£0.00
To understand distributed ledger, we will start by understanding a ledger. A ledger is a record in which commercial accounts are recorded, which can be considered the backbone of accounting. Ledgers have existed in many forms, from when clay has been used to keep records, to stones, to the paper age and then this computer age where it is digitalized. The digitized record emulates the same accounting pattern used on paper during its early phase, but advancement in technology especially in the cryptography and algorithmic areas of computing lead to the production of distributed ledgers.
Understanding distributed ledgers
A distributed ledger is a digital type of accounting where performed transactions are recorded in multiple ledgers at different places at the same time. Rather than the conventional way of keeping record where there is a main ledger, the distributed ledger record are generated separately by each node in the distributed network.
Record distribution over the network is unique as each record in individual ledgers are generated autonomously and saved by each node without any main node’s instruction. The principle governing are:
1. Every node in the network is independent
2. The node processes every transaction and determines the validity of the transaction.
3. Other nodes try to validate the result.
4. the result of the majority wins.
How to implement a distributed ledger
The blockchain technology is a very popular type of digitally distributed ledger. It separates data into independent chunks of data, which are then linked together, with a rule that data can only be added. The blockchain technology has been making waves especially financial sector as it might change the future of the financial sector. It promises efficiency, security and addressing of current challenges in the financial sector. It might as well break through to other sectors like manufacturing and energy. Want to more about blockchain?
The distributed ledger is far more flexible than the traditional paper accounting method, it is safer and more secure. With distributed journals it possible to send valued assets digitally without getting a central authority, a middleman, or any third party involved since the users are the ones to keep track and confirm the validity of record. Making the records more secure as validated records are immutable.
How are distributed ledgers different?
As we can see from the explanation above, the validation and maintenance of records and data are in the hands of the individuals in the distributed network, removing the importance of middlemen, 3rd parties and central authorities, thus making it a very trustworthy, transparent form of performing transaction without the fear of record been changed.
These attributes have made people embrace the new decentralized technology, enhancing its use in the stock trading, money exchange, contracts, the unbanked and crypto trading and this seems like only the beginning.
Any owner of Bitcoins or Altcoins, of course, thinks about where to put them. And since you have acquired a cryptocurrency, appreciating its advantages, you must also take time to study the issue of storage, so as not to fall for scammers and hackers. Most incidents in the world involving hacking and theft of cryptocurrencies could have been avoided if the owners of the crypt took security more seriously, which we propose to do to you. After all, you can never trust your money to anyone. Recently, there are a very large number of various services that accept digital coins, store, transfer, exchange, etc. So, what kind of wallet for cryptocurrencies to choose in the end? We will try to help you understand this diversity and make the right choice.
What is cold and hot storage
So, first, you need to understand the fundamental difference between the so-called hot and cold storage of tokens. What is the essence of these opposing methods:
Hot storage, or as it is also called hot wallet, or online storage – can be described in one word – “online”. It includes all online wallets that are connected to the network around the clock and give instant access to your funds at any time of the day or night.
Cold storage (in other words cold wallet, or offline storage) is a completely offline method. It could not be better suited for very wealthy people who have huge amounts, or just for people who are shaking over their savings, very afraid of losing them.
Wallets for PC
You can download and install an electronic wallet for cryptocurrency directly on your computer – the so-called desktop version. As a rule, such multicurrency versions, for example, Exodus, with the built-in platform ShapeShift. Protection through private keys, although the choice of currencies is small – only about a dozen of the most famous.
As for the interface, it is not complicated, the control is clear, the design is beautiful. Bitcoin Core product provides a good level of protection, as it is quite independent. As easier to use as compared to a Bitcoin wallet, Electrum can be considered, it runs on Windows, Linux and Mac supports basic hardware store, and will be convenient for beginners.
Advantages and disadvantages
Software wallets are mainly used for long-term storage of cryptocurrencies. However, they are also convenient for conducting large-scale calculations. Such wallets can be called the optimal ratio for safety and ease of use.
Private keys are stored by the user – this is a significant plus, but there are also disadvantages to such wallets. For example, binding to one device, as well as the loss of funds due to breakdown or theft of a computer (if there was no backup on removable media).
As for the features of using software repositories, we will highlight the following:
- Wallets for cryptocurrency need to be downloaded only from official sources and timely updated to new versions. Do not neglect the updates, even if you like the old version more. Often, developers eliminate flaws and vulnerabilities, because to ensure maximum security, it is important to timely download the latest version.
- Although software wallets are considered the most secure, it is also important for the user to monitor the security of his computer. First of all, you should take care of a high-quality and reliable anti-virus.
- You should not download a client or store a backup on devices that someone else has access to. This applies not only to computer workers but also to those devices that other family members have access to.
- After downloading the storage and replenishing the balance, it is important to make a backup copy in order to recover funds in case of computer breakdown or other unpredictable situations. Backups need to be done every time after new transactions.
Best wallet for every coin
Consider the most popular desktop wallets for main cryptocurrencies:
Bitcoin – Bitcoin Core, GreenAddress
Litecoin – Litecoin Core
Ethereum – Ethereum Wallet, Mist
Bitcoin Cash – Electron Cash
XRP – Toast
What are ERC-20 tokens?
Understanding how Bitcoin works is not easy for most people, and Ethereum is much more difficult. Even if you are with technologies on “you”, it will take a lot of time to understand how this system works. So, Ethereum is a decentralized platform on which smart contracts written in the Solidity programming language can work. It can also run hundreds of decentralized applications.
