LET’S START FROM THE BEGINNING: WHAT IS CRYPTO?
A decade or two ago, the word was generally used as
shorthand for cryptography. But in recent years, it’s been more closely
associated with cryptocurrencies. These days, “crypto” usually refers to the
entire universe of technologies that involve blockchains, the distributed
ledger systems that power digital currencies like Bitcoin but also serve as the
base layer of technology for things like NFTs, web3 applications and DeFi
trading protocols.
AH YES, BLOCKCHAINS. CAN YOU REMIND ME, WITHOUT GOING INTO
TOO MUCH TECHNICAL DETAIL, WHAT THEY ARE?
At a very basic level, blockchains are shared databases that
store and verify information in a cryptographically secure way.
You can think of a blockchain like a Google spreadsheet,
except that instead of being hosted on Google’s servers, blockchains are
maintained by a network of computers all over the world. These computers
(sometimes called miners or validators) are responsible for storing their own
copies of the database, adding and verifying new entries and securing the
database against hackers.
SO BLOCKCHAINS ARE … FANCY GOOGLE SPREADSHEETS?
Sort of, but there are at least three important conceptual
differences.
First, a blockchain is decentralised. It doesn’t need a
company like Google overseeing it. All of that work is done by the computers on
the network, using what’s called a consensus mechanism — a complicated
algorithm that allows them to agree on what’s in a…
