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In the exciting world of crypto staking you can earn passive income while supporting the decentralization and security of cryptocurrencies. By understanding the concept of crypto staking and embracing its benefits, you can unlock the full potential of your crypto assets. In this article, we will explore the concept of crypto staking and delve into its importance and numerous benefits within the cryptocurrency ecosystem.

What is crypto staking?

Crypto staking refers to the process where individuals hold their cryptocurrency funds in a supported wallet to support the operations of a blockchain network and in turn earn rewards. By participating in staking, users contribute to verifying transactions and building consensus on blockchain networks.

To compensate for their contribution to the network, stakers earn additional cryptocurrency rewards. Staking promotes network security, as participants are incentivized to act honestly and uphold a certain level of financial commitment. It also enables holders to earn passive income by utilizing their crypto holdings. Overall, crypto staking offers a way to actively participate in the blockchain ecosystem and potentially earn rewards for supporting the network.

The benefits of staking in the cryptocurrency ecosystem

Staking plays a vital role in the cryptocurrency ecosystem, offering several key advantages. Firstly, by staking your crypto, you actively participate in securing the network, ensuring its resistance to attacks and maintaining its integrity. This service helps in fostering the decentralized nature of cryptocurrencies, making them less vulnerable to centralized control.

Another significant benefit of staking is the ability to earn passive income. By staking your crypto assets, you can receive regular rewards in the form of additional tokens or transaction fees. This incentivizes users to keep their funds in the network and actively support its operations, ultimately leading to increased network participation and stability.

Moreover, staking frequently offers greater returns compared to conventional financial paths. While investments like stocks and bonds can generate profits over time, staking offers the opportunity to earn additional tokens from newly issued or transaction fees. This potential for compounded returns makes staking an appealing choice for crypto enthusiasts seeking to optimize their financial engagement and earn additional funds.

In conclusion, crypto staking combines financial gains with active participation in the cryptocurrency ecosystem. 

Understanding Proof-of-Stake

Proof-of-Stake (PoS) is a consensus algorithm used in crypto staking. Unlike Proof-of-Work (PoW), which relies on computational power, PoS determines block validators based on the number of coins they hold and "stake" in the network. Bitcoin is a PoW network while Ethereum utilizes a PoS mechanism.

As mentioned above, stakers lock up their coins in a wallet, making them eligible to participate in block validation and consensus. The algorithm selects validators based on their stake, and they take turns proposing and validating new blocks. By staking their coins, participants demonstrate their commitment to the network's security and integrity, as losing their stake would be financially costly.

Stakers play a crucial role in the validation of transactions and creation of new blocks. When a transaction occurs, stakers verify its validity and ensure it complies with the network's rules. They propose new blocks by assembling transactions into a block and digitally signing it. 

The probability of being chosen as a block validator is directly proportional to the staker's stake in the network. Once a validator is selected, they add the proposed block to the blockchain, making the transactions permanent and secure. Stakers are incentivized to act honestly and in the network's best interest, as dishonest behavior can result in penalties and the loss of their staked coins.

Users looking to engage in staking can decide how actively involved they want to be in the network, either storing funds in a wallet that generates returns, or actively participating in the network (and earning more returns).

A look at staking rewards

Staking enables participants to earn rewards in the form of additional tokens or transaction fees. In return for their participation, stakers receive rewards. These rewards can be in the form of newly minted tokens, which are typically distributed proportionally to the staked amount. 

Additionally, stakers may also receive a share of the transaction fees generated within the network. The exact reward structure varies depending on the specific blockchain protocol and can be adjusted through consensus-driven mechanisms.

Several factors influence the calculation of staking rewards. The most significant factor is the amount of cryptocurrency staked by an individual. Generally, the more coins one stakes, the higher the potential rewards. 

The duration of the staking period also plays a role, with longer commitments often resulting in greater rewards. Additionally, the overall network participation level and the specific rules of the blockchain protocol can impact reward calculations. Some protocols may consider factors such as node uptime, reputation, or voting power in determining the distribution of rewards among stakers.