For any new application that uses blockchain or smart contracts, a new Ethereum token can be created – several standards have been developed for such tokens, and tokens of different standards are suitable for different types of applications. Standards facilitate the interaction between tokens and smart contracts, and therefore Ethereum is a popular platform for developing decentralized applications. Ethereum can be likened to iOS or Android operating systems for decentralized applications – it simplifies their creation and supports operation.
Ethereum ERC-20 Token This is the current industry standard that is used by thousands of different cryptocurrency projects. The ERC-20 token standard has six required parameters for each smart contract and three additional (but recommended!) Options. For example, the permissible number of decimal places is additional. For comparison, Bitcoin supports eight decimal places, a symbol (usually a 3-4-digit code) and a name. The six required parameters determine the number and transfer of tokens.
Advantages and features of the standard
The main advantages of the ERC20 standard tokens include the following:
Free entry to the market
Most cryptocurrency exchanges have long been working with the standard ERC20. They do not have to make changes to their program code to accept new tokens.
This makes life much easier for ICO developers. They simply take the ERC20 code on GitHub, create their own tokens based on it, and after bidding submit an application for adding a coin to the listings of the required exchanges. If the cryptocurrency meets the requirements of the exchange, it is added in a few days.
Technical simplicity
ERC20 is such a simple standard that even a novice programmer can create tokens based on it. All technical information is freely available on GitHub, and ERC20 token generation tutorials can be found even on YouTube.
Multifunctionality
Most tokens perform one given function. For example, they confirm ownership of certain assets (as in the case of the purchase of tokens during the ICO), act as a cryptocurrency asset or stock.
The disadvantages and risks of the standard
The main problem with the ERC20 is the lack of transaction processing tools. They start automatically, even if they should not be started in principle. Consider a clear example.
Suppose an investor who wants to accept an asset in ICO sends funds to the specified address. But developers only accept BTC, and the investor wants to send them ETH. In this case, he will not be able to start a transaction – it will be rejected by the system.
But if he sends the ERC20 standard tokens to the same ICO, the transaction will be accepted. Funds from his balance will be debited and sent to the recipient’s address. But in our case, the address accepts only BTC. He does not know what to do with ERC20 tokens, and he cannot accept the transaction. As a result, the coins are simply “lost” somewhere in the blockchain. Moreover, it will be impossible to return them.
Summary
The ERC20 is a universal standard that most modern ICOs use. Its advantages are the simplicity and convenience of working with smart contracts. To verify the execution of a smart contract and move funds, the nodes do not need to contact the database and follow protocols. It is enough to check whether the conditions of the contract are fulfilled correctly.
However, simplicity was also a disadvantage of the ERC20. The ease of creating your own tokens attracts scammers who organize scam-ico and disappear with collected funds.
What are products?
Bitcoin is likely to become a new, independent asset class, so gold or stocks that will be sent for regulation, said Leo Melamed, honorary chairman of CME Group, this week in an interview with Reuters. According to Melamed, launch in the sale will be possible only in the near future. He pointed out the parallel between cryptocurrency and currency trading in the international currency market, launched in 1972: “The world in the 1970s was not considered currency trading with a full financial level. I, too, have come a long way from disbelief (in Bitcoin) to the desire to learn more.”
So what is it?
The answers will be positive for geeks who participate in the development of cryptocurrencies and use them for transactions. It will be negative for people because their price has recently risen, and we hope to sell when it becomes even bigger, as well as for those who buy cryptocurrency for a radical defense against inflation.
The rest should understand which forecast seems more plausible to them: either cryptocurrency will support the development of the non-traditional business sector, and this will lead to a blurring of the boundaries between investors, employees, and customers; or blockchain technologies will be used by a traditional business that receives funding through the placement of shares and bonds. Again, the question is not what you think about the probability of success of cryptocurrency and related technologies, but whether you think that their value (if it is, of course) will attract traditional companies or holders of crypto active assets. You don’t have to know for sure. If you believe that there is a significant likelihood that in the future a significant part of the economy will be represented by crypto active assets, it makes sense for you to think about how this will be reflected in your investment portfolio.
The second reason
The second reason for having asset classes is that it is difficult to compare different types of assets, for example, shares with bonds. Once you have selected an asset class, you can explore all the assets in it and select the combination that best suits your strategy. If the only thing that interests you in cryptocurrency is price dynamics, then this asset should be attributed to the class of shares. If you plan to read official documents, talk with developers, test the code and calculate future profitability, then you should allocate them into a separate asset class, since these studies differ from stocks or bonds research.
There remains one more group of investors – they are interested in the fundamental indicators of cryptocurrency, but they would like to entrust the research either to active fund managers or to the market itself – that is, to invest in an index fund. Here you should choose how you plan to evaluate the investment. If you are going to use traditional indicators, such as alpha and Sharpe ratio, then these investments should be equated to equity investments. You will use these assets to improve the risk-return ratio in your portfolio.
On the other hand, if you think that the manager’s task is not to make profits in dollars, but to increase the growth of your cryptocurrency portfolio, measured in cryptocurrencies, you need to consider them as a separate asset class. Do you plan to sell your cryptocurrency portfolio after retirement for cash to spend it alone? Or are you going to earn on cryptocurrencies and thus replenish the retirement account?
This decision has nothing to do with correlations, trading volume, market capitalization, expected returns, corporate governance or regulation. It’s about how you plan for the future. If you consider cryptocurrency as a potential way to increase your wealth, invested in traditional assets, they should be attributed to traditional asset classes. If you believe that they will open the way to a new type of wealth, you need to allocate them into a separate class.