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What is a Decentralized Application?
The Ethereum platform allows developers to use it as a coding environment and distribution network for applications built on the blockchain. The ability to create distributed applications on a blockchain is a novel idea that has gained a lot of momentum since Ethereum’s release. Developers can write and distribute their applications over the blockchain network, at little to no cost, while removing the necessity of running a website or a large server database because the blockchain satisfies these needs. The code for the application becomes part of the blockchain ledger, and users who wish to use some functionality of the decentralized application, or Ðapp as they are called, will submit requests to the Ethereum blockchain, pay the transaction fees for the distributed network to process the requests, and the network will call on the code of the Ðapp stored in the blockchain and process it using the computing power of the distributed network sometimes called the Ethereum Virtual Machine. Continue reading...
How Does Ethereum Work?
Ethereum uses a blockchain that looks very similar to Bitcoin’s until you get into the details. Ethereum is a platform on which transactions can be made using Ether or other tokens which have been made using the protocol, and smart contracts and decentralized applications (Ðapps) can be executed using the distributed computing power of what’s called the Ethereum Virtual Machine. When viewed from different angles, Ethereum is an open-source coding environment, a market upon which to distribute new blockchain-based applications, and a distributed computing machine that processes functions of the blockchain applications across a broad network. Distributed computing itself is not that new, but distributed computing on a blockchain is. Continue reading...
What is the Ethereum Virtual Machine?
Ethereum has a Turing-complete platform built into it that allows the blockchain to function like a large distributed computer. The Ethereum Virtual Machine is a part of every Ethereum client software on the blockchain, and it allows the interconnected computers to function as one processor. Distributed computation such as this is not really a new thing, but the fact that it allows all developers in Ethereum to decentralized their projects makes this one of the most revolutionary aspects of the Ethereum platform. Continue reading...
What is Ethereum?
Ethereum is an open-source, public, blockchain-based distributed computing platform. Ethereum provides a cryptocurrency known as ether. Ethereum is a decentralized platform that runs what are known as “smart contracts.” Smart contracts are applications that run on custom built blockchain, which functions on its own accord through rules programmed into the protocol, and which also makes decisions and keeps records based on consensus throughout a peer-to-peer network. A blockchain oversees its own activities without requiring any trust in a central authority or the other parties involved. Continue reading...
What is Ether?
Ether is the currency that powers the Ethereum network, which is a platform of distributed blockchain computing on which transactions, smart contracts, and distributed applications operate. Ethereum is a blockchain code environment through which distributed applications, smart contracts, and financial transactions using the Ethereum protocol are tested, validated, and added to distributed ledgers by the mining computers acting as nodes in the network. Ether is the currency, or token, in the Ethereum world which is used to pay the miners and transaction fees which are specific to its blockchain. Continue reading...
Why do ICOs Matter to Ethereum and Bitcoin?
ICOs can help the market and developers test the waters for new concepts using blockchain technology. When a new idea succeeds or fails after using an ICO, it could be said that the company had made use of every advantage at its disposal and that it had the best chance at success in that environment as it could have had anywhere else. It could have done so more cheaply, and with less interference, than in the “real world,” generally speaking. Continue reading...
What are Multichains and Sidechains?
Sidechains are blockchains which handle assets off of the main blockchain and are able to return them to the main blockchain at a future date. As you understand by now, blockchains are comprised of interconnected computers serving as nodes in a decentralized consensus network. Everything that happens to assets on that blockchain is validated and recorded on that blockchain. If assets are taken to another chain, however, where different protocols may apply to suit the needs of the parties using the assets, this may be called a sidechain. Continue reading...
How Do You Use Ethereum?
When most people ask this question they are actually asking how to use Ether, the main currency of the Ethereum platform. But the Ethereum platform can be used in many ways as well. Ethereum is a platform that can be used by developers to create decentralized applications (dapps), tokens/cryptocurrencies, and basically anything else that can be programmed. It was the front-runner of the race to develop what is sometimes called Crypto 2.0: blockchain technologies that go well beyond singular usage as digital currency and instead reach and revolutionize every aspect of digital technology in the world today. People can and do use Ether, the primary currency of the Ethereum system, to make transactions like a currency, or as an investment. Continue reading...
How Does Ethereum Mining Work?
Ethereum mining is the process of solving blocks of encrypted blockchain data using a proof-of-work algorithm and occasionally being rewarded with Ether. Blockchain data is validated and added to the distributed ledger by computers on the network performing the task of “mining,” which is continually attempting to solve puzzles, basically, which each unlock a block of encrypted data containing information about transactions, and, on the Ethereum platform, information about distributed application functions and smart contracts. Once a block is unlocked, the data within is shared with the network and added to the distributed ledger. Continue reading...
What is the Lightning Network?
The Lightning Network is a system that allows for extremely fast Bitcoin transactions off-chain. Lightning Network is a smart contract protocol that uses existing blockchains to mediate transactions off-chain to increase the speed at which they can be finalized. Such a technology is much sought-after in the Bitcoin community, where transactions can take hours to clear if the workflow for miners gets backed up. With the fast pace of business today, the emergence of many other options for faster settlement, such as Ethereum and Ripple, developers know that something like Lightning Network may be needed to keep Bitcoin relevant and make it more scalable. Continue reading...