How the staking process works

Anyone can participate in staking, and the process typically involves the following steps. Once you have chosen the cryptocurrency network, be sure to check what their specific steps are.

• Set-up a wallet

First, select a compatible wallet that supports staking for the specific cryptocurrency. Install and set up the wallet following the instructions provided. Ensure you have a sufficient balance of the cryptocurrency you wish to stake in your wallet.

• Network participation

Some blockchains require you to delegate your coins to a validator or a staking pool. Access the staking section of your wallet and choose a validator or pool to delegate your stake to. Confirm the delegation transaction and wait for it to be processed by the network.

• Claiming rewards

As you actively participate in staking and contribute to the network, you will accumulate rewards over time. Depending on the specific blockchain, you may need to manually claim these rewards. Access the staking section of your wallet and follow the instructions to claim the rewards earned. The rewards will typically be added to your wallet balance once the transaction is confirmed by the network.

5 blockchain networks that support staking

Here are five blockchain networks that support this rewarding mechanism.

Ethereum (ETH)

Ethereum is a popular blockchain platform that recently transitioned from Proof-of-Work (PoW) to Proof-of-Stake (PoS). The staking mechanism on Ethereum 2.0 involves locking up a minimum of 32 ETH in a special wallet called the "validator deposit contract." Stakers participate in block validation and consensus, earning rewards in ETH for their contributions.

Cardano (ADA)

Cardano is a blockchain platform that utilizes a PoS consensus algorithm called Ouroboros. ADA holders can participate in staking by delegating their tokens to a stake pool or operating a personal stake pool. Stakers earn rewards in ADA based on their stake and the performance of the delegated pool.

Polkadot (DOT)

Polkadot is a multi-chain network that employs a variation of PoS called Nominated Proof-of-Stake (NPoS). DOT holders can nominate validators to secure the network or become active validators themselves. Stakers receive rewards in DOT for their participation and can also participate in governance decisions.

Tezos (XTZ)

Tezos operates on its own PoS mechanism called "Liquid Proof-of-Stake" (LPoS). XTZ holders can delegate their tokens to bakers (validators) or become bakers themselves. Stakers receive baking rewards in XTZ and may also participate in the governance of the Tezos network.

Cosmos (ATOM)

Cosmos is a network of interconnected blockchains that uses a PoS consensus algorithm called Tendermint. ATOM holders can delegate their tokens to validators and earn rewards in ATOM. Additionally, ATOM holders can participate in network governance through on-chain voting.

These are just a few examples of blockchain platforms that support staking, each with its unique staking mechanism and token rewards. It's important to research and understand the specific staking requirements and rules of each platform before participating.

Earning a passive income through staking

​​Staking provides an opportunity to generate passive income from cryptocurrency holdings. By staking your coins, you can earn regular rewards without actively trading in other assets. Staking offers a way to put idle crypto holdings to work and potentially increase their value over time.

When comparing staking to traditional financial opportunities, staking stands out for its accessibility and lower barrier to entry. . Unlike traditional financial activities that often require substantial capital or market knowledge, staking allows individuals to participate with relatively small amounts of cryptocurrency. Additionally, staking can provide more predictable and stable returns compared to the volatility of traditional markets.

The advantages of staking as an alternative income source include the potential for compounding returns, as rewards are often put back automatically. Staking also aligns with the principles of decentralization and actively supports blockchain networks. 

However, it's important to consider the risks associated with staking, such as the potential loss of the staked coins if the network suffers an attack or if the staker behaves maliciously. Stakers should also assess the security and reputation of the staking platform or validator they choose to ensure the safety of their funds.

In conclusion

Crypto staking offers an exciting opportunity to earn passive income while actively participating in the cryptocurrency ecosystem. By understanding the concept of staking, the underlying Proof-of-Stake consensus mechanism, and the specific staking processes of different blockchain networks, individuals can unlock the potential of their crypto assets. 

