and Atmos all use proof-of-stake consensus mechanisms — with the goal being to maximize speed and efficiency while lowering fees.
In a proof of stake system, staking serves a similar function to proof of work’s mining, in that it’s the process by which a network participant gets selected to add the latest batch of transactions to the blockchain and earn some crypto in exchange.
The exact details vary by project, but in general proof of stake blockchains employ a network of “validators” who contribute — or “stake” — their own crypto in exchange for a chance of getting to validate new transaction, update the blockchain, and earn a reward.
* The network selects a winner based on the amount of crypto each validator has in the pool and the length of time they’ve had it there — literally rewarding the most invested participants.
* Once the winner has validated the latest block of transactions, other validators can attest that the block is accurate. When a threshold number of attestations have been made, the network updates the blockchain.
Becoming a validator is a major responsibility and requires a fairly high level of technical knowledge. The minimum amount of crypto that validators are required to stake is often relatively high (for ETH2, for example, it’s 32 ETH) and validators can lose some of their stake via a process called slashing if their node goes offline or if they validate a “bad” block of transactions.
But even if that sounds like too much responsibility, you can still participate in staking by joining a staking pool run by someone else — and earn rewards for crypto that would otherwise be sitting around. This process is often referred to as delegating, and tools offered by exchanges by Coinbase can make it simple and seamless.
Both consensus mechanisms have economic consequences that penalize network disruptions and thwart malicious actors. In proof of work, the penalty for miners submitting invalid information, or blocks, is the sunk cost of computing power, energy, and time. In proof of stake, the validators’ staked crypto funds serve as an economic incentive to act in the network’s best interests. In the case that a validator accepts a bad block, a portion of their staked funds will be “slashed” as a penalty. The amount that a validator can be slashed depends on the network.
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https://www.investopedia.com/tech/what-dao/ | Decentralized Autonomous Organization (DAO): Definition, Purpose, and Example | A decentralized autonomous organization (DAO) is an organizational structure with no central governing body. DAOs, which were popularized by enthusiasts. have members who share a common goal of acting in the community's best interests. They are completely and make decisions using a bottom-up management approach.
Digital currencies are , so they aren't controlled by one institution like a government or . Rather, they are divided among different computers, networks, and nodes. This inspired a group of developers, and they developed the idea for a decentralized autonomous organization in 2016. It was meant to promote oversight and management like a corporation but under a collective group of leaders and participants that acts as the governing body.
DAOs rely on smart contracts to function. These scripts generally automate the group's decisions when the required number of votes is reached. If a proposal fails, the smart contract doesn't execute anything. Imagine a governed by a DAO where some members wanted to change how a blockchain's tokenomics worked. This could be an increase in the circulating supply of coins, burning some reserve tokens, or issuing rewards to existing token holders.
Members could call for a vote on a proposal, which would be broadcast to voting members. The smart contract would tally the vote. This may be automated, as it would require altering the blockchain's coding. Regardless, the outcome would determine the direction the blockchain would take. If the vote was about spending tokens from the treasury on a certain project, the smart contract could automate the transfer of tokens to the entities working on the project.
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In 2021, ConstitutionDAO was formed to attempt to buy a copy of the U.S. Constitution. Though the DAO failed to acquire the asset, it proved that a collection of like-minded individuals could form and pursue such endeavors.
Voting power is often distributed across users based on the number of tokens they hold. For example, one user with 100 tokens of the DAO could have twice the weight of voting power over a user with 50 tokens.
The theory is that users with a larger investment in the DAO are incentivized to act in good faith. For instance, imagine that a DAO member owns a majority of the organization's voting power or a majority of the tokens. This user could act in bad faith; however, if the DAO is programmed to penalize bad actors, the user will jeopardize the value of their holdings.
DAOs often have treasuries that house tokens that can be issued in exchange for fiat. Members can vote on how to use those funds. For example, some DAOs that are intent on acquiring rare can vote on whether to relinquish treasury funds in exchange for assets.
* Decisions impacting the organization are made by a collection of individuals as opposed to a central authority. Instead of relying on the actions of one individual (CEO) or a small collection of individuals (), a DAO can decentralize authority across a vastly larger range of users.
* Individuals within an entity may feel more empowered and connected when they have a direct say and voting power on all matters. These individuals may not have strong voting power, but a DAO encourages holders to cast votes, burn tokens, or use their tokens in ways they think are best for the entity.
* Within a DAO, votes are cast via blockchain and made publicly viewable. This requires users to act in ways they feel are best, as their votes and decisions are publicly viewable. This incentivizes actions that will benefit voters' reputations and discourages acts against the community.
* The DAO concept can encourage people from all over the world to seamlessly come together to build a single vision. With just an internet connection, token holders can interact with other owners wherever they may live.
* If a public company is guided by a CEO, a single vote may be needed to decide a specific action or course for the company to take. In a DAO, every user can vote. This might require a much longer voting period, especially considering time zones and priorities outside the DAO.
* A DAO must educate members about pending activities. It's much easier for a single CEO to make decisions on company developments, as DAO token holders may have varying educational backgrounds, understanding of initiatives, incentives, or accessibility to resources. While DAOs bring a diverse group of people together, it's often challenging for those people to learn how to grow, strategize, and communicate.
* DAOs run a major risk of being inefficient. Because of the time needed to educate voters, communicate initiatives, explain strategies, and onboard new members, it is easy for a DAO to spend much more time discussing change than implementing it. A DAO may get bogged down in trivial, administrative tasks due to the nature of needing to coordinate many more individuals.
* A DAO requires significant technical expertise to implement. Without it, voting and decision-making may be compromised. Trust may be broken, and users may leave the entity if they can't rely on its structure. Even if multi-sig or are used, DAOs can be exploited, treasury reserves stolen, and vaults emptied.
The DAO was an organization designed to act as a form of fund based on open-source code without a typical management structure or board of directors. The DAO was built using the network.
The DAO launched in late April 2016 thanks to a month-long crowd sale of tokens that raised more than $150 million in funds. At the time, the launch was the largest campaign ever recorded.
By May 2016, The DAO held a large percentage of ether tokens (up to 14% of the total circulating amount), according to reporting by At roughly the same time, a paper was published that addressed several potential security vulnerabilities, cautioning investors from voting on future investment projects until those issues had been resolved.
In June 2016, hackers attacked The DAO based on these vulnerabilities. The hackers accessed 3.6 million ETH, worth about $50 million at the time. This prompted a massive and contentious argument among DAO investors, with some individuals suggesting various ways of addressing the hack and others calling for The DAO to be permanently disbanded.
According to IEEE Spectrum, the DAO was vulnerable to programming errors and attack vectors. The fact that the organization was charting new territory regarding regulation and corporate law likely did not make the process any easier. The ramifications of the organization's structure were potentially numerous: investors were concerned that they would be held liable for actions taken by The DAO as a broader organization.
The DAO also operated in murky territory regarding whether or not it was selling securities. Further, there were long-standing issues regarding how The DAO would function in the real world. and contractors alike needed to convert ETH into fiat currencies, which could have impacted the value of ether.
Following the contentious argument over The DAO's future and the massive hacking incident earlier in the summer, by the fall of 2016, several prominent , such as Kraken, de-listed The DAO's token, marking the effective end for The DAO as it was initially envisioned.
A DAO is a decentralized autonomous organization, a type of bottom-up entity structure with no central authority. Members of a DAO own DAO-issued tokens and can vote on initiatives for the entity. Smart contracts are implemented for the DAO, and the code governing many DAOs' operations is open-source or publicly auditable.
A DAO is an organization of people that uses blockchain technology to improve traditional top-down management structures. Instead of relying on a single individual or a small collection of individuals to guide the entity's direction, a DAO intends to give every member a voice, vote, and opportunity to propose initiatives.
