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A Beginner's Guide to Bitcoin's Lightning Network

A Beginner's Guide to Bitcoin's Lightning Network

Introduction

Cryptocurrencies have some pretty unique properties. They can’t be hacked or shut down easily, and anyone can use them to transmit value around the globe without a third party’s intervention.

To ensure that these features remain, significant trade-offs must be made. Since many nodes are responsible for running a cryptocurrency network, throughput is limited. As a result, the number of transactions per second (TPS) a blockchain network can process is relatively low for a technology that aims to be adopted by the masses.

To overcome the inherent limitations of blockchain technology, a number of scalability solutions have been proposed to increase the number of transactions that a network can handle. In this article, we’ll take a deep dive into the Lightning Network, one such extension of the Bitcoin protocol.

What is the Lightning Network?

The Lightning Network is a network that sits on top of a blockchain to facilitate fast peer-to-peer transactions. It’s not exclusive to Bitcoin – other cryptocurrencies such as Litecoin have integrated it.

You might be wondering what we mean by “sits on top of a blockchain.” The Lightning Network is what’s called an off-chain or layer two solution. It allows individuals to transact without having to record every transaction on the blockchain.

The Lightning Network is separate from the Bitcoin network – it has its own nodes and software, but it nonetheless communicates with the main chain. To enter or exit the Lightning Network, you need to create special transactions on the blockchain.

What you’re actually doing with your first transaction is building a sort of smart contract with another user. We’ll get into the details shortly – for now, just think of the smart contract holding a private ledger with the other user. You can write many transactions to this ledger. They’re only visible to you and your counterparty, but neither of you can cheat due to some peculiar features of the setup.

This mini-ledger is called a channel. Say Alice and Bob put 5 BTC each into the smart contract. In their channel – they’d now both have a balance of 5 BTC. Alice could then write to the ledger pay 1 BTC to Bob. Now, Bob has 6 BTC on his side, and Alice has 4. Then, Bob could send 2 BTC back to Alice at a later date, updating the balances to 6 BTC on Alice’s side and 4 BTC on Bob’s. They can continue to do this for a while.

At any time, either can publish the current state of the channel to the blockchain. At that point, the balances on each side of the channel are allocated to their respective parties on-chain.

True to the name, Lightning transactions are lightning-fast. There are no block confirmations to wait for – payments can be made as fast as your internet connection will permit.

Why is the Lightning Network necessary?

So far, the Lightning Network (or simply, LN) appears to be the most sensible approach to scaling the Bitcoin blockchain. Coordinating changes in such a vast ecosystem is tricky – there’s a risk of hard forks and potentially catastrophic bugs. With so much value at stake, experimentation is incredibly dangerous.

When you move that experimentation away from the blockchain, you have a lot more flexibility. If something goes wrong, it’ll have no impact on the actual Bitcoin network. Layer two solutions don’t undermine any of the security assumptions that have kept the protocol going for 10+ years.

There’s no obligation to switch from the old way of doing things, either. On-chain transactions continue to work as normal for the end-user, but they now have the option of transacting off-chain, too.

There are several benefits to using the Lightning Network. We’ll look at some of the main ones below.

Scalability

Bitcoin blocks are created approximately every ten minutes, and can only hold so many transactions. Block space is a scarce resource, so you must bid against other users to have yours included in a timely manner. Miners care, first and foremost, about getting paid, so they’ll include transactions with higher fees first.

When there aren’t many users trying to send funds at the same time, this isn’t really an issue. You can set a low fee, and you’re likely to have the transaction included in the next block. But when everyone’s broadcasting transactions at the same time, the average fee can rise significantly. On a few occasions, it has exceeded $5. At the height of the 2017 bull market, it exceeded $50.

Average Bitcoin Transaction Fee (in USD)

Average Bitcoin Transaction Fee (in USD)

That might seem insignificant for transactions moving thousands of dollars worth of Bitcoin, but for smaller payments, it’s not sustainable. Who wants to pay for a $3 coffee with a $5 fee attached?

With the Lightning Network, you still pay two fees – one to open your channel, and another to close it. But you and your counterparty can make thousands of transactions for free once the channel is open. Once you’re finished, you just need to publish the final state to the blockchain.

In the grand scheme, if more users rely on off-chain solutions like the Lightning Network, block space will be used more efficiently. Low-value, high-frequency transfers could be carried out in payment channels, while block space is used for larger transactions and channel opening/closing. This would make the system accessible to a vastly wider user base, allowing it to scale in the long run.

Micropayments

There’s a minimum amount of Bitcoin you can send in a transaction – approximately 0.00000546 BTC. At the time of writing, that’s equal to about four cents. It’s a small amount, but the Lightning Network allows you to push the limits to transact the smallest unit currently available – 0.00000001 BTC, or one satoshi.

Lightning is a lot more appealing for micropayments. The fees on regular transactions make it impractical to send tiny amounts on the main chain. Within a channel, however, you’re free to send a fraction of a fraction of a Bitcoin for free.

Micropayments are suited to plenty of use cases. Some speculate that they could be a viable replacement for subscription-based models, where users instead pay tiny amounts each time they use a service.

Privacy

A secondary benefit of the Lightning Network is that it can offer users a high degree of confidentiality. Parties do not need to make their channels known to the broader network. While you may be able to look at the blockchain and say this transaction opened a channel, you won’t necessarily be able to tell what’s going on inside it. If the participants choose to make their channel private, only they will know what transactions are taking place.

If Alice has a channel with Bob and Bob has a channel with Carol, Alice and Carol can send payments to each other via Bob. If Dan is connected to Carol, Alice can send payments to him. You can imagine this expanding into a sprawling network of interconnected payment channels. In such a setup, you couldn’t be sure who Alice has sent funds to once the channel is closed.

How does the Lightning Network work?

We’ve explained how the Lightning Network relies on channels between nodes at a high level. Let’s now take a look under the hood.