Staking provides benefits such as the ability to earn regular rewards and the potential for higher returns compared to traditional financial endeavors. However, it's important to weigh the advantages against the associated risks and carefully choose reliable platforms or validators for staking. With proper research and consideration, staking can serve as a valuable alternative income source for crypto enthusiasts.

There's a time-old debate over whether hodling or trading leads to better profits when it comes to buying into the cryptocurrency market. While both are great options, in the article below we look at the pros and cons of each option and weigh them up.

What is trading?‍

Trading refers to the buying and selling of financial instruments, assets, or commodities in financial markets with the aim of making a profit. Trading requires continuous monitoring of the charts and frequent study, whether in the commodities or stock market. Crypto trading involves buying and selling crypto at various intervals, whether minutes, hours, days, weeks, months, and years. Despite the greater risks involved, the potential for big percentage returns attracts individuals to trading.

If you want to trade crypto assets, it's essential to have a basic knowledge of the industry and how events in the news may influence Bitcoin's price. Remember to set stop losses and take profits so that you can protect your trade.

The pros of trading

• Potentially sizable profits

Crypto is known to be a volatile market and it's not uncommon to see price movements of 30% or above when crypto trading. With some strong analytical skills, one can observe, analyze and trade these waves and yield sizable profits.

• You're in control

Some people make a living trading part-time or full-time, particularly day trading. Day trading is where you enter and exit positions typically within a 24-hour period. Either way, you are in control of your own hours and workload, allowing you to take a break after you've met or exceeded your daily or weekly earnings targets.

The cons of trading

• Need to know trading fundamentals and technical analysis

Before you commence trading, you must acquire the skills to conduct fundamental and technical analysis of charts. This process demands dedicated effort and a time commitment.

• Need to be able to manage emotions

The prices of cryptocurrencies can change rapidly, making this a more risky proposition than long-term holding. You must be prepared to sell a losing cryptocurrency when it's plunging or decide to hodl for it to recover. Anything might happen in this fast-paced market, so you must make wise decisions without getting emotional.

What is hodling?

The term first came about in 2013 from a misspelled work in a BitcoinTalk Forum. The inebriated trader made the now infamous typo, and the word stuck. Almost a decade later, the term "hodl" remains a permanent fixture in the crypto ecosystem. Some have since branded it as "Hold On for Dear Life".

The term refers to holding a particular cryptocurrency for long periods of time, ignoring market volatility and knuckling through a bear market. As a passive strategy designed for long-term time frames, hodling requires a trader to simply buy a cryptocurrency and hold it in a secure place for months or even years until it reaches your price target.

You can buy Bitcoin or your favorite cryptocurrency at regular intervals if you're planning to HODL. This term is associated with buying a small amount of Bitcoins weekly or monthly. For example, let's say you have $1,000 to buy over time.

In this case, you might purchase $30 in Bitcoin each week or $50 worth every month. By staggering your buys like this rather than putting it all at once, you minimize the likelihood of price fluctuations having as much impact on the price per coin. This strategy prefers to buy Bitcoin over trade Bitcoin.

The upside to hodling

• Minimal effort

Hodling requires initial research into the cryptocurrency you wish to buy in (very important ans crucial to do your own research). From there establish your budget and strategy.

• Minimal stress

The crypto market is known for its significant swings in value. Thankfully with hodling there is no need to time the market for entry and exit positions or watch the chart all of the time.

• Minimal trading fees

Save money on trading fees by conducting on a few transactions, versus the many you will need to do when day trading. Some countries won't even charge tax on your crypto gains after a certain period of time (but be sure to check this in your area).

The downside of hodling

• Need patience

As hodling is a long-term strategy approach it requires patience and mental endurance. If you decide to use the Hodling strategy you'll need to manage emotions during tough market fluctuations and might need to wait years before being able to cash in on any ROI (return on investment).

• Funds are locked in

Because this is a long-term strategy, your funds would be inaccessible for an extended period. This could lead to missed opportunities to allocate resources elsewhere in the crypto space or any other market.