Decentralized autonomous organizations are entities using blockchains and tokens to democratize governance to those with voting rights. Members of DAOs decide the direction of the organization and govern how it is run. The intent behind DAOs is to remove centralized control and give decision-making abilities to all users rather than leaving it up to a centralized group or person.
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https://www.coinbase.com/learn/crypto-basics/what-is-a-private-key | What is a private key? | Coinbase | When you first buy cryptocurrency, you are issued two keys: a public key, which works like an email address (meaning you can safely share it with others, allowing you to send or receive funds), and a private key, which is typically a string of letters and numbers (and which is not to be shared with anyone). You can think of the private key as a password that unlocks the virtual vault that holds your money. As long as you — and only you — have access to your private key, your funds are safe and can be managed anywhere in the world with an internet connection.
* Cryptocurrencies like and are decentralized — meaning there is no bank or any other institution in the middle holding your digital money. Instead, your crypto is distributed across a network of computers via a technology called a blockchain. One feature of crypto blockchains is that they are open: all public key and transaction information is available for anyone to see.
* Via some complicated math, your public key is actually generated by your private key, which makes them a matched pair. When you make a transaction using your public key, you verify that it’s really you by using your private key.
* The best and simplest option for most people is to use a virtual wallet, like the one offered by Coinbase, to manage your private keys. These are known as “hot” wallets, because your private keys are stored on the internet. This makes buying, selling, or using your digital money as convenient and accessible as using a credit card online. Choose a wallet provided by a company with a long track record for security and features like two-factor authentication.
* Some investors choose to keep their private keys on a computer that isn’t connected to the internet, written on pieces of paper, or even just memorized. This is referred to as “cold storage,” and while it does protect your private key against digital theft, it makes using your cryptocurrency much less convenient while creating other risks.
Information provided on this Site is for general educational purposes only and is not intended to constitute investment or other advice on financial products. Such information is not, and should not be read as, an offer or recommendation to buy or sell or a solicitation of an offer or recommendation to buy or sell any particular digital asset or to use any particular investment strategy. Coinbase and its affiliates (collectively “Coinbase”) makes no representations as to the accuracy, completeness, timeliness, suitability, or validity of any information on this Site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Unless otherwise noted, all images are the property of Coinbase. Coinbase is not registered or licensed with the U.S. Securities and Exchange Commission or the U.S. Commodity Futures Trading Commission. Links provided to third-party sites are for informational purposes. Such sites are not under the control of Coinbase, and Coinbase is not responsible for the accuracy of the content on such third-party sites.
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https://academy.binance.com/en/articles/the-evolution-of-the-internet-web-3-0-explained | What Is Web3 and Why Does It Matter? | The Internet is a constantly evolving technology that continues to innovate. So far, we’ve experienced Web 1.0 and 2.0, and there’s much discussion of what to expect from Web3. Web 1.0 provided a static experience for users without the ability to create the content-rich sites we have today. Web 2.0 brought us together with social media and dynamic websites, but at the cost of centralization.
Web3 looks to give us control of our online information and also create a semantic web. This means that machines will easily read and process user-generated content. Blockchain will provide the power for decentralization, free digital identities with crypto wallets, and open digital economies.
The ways we interact with the net will become more immersive with 3D options available. The benefits to the user also include efficient browsing, relevant advertising, and improved customer support. Some of the most widely used Web3 technology can be seen with virtual assistants like Siri and Alexa and connected smart homes.
Over the past twenty or so years, the Internet has changed dramatically. We've gone from Internet Relay Chat (IRC) to modern social media platforms. Basic digital payments to sophisticated online banking services. We've even experienced brand new, Internet-based technologies like crypto and blockchain. The Internet has become a vital part of human interactions and connectivity - and continues to evolve. So far, we've seen Web 1.0 and 2.0, but what exactly should we expect from Web3? Let's dive into the details and see what's in store for us.
(AI), and blockchain technology. The term was created by Gavin Wood, Polkadot's founder and the co-founder of Ethereum. While Web 2.0 focuses on user-created content hosted on centralized websites, Web3 will give users more control of their online data.
The movement aims to create open, connected, intelligent websites and web apps with an improved machine-based understanding of data. Decentralization and digital economies also play an important role in Web3, as they allow us to place value on the content created on the net. It's also important to understand that Web3 is a changing concept. There is no single definition, and its exact meaning can differ from person to person.
and development in Big Data analytics will mean that machines can intuitively understand and recommend content. Web3 will also focus on user-ownership of content and support for accessible digital economies.
Current websites typically display static information or user-driven content, like forums or social media. While this allows data to be published to the masses, it doesn't cater to specific users' needs. A website should tailor the information it provides to each user, similar to the dynamism of real-world human communication. With Web 2.0, once this information is online, users lose ownership and control.
> _I have a dream for the Web [in which computers] become capable of analyzing all the data on the Web – the content, links, and transactions between people and computers. A "Semantic Web," which makes this possible, has yet to emerge, but when it does, the day-to-day mechanisms of trade, bureaucracy, and our daily lives will be handled by machines talking to machines._
Berners-Lee's vision has since combined with Gavin Wood's message. Here, an ocean of decentralized information will be available to websites and applications. They will understand and use that data meaningfully with individual users.
The original Internet provided an experience now known as Web 1.0. The term was coined in 1999 by author and web designer Darci DiNucci when distinguishing between Web 1.0 and Web 2.0. In the early 1990s, websites were built using static HTML pages that could only display information. There was no way for users to change the data or upload their own. Social interactions were limited to simple chat messengers and forums.
During the late 1990s, a shift towards a more interactive Internet started taking form. With Web 2.0, users were able to interact with websites through databases, server-side processing, forms, and social media. These tools changed the web experience from a static to a dynamic one.
between different sites and applications. Web 2.0 was less about observation and more about participation. By the mid-2000s, most websites transitioned to Web 2.0, and big tech began building up social networks and cloud-based services.
makes sense when looking at the Internet's history. Data was first statically presented to users. Then users could interact with that data dynamically. Now, algorithms will use all that data to improve user experience and make the web more personalized and familiar. You only need to look at YouTube or Netflix to see the power of algorithms and how they have already improved.
, and more. Web3 also aims to make the Internet more open and decentralized. In the current framework, users rely on network and cellular providers that access their personal data and information. With the advent of distributed ledger technologies, that soon might change, and users could take back ownership of their data.
Web3 is still far from complete adoption, but its core concepts are mostly already defined. The four topics below are commonly listed as the most important aspects of the Web3 future.
Over time, machines have improved at understanding the data and content humans create. However, there is still a long way to create a seamless experience where semantics are fully understood. For example, the use of the word "bad" can, in some cases, mean 'good'. For a machine to understand this can be incredibly hard. However, with Big Data and more information to study, AI is beginning to understand better what we write on the web and present it intuitively.
Data ownership, online economies, and decentralization are essential aspects of Gavin Wood's Web3 future. We'll cover the topic in more detail later on, but blockchain provides a tried and tested system to reach many of these goals. The power for anyone to tokenize assets, put information on-chain, and create a digital identity is a huge innovation that lends itself to Web3.
Put simply, the way the web looks will change hugely. We're already seeing a move towards 3D environments that even incorporate virtual reality. The metaverse is one area pioneering these experiences, and we're already familiar with socializing through 3D video games. The fields of UI and UX also work towards presenting information in more intuitive ways for web users.
Artificial intelligence is the key to turning human-created content into machine-readable data. We're already familiar with customer service bots, but this is just the beginning. AI can both present data to us and sort it, making it a versatile tool for Web3. Best of all, AI will learn and improve itself, reducing the work needed for human development in the future.