Who Created Ethereum?
Who would have thought that a 19-year-old from Toronto could write a whitepaper nearly as influential as Satoshi Nakamoto’s (Bitcoin founder)? A few years after Bitcoin’s launch, a young programmer and student of blockchain technology named Vitalik Buterin wrote a whitepaper imagining the Ethereum platform. While Bitcoin’s blockchain was primarily designed to handle transaction information, Ethereum is designed to offer a blockchain protocol for anything that can be programmed, which includes wh... Continue reading...
What is Tokenization?
Tokenization is a concept that can take several forms, but essentially it means to create a tradeable item which holds value anchored in an asset which is not itself readily tradeable. If something of value is not easily traded, it is natural that a token is created which represents part or all of such value, which can then be held until redemption or circulated as currency. Historically, some things, such as hours of labor, could not easily be accounted for without a physical token. Continue reading...
What Was the DAO?
The DAO was somewhat of an experiment in corporate governance and structure built on the open-source Ethereum platform, and the ripples of its fall are still felt in the Ethereum world. DAO stands for Decentralized Autonomous Organization, and it was a crowdfunded business or venture capital fund that raised $150 million in a month-- in fact, it was the single-largest crowdfunding campaign ever. It was so big that about 14% of the total Ether in existence at that point was invested in the project, and it was listed on all the major cryptocurrency exchanges. Continue reading...
What is the FCC?
The Federal Communications Commission is a bipartisan regulatory body that oversees interstate communications media, grants licenses to entities which plan to use the bands available, and to some extent regulates the content of these communications in the public interest. Communications media, including radio, satellite, cable, telephone, and others, are overseen and regulated by the FCC. They help to standardize measures and regulate the commercial activity of the entities which seek to use these media, including licensing and content regulation. Continue reading...
Can My Employer Pay Me In Bitcoin?
The IRS has already paved the way for employers to pay wages using bitcoin and other cryptocurrencies, and more services to facilitate this activity are being established. If your employer is willing to facilitate it, you can indeed receive your paycheck, or part of it, in bitcoins. Several financial services companies that deal in bitcoins exist that can help you accomplish this, and there will likely be more of them in the future. One such company, Bitwage, acts as an intermediary between your payroll service and Bitcoin exchanges, such as Coinbase, before sending the balance to your Bitcoin Wallet. The IRS has already established guidance on the subject. As an employer, you are free to pay employees in bitcoin and other “convertible virtual currencies” as long as you adhere to the same withholding and reporting requirements that would pertain to employee remunerations in US dollars, including FICA taxes and the rest of it. Continue reading...
What is Margin?
The act of “going on margin” means borrowing money from the custodian of your account, in order to purchase additional securities. Another way of saying this is that you are “leveraging” your account. Investors who go on margin are trying to pump up gains in their account, but doing so means taking the risk of outsized losses if you are wrong. To take an account on margin is not free - the custodian will charge interest for the loan, and will essentially use the assets in your account as collateral. Continue reading...
Do I Have to Pay Taxes on My Bitcoins?
The IRS currently requires that bitcoin and other cryptocurrencies be reported as personal property and capital assets. The IRS has published guidance that, yes, you do have to report gains/losses/income in the form of bitcoin and other “convertible virtual currencies.” Generally, the IRS treats bitcoin as property, instructing taxpayers to follow the existing IRS guidelines for personal property taxation. You can claim them as a capital asset, allowing you to treat them as stocks, essentially, with the ability to only pay long-term capital gains taxes on them if you hold them for a while. You can get paid in bitcoin by your employer, but employers must still withhold the usual amount of taxes, and you must report your bitcoin income the same way you would your regular income. Continue reading...
What is 'buying on margin' and margin trading?
A margin trade is one where the trader uses other securities or cash as collateral, for a transaction in which he or she has not purchased the security outright. The broker acts as a lender. If your broker approves you for a margin account, you have the ability to purchase new securities “on margin” by using your current holdings as collateral, or by depositing 50% (or more depending on the broker) of the market price of the security into the margin account. Continue reading...
What are 'non-marginable' securities?
Some securities, such as penny stocks and IPOs, are prohibited from being purchased on margin or for serving as margin for other purchases. Stocks and other securities that are too volatile to serve as margin collateral - or to be purchased on margin - are called Non-marginable Securities. The Federal Reserve Board has defined certain criteria for determining which securities are non-marginable, and brokers often have their own house rules for traders. Continue reading...
What is a Margin Account?
A margin account is one in which an investor uses borrowed money to purchase additional securities. An investor is almost always required to use the securities in the account as collateral for the borrowed money. The objective of a margin account is for the investor to magnify gains, but the opposite can also be true, and losses may lead the investor to have to sell securities in the account to cover the loan balance. There’s more upside in a margin account, but there’s more downside too. Continue reading...