Multisignature addresses

A multisignature (or multisig) address is one that multiple private keys can spend from. When creating one, you specify how many private keys can spend the funds, and how many of those keys are required to sign a transaction. For instance, a 1-of-5 scheme means that five keys can produce a valid signature and that only one is needed. A 2-of-3 scheme would indicate that, out of the three possible keys, any two are required to spend the funds.

To initialize a Lightning channel, the participants lock up funds in a 2-of-2 scheme. There are only two private keys capable of signing, and both are needed to move coins. Let’s bring back our friends Alice and Bob at this point. They’ll be making a lot of payments to each other in the coming months, so they decide to open a Lightning Network channel.

This starts with both of them depositing, say, 3 BTC each into the jointly-owned multisig address. It’s worth reiterating that Bob can’t move funds out of the address without Alice agreeing, or vice versa.

Now, they could just keep a sheet of paper that adjusts the balances on each side. Both have a starting balance of 3 BTC. If Alice wants to make a payment of 1 BTC to Bob, why not just make a note that Alice now owns 2 BTC and Bob owns 4 BTC? Balances could be tracked like this until they decided to move the funds out.

That’s possible, but where’s the fun in it? More importantly, doesn’t that make it incredibly easy for someone not to cooperate? If Alice ends up with 6 BTC and Bob with none, Bob loses nothing by refusing to release the funds (except, perhaps, his friendship with Alice).

Hash Timelock Contracts (HTLCs)

The system above is boring and doesn’t offer much over today’s trusted setups. It gets a lot more interesting when we introduce a mechanism that enforces the “contract” between Alice and Bob. If one of the parties decides not to play by the rules, then the other one still has a remedy to get their funds out of the channel.

That mechanism is a Hash Timelock Contract (or HTLC). The term may sound daunting, but it’s actually quite a straightforward concept to grasp. It marries two other technologies (hashlocks and timelocks) to remedy any uncooperative behavior in payment channels.

A hashlock is a condition placed on a transaction dictating that you can only spend funds by proving that you know a secret. The sender hashes a piece of data and includes the hash in the transaction to the receiver. The only way that the receiver can spend it is if they provide the original data (the secret) that matches the hash. And the only way they can provide that data is if the sender gives it to them.

A timelock is a condition that prevents you from spending funds before a certain time. It’s specified either as an actual time, or a specified block height.

HTLCs are created by combining hashlocks and timelocks. In practice, HTLCs can be used to create conditional payments – the receiver has to provide a secret before a certain time, or the sender can reclaim the funds. This next part is probably better explained with an example, so let’s get back to Alice and Bob.

Opening and closing channels

We gave the example of Alice and Bob having just created transactions that fund the multisignature address they’ll share. But those transactions aren’t published to the blockchain yet! We need to do one more thing first.

Three coins from Bob and three coins from Alice.

Three coins from Bob and three coins from Alice.

Remember, the only way those coins can move out of the multisig is if both Alice and Bob jointly sign a transaction. If Alice wanted to send all the six coins to an external address, she would need Bob’s approval. She’d first put together a transaction (six bitcoins to this address) and add her own signature.

She could try to broadcast the transaction right away, but it would be invalid because Bob hasn’t included his signature. Alice must give the incomplete transaction to him first. Once he adds his signature, it becomes valid.

We still haven’t put a mechanism in place to keep everyone playing honestly. As we said earlier, if your counterparty refuses to cooperate, your funds are effectively trapped. Let’s get into the mechanism that prevents this. There are a few different moving pieces, so bear with us.

Each party needs to come up with a secret – let’s just call those As and Bs. They’d be terrible secrets if Alice and Bob revealed them, so they’ll keep them hidden for now. The pair will generate the respective secrets’ hashes – h(As) and h(Bs). So instead of sharing their secrets, they share those hashes with each other.

Alice and Bob share the hashes of their secrets with each other.

Alice and Bob share the hashes of their secrets with each other.

Alice and Bob also need to create a set of commitment transactions before they publish their first transactions to the multisignature address. This will give them a remedy in case the other decides to keep funds hostage.

If you think about a channel like the mini-ledger we referenced earlier, then commitment transactions are the updates that you make to the ledger. Any time you create a new pair of commitment transactions, you’re rebalancing the funds between the two participants.

Alice’s one will have two outputs – one that pays an address she owns, and another that’s locked into a new multisig address. She signs it and gives it to Bob.

Alice’s transaction with two outputs – one to her own address, and one to a new multisig. She still needs Bob’s signature to make it valid.

Alice’s transaction with two outputs – one to her own address, and one to a new multisig. She still needs Bob’s signature to make it valid.

Bob does the same – one output pays himself, the other pays another multisig address. He signs it and gives it to Alice.

We have two incomplete transactions that are very similar.

We have two incomplete transactions that are very similar.

Normally, Alice could add a signature to Bob’s transaction to make it valid. But you’ll note that these funds are being spent from the 2-of-2 multisig that we haven’t funded yet. It’s a bit like trying to spend a cheque from an account that has zero balance for now. Therefore, these partially-signed transactions will only be usable once the multisig is up and running.

The new multisignature addresses (where the 3 BTC outputs are destined) have some peculiar properties. Let’s take a look at the incomplete transaction that Alice signed and gave to Bob. The multisig output can be spent under the following conditions:

  • Both parties can cooperatively sign it.
  • Bob can spend it by himself after a certain period of time (due to our timelock).
  • Alice can spend it if she knows Bob’s secret Bs.

For the transaction Bob gave to Alice:

  • Both parties can cooperatively sign it.
  • Alice can spend it by herself after a certain period of time.
  • Bob can spend it if he knows Alice’s secret As.

Bear in mind that neither party knows the other’s secret, so 3) isn’t a possibility yet. Another thing to note is that, if you sign a transaction, your counterparty can spend immediately because there are no special conditions on their output. You can either wait for the timelock to expire to spend the funds by yourself, or you can cooperate with the other party to spend them outright.

Okay! Now you can publish the transactions into the original 2-of-2 multisignature address. It’s finally safe to do so because you can retrieve your funds if your counterparty abandons the channel.