- Since intermediaries are removed from the equation, they will no longer control user data. This freedom reduces the risk of censorship by governments or corporations and cuts down the effectiveness of
- As more products become connected to the Internet, larger data sets provide algorithms with more information to analyze. This can help them deliver more accurate information that accommodates the individual user's specific needs.
- When using search engines, finding the best results have sometimes posed a challenge. However, they have become better at finding semantically-relevant results based on search context and metadata over the years. This results in a more convenient web browsing experience that can help anyone find the exact information they need with ease.
- No one likes being bombarded with online ads. However, if the ads are relevant to your needs, they could be useful instead of being an annoyance. Web3 aims to improve advertising by leveraging smarter AI systems and targeting specific audiences based on consumer data.
- Customer service is critical for a smooth user experience for websites and web applications. Due to the massive costs, though, many web services that become successful struggle to scale their customer service operations. Using more intelligent chatbots that can talk to multiple customers simultaneously, users can enjoy a superior experience when dealing with support agents.
Blockchain and crypto have great potential when it comes to Web3. Decentralized networks successfully create incentives for more responsible data ownership, governance, and content creation. Some of its most relevant aspects for Web3 include:
- Anyone can create a wallet that allows you to make transactions and acts as a digital identity. There's no need to store your details or create an account with a centralized service provider. You have total control over your wallet, and often the same wallet can be used across multiple blockchains.
- The transparent spread of information and power across a vast collection of people is simple with blockchain. This is in contrast to Web 2.0, where large tech giants dominate huge areas of our online lives.
- The ability to own data on a blockchain and use decentralized transactions creates new digital economies. These allow us to easily value and trade online goods, services, and content without the need for banking or personal details. This openness helps improve access to financial services and empowers users to begin earning.
Both Apple’s Siri and Amazon’s Alexa offer virtual assistants that check many of the Web3 boxes. AI and natural language processing help both services better understand human voice commands. The more people use Siri and Alexa, the more their AI improves its recommendations and interactions. This makes it a perfect example of a semantically intelligent web app that belongs in the Web3 world.
One key feature of Web3 is ubiquity. This means that we can access our data and online services across multiple devices. Systems that control your home’s heating, air conditioning, and other utilities can now do so in a smart and connected manner. Your smart home can tell when you leave, arrive, and how hot or cold you like your house. It can use this information, and more, to create a personalized experience. You can then access this service from your phone or other online devices, no matter where you are.
The evolution of the Internet has been a long journey and will surely continue towards further iterations. With the massive explosion of available data, websites and applications are transitioning to a more immersive web experience. While there is still no concrete definition for Web3, the innovations are already in motion. It’s plain to see the direction we are going, and blockchain, of course, looks to be a key part of the Web3 future. | 1,726 | 0 | academy.binance.com | [] |
https://academy.binance.com/en/articles/the-complete-beginners-guide-to-decentralized-finance-defi | What Is Decentralized Finance (DeFi)? | * While Ethereum was DeFi's original home, most blockchains with smart contract capabilities now host DeFi DApps, including layer-2 solutions like Arbitrum and Optimism. Smart contracts are essential to the services DeFi offers, which include staking, investing, lending, harvesting, and more.
* DeFi allows people to optimize yield, join decentralized marketplaces, access banking services, and engage in quick borrowing and lending. However, DeFi isn't without its risks; you should always do careful research before taking risks.
Entering the world of decentralized finance (DeFi) can be exciting but also confusing. After some time HODLing, it's common to wonder how you can squeeze extra gains out of your portfolio. However, there's a lot to unpack when it comes to DeFi.
When used responsibly, DeFi DApps and projects can become powerful tools. But if you jump in too soon, it's easy to become overwhelmed and make unwise investment decisions. The best way to get involved is to learn the risks and find what's suitable for you. With this in mind, let's explore the basics you'll need when starting your DeFi journey.
networks. More specifically, DeFi aims to create an open-source, permissionless, and transparent financial service ecosystem that is available to everyone and operates without any central authority. Users maintain complete control over their assets and interact with this ecosystem through peer-to-peer (
Traditional finance relies on institutions such as banks to act as intermediaries and courts to provide arbitration. DeFi applications don’t need any intermediaries or arbitrators. The code specifies the resolution of every possible dispute, and users maintain control over their funds at all times. This automation reduces costs and allows for a more frictionless financial system.
Another significant advantage of such an open ecosystem is the ease of access for individuals who otherwise wouldn't have access to any financial services. Since the traditional financial system relies on intermediaries making a profit, their services are typically absent from low-income communities. However, with DeFi, costs are significantly reduced, and low-income individuals can also benefit from a broader range of financial services.
protocols are among the most popular application types in the DeFi ecosystem. Open, decentralized borrowing and lending have many advantages over the traditional credit system, including instant transaction settlement, no credit checks, and the ability to collateralize digital assets.
Since these lending services are built on public blockchains, they minimize trust requirements and provide cryptographic verification. Lending marketplaces on the blockchain reduce counterparty risk and make borrowing and lending cheaper, faster, and available to more people.
As the blockchain industry matures, there's an increased focus on creating stablecoins. These are crypto assets usually pegged to real-world assets and are easily digitally transferable. As cryptocurrency prices can fluctuate rapidly, decentralized stablecoins could be adopted for everyday use as digital currencies not issued or monitored by a central authority.
, underwriting and legal fees for mortgages could be reduced significantly. Insurance on the blockchain could eliminate intermediaries and allow the distribution of risk between many participants, potentially resulting in lower premiums with the same quality of service.
Blockchain technology may also be used to issue and allow ownership of a wide range of conventional financial instruments. These applications would work in a decentralized way that cuts out custodians and eliminates single points of failure.
mining, delegating BNB, or providing liquidity. A smart contract can take your rewards, purchase more of the underlying asset, and reinvest it. This process will compound your interest, often significantly raising your returns.
Using a smart contract saves time and optimizes compounding. Your funds are usually pooled with other users’, meaning gas fees are shared across all members of the yield-optimizing smart contract.
Most existing and potential applications of decentralized finance involve creating and executing smart contracts. While a usual contract uses legal terminology to specify the terms of the relationship between the entities entering the contract, a smart contract uses computer code.
Since their terms are written in computer code, smart contracts can enforce those terms in an automated manner. This enables reliable execution and automation of many business processes that currently require manual supervision.
Using smart contracts is faster, easier, and reduces the risk for both parties. However, smart contracts also introduce new types of risks. As computer code is prone to bugs and vulnerabilities, the value and confidential information locked in smart contracts are at risk.
Blockchains are inherently slower than their centralized counterparts, affecting the applications built on them. Developers of DeFi applications need to take these limitations into account and optimize their products accordingly. Layer-2 solutions like Arbitrum and Optimism are addressing these issues by offering faster and cheaper transactions.
DeFi applications transfer the responsibility from intermediaries to the user. This can be a negative aspect for many. Designing products that minimize the risk of user error is a tough challenge when the products are deployed on top of immutable blockchains.
Using DeFi applications currently requires extra effort on the user's part. For DeFi applications to become a core element of the global financial system, they must provide a tangible benefit that incentivizes users to switch from the traditional system. Recent improvements in user interfaces and educational resources are helping to mitigate this issue.
Finding the most suitable application for a specific use case can be daunting, and users must be able to find the best choices. The challenge is not only building the applications but also thinking about how they fit into the broader DeFi ecosystem.
While the DeFi world can offer appealing APYs, it is not without risks. Even though they are decentralized, you are essentially consuming financial services, and some of the risks are familiar:
The legality of certain services and projects can be difficult to ascertain. If you are invested in a smart contract that is subsequently shut down due to regulatory problems, then your funds can be at risk. Recent actions and guidelines from global regulators are influencing the development and adoption of DeFi.
The assets you hold have different risk levels affected by their liquidity, trustworthiness, token smart contract security, and associated project and team. As the DeFi space has many low market-cap tokens, token risk can be particularly high.