However, this can be avoided by leaving your funds in a crypto interest account. Tap provides users access to yield-generating wallets that allow you to enjoy both the long-term price gains as well as the returns.

In Conclusion: hodling vs trading

If you're a novice cryptocurrency investor, proceed with caution. There is no right or wrong answer to which of these strategies is "superior" and you could always combine both methods to match your portfolio depending of your risk appetite. Always keep in mind that before making any decisions, always do your homework, research about the asset you wish to purchase and about diversifying your portfolio to reduce risk regardless of the strategy you pick.

Since the advent of cryptocurrencies in 2009, the world has seen a substantial shift in the way that people transact and manage their money online. The first cryptocurrency, Bitcoin, sparked a wave that has impacted almost every corner of the globe, significantly shifting the financial landscape as we know it. Let’s explore how crypto is expanding economic freedom on a global scale.

What is economic freedom?

Before we evaluate how this $2 trillion industry is contributing to financial liberation, let’s first establish what economic freedom is. Explained simply, the term refers to measures that grant users the freedom to manage their money, property, and labour in each country, which is then compared globally.

More accurately, the measure of economic freedom is determined by using the Index of Economic Freedom, which weighs up 12 factors contributing to a country’s overall measure. This is broken down into 4 categories, each carrying varying subcategories, such as market openness measuring a country’s trade, financial and investment freedom. The others are regulatory efficiency, rules of law, and government size, each with its own subcategories.

This index was first published in 1995 by The Heritage Foundation and The Wall Street Journal and is used around the world today. This year, Singapore, New Zealand, Australia, Switzerland, and Ireland have ranked as the most financially free countries in the world.

Crypto and economic freedom

Cryptocurrencies were first established to provide an alternative monetary solution to the global financial crisis that sent the world into disarray in 2007. Satoshi Nakamoto created the new age payment system to empower individuals to hold control over their own finances, allowing them to manage and transact their money without the control of an authoritarian entity. For the first time in history, people were able to send money overseas without incurring the usual costly and time-consuming setbacks incurred with regular, global fiat transactions.

Due to the decentralized nature in which they are run, people are responsible for managing their own crypto wallets and specialised users on the network positioned across the globe are responsible for verifying and executing transactions. After Bitcoin entered the scene a significant number of new cryptocurrencies have been launched, over 12,000 at the time of writing. While some maintain the same “medium of exchange” model, many new cryptocurrencies have emerged providing alternative solutions to the industry.

Ethereum, the world’s second-biggest cryptocurrency, for example, provides a platform on which developers can create their own decentralized apps and cryptocurrencies, while other cryptocurrencies revolve around faster transaction times, cloud storage and private transactions. Each of these projects utilizes a blockchain network that was designed to improve and innovate the crypto and blockchain space.

Spanning beyond government control and lengthy paperwork, cryptocurrencies are able to provide a global currency that operates entirely online and is not confirmed to the borders of a country. Cryptocurrencies are global, accessible 24/7 and cannot be frozen in accounts.

How crypto is driving economic freedom

Requiring only an internet connection and start-up funds, Bitcoin (and cryptocurrencies in general) allows anyone around the world to create a wallet and start trading. One doesn’t need access to a large bank branch or lengthy paperwork, one simply needs an internet connection and a smartphone.

Curling back to the factors that contribute to economic freedom, cryptocurrencies are able to seamlessly check six of twelve of the categories of the Index of Economic Freedom through their innate properties. 

• Trade Freedom [Market Openness]
• Financial Freedom  [Market Openness]
• Business Freedom  [Regulatory Efficiency]
• Labour Freedom  [Regulatory Efficiency]
• Monetary Freedom  [Regulatory Efficiency]
• Property Rights  [Rule Of Law] 

The remaining categories however revolve around the governments running the nations in question, particularly the rule of law and government size categories. Nevertheless, cryptocurrencies can still assist in creating better-functioning economies and provide the technology that allows for a more open and free financial system.

