Disclaimer: Nothing in this article should be considered as investment advice.
The goal of this article is to help newcomers in the cryptocurrency space or anyone unfamiliar with the technology behind it to understand what Distributed Ledger Technologies (DLTs) are and why we need them. Therefore, I will try not to go too deep into the technical details of DLTs, but rather give an overview of the principles used. I know this is a long article, but I wanted to explain everything in one document so you don’t have to look in different places if you want to get a basic understanding. Feel free to skip parts you already know. It’s important to note, that I won’t discuss all possible attack vectors or every detail of the tech. This article should only be an introduction to the topic and the first stepping stone to dig deeper if it sparks your interest.
I’m going to talk mostly about cryptocurrencies because this is an easy example to understand, but there are a lot of other exciting use cases for DLTs (maybe I’ll talk more about them in a future blog post). The Blockchain and Tangle sections have a short TLDR paragraph in the beginning explaining what they are. If you read the whole article, you can skip these TLDR sections as everything will be explained in more detail afterwards. If you have questions about this blog post, feel free to ask in the comments. So let’s dive into the topic.
To understand why cryptocurrencies were created in the first place, let’s take a quick look at how currencies have evolved in the past and how the current system works.What is Money and why do we use it?
Before the concept of money was created, people already exchanged goods by bartering. In the right circumstances, bartering can be very simple and effective. Lets say Alice wants to trade some apples for a pair of shoes. If she can find someone that wants to trade shoes for apples, this system works perfectly. A challenge arises when Alice wants shoes f...