Code vulnerabilities can undermine the security of smart contracts you’re invested in. Your wallet could also be compromised due to connecting to DeFi DApps and giving them certain permissions. Security practices, such as multi-signature wallets and insurance funds, are emerging to address these risks.
Finding projects and DeFi protocols requires research. Online forums, messengers, and websites can help you learn about new opportunities. However, be extremely cautious with any information you find. Always double-check the safety of any project you read or hear about.
* or a mobile one such as Trust Wallet will do the job. A custodial wallet (one where you don't own the private keys) is less likely to allow you to connect to DApps.
*
DeFi offers an open financial system to anyone with internet access, contrasting traditional finance, which relies on centralized institutions and regulatory bodies. However, DeFi and traditional finance are increasingly interacting. Banks and financial institutions are beginning to explore DeFi protocols, creating hybrid models that blend the benefits of both systems.
Even in the crypto world, not every financial service is decentralized. For example, staking through a centralized exchange like Binance often requires you to give up custody of your tokens. In this case, you must trust the centralized entity that deals with your funds.
The majority of the services offered will be the same. They likely are done through the same DeFi platforms that a user can access directly. However, CeFi takes away the often complicated nature of managing DeFi investments yourself. You may also have extra guarantees on your deposits.
CeFi is neither worse nor better than DeFi. Its suitability depends on your wants and needs. While you may sacrifice some control in CeFi, you often receive stronger guarantees and offload some responsibility for handling assets and executing transactions.
Open banking is a banking system where third-party financial service providers are given secure access to financial data through APIs. This enables the networking of accounts and data between banks and non-bank financial institutions. Essentially, it allows for new products and services within the traditional financial system.
DeFi has quickly created a self-sustaining ecosystem of value that attracts capital, developers, and new products. While DeFi promises to revolutionize the financial sector, it is still an emerging field. The future of DeFi lies in ongoing technological advancements, regulatory developments, and increasing mainstream adoption. For sustainable growth, continuous innovation is essential to address the limitations and risks associated with DeFi.
_Disclaimer: This content is presented to you on an “as is” basis for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Where the article is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Please read our full disclaimer_ _for further details. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. This material should not be construed as financial, legal or other professional advice. For more information, see our_ | 1,592 | 0 | academy.binance.com | [] |
https://www.coinbase.com/learn/crypto-basics/what-is-volatility | What is volatility? | Coinbase | Volatility is a measure of how much the price of an asset has moved up or down over time. Generally, the more volatile an asset is, the riskier it’s considered to be as an investment — and the more potential it has to offer either higher returns or higher losses over shorter periods of time than comparatively less volatile assets.
Volatility is a measure of how much the price of any particular asset has moved up or down over time. Generally, the more volatile an asset is, the riskier it’s considered to be as an investment — and the more potential it has to offer either higher returns or higher losses over shorter periods of time than comparatively less volatile assets.
As a newer asset class, crypto is widely considered to be volatile — with the potential for significant upward and downward movements over shorter time periods. Stocks are considered to have a wide range of volatility, from the relative stability of large-cap stocks (like Apple or Berkshire Hathaway) to often erratic “penny stocks.” Bonds, by contrast, are considered to be a lower-volatility asset — and typically see less dramatic upward and downward swings that take place over longer time frames.
(often 30 days or a year). The prediction of future movements is called “implied volatility” — and because nobody can actually predict the future it’s a less exact science (although it’s the basis for widely used financial tools like the Cboe Volatility Index, nicknamed the “fear index,” which predicts the next 30 days’ stock market volatility). Quantifying volatility can be done a couple of ways:
Traditionally, investors will take on a high level of risk if they believe the potential reward is worth the possibility of losing some of their investment. (Or of their investment, as in the of high-risk hedge-fund manager Bill Hwang, whose entire $20 billion dollar fund disappeared in two days.)
* Traditionally, retail investors are advised to diversify their investments within an asset class as a way of reducing risk. One popular strategy is to invest in a basket of stocks (or an ), rather than just a few. To further reduce the potential for downside, they may also pair investments in more volatile asset classes like stocks with investments in less volatile classes like bonds.
* As an asset class that’s , crypto has seen a series of steep rises and subsequent falls — and is considered to be more volatile as a category than stocks. That said, on (by far the biggest cryptocurrency by market cap) and increased institutional participation seem to be reducing its volatility over time. or emerging cryptoassets like tokens tend to have higher volatility — when experimenting with these assets as a beginner it’s best to risk amounts you can afford to lose.
* Factors that can increase volatility include positive or negative news coverage and earnings reports that are better or worse than expected. Unusually high spikes in volume of trading will usually correspond to volatility. Very low volume (as seen with so-called penny stocks that don’t trade on major markets or smaller cryptocurrencies) also usually corresponds with high volatility.
For some crypto investors, high volatility is part of the appeal — it creates the possibility for high returns. (And even as ’s volatility seems to be declining, it often moves by double-digit percentages in a single week, allowing for strategies like “buying the dip.”)
For less risk-tolerant investors, there are strategies that can be used to limit the downside impact of volatility, like . (Generally, investors with longer-term strategies who have good reason to believe that an investment will ultimately rise over time don’t need to think as much about short-term volatility.) And there are now cryptocurrencies specifically designed to have low volatility called (including and ) — these have their price pegged to a reserve asset like the U.S. dollar.
Information provided on this Site is for general educational purposes only and is not intended to constitute investment or other advice on financial products. Such information is not, and should not be read as, an offer or recommendation to buy or sell or a solicitation of an offer or recommendation to buy or sell any particular digital asset or to use any particular investment strategy. Coinbase and its affiliates (collectively “Coinbase”) makes no representations as to the accuracy, completeness, timeliness, suitability, or validity of any information on this Site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Unless otherwise noted, all images are the property of Coinbase. Coinbase is not registered or licensed with the U.S. Securities and Exchange Commission or the U.S. Commodity Futures Trading Commission. Links provided to third-party sites are for informational purposes. Such sites are not under the control of Coinbase, and Coinbase is not responsible for the accuracy of the content on such third-party sites. | 822 | 0 | coinbase.com | [] |
https://www.coinbase.com/learn/crypto-basics/what-is-a-token | What is a token? | Coinbase | Technically, “token” is just another word for “cryptocurrency” or “cryptoasset.” But increasingly it has taken on a couple of more specific meanings depending on context. The first is to describe all cryptocurrencies Bitcoin and Ethereum (even though they are technically also tokens). The second is to describe certain digital assets that run another cryptocurrencies’ blockchain, as many decentralized finance (or DeFi) tokens do. Tokens have a huge range of potential functions, from helping make decentralized exchanges possible to selling rare items in video games. But they can all be traded or held like any other cryptocurrency.
“Token” is a word that you hear a lot in cryptocurrency. In fact, you might hear described as a “crypto token” or something similar, because — technically — all cryptoassets can also be described as tokens. But the word has increasingly taken on two specific meanings that are common enough that there’s a good chance you’ll encounter them.
* A “token” often refers to and are by far the biggest two cryptocurrencies, it’s useful to have a word to describe the universe of other coins. (Another word you might hear with virtually the same meaning is “altcoin.”)
* The other increasingly common meaning for “token” has an even more specific connotation, which is to describe. You’ll encounter this usage if you become interested in decentralized finance (or DeFi). While a cryptocurrency like Bitcoin has its own dedicated blockchain, DeFi tokens like and run , or leverage, an existing blockchain, most commonly ’s.
* Tokens in this second category help decentralized applications to do everything from automate interest rates to sell virtual real estate. But they can also be held or traded like any other cryptocurrency.