Once the transactions confirm, the channel is up and running. That first pair of transactions shows us the current state of the mini-ledger. Currently, it will pay out 3 BTC to Bob, and 3 BTC to Alice.

When Alice wants to make a new payment to Bob, the pair create two new transactions to replace the first set. The drill is the same – they’re only half-signed. However, Alice and Bob first give up their old secrets and trade new hashes for the next round of transactions.

If Alice wanted to pay 1 BTC to Bob, for example, the two new transactions would credit 2 BTC to Alice, and 4 BTC to Bob. In this way, the balance is updated.

If Alice wanted to pay 1 BTC to Bob, for example, the two new transactions would credit 2 BTC to Alice, and 4 BTC to Bob. In this way, the balance is updated.

Either party can sign and broadcast one of the most recent transactions at any time to “settle” it on the blockchain. But whichever party does so will need to wait until the timelock has expired, while the other can spend immediately. Remember, if Bob signs and broadcasts Alice’s transaction, she now has an output with no conditions on it.

Both parties can agree to close the channel together (a cooperative close). This is probably the easiest and quickest way to get your funds back onto the chain. However, even if one party becomes unresponsive or refuses to cooperate, the other can still reclaim their funds by waiting out the timelock.

How does the Lightning Network prevent cheating?

You might have identified an attack vector here. If Bob currently has a 1 BTC balance, what’s to stop him from broadcasting an older transaction where he had more? He’s already got the half-signed transaction from Alice, he just needs to add his signature and broadcast it, right?

Nothing’s stopping him from doing that – except for the fact that he could lose his entire balance. Let’s say he goes through with it and broadcasts an old transaction that pays one coin to Alice and five to that multisig address we mentioned earlier.

Alice receives her coin immediately. Bob, on the other hand, must wait until the timelock expires to spend from the multisig address. Remember the other condition we mentioned that would allow Alice to spend those same funds immediately? She needs a secret that she didn’t have then. She does now – as soon as the second round of transactions were created, Bob gave that secret away.

While Bob sits, unable to do anything as he waits for the timelock to expire, Alice can move those funds. This punishment-based mechanism means that participants are unlikely to even attempt to cheat because the peer will get access to their coins.

Routing payments

We touched on this earlier – channels can be connected. The Lightning Network wouldn’t be that useful for payments otherwise. Are you really going to lock up $500 in a channel with a coffee shop just so you can get your daily fix for the next few months?

You don’t have to do that. If Alice opens a channel with Bob and Bob already has one with Carol, Bob can route payments between the two. This can work across multiple “hops”, meaning that Alice can effectively pay anyone to whom a path exists.

In this scenario, Alice can go through multiple routes to get to Frank. In practice, she will always take the easiest one.

In this scenario, Alice can go through multiple routes to get to Frank. In practice, she will always take the easiest one.

For their role in routing, the intermediaries might take a small fee (though there’s no obligation to). The Lightning Network is still very new, so a fee market has yet to materialize. What many expect to see are fees based on liquidity provided.

On the base chain, your fee is based solely on the space your transaction takes up in a block – the value being transmitted doesn’t matter – $1 and $10,000,000 payments cost the same. In contrast, there’s no such thing as block space within the Lightning Network.

Instead, there’s the idea of local and remote balances. The local balance is the amount that you can “push” to the other end of the channel, whereas the remote balance is that which your counterparty can push to you.

Time for another example. Let’s take a closer look at one of the above paths: Alice <> Carol <> Frank.

Users’ balance before and after a transfer of 0.3 BTC from Alice to Frank.

Users’ balance before and after a transfer of 0.3 BTC from Alice to Frank.

The Alice <> Carol and Carol <> Frank each have a total capacity of 1 BTC. Alice’s local balance is 0.7 BTC. If they settled on the blockchain now, she would receive 0.7 BTC, and Carol would receive the remote balance (i.e., 0.3 BTC).

If Alice wants to send 0.3 BTC to Frank, she pushes 0.3 BTC to Carol’s side of the channel. Then Carol pushes 0.3 BTC from her local balance in the channel with Frank. As a result, Carol’s balance remains the same: the +0.3 BTC from Alice and -0.3 BTC to Frank cancel each other out.

Carol isn’t losing value from acting as a connection between Frank, but she is making herself less flexible. You see, she can now spend 0.6 BTC in her channel with Alice, but only 0.1 BTC in the channel with Frank.

You can imagine a situation where Alice is only connected to Carol, whereas Frank is connected to a much wider network. Carol could previously send a total of 0.4 BTC to others via Frank, but now she can only push 0.1 BTC because that’s all she has on her end of the channel.

In this scenario, Alice is effectively eating into Carol’s liquidity. Without any kind of incentive, Carol may not want to weaken her own position. So, instead, she might just say I will route every 0.01 BTC at a fee of ten satoshis. In this way, the more of her local balances Carol sacrifices in “stronger” paths, the more she profits.

As mentioned previously, there’s no de facto requirement to charge a fee. Some might not be concerned with the reduction in liquidity. Others might just open channels directly to the receiver.

Limitations of the Lightning Network

It would be fantastic if the Lightning Network proved to be the solution to all of Bitcoin’s scalability troubles. Unfortunately, it has its own shortcomings that may get in the way.

Usability

Bitcoin isn’t the most intuitive system for beginners – addresses, fees, etc. can be confusing to familiarize yourself with. But wallets can abstract away the complicated stuff to give users something that vaguely resembles existing payment systems. You can get someone to download a smartphone wallet, send them coins, and they’re good to go.

For now, that isn’t possible with the Lightning Network. Options are limited when it comes to smartphone apps – generally, Lightning nodes require access to a Bitcoin node to be fully usable.

After a client has been set up, users also need to start opening channels before they can make payments. This can be a time-consuming process, and it could be overwhelming when a newcomer is introduced to concepts like inbound/outbound capacity.

That said, improvements are constantly being made to reduce the barriers to entry, and to provide users with a more streamlined experience.

