Crypto TREND – Fifth Edition

As we expected, since publishing Crypto TREND we have received many questions from readers. In this edition we will answer the most common one.

What kind of changes are coming that could be game changers in the cryptocurrency sector?

One of the biggest changes that will impact the cryptocurrency world is an alternative method of block validation called Proof of Stake (PoS). We will try to keep this explanation fairly high level, but it is important to have a conceptual understanding of what the difference is and why it is a significant factor.

Remember that the underlying technology with digital currencies is called blockchain and most of the current digital currencies use a validation protocol called Proof of Work (PoW).

With traditional methods of payment, you need to trust a third party, such as Visa, Interact, or a bank, or a cheque clearing house to settle your transaction. Zima Digital Assets These trusted entities are “centralized”, meaning they keep their own private ledger which stores the transaction’s history and balance of each account. They will show the transactions to you, and you must agree that it is correct, or launch a dispute. Only the parties to the transaction ever see it.

With Bitcoin and most other digital currencies, the ledgers are “decentralized”, meaning everyone on the network gets a copy, so no one has to trust a third party, such as a bank, because anyone can directly verify the information. This verification process is called “distributed consensus.”

PoW requires that “work” be done in order to validate a new transaction for entry on the blockchain. With cryptocurrencies, that validation is done by “miners”, who must solve complex algorithmic problems. As the algorithmic problems become more complex, these “miners” need more expensive and more powerful computers to solve the problems ahead of everyone else. “Mining” computers are often specialized, typically using ASIC chips (Application Specific Integrated Circuits), which are more adept and faster at solving these difficult puzzles.

Navigation