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Blockchain 101: Your Easiest Guide to Proof of Stake Consensus Mechanism

Intermediate Apr 7, 2023

The Beginner’s Guide to the Proof-of-Stake

What Is Proof of Stake (PoS) in Crypto?

Proof Of Stake (PoS) in crypto is among the several consensus mechanisms used by blockchain networks to achieve a distributed consensus. Consensus mechanisms, moreover, are what we call the stack of protocols that allows a network of nodes to agree on the blockchain’s performance, as well as incentivize these nodes ensuring the efficiency of the network.

Furthermore, while Bitcoin uses the Proof of Work mechanism, Ethereum, on the other hand, uses the Proof of Stake mechanism. 

The Proof-of-Stake consensus mechanism is where validators stake capital (ETH) into a smart contract in the Ethereum blockchain. The validators are responsible for the proposal and validation of blocks in a Proof of Stake blockchain. Moreover, these participants with stakes are selected randomly as validators, depending on how much they have staked. These validators should ensure to attest that the blocks are verified. Only with adequate attestations would a block be added to the blockchain. Afterward, the validators receive rewards for these crucial tasks.

Furthermore, in Proof of Stake mechanism, offers a better node level of decentralization compared to the Proof of Work mechanism. What’s more, it gives improved scalability solutions like sharding.

Importance of Proof of Stake

One of the key highlights of the Proof of Stake mechanism is its freedom from mining. In this consensus, validators do not need an immense amount of computational power when mining blocks. 

Also, it gives validators the task to generate blocks when selected and even if they are not selected, they can validate the proposed blocks—attesting—and still receive rewards for this task.

Issues with Proof of Stake

Some find the Proof of Stake consensus a bit new and less battle-tested compared to its predecessor, Proof of Work.

Also, trailers find the Proof of Stake more complex to implement. Users even need to run three (3) pieces of software to participate in the Ethereum Proof of Stake consensus.

Cryptocurrencies Using Proof of Stake

Furthermore, when a cryptocurrency uses the Proof of Stake mechanism, they use staking rather than mining. 

Some of the major cryptocurrencies using the PoS consensus are:

  • Ethereum
  • Cardano
  • Solana
  • Polkadot

Conclusion

Nonetheless, the PoS consensus algorithm has had a significant impact on how we view cryptocurrencies today.

With that said, stay tuned to learn more about everything blockchain!

101 blockchains

101 Blockchain: Your Easiest Guide to Proof of Work Consensus Mechanism

Intermediate Jan 17, 2023

Proof of Work (PoW) in Blockchain, Explained

Cryptocurrencies use the Proof of Work (PoW) consensus to verify the accuracy of new transactions that blockchains record continually.

This Proof of Work consensus mechanism replaces the centralized governing of traditional systems. Instead, it relies on a distributed network of participants to validate all transactions coming into the blockchain, and at the same time, add them as new blocks on the chain or network.

More so, this type of consensus chooses which of the participants (called miners), can handle the lucrative task of verifying transactions and new data, as well as solving mathematical problems and complex equations that prevent the network from external attacks and hacks. Also, this allows miners to receive rewards in crypto—whenever they accurately perform and execute the said tasks.

Additionally, cryptocurrency widely uses the PoW mechanism. In fact, Bitcoin uses this consensus algorithm, wherein miners need to mine the new blocks and tokens to validate the transactions coming into the chain. In return, they are rewarded with bitcoin or altcoins as mentioned above.

Importance of Proof of Work

It is known that Satoshi Nakamoto introduced the very first cryptocurrency to the world around 2008. He did this by publishing the famous white paper regarding a digital currency based on the PoW protocol.

This white paper describes how a “peer-to-peer version of electronic cash” can solve the existing problems in online payments. Indeed, today we saw how cryptocurrency developed and introduced a new dawn for online payments. 

According to experts, this protocol solves the double-spend issue in a traditional payment. Moreover, it also provides a decentralized method of verifying transactions while promoting the highest level of securities. Not to mention, incentivizing the efforts that miners exert in verifying transactions and adding data on the chain.