Liquidity

One of the biggest criticisms of the Lightning Network is that your ability to transact is constrained. You can’t spend more than you have locked into a channel. If you spend all of your funds so that the remote balance has all of the channel’s funds, you’ll have to close the channel. Alternatively, you can wait until someone pays you through it, but that’s not ideal.

Your paths can also be limited by the channel’s total capacity. Take the Alice <> Carol <> Frank example from earlier. If Alice and Carol have a capacity of 5 BTC in their channel, but Carol and Frank only have a capacity of 1 BTC, Alice can never send more than 1 BTC. Even then, the entire balance would need to be on Carol’s side of the Carol <> Frank channel for that to work. This can severely limit the amount of funds that can be passed along LN channels, and thus has a knock-on effect on usability.

Centralized hubs

Because of the issue mentioned in the previous section, there’s some concern that the network will facilitate the creation of massive “hubs.” That is, large, heavily-connected entities with a lot of liquidity. Any significant payments would need to be routed through some of these entities.

Obviously, that wouldn’t be a great situation. It would weaken the system, as these entities going offline would majorly disrupt relationships between peers. There’s also an increased risk of censorship since there are only a few points through which transactions are flowing.

The current state of the Lightning Network

As of March 2022, the Lightning Network looks healthy. It boasts upwards of 35,000 online nodes, 85,000+ active channels, and just over 3,570 BTC in capacity.

Global distribution of Lightning Network nodes. Source: explorer.acinq.co

Global distribution of Lightning Network nodes. Source: explorer.acinq.co

There are a handful of different node implementations – Blockstream’s c-lightning, Lightning Labs’ Lightning Network Daemon, and ACINQ’s Eclair are some of the most popular. For users that are less technically inclined, many companies offer plug-and-play nodes. The only thing you have to do with these is power up the device and you’re ready to get started with the Lightning Network.

Closing thoughts

Since its mainnet launch in 2018, the Lightning Network has seen impressive growth, in spite of many considering it to still be in beta.

There are still some usability obstacles to overcome, as it currently requires some degree of technical proficiency to operate a Lightning node. But with the amount of development taking place, we may well see the barriers to entry reduced over time.

If the issues can be resolved, the Lightning Network could become an integral part of the Bitcoin ecosystem, greatly boosting scalability and transaction speeds.

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Who Is Satoshi Nakamoto?

Who Is Satoshi Nakamoto?
Satoshi Nakamoto is the pseudonym behind the development of Bitcoin and the authorship of the original Bitcoin whitepaper. The question “who is Satoshi Nakamoto?” has led to speculation of their true identity as well as people falsely claiming they are Satoshi Nakamoto. The creator of Bitcoin has been clouded in mystery for more than a decade. However, it’s clear that Satoshi still owns bitcoins since their public keys were traced from the genesis block, which Satoshi mined.
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What Is Cryptocurrency Mining?

What Is Cryptocurrency Mining?
Cryptocurrency mining refers to the process of verifying and validating blockchain transactions. It’s also the process that creates new units of cryptocurrencies. The work done by miners requires intensive computational resources, but it’s what keeps a blockchain network secure. Honest and successful miners are rewarded for their work with newly created cryptocurrencies plus transaction fees.
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A Quick Guide to Binance Dual Investment

A Quick Guide to Binance Dual Investment
We all know that to get a return on an investment, we need to buy low and sell high. Investing in cryptocurrency is no different. Binance Dual Investment provides a great way to seize Buy Low and Sell High opportunities while also providing you with additional returns. Let’s dive into how it works and exactly how you can get started.
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Hybrid PoW/PoS Consensus Explained

Hybrid PoW/PoS Consensus Explained
A blockchain’s consensus mechanism serves to ensure that there is agreement among participants on the current state of the blockchain. The consensus mechanism determines who is able to add new blocks of transactions, and one of its primary aims is to ensure that the chain is not re-written.
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Your Guide to Binance Earn

Your Guide to Binance Earn
Not interested in trading but still looking to increase your crypto holdings? Is the 0.05% interest your local bank offers on your savings account not exciting enough? Well, you’ll find alternative choices within the Binance Earn product suite. Binance Earn is your crypto savings account. Here, you’ll find a great variety of options for earning passive income with your crypto holdings.
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Delegated Proof of Stake Explained

Delegated Proof of Stake Explained
The Delegated Proof of Stake (DPoS) consensus algorithm is considered by many as a more efficient and democratic version of the preceding PoS mechanism. Both PoS and DPoS are used as an alternative to the Proof of Work consensus algorithm, since a PoW system requires, by design, lots of external resources. The Proof of Work algorithm makes use of a large amount of computational work in order to secure an immutable, decentralized and transparent distributed ledger. Contrarily, PoS and DPoS require fewer resources and are, by design, more sustainable and eco-friendly. To understand how Delegated Proof of Stake works, one must first grasp the basics of the Proof of Work and Proof of Stake algorithms that preceded it.
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Proof of Burn Explained

Proof of Burn Explained
While most blockchain systems either make use of a Proof of Work (PoW) or a Proof of Stake (PoS) consensus algorithm, the Proof of Burn (PoB) is being tested as a possible alternative to those.
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Proof of Authority Explained

Proof of Authority Explained
The cryptocurrency space has changed a lot since the first blockchain transaction on the Bitcoin network. Along with the well-known Proof of Work and Proof of Stake algorithms, other consensus mechanisms were proposed, with alternative methods for reaching consensus within a blockchain system.
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What Is a DoS Attack?

What Is a DoS Attack?
In short, a DoS attack (or Denial-of-Service attack) is a method used to disrupt legitimate users' access to a target network or web resource. Typically, this is accomplished by overloading the target (often a web server) with a massive amount of traffic - or by sending malicious requests that cause the target resource to malfunction or crash entirely.
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What Is a 51% Attack?