Given that you’ll come across the word a lot while researching cryptocurrencies, it’s useful to understand some common connotations. But besides the big-picture definitions in the section above, there are also some categories of cryptoassets that actually have “token” in their name. Here are a few examples of those:
* A new world of cryptocurrency-based protocols that aim to reproduce traditional financial-system functions (lending and saving, insurance, trading) has emerged in recent years. These protocols issue tokens that perform a wide variety of functions but can also be traded or held like any other cryptocurrency.
* These are specialized DeFi tokens that give holders a say in the future of a protocol or app, which (being decentralized) don’t have boards of directors or any other central authority. The popular savings protocol Compound, for example, issues all users a token called COMP. This token gives holders a vote in how Compound is upgraded. The more COMP tokens you have, the more votes you get.
* NFTs represent ownership rights to a unique digital or real-world asset. They can be used to make it more difficult for digital creations to be copied and shared (an issue anyone who has ever visited a Torrent site full of the latest movies and video games understands). They’ve also been used to issue a limited number of digital artworks or sell unique virtual assets like rare items in a video game.
* Security tokens are a new class of assets that aim to be the crypto equivalent of traditional securities like stocks and bonds. Their main use case is to sell shares in a company (very much like the shares or fractional shares sold via conventional markets) or other enterprises (for instance, real estate) without the need for a broker. Major companies and startups have been reported to be investigating security tokens as a potential alternative to other methods of fundraising.
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https://www.investopedia.com/terms/p/proof-stake-pos.asp | Understanding Proof-of-Stake: How PoS Transforms Cryptocurrency | Proof-of-Stake (PoS) revolutionizes the way cryptocurrencies process transactions and build new blocks by utilizing a consensus mechanism that relies on randomly selected validators, rather than the computationally intensive process seen in Proof-of-Work (PoW) systems.
This method involves coin owners staking their cryptocurrency to earn the opportunity to validate transactions, thereby enhancing security and reducing environmental impact. As blockchain technology continues to evolve, understanding the differences and advantages of PoS over traditional PoW protocols is crucial for addressing the challenges faced by the cryptocurrency industry today.
* Proof-of-Stake (PoS) is a consensus mechanism that reduces the need for computational power by using randomly selected validators to confirm transactions and create new blocks, significantly lowering energy consumption compared to Proof-of-Work (PoW).
Proof-of-stake reduces the computational work needed for verifying and transactions. While proof-of-work relies on heavy computing for security, proof-of-stake allows coin owners to use their machines to verify blocks with less computational effort. Owners stake their coins as collateral, earning the opportunity to validate blocks and receive rewards.
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To become a validator, a coin owner must "stake" a specific amount of coins. For example, requires users to stake 32 ETH to operate a node. Multiple validators must confirm a block's accuracy before it is finalized and closed. Blocks are validated by multiple validators, and when a specific number of validators verify that the block is accurate, it is finalized and closed.
To activate your own validator, you'll need to stake 32 ETH; however, you don't need to stake that much ETH to participate in validation. You can join validation pools using "liquid staking" which uses an ERC-20 token that represents your ETH.
Different proof-of-stake mechanisms use various methods to achieve consensus. For instance, in Ethereum's sharding, a validator checks transactions and adds them to a shard block, needing up to 128 validators to form a voting "committee." After shard validation, two-thirds of validators must concur on the transaction's validity to close the block.
Both consensus mechanisms help blockchains synchronize data, validate information, and process transactions. Each method has proven successful at maintaining a blockchain, although each has pros and cons. However, the two algorithms have very different approaches.
Under PoS, block creators are called validators. A validator checks transactions, verifies activity, votes on outcomes, and maintains records. Under PoW, block creators are called miners. Miners work to solve a hashing problem to verify transactions. In return for solving it, they are rewarded with a coin.
To become a block creator in PoS, you need to own enough coins or tokens to qualify as a validator. In contrast, PoW miners must invest in processing equipment and pay high energy costs to solve computations.
High equipment and energy costs in PoW limit mining access and enhance blockchain security. PoS blockchains need less processing power to validate blocks and transactions. The mechanism also lowers network congestion and removes the rewards-based incentive PoW blockchains have.
Proof-of-stake is designed to reduce network congestion and address surrounding the proof-of-work (PoW) protocol. is a competitive approach to verifying transactions, which naturally encourages people to look for ways to gain an advantage, especially since monetary value is involved.
Bitcoin miners earn bitcoin by verifying transactions and blocks. However, they pay their operating expenses, such as electricity and rent, with . So what's really happening is that miners exchange energy for cryptocurrency, which causes to use as much energy as some small countries.
PoS addresses these issues by replacing computational power with staking, allowing the network to randomize mining ability. This means there should be a drastic reduction in energy consumption since miners can no longer rely on massive farms of single-purpose hardware to gain an advantage. For example, Ethereum's transition from PoW to PoS reduced the blockchain's energy consumption by 99.84%.
Long touted as a threat to cryptocurrency fans, the is a concern when PoS is used, but it is doubtful it will occur. A 51% attack in PoW happens when an entity controls over half the network’s miners and alters the blockchain. In PoS, this would require owning 51% of the staked cryptocurrency.
It's very expensive to control 51% of staked cryptocurrency. Under Ethereum's PoS, if a 51% attack occurred, the honest validators in the network could vote to disregard the altered blockchain and burn the offender(s) staked ETH. This incentivizes validators to act in good faith to benefit the cryptocurrency and the network.
Most other security features of PoS are not advertised, as this might create an opportunity to circumvent security measures. However, most PoS systems have extra security features in place that add to the inherent security behind blockchains and PoS mechanisms.
Under Proof of Stake (POS) consensus, users must generally own a cryptocurrency before they can participate in consensus and earn more crypto. To host a full validator node on Ethereum, a user needs to stake 32 ETH, which is very expensive. Another disadvantage of PoS is that on blockchains with smaller networks, a large minimum stake could lead to centralization.
Ethereum uses proof-of-stake as its consensus mechanic. Full validator nodes require a stake of 32 ETH, but other participants can take part in consensus by delegating their ETH to a validator or participating in staking pools. Users can also stake small amounts of ETH on their own, but no rewards are earned.
Proof-of-stake is a mechanism used to verify blockchain transactions. It differs from proof-of-work significantly, mainly in the fact that it incentivizes honest behavior by rewarding those who put their crypto up as collateral for a chance to earn more.
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https://academy.binance.com/en/articles/what-is-blockchain-and-how-does-it-work | What Is Blockchain and How Does It Work? | Blockchain technology has transformed industries, especially finance, by introducing a decentralized, transparent, and secure way of managing data and transactions. While it began as the foundation for cryptocurrencies like Bitcoin, its applications have grown to include supply chain management, healthcare, voting systems, and much more.
A blockchain is a special kind of database. It’s a decentralized digital ledger that’s maintained by a distributed network of computers. Blockchain data is organized into blocks, which are chronologically arranged and secured by cryptography.
This structure ensures that the data is transparent, secure, and immutable. It’s virtually impossible to change data stored in a block after the block is confirmed and added to the chain. The decentralized structure also removes the need for a central authority. Blockchain transactions can happen between users without the need for intermediaries.
was created in the early 1990s when computer scientist Stuart Haber and physicist W. Scott Stornetta employed cryptographic techniques in a chain of blocks as a way to secure digital documents from data tampering.
Decentralization in blockchain refers to the idea that the control and decision-making power of a network is distributed among its users rather than controlled by a single entity, such as a bank, government, or corporation.
In a decentralized blockchain network, there’s no central authority or intermediary that controls the flow of data or transactions. Instead, transactions are verified and recorded by a distributed network of computers that work together to maintain the integrity of the network.
and other transaction data. Once the transaction is verified, it's added to a block along with other transactions. We can think of each block as a page of the digital ledger.