Cryptocurrencies Using PoW

Analysts say that around 64% of the total market cap of cryptocurrencies uses the PoW mechanism. Some of the most popular ones are:

  • Bitcoin
  • Dogecoin
  • Bitcoin Cash
  • Litecoin
  • Monero

Issues with PoW Mechanism

As popular as it is, the PoW mechanism has also received criticism and backlash since its inception. One of the major reasons is its appetite for electric power.

Furthermore, PoW’s energy consumption exceeds the regular amount of electricity in a regular desktop computer—especially today, that bitcoin mining would require energy consumption that is equivalent to a standard home in nine years, just to mine one Bitcoin.

In hindsight, this intense computational energy demands in PoW make major outfits centralize mining operations. Moreover, this might result in manipulation and control of cryptocurrency operations for some.

Conclusion

Nonetheless, the PoW consensus algorithm has contributed so much to how we view cryptocurrencies today.

With that said, we will discuss what is Proof of Stake in the next article and differentiate it from the PoW mechanism. Stay tuned!

types crypto exchanges

Types of Crypto Exchanges: Here’s What You Need To Know

Beginner Jan 17, 2023

Crypto exchanges are helpful in allowing traders to buy and sell cryptocurrencies. 

As an individual, traders should consider their goals and the risks they might take before diving into crypto trading. Most importantly, they have to be familiar with how cryptocurrency exchanges work first, before choosing which one to use. 

Below are a few types of crypto exchanges available in the market today:

1. Centralized Exchanges

Centralized Exchanges or otherwise known as CEX, are similar to the traditional stock exchanges in the market today. It acts as a middleman for buyers and sellers of cryptocurrencies wanting to acquire or sell virtual assets.

As it is ‘centralized’, traders are trusting somebody else—a central authority—to handle their cryptocurrencies. It is overseen by a third party that ensures customers sign-up and trading runs smoothly and efficiently. 

Notably, centralized exchanges allow trading with both fiat currency and other cryptocurrencies.

2. Decentralized Exchanges

Decentralized Exchanges or otherwise known as DEX, are platforms that facilitate peer-to-peer trades. It aims to stay true to the very nature of cryptocurrencies and blockchain—decentralization, without a middleman to handle traders’ funds.

Since it conducts peer-to-peer trades, traders come to the platform to conduct the transactions directly with each other.

In addition, most experienced traders go to this kind of exchange as it needs more technical skills to navigate. Moreover, because it has no central authority, traders are expected to be responsible and accountable for their funds and their private keys. 

Centralized Exchange vs. Decentralized Exchange

CEXDEX
Advantages
1. Excessive trading volume
2. A high level of liquidity
3. Trading from fiat to cryptocurrency
4. Crypto-to-fiat exchange
5. Extensive functionality
6. Simple to use
7. Transactions that are completed quickly
1. Security against hackers
2. Reduced fees and costs
3. There is no deception.
4. Allows integration of DeFi and NFT
5. A wide range of tokens
6. Independence from government control
Disadvantages
1. Vulnerable to hacks
2. Gathers extensive data from their customers
3. Custodial
1. Less liquidity 
2. Limited performance

Conclusion

It is critical to have a thorough understanding of the various types of crypto exchanges when selecting the right one to use. This will allow you to determine the best crypto trading platform that meets your needs and, as a result, which will be the most convenient for you to use.

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Disclaimer: This article solely expresses the author’s thoughts, which may not reflect those of Hippo Wallet. Nothing in this article should be interpreted as investment guidance. Hippo Wallet encourages all users to do their research before investing in cryptocurrencies.

Beginner’s Guide To Crypto Exchange

A Beginner’s Guide to Crypto Exchange

Beginner Jan 17, 2023

Binance, Kraken, Riverex, Pancakeswap—these are all examples of crypto exchanges present in the crypto space today. These crypto exchanges hold important functions for traders because these exchanges allow them to buy and trade cryptocurrencies.

Cryptocurrency 101: What is a crypto exchange?

By definition, a crypto exchange is a platform where traders buy and sell cryptocurrencies and digital assets. This is where traders trade one cryptocurrency for another or buy cryptocurrencies using fiat currencies.