What Is a 51% Attack?
Before diving into the 51% attack, it is crucial to have a good understanding of mining and blockchain-based systems. One of the key strengths of Bitcoin and its underlying blockchain technology is the distributed nature of building and verifying data. The decentralized work of the nodes ensures that the protocol rules are being followed and that all network participants agree on the current state of the blockchain. This means that the majority of nodes need to regularly reach consensus in regards to the process of mining, to the version of the software being used, to the validity of transactions, and so forth.
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Delayed Proof of Work Explained

Delayed Proof of Work Explained
Delayed Proof of Work (dPoW) is a security mechanism designed by the Komodo project. It is basically a modified version of the Proof of Work (PoW) consensus algorithm that makes use of Bitcoin blockchain’s hashpower as a way to enhance network security. By using dPoW, Komodo developers are able to secure not only their own network but also any third-party chain that ends up joining the Komodo ecosystem in the future. In fact, dPoW can be implemented for any project that develops an independent blockchain using a UTXO model.
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What Is a Blockchain Consensus Algorithm?

What Is a Blockchain Consensus Algorithm?
A consensus algorithm is a mechanism that allows users or machines to coordinate in a distributed setting. It needs to ensure that all agents in the system can agree on a single source of truth, even if some agents fail. In other words, the system must be fault-tolerant (see also - Byzantine Fault Tolerance Explained). In a centralized setup, a single entity has power over the system. In most cases, they can make changes as they please – there isn’t some complex governance system for reaching consensus amongst many administrators.
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5 BSC Metaverse Projects You Should Know

5 BSC Metaverse Projects You Should Know
The metaverse is an online, immersive space where users can work, play, and socialize in a 3D environment. The metaverse is still developing, but blockchain technology already plays a significant role. BNB Smart Chain (BSC) is the home to many metaverse projects experimenting with play-to-earn blockchain games and community sandboxes.decentral.games lets users play and run their own casino through governance mechanisms. Cyber Dragon and Alien Worlds both provide an RPG-like experience where players have their own character, missions, and loot. TopGoal is also gaming-related but focuses on the collectability of Non-Fungible Tokens (NFTs) to represent sports stars like trading cards.
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A Beginner's Guide to Earning Passive Income With Crypto

A Beginner's Guide to Earning Passive Income With Crypto
Trading or investing in projects is one way to make money in the blockchain industry. However, that typically requires detailed research and a substantial investment of time – but it still won’t guarantee a reliable source of income. Even the best investors can experience prolonged periods of loss, and one of the ways to survive them is to have alternative sources of income.
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What Is Crypto Lending and How Does It Work?

What Is Crypto Lending and How Does It Work?
Crypto lending lets users borrow and lend cryptocurrencies for a fee or interest. You can instantly get a loan and start investing just by providing some collateral. This could be through a DeFi lending DApp or a cryptocurrency exchange. When your collateral falls below a certain value, you will need to top it up to the required level to avoid liquidation. When you return your loan plus a fee, your capital is unlocked.
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A Beginner's Guide to Decentralized Finance (DeFi)

A Beginner's Guide to Decentralized Finance (DeFi)
DeFi lets users access crypto financial services with just no more than a wallet with some crypto. A range of DApps facilitates lending, liquidity provision, swaps, staking, and more across many blockchains. While Ethereum was DeFi's original home, most blockchains with smart contract capabilities now host DeFi DApps. Smart contracts are essential to the services DeFi offers, which include staking, investing, lending, harvesting, and more.
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5 NFT Projects You Should Know

5 NFT Projects You Should Know
The interest in NFTs has exploded. While many NFT projects had a small community of enthusiasts since their early existence, 2021 has brought forth a bit of an NFT bubble. Many thought DeFi would bring mainstream adoption to the crypto space. However, it seems like the value proposition of NFTs is much easier to grasp for people not involved with blockchain technology. As such, some NFT projects have even entered the mainstream. But which ones are they?
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Top 3 NFT Projects on Binance Smart Chain

Top 3 NFT Projects on Binance Smart Chain
The demand for non-fungible tokens (NFTs) keeps growing on Binance Smart Chain (BSC). The blockchain’s speed and low transaction fees make it very attractive for both users and developers. On BSC, Battle Pets, PancakeSwap, and BakerySwap have all pushed further the limits of what an NFT can do. Both Battle Pets and BakerySwap combine collectibles with Decentralized Finance (DeFi) staking for their tokens. PancakeSwap is also experimenting with NFTs that merge collectability, financial utility, and gamification.
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Top 7 NFT Use Cases

Top 7 NFT Use Cases
Massive interest in non-fungible tokens has led to a boom in crypto-collectibles and NFT art. These are two of the most prominent use cases in the DeFi ecosystem, but they aren’t the only applications. Scarcity and uniqueness make non-fungible tokens a good match for real-world assets, logistics, music royalties, and more. As NFTs mature, we can expect to see further adoption of more experimental use cases.
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What Are NFT Games and How Do They Work?

What Are NFT Games and How Do They Work?
NFTs are unique digital collectibles on the blockchain. This feature makes them suitable to use in games as representations as characters, consumables, and other tradeable items. NFT games have become popular in the Game-fi world as a way to earn income. You can sell your in-game NFTs to other collectors and players and even earn tokens with play-to-earn models.
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What Is the Metaverse?

What Is the Metaverse?
The metaverse is a concept of a persistent, online, 3D universe that combines multiple different virtual spaces. You can think of it as a future iteration of the internet. The metaverse will allow users to work, meet, game, and socialize together in these 3D spaces.
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What Are CryptoPunks?

What Are CryptoPunks?
CryptoPunks are collectible pieces of crypto art, represented by NFTs on the Ethereum blockchain. There are 10,000 small, 8-bit-style punks, all with unique features. As one of the first famous NFT projects, they inspired a lot of crypto artists and even the development of the ERC-721 token standard for digital collectibles. The project became more popular in 2021 after some CryptoPunks were sold for millions of dollars, making them some of the most expensive NFTs.
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What Is an Automated Market Maker (AMM)?