A free and open financial system

As cryptocurrencies remove the barriers of borders, they allow people to transact their money in the same way that they communicate with each other (through the internet). As the digital age continues to evolve, we are likely to continue seeing a significant increase in the level of economic freedom that crypto provides to users around the world, empowering both the individual and the nation.

If you’re a business owner looking to tap into the over 300 million people across the globe using cryptocurrencies, you’ve come to the right place. In this piece we’re covering why that’s a great idea, and how you can go about incorporating cryptocurrencies as a payment option.

The benefits of crypto payments

Whether you want to accept Bitcoin payments or crypto payments, incorporating digital currencies into your business is a great idea. Below we run through several advantages that crypto payments bring to the table. 

• Faster Settlements

Did you know that credit card companies can take a few business days to move the funds into your account? With crypto payments, once the transaction has been executed the funds will (almost) immediately appear in your crypto wallet. 

• Lower Fees

Card processing companies charge anywhere from 1% - 3% plus an additional charge for using that service. Other payment services, like PayPal for example, charge even more. While the transaction fees structure is dependent on the specific network, cryptocurrencies charge a minimal flat rate, with no added hidden costs. When making or accepting crypto payments, you will know the transaction fees upfront.

• Wider Audience

With over 300 million people using cryptocurrencies, expected to rise to 1 billion by the end of 2022, there is now a much wider audience that your business can tap into. Capture new customers by adding crypto payments to your payment options and attract a new demographic.

• Reduce Fraudulent Charges

Fraudulent card activity costs the global economy over $120 billion each year. These chargebacks can range from a number of reasons, from technical issues to outright fraud. With cryptocurrencies, transactions are final and cannot be reversed due to the nature of blockchain technology facilitating these crypto payments. 

What does a business accepting cryptocurrencies entail?

First, you will need to have a proper understanding of cryptocurrencies, and an idea of which cryptocurrencies you would like to accept. While most businesses new to accepting crypto payments might opt for Bitcoin payments, there are several alternative options with varying features. Bitcoin Cash, for example, provides faster transaction times at a lower cost.

Next, you will need to create an account with a payment gateway, the crypto equivalent of a payment processor. This gateway will allow you to easily transfer crypto to fiat and vice versa. Ensure that the platform you opt to use is reputable, has high levels of security, and is in line with the regulatory requirements. If you decide to accept Bitcoin payment, you need to ensure that everything you are doing is above-board.

Once you have chosen your payment gateway and set up the account, the last step is to let your customers know. Whether you do this through a marketing campaign or simply incorporate the crypto QR code on your website or in-store, this is an excellent opportunity to get the word out there and create a buzz around your business now accepting crypto payments.

A crash course in cryptocurrencies

For the sake of getting you fully prepared to accept crypto payments, we've included a short crash course on cryptocurrencies. The first cryptocurrency to come into existence was launched in 2009 as a response to the global financial crisis. The still-anonymous creator, Satoshi Nakamoto, wanted to create a global digital currency that would allow each individual to take control of their own funds, and not have to rely on governments and centralized financial institutions to do so.

A few years after Bitcoin entered the scene, several other cryptocurrencies started emerging, many of which used the same infrastructure. Bitcoin Cash and Litecoin are examples of this, offering the same service with several tweaks, notably faster and cheaper transactions.

While adoption was slow to take off, crypto payments eventually integrated into the mainstream financial sector as several companies started catering to the crypto crowd. While the markets still go through the typical economic cycles, cryptocurrencies and most notably crypto payments are believe to be here to stay.

Since Bitcoin entered the financial landscape in 2009 it has made immense leaps and bounds in becoming the internationally recognised digital currency it is today. Despite the giant progress, crypto still has the potential to further infiltrate many aspects of society, particularly how we travel. 

This unprecedented technology can ultimately revolutionise the way we live our lives. Let’s take a look at how crypto is easing international travel, and how you can use it to your advantage.