Instead of traders agreeing upon an exchange rate and sending coins directly to their fellow traders, crypto exchanges expedite and simplify this process. Crypto exchanges make the process of trading and procuring cryptocurrencies easier and more convenient for crypto users all over the world.

Types of Crypto Exchanges

Centralized Exchanges (CEX): What is CEX exchange?

Centralized exchanges (CEX) are often the perfect choice for beginners. It has a user-friendly interface with all the functions needed in trading. Centralized exchanges (CEX) have KYC requirements, to comply with anti-money laundering regulations. In this sense, it has an ‘official’ feeling to them as the process is somewhat similar to that of brokerage accounts or opening a savings account.

Another thing to note, a centralized exchange uses a third party in conducting transactions, as well as in offering them security and monitoring. This central authority, however, has access to users’ funds and keys. 

Pros

  • User-friendly; easy to use
  • Allows the purchase of cryptocurrencies using fiat currencies.
  • The centralized authority guarantees maximum security and dependability.

Cons

  • Exposable to cyberattacks
  • Gathers a lot of info from their clients
  • Custodial

Decentralized Exchanges (DEX): What is DEX exchange?

Because there is no central authority on decentralized exchanges, it is much closer to the fundamental essence of Bitcoin. Servers are distributed globally to ensure that, in the event of an attack, not one computer can compromise the entire network. A DEX also does not require a KYC procedure, in contrast to CEXs. It is not facilitated by a central organization.

A decentralized exchange does not use any third party, authority, or financial regulators for monitoring or imposing regulations on the platform. This provides users control over their funds and private keys. This, in some way, imposes a high level of security and confidentiality for the users.

Pros

  • Security against hackers
  • Reduced fees and expenses
  • No fraud

Cons

  • Reduced liquidity
  • Limited functions
  • High transaction fees

Conclusion

Make sure that you understand the differences between the cryptocurrency exchanges before entering the world of cryptocurrencies, and find out more about your chosen exchange (no matter if it is centralized or decentralized). With this, you will be able to manage your trading wisely and protect yourself from any risks when it comes to crypto trading. You can also read our Beginner’s Guide To Crypto Wallets to crypto wallets.

Disclaimer: This article solely expresses the author’s thoughts, which may not reflect those of Hippo Wallet. Nothing in this article should be interpreted as investment guidance. Hippo Wallet encourages all users to do their research before investing in cryptocurrencies.

Beginner’s Guide To Crypto Wallets

A Beginner’s Guide to Crypto Wallets

Beginner Nov 8, 2022

Owning cryptocurrencies requires you to store them in crypto wallets—just like how fiat currencies are kept in your wallets or bank accounts. 

A crypto wallet (cryptocurrency wallet) allows users to receive, send, and store their crypto assets securely. Additionally, crypto wallets validate transactions in the blockchain and help in managing digital assets easily.

There are several types of wallets present in the crypto space. While they all share the same functions and purpose, several crypto wallets are designed differently from the others.

With that said, understanding the difference between different types of crypto wallets will also help in choosing which wallet suits your needs—which among them is the best cryptocurrency wallet. Let’s find out how do crypto wallets work.

Crypto Wallets: Categories

Before diving into the different types of crypto wallets, first, it’s important to understand that crypto wallets are categorized into two: hot and cold wallets.

A hot wallet is simply any crypto wallet that is connected to the internet. Hot wallets have this ‘always on’ nature, that makes them convenient to use. On the other hand, a cold wallet is any type of wallet that is offline or not connected to the internet. This type of wallet may require more technical know-how; hence, they are suited for experienced traders or those with huge amounts of crypto assets.

Crypto Wallets: Custodial Vs. Non-custodial

Another key distinction between crypto wallets is having a custodial or non-custodial mechanism.

A custodial wallet uses a third party like a crypto exchange to hold users’ private keys and use them to ‘sign’ and initiate transactions on behalf of the owner. In other words, aside from the users, even the parties have access to their private keys.