What Is an Automated Market Maker (AMM)?
You could think of an automated market maker as a robot that’s always willing to quote you a price between two assets. Some use a simple formula like Uniswap, while Curve, Balancer and others use more complicated ones.
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A Guide to Crypto Collectibles and Non-fungible Tokens (NFTs)

A Guide to Crypto Collectibles and Non-fungible Tokens (NFTs)
The creation of Bitcoin introduced the concept of trustless, digital scarcity. Before it, the cost of digitally copying something was next to nothing. With the advent of blockchain technology, programmable digital scarcity has become possible – letting us map the digital world to the real world. Non-fungible tokens (NFTs), often referred to as crypto collectibles, expand this idea. Unlike cryptocurrencies, where each token is equal, non-fungible tokens are unique and limited in quantity.
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Decentralized Autonomous Organizations (DAOs) Explained

Decentralized Autonomous Organizations (DAOs) Explained
Blockchains are already radically transforming our financial system. However, properties such as trustlessness and immutability aren’t only useful in monetary applications. Another potential candidate ripe for disruption by this technology is governance. Blockchains could enable entirely new types of organizations that can run autonomously without the need for coordination by a central entity. This article will give an introduction to what these organizations might look like.
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A Beginner's Introduction to Cryptoeconomics

A Beginner's Introduction to Cryptoeconomics
In simple terms, cryptoeconomics provides a way to coordinate the behavior of network participants by combining cryptography with economics. More specifically, cryptoeconomics is an area of computer science that attempts to solve participant coordination problems in digital ecosystems through cryptography and economic incentives.
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Pyramid and Ponzi Schemes

Pyramid and Ponzi Schemes
Most individuals that invest in Bitcoin – or that participate in Initial Coin Offering (ICO) events – are usually concerned about two things. First, the Return of Investment (ROI), which represents the profits they will eventually make from the initial investment. Then, there is a second concern, which is related to the amount of risk involved with the investment. When the risks are too high, investors are more likely to lose their initial investment (in parts or completely), which would result in a negative ROI.
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What is Public Key Cryptography?

What is Public Key Cryptography?
Public key cryptography (PKC), also known as asymmetric cryptography, is a framework that uses both a private and a public key, as opposed to the single key used in symmetric cryptography. The use of key pairs gives PKC a unique set of characteristics and capabilities that can be utilized to solve challenges inherent in other cryptographic techniques. This form of cryptography has become an important element of modern computer security, as well as a critical component of the growing cryptocurrency ecosystem.
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History of Cryptography

History of Cryptography
Cryptography, the science of writing codes and ciphers for secure communication, is one of the most important elements that goes into making modern cryptocurrencies and blockchains possible. The cryptographic techniques used today, however, are the result of an incredibly long history of development. Since ancient times, people have used cryptography to transmit information in a secure manner. Following is the fascinating history of cryptography that has led up to the advanced and sophisticated methods used for modern digital encryption.
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What Is Axie Infinity (AXS)?

What Is Axie Infinity (AXS)?
It’s 2021, and that means you can earn money by playing games and breeding virtual pets. An easy way to think of Axie Infinity is to imagine a blockchain game that combines Pokémon, CryptoKitties, and card game elements.
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Is Bitcoin a Store of Value?

When you think of a safe-haven asset, precious metals like gold or silver probably come to mind. They’re investments that individuals flock to as hedges against turmoil in traditional markets. The debate over whether Bitcoin follows in the footsteps of these assets rages on. In this article, we’ll look at some of the main arguments for and against Bitcoin being a store of value.
When you think of a safe-haven asset, precious metals like gold or silver probably come to mind. They’re investments that individuals flock to as hedges against turmoil in traditional markets. The debate over whether Bitcoin follows in the footsteps of these assets rages on. In this article, we’ll look at some of the main arguments for and against Bitcoin being a store of value.
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What Is VeChain (VET)?

What Is VeChain (VET)?
VeChain provides blockchain solutions for businesses around the globe. With plenty of existing industry blockchain applications from supply chain management to anti-counterfeiting and carbon credits, their systems have been proven in the real world. VET is the coin that underpins VeChain, where VTHO is the gas token that’s used for transactions on the VeChainThor blockchain (like Ethereum’s gas).
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Приготовьтесь! Биткойн будут сливать, но это не точно

Приготовьтесь! Биткойн будут сливать, но это не точно
Только что в Twitter наткнулся на пост от Jacob Canfield, якобы есть инсайдерская информация, о том что Bitcoin планируют сливать, дабы выбить некоторых конкурентов, потом обратно откупить, подняв стоимость до $70к.
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More about the Crypto Fans club

More about the Crypto Fans club
Now I will tell you what our club is, how it works and what advantages it has. A minimum of water, a maximum of specifics. The club is a kind of trust fund, which consists of a team of Asset Managers, on the one hand, who invest in the crypto market, and Investors, on the other. I will not describe in this article what cryptocurrency is, why it is growing, and what are its advantages, this topic is worthy of a separate article. You can google all this, or go to coinmarketcap.com and see how the value of a particular cryptocurrency has grown at least this year, and doubts about investing in cryptocurrency should disappear.
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What Is The Sandbox (SAND)?

What Is The Sandbox (SAND)?
The Sandbox is a play-to-earn game that combines blockchain technology, DeFi, and NFTs in a 3D metaverse. Its virtual world allows players to create and customize their games and digital assets with free design tools. The virtual goods created can then be monetized as NFTs and sold for SAND tokens on The Sandbox Marketplace.
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What Is Tether (USDT)?

What Is Tether (USDT)?
Tether (USDT) is one of the most popular stablecoins out there. It was designed to hold a one-to-one value with the US dollar. The coin exists on many different blockchains and has experienced rising trading volumes and improved liquidity over the past few years.
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What Is Solana (SOL)?

What Is Solana (SOL)?
Solana is a blockchain network focused on fast transactions and high throughput. It uses a unique method of ordering transactions to improve its speed. Users can pay their transaction fees and interact with smart contracts with SOL, the network’s native cryptocurrency.
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What Is Polkadot (DOT)?