To add a block to the chain, participants in the network must agree on its validity. This is achieved using a consensus algorithm, such as Proof of Work (PoW) and Proof of Stake (PoS). We will discuss both in more detail soon, but here is a brief summary:
Once validated, the block is added to the blockchain. Each subsequent block references the previous one, ensuring a tamper-proof structure. In other words, for a new block to be validated, it must use the previous block identifier.
The hash functions used in blockchains are generally collision-resistant, meaning that the odds of finding two pieces of data that produce the same output are astronomically small. Another feature is called the avalanche effect, referring to the phenomenon that any slight change in the input data would produce a drastically different output.
Let's illustrate this with SHA256, a function used in Bitcoin. As you can see, changing the capitalization of the letters caused the output to be dramatically different. Hash functions are also one-way functions because it’s computationally infeasible to arrive at the input data by reverse engineering the hash output.
Each block within a blockchain securely contains the hash of the preceding block, establishing a robust chain of blocks. Anyone wanting to alter one block would need to modify all the succeeding blocks, a task that is not only technically challenging but also prohibitively costly.
This is how it works. Each participant has a unique pair of keys: a private key, which they keep secret, and a public key, which is openly shared. When a user initiates a transaction, they sign it using their private key, creating a digital signature.
Other users in the network can then verify the transaction's authenticity by applying the sender's public key to the digital signature. This approach ensures secure transactions because only the legitimate owner of the private key can authorize a transaction, and everyone can verify the signatures using the public key.
is a mechanism that allows users or machines to coordinate in a distributed setting. It needs to ensure that all agents in the system can agree on a single source of truth, even if some agents fail.
When tens of thousands of nodes keep a copy of the blockchain's data, some challenges can quickly arise, including data consistency and malicious nodes. To ensure the integrity of the blockchain, there are various consensus mechanisms that govern how network nodes reach an agreement. Let's take a closer look at the major consensus mechanisms.
Proof of Work (PoW) is a consensus mechanism used in many blockchain networks to verify transactions and maintain the integrity of the blockchain. It's the original consensus mechanism used by Bitcoin.
Miners must use powerful computers to solve mathematical problems, mine new coins, and secure the network. This is why the mining process requires significant amounts of resources (computational power and energy).
Proof of Stake (PoS) is a consensus mechanism designed to address some of the drawbacks of Proof of Work (PoW). In a PoS system, instead of miners competing to solve complex mathematical problems to validate transactions and add new blocks to the blockchain, validators are chosen based on the amount of cryptocurrency they "stake" in the network.
The stake represents the amount of crypto held by validators as collateral. Usually, PoS validators are randomly selected to create new blocks and validate transactions based on the size of their stake. They are rewarded with transaction fees for creating new blocks and as an incentive to act in the best interest of the network. If they act maliciously, they risk losing their staked crypto.
) is similar to PoS, but instead of all validators being eligible to create new blocks, token holders elect a smaller set of delegates to do so on their behalf.
), validators are identified by their reputation or identity rather than the amount of cryptocurrency they hold. Validators are selected based on their trustworthiness and can be removed from the network if they act maliciously.
A public blockchain is a decentralized network that is open to anyone who wants to participate. These networks are typically open-source, transparent, and permissionless, meaning that anyone can access and use them. Bitcoin and Ethereum are examples of public blockchains.
A private blockchain, as the name suggests, is a blockchain network that is not open to the public. Private blockchains are typically run by a single entity, such as a company, and are used for internal purposes and use cases.
Private blockchains are permissioned environments with established rules that dictate who can see and write to the chain. They are not decentralized systems because there is a clear hierarchy of control. However, they can be distributed in that many nodes maintain a copy of the chain on their machines.
A consortium blockchain is a hybrid of public and private blockchains. In a consortium blockchain, multiple organizations come together to create a shared blockchain network that is jointly managed and governed. These networks can be either open or closed, depending on the needs of the consortium members.
Instead of an open system where anyone can validate blocks or a closed system where only a single entity designates block producers, a consortium chain sees a handful of equally powerful parties acting as validators.
The rules of the system are flexible: visibility of the chain can be limited to validators, visible to authorized individuals, or visible to all. If the validators can reach a consensus, changes can be easily implemented. As for how the blockchain works, if a certain threshold of these parties behave honestly, the system won't run into problems.
Smart contracts are self-executing contracts that can be programmed to execute automatically when certain conditions are met. Blockchain technology enables the creation and execution of smart contracts in a secure and decentralized manner.
) and organizations (DAOs), which are a big part of decentralized finance (DeFi) platforms. DeFi platforms leverage blockchain to provide financial services like lending, borrowing, and trading without traditional institutions. This democratizes access to financial tools.
Blockchain can be used to create secure and tamper-proof digital identities that can be used to verify personal information and other sensitive data. This could become increasingly important as more of our personal information and assets move online.
By providing a decentralized, tamper-proof ledger of all votes cast, blockchain technology can be used to create a secure and transparent voting system that eliminates the possibility of voter fraud and ensures the integrity of the voting process.
Blockchain technology offers a secure and transparent way to record transactions and store data. It’s a technology that is revolutionizing industries by bringing a new level of trust and security to the digital world.
Whether enabling peer-to-peer transactions, creating new forms of digital assets, or facilitating decentralized applications, blockchain technology opens up a world of possibilities. As the technology continues to evolve and gain wider adoption, we can expect more innovative and transformative use cases to emerge in the coming years.
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https://www.investopedia.com/terms/s/smart-contracts.asp | Smart Contracts on Blockchain: Definition, Functionality, and Applications | A smart contract is a self-executing program that automates the actions required in a blockchain transaction. Once done, these transactions are traceable and cannot be undone. The best way to envision a smart contract is to think of a vending machine—when you insert the correct amount of money and push an item's button, the program (the smart contract) activates the machine to dispense your chosen item.
Smart contracts were first proposed in 1994 by Nick Szabo, an American computer scientist who conceptualized a virtual currency called "Bit Gold" in 1998, 10 years before Bitcoin was introduced. Szabo is often rumored to be the real Satoshi Nakamoto, the anonymous Bitcoin inventor, which he has denied.
Szabo defined smart contracts as computerized transaction protocols that execute the terms of a contract. He wanted to extend the functionality of electronic transaction methods, such as POS (points of sale), to the digital realm.
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Szabo's paper also suggested contracts for synthetic assets, like combining derivatives and bonds. Szabo wrote, "These new securities are formed by combining securities (such as bonds) and derivatives (options and futures) in a wide variety of ways. Very complex term structures for payments...can now be built into standardized contracts and traded with low transaction costs, due to computerized analysis of these complex term structures."
Smart contracts don't include legal language or the actual terms of an agreement. They are scripts that contain functions, module imports, and other programming that automate the actions between two parties.
Because smart contracts execute agreements, they can be used for many different purposes. One of the simplest uses is ensuring transactions between two parties occur, such as the purchase and delivery of goods. For example, a manufacturer needing raw materials can set up payments using smart contracts, and the supplier can set up shipments. Then, depending on the agreement between the two businesses, the funds could be transferred automatically to the supplier upon shipment or delivery.
It's important to understand that the connections between blockchain transactions and real-world transfers are still being developed. For example, if you buy an item with ether from a retailer using a blockchain tied to Ethereum, it still needs human packing and shipping. In this case, a smart contract would likely transfer your cryptocurrency to the retailer and initiate another script that notifies the shipping department of a sale.
A basic example of a smart contract is a sale transaction between a consumer and a business. The smart contract could execute the customer's payment and initiate the business's shipment process.
It depends on the blockchain and how it is programmed. Generally speaking, smart contracts have state variables (data), functions (what can be done), events (messages in and out), and modifiers (special rules for specific users). Some may have additional elements depending on what they are designed to do.
