Crypto 101, Part 2 of 9: The Blockchain - The Unbreakable Shield.

Welcome to Crypto 101!

If you haven't read the first article in our series Crypto 101, Part 1 of 9 : Understand Crypto, How it Empowers you and Transforms the Financial World.

I strongly recommend doing so before continuing with this one.

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In the previous article, we learned that cryptocurrency is more of a currency than anything else.

Like traditional money, the focus should be on earning it rather than buying it.

We also provided an overview of the blockchain concept, discussing blocks, chains, and briefly explaining how blocks are chained together

When I personally think about blockchain, I believe the best analogy is the mythological creature, the Hydra.

According to mythology, when you cut off one of the Hydra's heads, two more grow back in its place.

While not exactly the same, blockchain shares similarities with the Hydra in that it draws power from self-replication and organic redundancy. But how does it achieve this?

We will use the Bitcoin Blockchain network for this example.

The Bitcoin blockchain utilizes two crucial mechanisms: one is the node system , and the other is mining, which operates according to a pre-established consensus.

We'll learn more about mining and consensus in Part 5 of this series.

Looking for redundancy, the nodes are the mechanism that interests us here.

Nodes are servers that maintain and update a copy of the ledger, similar to how DNA holds a copy of genetic information.

Essentially, nodes act as bookkeepers.

Anyone can run a node if they wish, but why would someone host a node? Out of the kindness of their heart?

Perhaps, but there is a smart incentive for hosting a node: full node wallets, which are the only truly decentralized Bitcoin wallets available.

They offer numerous advantages, but discussing them is beyond the scope of this article. We'll learn more about them in the upcoming series about Wallets and security in Part 4 of this series.

Now that we know there are bookkeepers, how can we verify, without trust, that they aren't cheating or taking advantage of the books?

Remember the two crucial mechanisms I mentioned earlier: nodes and mining.

Nodes are the bookkeepers, maintaining and distributing the ledger, while miners are the writers who finalize and validate the ledger before redistribution.

Miners voluntarily authenticate the blockchain's writing, and there is a strong incentive to do so: each time a miner validates and writes a block, they receive a freshly minted amount of coins.

In part 5 of this series you will learn how and why mining bitcoin is a hard thing to do.

It may sound weird to ear but, mining bitcoin is as hard or even harder than to mine gold.

It's important to note that mining is how new coins are created, and mining is hard.

The new block provides a sort of serial code for the new coins.

Taking a step back, consider the fact that there are multiple nodes, around 12 million as of today, and even more verifiers scattered across the globe.

None have authority over the others, most are anonymous, and almost none know or trust each other. This system, the blockchain, verifies and secures itself billions of times per second—more than 300 quintillion times a second, to be precise.

If a node attempts to cheat, it is automatically rejected by the others. If a miner cheats, they lose money.

This is an immutable force.

Blockchain technology cannot be cheated, the ledger cannot be falsified, anyone can easily verify that the transactions are true, and it cannot be censored or stopped—you would need to shut down the internet forever to do so, and as soon as you brought it back, the blockchain would return with it.

It's no secret that central banks can and do print as much money as they want.

When you deposit this freshly printed money into your bank account, retail banks keep 10% of it and lend the rest, effectively multiplying the printed money by 10 times.

Think about the fact that you work the bulk of your life to earn this money, which is printed from thin air and then multiplied by 10.

Now, remember how I mentioned that when a new block is created, the miner who verifies it receives newly minted coins?

This is how cryptocurrency is created.

But there is a crucial mechanism in place: a limit.

As of today, regardless of how many nodes, miners, or coin users are added to the network and regardless of the demand, only 5.6 BTC are minted every 10 minutes.

Even better, this number is cut in half every four years, with the next "halving" set for 2024.

Regardless of demand, the supply always decreases—Bitcoin is the only thing in the world with this property.

Want more gold? The price goes up, new mines open, and the supply increases.

Want more Bitcoin? What you see is what you get.

You can only hope and wait for the price to decrease.

For Bitcoin, in particular, only 21 million will ever be minted.

Nineteen million have already been minted, and the new supply is decreasing exponentially every four years.

I can't wait to show you how you can verify a block of transactions all by yourself.

Paradoxically, being able to verify whatever you want, whenever you want, in a trustless environment is the best way to trust the process. You won't believe how simple it is—easy as 1, 2, 3. But let's pique your curiosity by telling you this: it's as easy as 0, 0, 0. You'll learn why in Part 5.

In conclusion, you learn that apart from being insanely secure, blockchain technology and crypto are designed to give you the power to verify information by yourself.

It's a tool to verify information instead of trusting.

It's a tool to regain control over your own money.

In a way, we can say that blockchain and crypto are focused on promoting freedom.

In our next article, Crypto 101, Part 3 of 9: How to buy, sell, and store cryptocurrencies.

I will teach you how to transact and store crypto securely, all by yourself, without relying on anyone else.

I will give you clear example on why never trust and always verify.

I will also discuss how to recognize a crypto scam and how to avoid them.

I hope this series will bring you value and that you'll enjoyed it.

Thank you for reading our article!

We hope you found it insightful and valuable.

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