Blockchain in travel

Many are familiar with cryptocurrencies, but few are aware that blockchain is the technology behind them. Blockchain technology, in simple terms, is a giant public ledger that stores data in a chronological, immutable manner. Particularly flourishing in supply chain management and the broader tech space, blockchain is also proving to be a useful asset to companies operating in the travel sector. 

With a wide range of options within the sector, from flights to car rental to hotels, blockchain is slowly starting to prove to be a powerful force in each case. Already several companies have adopted the technology and used it to add more streamlined and efficient services to the travel industry. 

For example, a French company, Sandblock is harnessing the technology and allowing travel companies to create their own loyalty tokens to attract and retain customers. These tokens can then be traded for a variety of services (beyond the company that issued them) or exchanged for alternative coins or fiat currencies. 

Another example is a Swiss-based, blockchain based company called Winding Tree which was designed to minimize fees for travelers while reducing costs for service providers. The non-profit company aims to cut out the middleman adding high fees to travelers' bookings and connect travelers directly to the service providers using smart contracts. 

These are just two in a wide range of companies already implementing blockchain technology into their businesses, illustrating the unlimited potential the nascent technology holds. 

Crypto bridges the gap

Like blockchain, cryptocurrencies are too playing an impressive role in easing cross-border travel, with plenty more room for development and better adoption. 

Cryptocurrencies facilitate seamless transactions without having to exchange one currency for another when going abroad. Say you lived in America and were visiting Australia, you wouldn’t need to exchange your US dollars for Australian dollars incurring high exchange fees and company-chosen exchange rates if you could just scan a QR code that automatically accesses funds in your universal crypto wallet.

Top tourist destinations around the world have started embracing cryptocurrencies, with a large amount likely to follow. For example, several destinations in Queensland, Australia, that provide access to the Great Barrier Reef have started implementing crypto payments into their tourist-focused businesses, and the reception has been impressive (see more below). 

El Salvador on the other hand approved Bitcoin as a legal tender in 2021, effectively making it very simple for any crypto-savvy tourist to travel around. One doesn’t even need to take a fiat card with them as all transactions can be completed using their mobile device. If that’s not the future of travel, what is?

Advantages of using crypto to travel

For the sceptics out there we’ve outlined several advantages of using cryptocurrencies when traveling, below. 

• It reduces the chance of theft or money loss
• It eases the booking process
• It allows users to avoid excessive exchange rates and ATM fees
• It minimizes the risk of credit card fraud
• Your smartphone functions as a wallet
• No left-over currency when you leave the country
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Globalisation meets blockchain

With increased awareness around countries and societies around the world, thanks to both mainstream and social media, companies expanding on a global level are becoming more and more common. 

However, this level of globalisation is often plagued with inconsistent means of distributing funds, causing delays, disruptions and unnecessary expenses. Cryptocurrencies and blockchain technology provide the infrastructure to change these difficulties, stablecoins even more so. 

The mobile revolution

According to a recent study, there are 6.37 billion smartphone users around the world, with 80% of the population in possession of one device. This is a significant rise from 2016’s statistics where only 49% of the world owned a smartphone.

Ownership levels are unsurprisingly highest in developed countries like the United States, Germany and the United Kingdom, where on average 80% of the population own a smartphone. Bangladesh, Pakistan and India are among the lowest percentages, with an average of 27% of the country owning one. 

Despite this, 80% of the developing world are still crypto-capable. All that is required is a smartphone and an internet connection. In the future, more local businesses, hotels, and shops in these countries will set up crypto wallets, enabling them to accept global payments in a matter of seconds (depending on the coin of choice).

This is likely to happen faster in the developing world than elsewhere, as demand for convenient and reliable payment solutions is on the rise. Less developed countries like the Bahamas are already catching on. 

An industry on the up

Crypto is easing international travel and contributing to a growing industry. Since the pandemic emerged, travel was put on a back foot but has since experienced a surge as people seek an alternative change of scenery. Now, cryptocurrency is making travel to remote areas, a growing demand, all the more possible.