Smart contracts are code written into a blockchain that executes the actions two parties agree to outside the chain. By automating these actions, the need for an intermediary or trust between the parties is removed.
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https://www.investopedia.com/terms/e/ethereum.asp | Ethereum Explained: Blockchain, Smart Contracts, and Its Future | Ethereum is a revolutionary global software platform driven by . Known for its native cryptocurrency, ether (ETH), Ethereum is pivotal in the world of blockchain and decentralized finance. It is designed to be scalable, programmable, secure, and decentralized, allowing anyone to develop secure digital technologies. Ether is utilized to power the blockchain and can also be used for payments across platforms that accept it.
* In 2016, Ethereum experienced a significant event known as "The DAO hack," leading to a split that created Ethereum Classic (ETC) after a portion of the community chose to retain the original blockchain.
Vitalik Buterin, credited with conceiving Ethereum, published a white paper introducing it in 2014. Ethereum was launched in 2015 by Buterin and Joe Lubin, the founder of ConsenSys, a blockchain software company.
One notable event in Ethereum's history is the , or split, of Ethereum and Ethereum Classic. In 2016, a group of network participants gained control of the smart contracts used by a project called The DAO to steal more than $50 million worth of ether.
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The raid succeeded partly due to a third-party developer's involvement with the new project. Most of the Ethereum community chose to reverse the theft, approving a new blockchain with a revised history.
The Dencun hard fork was activated on March 13, 2024. This hard fork introduced proto-danksharding (named in honor of the proposers, Protolambda and Dankrad Feist) to the Ethereum mainchain. Proto-danksharding is a stepping stone for future upgrades to the Ethereum blockchain.
Ethereum operates on a blockchain, a type of distributed ledger similar to a database. Information is stored in blocks, each containing encoded data from the block before it and the new information. This creates an encoded chain of information that cannot be changed. Throughout the blockchain network, an identical copy of the blockchain is distributed.
Each cell, or block, is created with new ether tokens awarded to the validator for the work required to validate the information in one block and propose a new one. The ether is assigned to the validator's address.
The network's automated programs validate a new block by reaching a consensus on its transaction information. On the Ethereum blockchain, consensus is reached after the data and hash are passed between the consensus layer and the execution layer. Enough validators must demonstrate that they all had the same comparative results, and the block becomes finalized.
Proof-of-stake doesn't require the energy-intensive mining used in proof-of-work for block validation. It uses a finalization protocol called Casper-FFG and the algorithm LMD Ghost, combined into a consensus mechanism called Gasper. Gasper monitors consensus and defines how validators receive rewards for work or are punished for dishonesty or lack of activity.
Solo validators need to stake 32 ETH to become active. Individuals can stake smaller amounts of ETH, but they are required to join a validation pool and share any rewards. A validator creates a new block and attests that the information is valid in a process called attestation. The block is broadcast to other validators called a committee, which verifies it and votes for its validity.
Dishonest validators face penalties under proof-of-stake. Those who attempt to attack the network are identified by Gasper, which flags the blocks to accept and reject based on the validators' votes.
Dishonest validators are punished by having their staked ETH burned and removed from the network. "Burning" is the term for sending crypto to a wallet without private keys, effectively taking it out of circulation.
Ethereum owners use wallets to store their ether keys. A wallet is a digital interface that lets you access your cryptocurrency. Your wallet has an address, which can be thought of as an email address in that it is where users send ether, much like they would an email.
doesn't store the ether itself. Your wallet holds you use as you would a password when you initiate a transaction. You receive a private key for each ether you own. This key is essential for accessing your ether—you can't use it without it. That's why you hear so much about securing keys using different .
Ethereum is described by founders and developers as “the world’s programmable blockchain,” positioning itself as a distributed virtual computer on which applications can be developed. The , by contrast, was created only to support the bitcoin cryptocurrency as a payment method.
The maximum number of bitcoins that can enter circulation is 21 million. The amount of ETH that can be created is unlimited, although the time it takes to process a block of ETH limits how much can be minted each year. The number of Ethereum coins in circulation as of May 2024 is just over 120 million.
Another significant difference between Ethereum and Bitcoin is how the respective networks treat transaction processing fees. These fees, known as gas on the Ethereum network, are paid by the participants in Ethereum transactions and burned by the network. The fees associated with Bitcoin transactions are paid to Bitcoin miners.
Ethereum’s transition to the proof-of-stake protocol, which enabled users to validate transactions and mint new ETH based on their ether holdings, was part of a significant upgrade to the Ethereum platform. However, Ethereum now has two layers. The first layer is the execution layer, where transactions and validations occur. The second layer is the consensus layer, where attestations and the consensus chain are maintained.
To address scalability, Ethereum is continuing to develop a scalability solution called "danksharding." Sharding was a planned concept that would allow portions (shards) of the blockchain to be stored on nodes rather than the entire blockchain. However, sharding was replaced with plans for danksharding, where transactions are processed off-chain, rolled up (summarized using data availability sampling), and posted to the main chain via a BLOB (Binary Large OBject).
Web3 is still a concept, but it is generally theorized that it will be powered by Ethereum because many of the applications being developed for the "future of the internet" use it.
Ethereum is also being implemented into gaming and virtual reality. is a virtual world that uses the Ethereum blockchain to secure items contained within it. Virtual land, avatars, wearables, buildings, and environments are all tokenized through the blockchain to create ownership.
(NFTs) gained popularity in 2021. NFTs are tokenized digital items created using Ethereum. Generally speaking, tokenization gives one digital asset an identifying token with a private key. The key gives only the owner access to the token.
NFTs are being developed for all sorts of assets. For example, sports fans can buy a sports token—also called fan tokens—of their favorite athletes, which can be treated like trading cards. Some of these NFTs are pictures that resemble a trading card, and some of them are videos of a memorable or historic moment in the athlete's career.
The applications you may use in the metaverse, such as your wallet, a dApp, or the virtual world and buildings you visit, are likely to have been built on Ethereum.
Here's how DAOs are generally designed: Imagine that you created a venture capital fund and raised money through fundraising, but you want decision-making to be decentralized and distributions to be automatic and transparent.
Your DAO could use smart contracts and applications to gather the votes from the fund members, buy into ventures based on the majority of the group's votes, and automatically distribute any returns. The transactions could be viewed by all parties, and there would be no third-party involvement in handling any funds.
There are many predictions about ether's price, but they are speculation at best. There are too many factors at work in cryptocurrency valuation to accurately predict prices in one week, let alone several years.
Ethereum is a decentralized blockchain and development platform. It allows developers to build and deploy applications and smart contracts. Ethereum utilizes its native cryptocurrency, ether (ETH), for transactions and incentivizes network participants through proof-of-stake (PoS) validation.
The role that cryptocurrency will play in the future is still vague. However, Ethereum appears to have a significant, upcoming role in personal and corporate finance and many aspects of modern life.
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https://www.investopedia.com/terms/s/stablecoin.asp | Stablecoins Explained: Definitions, Mechanisms, and Types | * Stablecoins are a type of cryptocurrency designed to maintain a stable value by pegging to fiat currencies, commodities, or financial instruments, aiming to offer a less volatile alternative to cryptocurrencies like .
Stablecoins, which can be found through , are designed to bridge the gap between the unpredictability of popular cryptocurrencies like Bitcoin (BTC) and the stability required for everyday financial transactions. By pegging their value to fiat currencies, commodities, or other financial instruments, stablecoins offer a crypto alternative with reduced volatility. As a result, they provide a more consistent medium of exchange capable of fulfilling daily transactional needs, unlike their more volatile cryptocurrency counterparts.
Bitcoin is the most popular cryptocurrency. On Oct. 6, 2025, it reached an all-time high of $126,198.07; however, it experiences significant price swings. For example, its price increased from around $6,000 in March 2020 to over $63,000 in April 2021, then dropped nearly 50% in the next two months. It often fluctuates over 10% in just a few hours.