What Is Polkadot (DOT)?
Polkadot positions itself as the next-generation blockchain protocol, capable of connecting multiple specialized chains into one universal network. With a strong focus on building infrastructure for Web 3.0 – and founded by the Web3 Foundation – Polkadot aims to disrupt Internet monopolies and empower individual users.
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What Is Harmony (ONE)?

What Is Harmony (ONE)?
Harmony is a layer-1 blockchain using sharding and Effective Proof of Stake to achieve scalability, security, and decentralization. The network was launched in 2019 and features trustless cross-chain bridges and four shards, which process transactions in parallel. Effective Proof of Stake encourages decentralization of validators, and sharding shares the network's load among validators, delegators, and users.
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What Is Filecoin (FIL)?

What Is Filecoin (FIL)?
FFilecoin is a decentralized, peer-to-peer digital storage marketplace using blockchain technology. It’s built on top of InterPlanetary File System (IPFS) and allows users to rent unused hard disk space and earn FIL tokens in return. Let’s see how Filecoin aims to shake up the online storage space.
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What Is Decentraland (MANA)?

What Is Decentraland (MANA)?
Decentraland is a virtual world and community based on blockchain technology. Users develop and own plots of land, artwork, and Non-Fungible Tokens (NFT). Members also participate in the platform’s Decentralized Autonomous Organization (DAO).
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What Is Ethereum 2.0 And Why Does It Matter?

What Is Ethereum 2.0 And Why Does It Matter?
Ethereum 2.0 is a long-awaited upgrade to the Ethereum (ETH) network that’s promised significant improvements to the functionality and experience of the network as a whole. Some of the more notable upgrades include a shift to Proof of Stake (PoS), shard chains, and a new blockchain at the core called the beacon chain. All of this and more is expected to be phased in through a carefully planned roadmap.
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What Is BUSD?

What Is BUSD?
BUSD is a regulated, fiat-backed stablecoin pegged to the U.S. dollar. For every unit of BUSD, there is one U.S. dollar held in reserve. In other words, the supply of BUSD is pegged to the U.S. dollar at a 1:1 ratio. Holders can swap their tokens for fiat and vice versa. Paxos, the token’s issuer, releases monthly attestations of BUSD’s reserves.
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What Is Avalanche (AVAX)?

What Is Avalanche (AVAX)?
Avalanche attempts to improve scalability without compromising speed or decentralization. Three blockchains make up its core platform - the Exchange Chain (X-Chain), Contract Chain (C-Chain), and Platform Chain (P-Chain). The X-Chain is used for creating and trading assets. The C-Chain is for smart contract creation. The P-Chain is for coordinating validators and Subnets.
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What Are Wrapped Tokens?

What Are Wrapped Tokens?
A wrapped token is a cryptocurrency token pegged to the value of another crypto. It’s called a wrapped token because the original asset is put in a wrapper, a kind of digital vault that allows the wrapped version to be created on another blockchain.
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What Is a Stablecoin?

What Is a Stablecoin?
A stablecoin is a cryptoasset pegged to another asset, such as fiat currencies or precious metals. Stablecoins are designed to maintain a relatively stable price so that users can avoid the volatility risks common in the crypto markets.
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Tokenized Bitcoin on Ethereum Explained

Tokenized Bitcoin on Ethereum Explained
Tokenized Bitcoin is a way to use bitcoin on other blockchains. But wait, isn’t Bitcoin great already? Indeed it is! It has a solid use case, and it already acts as a kind of public good. At the same time, its purposely limited features leave little room for further innovation.
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How to Use WalletConnect

WalletConnect is a protocol used by many crypto wallets that allows you to easily connect with the many DApps of decentralized finance (DeFi). Simply find the DApp you want to interact with, connect with a QR code or deep link, and you’re good to go. Always remember to disconnect at the end of any session for maximum security
WalletConnect is a protocol used by many crypto wallets that allows you to easily connect with the many DApps of decentralized finance (DeFi). Simply find the DApp you want to interact with, connect with a QR code or deep link, and you’re good to go. Always remember to disconnect at the end of any session for maximum security
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What Is Ethereum? (ETH)

Ethereum is a decentralized computing platform. You can think of it like a laptop or PC, but it doesn't run on a single device. Instead, it simultaneously runs on thousands of machines around the world, meaning that it has no owner.
Ethereum is a decentralized computing platform. You can think of it like a laptop or PC, but it doesn't run on a single device. Instead, it simultaneously runs on thousands of machines around the world, meaning that it has no owner.
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What Is Bitcoin (BTC)

Bitcoin is a digital form of cash. But unlike the fiat currencies you’re used to, there is no central bank controlling it.
Bitcoin is a digital form of cash. But unlike the fiat currencies you’re used to, there is no central bank controlling it. Instead, the financial system in Bitcoin is run by thousands of computers distributed around the world. Anyone can participate in the ecosystem by downloading open-source software.
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How to Use MetaMask

If you’re interested in the Ethereum ecosystem, you need an application like MetaMask. Far more than a simple wallet, it allows you to interact with websites that integrate Ethereum.
If you’re interested in the Ethereum ecosystem, you need an application like MetaMask. Far more than a simple wallet, it allows you to interact with websites that integrate Ethereum.
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A Beginner's Guide to Bitcoin's Lightning Network

A Beginner's Guide to Bitcoin's Lightning Network
Cryptocurrencies have some pretty unique properties. They can’t be hacked or shut down easily, and anyone can use them to transmit value around the globe without a third party’s intervention. To ensure that these features remain, significant trade-offs must be made. Since many nodes are responsible for running a cryptocurrency network, throughput is limited. As a result, the number of transactions per second (TPS) a blockchain network can process is relatively low for a technology that aims to be adopted by the masses.
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What is Fundamental Analysis (FA)?

What is Fundamental Analysis (FA)?
When it comes to trading – whether you’re dealing with century-old stocks or nascent cryptocurrencies – there’s no exact science involved. Or, if there is, Wall Street’s top players ensure that the formula remains a well-kept secret.
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History of Blockchain

The underlying technology behind cryptocurrencies is the blockchain. It allows every client in the network to reach consensus without ever having to trust each other.
The underlying technology behind cryptocurrencies is the blockchain. It allows every client in the network to reach consensus without ever having to trust each other.
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How Does Blockchain Work?