Of course, government collaboration is paramount. Brisbane Airport in Australia is the first in the world to accept cryptocurrency at 30 merchants. As mentioned above, Queensland itself is a trailblazer in the crypto world. Agnes Water, a town located at the south of the Great Barrier Reef, has more than 40 businesses that accept Bitcoin. This kind of initiative is precisely what is required from governments and businesses for crypto to help grow the travel industry.

Ironing out foreign currency wrinkles

It is clear that crypto has the potential to revolutionise the way we operate around the world. Cryptocurrencies can make travelling easier and more accessible, and bolster tourism industries in developing countries. Solutions offered by several payment-focused cryptocurrencies could very well take over, as more and more tourists demand easier payment options.

Tap a streamlined cryptocurrency platform, is also contributing to the movement by providing a mobile app that facilitates rapid purchasing, trading, and secure storage of cryptocurrencies.

You’ve likely heard that cryptocurrencies provide a faster, easier and cheaper way to send money overseas. While this is true, what many people don’t necessarily know is how this is true. In this article we’re going to be fleshing out exactly how Bitcoin and altcoin transactions work, and how you can easily tap into this modern day phenomenon. 

What is Bitcoin, and what are Altcoins?

If you’re new around here, let’s get you up to speed. Bitcoin was first introduced to the world through a whitepaper in 2008 by an anonymous entity by the name of Satoshi Nakamoto (to this day their identity remains a mystery). Following the global financial crisis, Nakamoto wanted to create a currency that was free from banks and governments, instead putting financial power back into the hands of the people.

Using blockchain technology, Bitcoin was able to facilitate the peer to peer transfer of value, allowing users to make global payments at a much faster and cheaper rate than ever before. While it took a few years for Bitcoin to enter the mainstream market, during this time a number of alternative cryptocurrencies were created. In the early days, any alternative cryptocurrency was referred to as an altcoin (alternative coin to Bitcoin), while this notion has stuck, the altcoin market has grown into a sizable 9,000+ strong industry.

While many altcoins, like Ethereum and Litecoin, were created using Bitcoin’s blockchain, not all offer the same exact functionality. Each cryptocurrency that comes into existence is designed to solve a “problem” in the market, whether that be linked to data storage, smart contract functionality, faster payments systems, etc. 

How do Bitcoin and Altcoin transactions work?

Now that we understand the just of what they are, let’s explore how they work. We’ll use Bitcoin as the prime example. So while bank accounts require lengthy paperwork and administrative tasks, creating a Bitcoin “account” simply requires one to open a wallet. These can be found in different formats, with several options available on the market catered to the user's unique needs. Once you’ve created a wallet, you’ll need to load it with Bitcoin which can be done through a platform like Tap. 

Once you have funds in your account, you will be able to send them to another user on the network (note that Bitcoin can only be sent on the Bitcoin network and Ethereum can only be sent on the Ethereum network). To send funds you will indicate on the app (or through the wallet) how much you’d like to send, enter the recipient’s wallet address and then pay a small network fee for executing the trade. 

On the backend your transaction will enter what is known as a mempool, a pool of pending transactions, until it is picked up by a miner. Bitcoin miners are responsible for verifying all transactions on the network, and compete with each other to solve the complex cryptographic puzzle first. The first one to do so is responsible for confirming the next batch of transactions in the mempool and adding them to a block. This block is then added to the blockchain in chronological order to ensure the immutable, transparent qualities of blockchain technology are upheld. Once the block has been added to the blockchain, the miner will receive all the network fees of each transaction verified as well as the block reward to compensate for the time and electricity it took to mine. 

The funds will then leave your wallet and enter the recipient's wallet, and will usually be required to go through 3 confirmations before being able to access the funds. Confirmations are measured by new blocks being added to the blockchain following the block in which the transaction is stored. Three confirmations means that three new blocks need to be added to the blockchain before the funds can be used.

Most altcoins work in a similar fashion, however many use different methods of mining (also known as hashing algorithms) but the concept remains much the same. Miners verify the transactions, add them to a block, the block is added to the blockchain and the transaction is executed.

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