This volatility appeals to traders but makes everyday transactions risky for buyers and sellers. Investors holding cryptocurrencies for long-term appreciation don't want to become famous for paying . Similarly, most merchants don't want to lose money if the price of a cryptocurrency plunges after they get paid in it.
For a currency that isn't legal tender to work as a medium of exchange, it must stay relatively stable to ensure short-term purchasing power. In traditional fiat exchange, even 1% daily movements are rare.
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should be cautious with stablecoins because they need an auditor to verify their reserves. While most auditors are trustworthy, auditing introduces another third party into a system meant to minimize third-party involvement.
Some argue that stablecoins are unnecessary because the U.S. dollar is widely accepted. Others believe digital currencies not controlled by are the future. With that in mind, four types of stablecoins, based on the assets used to stabilize their value, have been created.
Tether (USDT) and TrueUSD () are popular stablecoins backed by U.S. dollar reserves and denominated at parity to the dollar. As of December 2025, Tether (USDT) was the third-largest cryptocurrency by market capitalization, worth more than $184 billion.
For example, commodity-backed token Tether Gold (XAUt) is a cryptocurrency backed by gold reserves. The gold is thought to be held by an unnamed custodian in Switzerland, as the terms of service state:
> "A Gold Token holder who has effectuated redemption can elect to receive physical delivery of their gold bar at a place of their choosing, acting reasonably, in Switzerland (subject to the payment of fees in accordance with the Gold Token Fee Schedule in effect at the time of redemption)."
Crypto-collateralized stablecoins are backed by other cryptocurrencies. Because the may also be prone to high volatility, such stablecoins are generally overcollateralized—that is, the value of cryptocurrency held in reserves exceeds the value of the stablecoins issued.
Cryptocurrencies worth $2 million might be held as a reserve to issue $1 million in a crypto-backed stablecoin, insuring against a 50% decline in the price of the reserve cryptocurrency. For example, MakerDAO's Dai () stablecoin is pegged to the U.S. dollar but is backed by Ethereum (ETH) and other cryptocurrencies worth about 100.5% of the DAI stablecoin in circulation.
Algorithmic stablecoins may or may not hold reserve assets. Their primary distinction is the strategy of keeping the stablecoin's value stable by controlling its supply through an algorithm, essentially a computer program running a preset formula.
In some ways, that's not so different from central banks, which also don't rely on a reserve asset to keep the value of the currency they issue stable. The difference is that a central bank like the sets monetary policy publicly based on well-understood parameters, and its status as the issuer of legal tender does wonders for the credibility of that policy.
Algorithmic stablecoin issuers can't fall back on such advantages in a crisis. The price of the TerraUSD (UST) algorithmic stablecoin plunged more than 60% on May 11, 2022, vaporizing its peg to the U.S. dollar, as the price of the related slumped more than 80% overnight.
Stablecoins continue to be , given the rapid growth of the $290 billion market and its potential to affect the broader financial system. In October 2021, the and the Bank for International Settlements said stablecoins should be regulated as financial market infrastructure alongside payment systems and clearinghouses. Its proposed rules focus on stablecoins considered systemically important, those with the potential to disrupt payment and settlement transactions.
Under the Markets in Crypto Assets Regulation in Europe, which took effect in 2023, algorithmic stablecoins are strictly regulated. All others must have assets held in custody by a third party. Reserves must be liquid and have a 1:1 ratio of assets to coins.
Moreover, U.S. politicians have increased calls for tighter regulation of stablecoins. In 2025, President Donald Trump signed the Genius Act into law, which requires stablecoin issuers to adhere to marketing rules, such as making misleading claims that their stablecoins are federally insured or legal tender. They must also publicly disclose the reserve composition every month as well as hold liquid assets like U.S. dollars or short-term Treasuries.
Stablecoins attempt to peg their market value to some external reference, usually a fiat currency. They are more useful than volatile cryptocurrencies as a medium of exchange. Stablecoins may be pegged to a currency like the U.S. dollar or the price of a commodity such as gold, or use an algorithm to control supply. They also maintain reserve assets as collateral or through algorithmic formulas that are supposed to control supply.
The most popular and largest stablecoin by market capitalization is Tether (USDT). It is pegged to the U.S. dollar at a 1:1 ratio and backed by reserves. It's also consistently in the top five cryptocurrencies by market cap. You can find Tether on most major crypto exchanges, including and Coinbase.
Stablecoins are cryptocurrencies with a peg to other assets, such as fiat currency or commodities held in reserve. The intent behind them is to create a crypto asset with much lower price volatility, which makes them better for use in transactions.
_The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our for more info. As of the date this article was written, the author does not own cryptocurrency._
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our
1. EUR-Lex. "Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on Markets in Crypto-Assets, and Amending Regulations (EU) No 1093/2010 and (EU) No 1095/2010 and Directives 2013/36/EU and (EU) 2019/1937 (Text with EEA Relevance)."
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in Data Studio
Crypto Education Corpus (EN)
A curated educational corpus about cryptocurrency and blockchain technology, designed for building and evaluating RAG (Retrieval-Augmented Generation) systems.
Source Distribution
| Source | Documents | Share |
|---|---|---|
| iqwiki.com | 2,379 | 68.2% |
| academy.binance.com | 581 | 16.7% |
| kraken.com | 183 | 5.2% |
| coinbase.com | 125 | 3.6% |
| gemini.com | 94 | 2.7% |
| ethereum.org | 74 | 2.1% |
| investopedia.com | 51 | 1.5% |
Word Count Statistics
| Metric | Value |
|---|---|
| Mean | 1,021 |
| Median | 888 |
| Min | 100 |
| Max | 7,259 |
Schema
| Column | Type | Description |
|---|---|---|
url |
string | Source URL of the document |
title |
string | Document title |
markdown |
string | Full text content in Markdown format |
word_count |
int | Number of words in the document |
depth |
int | Crawl depth (0 = seed page) |
source |
string | Source domain name |
related_topics |
list[string] | Related topic names extracted from internal wiki links (iqwiki.com docs only; 59% of docs have topics) |
Data Collection
The corpus was built from multiple sources:
- Web scraping (Round 1 & 2) — Educational pages from Investopedia, Coinbase Learn, Kraken Learn, Ethereum.org, Gemini Cryptopedia, and others, scraped using Crawl4AI with BFS deep crawl strategy
- HuggingFace datasets — Filtered educational splits from
distilled-ai/web3-oriented-pretraining-data(Binance Academy articles, IQ Wiki encyclopedia)
Quality Filters Applied
- Minimum 100 words per document
- Boilerplate detection (cookie/privacy/newsletter heavy pages removed)
- URL-based deduplication (normalized: lowercase, stripped fragments/query params)
- English language only
- Listing/category pages removed (link-heavy pages with <50 words of actual content)
- Raw bytecode/assembly pages removed
- Markup cleanup: wiki-style internal links, citation markers, markdown links, and bare URLs stripped from text
- Related topics metadata extracted from wiki links before cleanup
Usage
from datasets import load_dataset
ds = load_dataset("kskada/crypto-education-en-corpus")
df = ds["train"].to_pandas()
print(f"Documents: {len(df)}")
print(f"Sources: {df['source'].nunique()}")
Related Datasets
- Golden evaluation set:
kskada/crypto-education-en-golden-set— 497 Q&A pairs for RAG evaluation
Citation
If you use this dataset, please reference:
@dataset{konovalov2026crypto_corpus,
title={Crypto Education Corpus (EN)},
author={Konovalov, Kirill},
year={2026},
publisher={HuggingFace},
url={https://huggingface.co/datasets/kskada/crypto-education-en-corpus}
}
License
MIT
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