In short, a blockchain is a list of data records that works as a decentralized digital ledger. The data is organized into blocks, which are chronologically arranged and secured by cryptography.
In short, a blockchain is a list of data records that works as a decentralized digital ledger. The data is organized into blocks, which are chronologically arranged and secured by cryptography.
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What Is MakerDAO (DAI)?

What Is MakerDAO (DAI)?
MakerDAO is a Decentralized Finance (DeFi) project with a crypto-collateralized, stablecoin DAI pegged to the US dollar. Its community manages the coin via a Decentralized Autonomous Organization (DAO). Users generate DAI by locking cryptocurrency in a Maker Vault at a certain Liquidation Ratio. For example, a 125% Liquidation Ratio requires $1.25 of crypto collateral value for each $1 of DAI.
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What Is a Crypto Wallet?

In short, a crypto wallet is a tool that you can use to interact with a blockchain network. There are various crypto wallet types, which can be divided into three groups - software, hardware, and paper wallets. Depending on their working mechanisms, they may also be referred to as hot or cold wallets.
In short, a crypto wallet is a tool that you can use to interact with a blockchain network. There are various crypto wallet types, which can be divided into three groups - software, hardware, and paper wallets. Depending on their working mechanisms, they may also be referred to as hot or cold wallets.
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What Is Tulip Mania?

The Tulip Mania is considered by many as the first recorded story of a financial bubble, which supposedly occurred in the 1600s. Before discussing if the Tulip Mania was really a financial bubble or not, let’s go through the most common narrative that considers it to be a real bubble.
The Tulip Mania is considered by many as the first recorded story of a financial bubble, which supposedly occurred in the 1600s. Before discussing if the Tulip Mania was really a financial bubble or not, let’s go through the most common narrative that considers it to be a real bubble.
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What Is Technical Analysis?

What Is Technical Analysis?
Technical analysis (TA), often referred to as charting, is a type of analysis that aims to predict future market behavior based on previous price action and volume data. The TA approach is extensively applied to stocks and other assets in traditional financial markets, but it is also an integral component of trading digital currencies in the cryptocurrency market.
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What Is Staking?

What Is Staking?
You may think of staking as a less resource-intensive alternative to mining. It involves holding funds in a cryptocurrency wallet to support the security and operations of a blockchain network. Simply put, staking is the act of locking cryptocurrencies to receive rewards.
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What Is Phishing?

What Is Phishing?
Phishing is a type of cyber attack where a malicious actor poses as a reputable entity or business in order to deceive people and collect their sensitive information - such as credit card details, usernames, passwords, and so forth. Since phishing involves psychological manipulation and relies on human failures (instead of hardware or software) it is considered a type of social engineering attack.
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What Is Inflation?

Ever hear your grandmother talk about how everything was cheaper when she was younger? That’s because of inflation. It’s caused by irregularities in supply and demand for products and services, leading to an increase in prices.
Ever hear your grandmother talk about how everything was cheaper when she was younger? That’s because of inflation. It’s caused by irregularities in supply and demand for products and services, leading to an increase in prices.
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What Is Hyperinflation?

All economies experience some level of inflation, which occurs when the average price of goods increases, as the purchasing power of that currency decreases. Usually, governments and financial institutions work together to ensure inflation occurs at a smooth and gradual rate. However, there have been many instances in history where inflation rates have accelerated at such an unprecedented degree that it caused the real value of that country's currency to be diminished in alarming proportions. This accelerated rate of inflation is what we call hyperinflation.
All economies experience some level of inflation, which occurs when the average price of goods increases, as the purchasing power of that currency decreases. Usually, governments and financial institutions work together to ensure inflation occurs at a smooth and gradual rate. However, there have been many instances in history where inflation rates have accelerated at such an unprecedented degree that it caused the real value of that country's currency to be diminished in alarming proportions. This accelerated rate of inflation is what we call hyperinflation.
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What Is Hashing?

What Is Hashing?
Hashing refers to the process of generating a fixed-size output from an input of variable size. This is done through the use of mathematical formulas known as hash functions (implemented as hashing algorithms).
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What Is Fiat Currency?

Simply put, fiat currency is legal tender that derives its value from its issuing government rather than a physical good or commodity. The strength of the government that establishes the value of fiat currency is key in this type of money. Most countries around the world use the fiat currency system to purchase goods and services, invest, and save. Fiat currency replaced the gold standard and other commodity-based systems in establishing the value of legal tender.
Simply put, fiat currency is legal tender that derives its value from its issuing government rather than a physical good or commodity. The strength of the government that establishes the value of fiat currency is key in this type of money. Most countries around the world use the fiat currency system to purchase goods and services, invest, and save. Fiat currency replaced the gold standard and other commodity-based systems in establishing the value of legal tender.
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What Is Cryptojacking?

What Is Cryptojacking?
Cryptojacking is a malicious activity, in which an infected device is used to secretly mine for cryptocurrencies. In order to do so, the attacker makes use of the victims’ processing power and bandwidth (in most cases this is done without their awareness or consent).
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What Is Arbitrage Trading?

What Is Arbitrage Trading?
Arbitrage trading is a relatively low-risk trading strategy that takes advantage of price differences across markets. Most of the time, this involves buying and selling the same asset (like Bitcoin) on different exchanges. Since the price of Bitcoin should, in theory, be equal on Binance and on another exchange, any difference between the two is likely an arbitrage opportunity.
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What Is a Multisig Wallet?

What Is a Multisig Wallet?
Multisig stands for multi-signature, which is a specific type of digital signature that makes it possible for two or more users to sign documents as a group. Therefore, a multi-signature is produced through the combination of multiple unique signatures. Multisig technology has been extant within the world of cryptocurrencies, but the principle is one that existed long before the creation of Bitcoin.
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