Distributed ledgers are typically public. They are a type of database that is spread across multiple sites,
computers, countries or institutions. In order to store new records or information participants need to
reach a quorum. If so, new information is stored one after the other in a continuous ledger.
There are different kinds of distributed ledgers. As mentioned above, some need a quorum to verify new
information, that is at least 51% of the validators need to agree with this new information. Other
distributed ledgers require even greater trust in the validators of the ledger. There is, for example, a
financial system called Ripple, that only selects 200 validators. This is much less than the needed 51% for
a quorum. However, even if this makes the system a little less secure, it is a much faster way of getting to
a consensus and accept the new information.
A consensus is a group decision making process in which a group of members develop, and agree to support a decision in the best interest of the whole. It is used to describe both the decision and the process of reaching a decision, in order to achieve an agreement of some sort, on which most individuals of the involved agree on. To achieve a consensus on a global scale is quite difficult.
There are various approaches of how to solve the issue of creating a global consensus on a blockchain, with each various assumptions in terms of synchronicity, message broadcasts, failures, malicious nodes, performance and security of the messages exchanged. For a blockchain network, achieving consensus ensures that all nodes in the network agree upon a consistent global state of the blockchain.
A consensus algorithm is a model of computation which solves a consensus problems. In order to solve this problem, the algorithm needs an agreement on various processes and be resilient for failure. Depending on the protocol, it must satisfy a number of requirements to be useful.
In order to be an useful protocol for a blockchain, it needs to update the blockchain in a way that ensures a common, unambiguous ordering of transactions and blocks and guarantees the integrity and consistency of the blockchain across geographically distributed nodes. It also meets real-world application requirements, such as low latencies, immediate transaction finality, high performance and good scalability. This can be quite challenging.
There are various approaches of how to create a blockchain consensus algorithm (protocol) like proof of work, proof of stake, proof of importance, etc.
For a general explonation, go here
For more detailed information about blockchain consensus models go here.
In an online dictionary the word trustless means: „not worthy of trust; faithless; unreliable; false“
The word „trustless“ with regard to blockchain technology however, has a different meaning. Of course, we have to trust a system that deals with value exchange, to be sure that everything that happens with our value is correct. When we give our money in the hands of a bank, we trust it to give it back to us, whenever we want to withdraw the money. In contrast to this example we do not need this kind of trust in a trustless system. We don‘t need to trust any particular party of the system, because the system itself makes sure, that no malicious activity can be done in this system. It does this by having a large
community of validators, that need to agree on any change (for example a transaction) in a blockchain.
Because the system is very hard to manipulate, there is no need anymore for trust, thus it becomes a
A hash function is a mathematical function, that maps arbitrary data on fixed data. Because the function
hashes the original data randomly to fixed data, it is almost impossible to have acces to the original data.
In terms of a cryptocurrency, this means, that a receiver of money is not able to detect the private key.
The private key was hashed and the receiver or anybody else, who looks up the transaction information on
the blockchain, only sees the hash of the private key. This then is called a cryptographic hash function
„In cryptography, encryption is the process of encoding a message or information in such a way that only
authorized parties can access it and those who are not authorized cannot. Encryption does not itself
prevent interference, but denies the intelligible content to a would-be interceptor. In an encryption
scheme, the intended information or message, referred to as plaintext, is encrypted using an encryption
algorithm – a cipher – generating ciphertext that can only be read if decrypted. For technical reasons, an
encryption scheme usually uses a pseudo-random encryption key generated by an algorithm. It is in
principle possible to decrypt the message without possessing the key, but, for a well-designed encryption
scheme, considerable computational resources and skills are required. An authorized recipient can easily
decrypt the message with the key provided by the originator to recipients but not to unauthorized users.“
An asset can have many forms. An asset is a value of some sort, for example a physical good like gold, carbon, ice etc., but can also be non physical like balllllz
A token can have various meanings, from being a economical item to a computing right to perform certain operations.
In the cryptospace, tokens are specific amounts of digital resources on which you have access to through your private key.
These tokens can have an intrinic value, meaning, that they have some sort of utility based on made up resources. These intrinsic tokens can be made by anyone through programming a specific software. These tokens (coins) get their value from the community that uses them. This doesn't mean, they aren't worth anything. Through the energy costs needed for the computing power used to create a Bitcoin, it somewhat has an external value. However, these tokens do not have any other physical value linked directly to them.
Asset backed tokens on the other hand are claims on an underlying asset like gold, music, etc. They are directly linked to an asset of a certain value and do have a linked value to them. These tokens represent a specific amount of a certain asset (sand, gold).
ICO‘s are similar to crowdfunding. People buy a new cryptocurrency venture and by doing so, raise funds
for a new project linked to a new coin. In contrast to a simple donation, people that buy ICO’s, do this
also hoping that the new project will be successful and the new coin will be worth more in the future. The
idea behind an ICO is to cut out “the rigorous and regulated capital-raising process required by venture
capitalists or banks.“ Everyone in the world is able to buy ICO‘s through fiat money or cryptocurrencys
like bitcoin. People who are interested or who believe in the new project can be investors – no matter
where they‘re from.
The new project is mostly presented in a white paper, where people can inform themselves what the ICO
is all about. Often, there is a timeschedule to meet a certain amount of money to get the project started. If
this minimum is not acquired in time, the money flows back to the early backers of the ICO.
In the cryptospace, people also talk about so called token sales, which is a synonym to an ICO.