In contrast, non-custodial, decentralized crypto wallet wallets have full control over their private keys and funds. The holder has the sole responsibility of keeping their cryptocurrencies and private keys safe and secure. 

Crypto Wallets: Types

Desktop Wallet

A desktop wallet is a type of hot wallet that uses encryption to keep users’ holdings and private keys securely stored on their computer hard drives. These are programs that run on users’ desktop or laptop computers.

Examples: Electrum, Exodus, Brave Wallet

Mobile Wallet

A mobile wallet is a type of hot wallet that allows users to quickly send or receive transactions on the go, using their mobile phones and active internet connection. It is also a type of hot wallet.

Examples: Hippo Wallet, Trust Wallet, MetaMask

Paper Wallets

A paper wallet is a type of cold wallet, wherein private keys are written down or printed on a paper. This paper is securely stored by the user as well.

Example: WalletGenerator.Net and BitcoinPaperWallet.com

Hardware Wallets

Hardware wallets offer a high-tech solution for securing private keys in a number of formats. Additionally, these wallets are physical devices resembling a USB hard drive, which is plugged into a computer or mobile device. 

Example: Ledger Nano S, Trezor Model One, Ledger Nano X

Conclusion

When choosing the best crypto wallet for you, it is important to have a deep understanding of the types of wallets. With this, you will know which wallet suits your needs best; hence, know which one will be convenient for you to use.

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Disclaimer: This article solely expresses the author’s thoughts, which may not reflect those of Hippo Wallet. Nothing in this article should be interpreted as investment guidance. Hippo Wallet encourages all users to do their research before investing in cryptocurrencies.

pros and cons of cryptocurrencies

The Pros and Cons of Cryptocurrencies: Beginner’s Guide

Beginner Nov 8, 2022

When cryptocurrencies first emerged, everyone knew of their endless potential to reshape the financial world as we know it. With its complex and somehow different structure, its very existence has somehow opened the eyes of everyone to borderless transactions without any intermediaries.

Several questions, however, remain—what is a cryptocurrency and how does it work? What are the pros and cons of cryptocurrencies? How do we know which cryptocurrency to invest in? 

Let’s dive into it.

Cryptocurrency 101: The Pros and Cons of Cryptocurrencies

The Pros

1. High Rewards

There are more than 20,000 cryptocurrencies on the market today—each digital currency has its own function, utility, and perks. However, there is one common denominator within these cryptocurrencies: their tendency to spike up (and drop), depending on the crypto’s supply and demand. The more a cryptocurrency is used, the higher its price goes.

2. Secure Technology

The major reason why cryptocurrencies rose to fame is their inherently secure infrastructure—blockchain technology. More so, the decentralized nature of cryptocurrencies allows all transactions on the network to be tracked in real-time. 

3. No Intermediaries

Since it lies on a decentralized infrastructure, cryptocurrencies completely eliminate intermediaries in transactions. 

4. Round-the-Clock Trades

Crypto markets are always open—allowing crypto traders to trade anytime, anywhere. More so, coins are being mined and transactions are also recorded around the clock. This is in contrast to traditional trading markets and exchanges like NYSE or NASDAQ. 

Now, let’s go to the Cons.

The Cons

1. High Risks

As a crypto trader, achieving high rewards come with high risks. The volatility of cryptocurrencies, like any form of investment, is risky. This is the reason why investors are advised to invest only what they can afford to lose.

2. Complex Infrastructure

Understanding cryptocurrencies and the technology behind them is a little complicated—it takes time and effort. For this reason, investors should practice DYOR (Do Your Own Research) before investing, to know the ins and outs of their investment.

3. Vulnerability for Newbies

While the security infrastructure of cryptocurrencies is intact, this does not mean it is 100% free from security breaches. There are existing issues in the crypto market like hacking, phishing, and several attempts to gain control over a network. This is something that new and experienced traders should look out for.

4. Long-term Investment Issues

At present, cryptocurrencies have not yet proven themselves as long-term investment. Not quite yet, at least. Stock markets and gold were founded centuries ago—it has a good track history already. The very first cryptocurrency ever released to the public is Bitcoin and that was just in 2008. It really is a risky investment, but still, it comes with high rewards.

