What is a Coin?
Coins are cryptocurrencies that belong to their NATIVE blockchain.
This means that the coin was created for and operates on a specific blockchain network.
Examples:
BTC: BitcoinETH: EthereumDOGE: Dogecoin
Characteristics of Coins:
Decentralisation: not controlled by one central authority and governed by rules of protocol and consensus of communitySecure: protected by cryptography and encryption, therefore resistant to hacking, censorship, and fraud.Scarcity: MOST tend to have a limited supply predetermined by algorithm/code. e.g. Bitcoin has a total supply of 21 million.
Types of Coins
Native coins — coins which run on their own blockchain and serve as the main currency on the network. e.g. BTC (Bitcoin)Stablecoins: coins that are pegged to the value of another asset, such as fiat or gold. Example: Tether (USDT), USD coin (USDC).
Forked coins — coins that derive from the same original blockchain but have split off due to a change in the blockchain protocol.
Forks occur when the community makes a change to the blockchain protocol (set of rules), resulting in the chain splitting, producing a second blockchain that shares its history with the original.
There are two types of forks:
Soft fork — essentially a software upgrade for the blockchain, and becomes a new set of standards for the blockchain as long as it’s adopted by all users. Examples of new standards would be new functions or features.Hard fork- code is changed so much that the new version is no longer backward compatible with the earlier blockchain, so the blockchain splits in two; the original blockchain and the new blockchain which follows a new set of rules. This creates an entirely new cryptocurrency, examples include: Bitcoin Cash and Bitcoin Gold which evolved out of the original Bitcoin blockchain via a hard fork.
Wrapped coins — coins that represent another cryptocurrency on a different blockchain. They are ‘wrapped’ to allow them to be used on another blockchain. For example, if you have a Bitcoin (BTC operates on its own blockchain) but you want to use it on an Ethereum blockchain (doesn’t support Bitcoin). You wrap the 1 Bitcoin into 1 wrapped Bitcoin (WBTC) which is an Ethereum-based token that represents 1 bitcoin, and thus allows you to use that Bitcoin on the Ethereum blockchain.Altcoins — cryptocurrencies other than Bitcoin.
How are coins created?
Coins are created through MINING.
Mining — computers solve complex math puzzles and validate transactions to produce coins.
Miners use powerful computers to solve complex mathematical problems, the first one to solve the problem (verify the problem) gets to add the next block of transactions to the blockchain and is rewarded with a certain amount of cryptocurrency.
Simple Example:
Your school has a system where students earn digital points (“SchoolCoin) for completing tasks or helping others. To ensure everyone’s points are recorded fairly and no one cheats, each time someone earns points, the transferring of points to that individual (transaction) needs to be verified and added to the school’s digital ledger. Now imagine, some students volunteer to use their calculators to check and record these transactions in exchange for the chance of earning some SchoolCoin themselves. The student volunteer who can solve the challenging math problem the quickest and verify the transactions quickly earns SchoolCoin and gets to record the transaction on the ledger.
In regards to how the SchoolCoin Digital Ledger System would operate:
Alex helps Jamie with a difficult math problem, Alex receives 10 SchoolCoin points.Alex submitted a claim for these 10 points through the school’s digital platform, specifying the task (helping Jamie with math) and the points earnedThe system randomly selects a few students who have volunteered as verifiers, these students verify to see if Alex’s submitted claim is genuine. They do this through checking the submission against a set of criteria such as confirmation from Jamie, or a teacher’s note.The approved transaction includes the date, participants, the task, and the amount of SchoolCoin points (10 points), is encrypted and added to the ledgerAll students can view the transaction in the ledger, ensuring transparency and the ledger is secure through encryption, meaning no unauthorized changes can occur