Conclusion

Investing in cryptocurrencies requires thorough research and adequate trading knowledge. Before diving into the world of cryptocurrencies, make sure to understand it first—this way, you can maximize its benefits and advantages to grow your portfolio.

Disclaimer: This article solely expresses the author’s thoughts, which may not reflect those of Hippo Wallet. Nothing in this article should be interpreted as investment guidance. Hippo Wallet encourages all users to do their research before investing in cryptocurrencies.

How to mine Bitcoin

Bitcoin (BTC) 101: How to Mine and Use BTC

Intermediate Nov 8, 2022

The hype for Bitcoin is overly evident today—cryptocurrencies, in general. It currently tops the list as the most popular and most secure cryptocurrency. Perhaps this is because it is the first cryptocurrency ever created.

Bitcoin, Defined

By definition, Bitcoin is a cryptocurrency. It was first introduced in 2009 by an anonymous developer, Satoshi Nakamoto. Since then, it became the most well-known cryptocurrency, with the highest value among thousands of other altcoins. Unlike fiat currencies, Bitcoin was developed using a decentralized ledger—a blockchain network.

In a white paper that Satoshi Nakamoto shared in late 2008, Bitcoin’s aim is to create a fully peer-to-peer electronic cash system. Come 2009, the very first Bitcoin block was mined—Block 0 or Genesis Block. This block contains cryptic text, which still remains a mystery today. 

Bitcoin uses the SHA-256 hashing algorithm to encrypt data stored on its blocks. In other words, the transaction data stored in Bitcoin’s blocks use are encrypted in a 256-bit hexadecimal number. This number, moreover, contains all of the transaction’s data and information, linked to the preceding blocks of that certain block. More so, these transactions are validated by the miners within the network. 

How Does Bitcoin Mining Work

What is bitcoin mining? By definition, it is the process by which new bitcoins are entered into circulation. It is also the network’s way to confirm transactions. It is a critical component of the bitcoin network’s development and maintenance.

‘Mining’ uses sophisticated hardware that solves complex computational math equations. It is possible to mine Bitcoin competitively using a personal computer, and the first computer to find the solution to these equations receives the next block of bitcoins, then, the process will begin again. The participants who solve these equations are called Bitcoin miners.

Bitcoin rewards the first miner to solve the equation. This serves as an incentive and motivation for people to mine—which in a sense, helps Bitcoin’s circulation and thus, ensures the validity of the transactions. 

As bitcoin mining became popular, however, more miners joined which lowered the chances of being able to solve the hash.

Buying Bitcoin; Described

As stated, bitcoin mining is one way to own Bitcoin. If you don’t want to mine bitcoin, however, you can purchase Bitcoin (BTC) from a crypto exchange.

To buy BTC, you will need to fund your crypto wallet with fiat currency like U.S. dollars, then, purchase BTC through the exchange or wallet.

There are several crypto wallets present today. It has different types as well. Fret not, we will tackle it next time. 

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Disclaimer: This article solely expresses the author’s thoughts, which may not reflect those of Hippo Wallet. Nothing in this article should be interpreted as investment guidance. Hippo Wallet encourages all users to do their research before investing in cryptocurrencies.

Crypto 101: The Basics Of Cryptocurrencies

Cryptocurrency 101: The Basics of Cryptocurrencies

Beginner Nov 8, 2022

Cryptocurrency 101: What is Cryptocurrency?

A cryptocurrency by definition is any form of currency that is digitally or virtually created via cryptography to have secure transactions. 

Cryptocurrencies are famous for having no central issuing or regulating authority—it uses a decentralized system (blockchain) to record transactions and issue new cryptocurrencies.

To put it simply, cryptocurrencies don’t rely on banks to verify transactions. It utilizes a peer-to-peer technology that enables people to send and receive payments anywhere and anytime.

Moreover, cryptocurrencies are stored in digital wallets (crypto wallets) and are recorded in a public ledger (blockchain). Each transaction is verified through encryptions, to ensure a more secure and safer procedure.

How Does It Work?

Every unit of cryptocurrency is created through mining. This involves the usage of computer power to solve complex mathematical problems and algorithms to generate cryptocurrencies. 

Again, these cryptocurrencies are virtual and digital—owning cryptocurrencies means you do not own anything tangible. Instead, what you own is a key that allows you to move these cryptocurrencies from Point A to Point B without trusting a third-party regulator. 

Types of Cryptocurrencies

The very first cryptocurrency ever created was Bitcoin (BTC) in 2009 by Satoshi Nakamoto. It still remains the best to date. After Bitcoin, thousands of cryptocurrencies succeeded it. 

There is another type of cryptocurrency, Altcoins, which are literally forks or clones of Bitcoin. Some cryptocurrencies, however, like Solana (SOL), Litecoin (LTC), Cardano (ADA), etc., are all built from scratch.

Each cryptocurrency claims to have distinct functions and specifications. While securities are in place, (thanks to smart contracts and the innate algorithms behind cryptocurrencies), like all types of investments, they still carry risks. What’s more, cryptocurrency prices also vary.

For this reason, traders should always do their own research, to understand how cryptocurrencies work, and only invest what they can afford to lose. What’s more, they have to own the safest and most secure blockchain wallet to keep their digital assets safe.

There are still a lot of things to discuss entailing cryptocurrencies. Subscribe to stay tuned to our latest articles, tackling everything about cryptocurrency guide!

Disclaimer: This article solely expresses the author’s thoughts, which may not reflect those of Hippo Wallet. Nothing in this article should be interpreted as investment guidance. Hippo Wallet encourages all users to do their research before investing in cryptocurrencies.

Blockchain 101

Blockchain 101: What Really Is Blockchain and How Does It Work?

Beginner Nov 8, 2022

We always hear the word blockchain—it’s everywhere. But, what is it, really? Why is it regarded as one of the most advanced technologies ever developed? Let’s find out.

Blockchain 101: What is a Blockchain?

In definition, a blockchain is a distributed ledger or database which is shared between nodes of a computer network. This database records transactions, stores information, and tracks assets. Moreover, assets can be anything virtual that holds value and can be traded on a blockchain network; this, reducing risks and cutting costs for everyone involved in the ledger and asset.

Key Elements of a Blockchain 

Distributed Ledger

Everyone involved in the transactions has access to the blockchain (distributed ledger, as defined above). The network participants share the same distributed ledger wherein transactions are only recorded once—eliminating any duplication efforts which cause problems in business networks.

Immutable Records

No participant in the distributed ledger is not allowed to change or tamper with any transaction after it is already recorded in the blockchain (distributed ledger). Even if a transaction contains an error, a new record or transaction shall be added to reverse it—nonetheless, both records are visible on the blockchain.

Smart Contracts

A set of rules, called Smart Contracts, are programs created to speed up transactions. They are stored on the blockchain and are executed automatically when the predetermined terms and conditions are met by the transactions. To put it simply, smart contracts in blockchain are used to automate the execution of the agreements so that the participants can be certain of the outcomes without an intermediary’s involvement or time loss.

How Blockchain Works

  1. As each transaction occurs, it is recorded in blocks of data. These transactions show the movements of assets. 
  2. Each block is connected to the blocks preceding and succeeding it. The blocks are securely linked together to prevent any block from alteration or having a block inserted between two existing blocks.
  3. The transactions are blocked together and are linked in an irreversible chain—a blockchain. Each additional block strengthens the entire blockchain; hence, making it immutable and tamper-resistant. This makes the ledger a network that all the members can trust.

Conclusion

To suffice, blockchain is all about immutable and unchangeable transactions recorded in blocks, executed by smart contracts, and linked together to create an irreversible chain.

There are many other technologies generated from the concept of blockchain technology—there is cryptocurrency, non-fungible tokens, metaverse, etc.

We will talk about it next time!

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Disclaimer: This article solely expresses the author’s thoughts, which may not reflect those of Hippo Wallet. Nothing in this article should be interpreted as investment guidance. Hippo Wallet encourages all users to do their research before investing in cryptocurrencies.