Blockchain Layers:
Blockchain layers are conceptual or technical divisions in blockchain architecture that separate tasks and roles, ranging from the foundational infrastructure to user-facing applications. Each layer builds on top of the previous one, allowing for specialized functionality and improved performance. Blockchains are typically divided into three primary layers, each serving specific roles in the ecosystem:

These layers work together to provide scalability, security, interoperability, and usability in blockchain ecosystems.

Cryptocurrency – A digital asset/credit/unit within the system, which is cryptographically sent from one blockchain network user to another. In the case of cryptocurrency creation (such as the reward for mining), the publishing node includes a transaction sending the newly created cryptocurrency to one or more blockchain network users. These assets are transferred from one user to another by using digital signatures with asymmetric-key pairs.
Sources:
NIST IR 8408 from NISTIR 8202

A digital asset/credit/unit within the system, which is cryptographically sent from one blockchain network user to another. In the case of cryptocurrency creation (such as the reward for mining), the publishing node includes a transaction sending the newly created cryptocurrency to one or more blockchain network users.
Sources:
NISTIR 8301 

Cryptography (Hash) – A cryptographic hash function is a mathematical function used in cryptography. Typical hash functions take inputs of variable lengths to return outputs of a fixed length. A cryptographic hash function combines the message-passing capabilities of hash functions with security properties.

Dai (DAI) – A decentralized stablecoin that is pegged to the U.S. Dollar. Unlike traditional stablecoins that are backed by fiat reserves held in a centralized entity (like USDC or Tether), Dai is maintained through smart contracts on the Ethereum blockchain and is backed by a variety of collateral assets, including cryptocurrencies like Ether (ETH) and BAT (Basic Attention Token), which are stored in a system called the Maker Protocol. https://sky.money  – Maker Dai has changed to this!

Day Trading – Day trading is considered the buying and selling of a stock during the same business day. The issue with Day Trading is that as a strategy is considered incredibly risky. If you’d like to learn more about Day Trading, why it’s risky and how to avoid it I’d love you to check out this article by the SEC on it here.

Decentralized Finance (DeFi) – An emerging peer-to-peer financial system that uses blockchain and cryptocurrencies to allow people, businesses, or other entities to transact directly with each other. The key principle behind DeFi is to remove third parties like banks from the financial system, thereby reducing costs and transaction times.

Decentralization in cryptocurrency refers to a system where control and decision-making are distributed across a network of participants rather than being managed by a single central authority, like a government or bank. In a decentralized cryptocurrency network, transactions and data are verified and recorded on a shared public ledger (blockchain) by multiple independent nodes, ensuring transparency, security, and resistance to censorship or manipulation. This structure allows users to interact directly with one another without relying on intermediaries.

Digital Applications (dApps) –  Decentralized applications, or dApps, are software programs that run on a blockchain or peer-to-peer (P2P) network of computers instead of on a single computer. Rather than operating under the control of a single authority, dApps are spread across the network to be collectively controlled by its users. They are often built on the Ethereum platform and have been developed for various purposes, including wallets, exchanges, gaming, personal finance, and social media.

Ethereum – A decentralized, open-source blockchain platform that allows users to create and run smart contracts and decentralized applications (dApps). It’s the second most popular cryptocurrency after Bitcoin.

Immutable – Unchangeable over time, not able to be changed.

Market capitalization (market cap) is the total value of a cryptocurrency or any asset, calculated by multiplying its current price by the total supply of coins or tokens in circulation. In a nutshell Market cap is a measure of a cryptocurrency’s total value, calculated by multiplying its price by the total number of coins or tokens in circulation. It helps investors assess the size, stability, and potential of a cryptocurrency.

Formula for Market Cap:

Market Cap = Current Price x Circulating Supply

If a cryptocurrency has a current price of $50 and a circulating supply of 1 million coins, its market cap would be:

Market Cap = 50 x 1,000,000 = 50,000,000. So, the market cap of this cryptocurrency is $50 million.

The importance of Market Cap are Valuations, Investment Decision

1. Valuation: Market cap is used to assess the size and value of a cryptocurrency in comparison to others. It helps investors determine whether a cryptocurrency is considered “large” (high market cap), “mid-sized” (mid-market cap), or “small” (low market cap).
2. Investment Decisions: A higher market cap often indicates greater stability and adoption, whereas lower market cap cryptocurrencies can be more volatile but may have higher growth potential.
3. Categories: Cryptocurrencies can be classified based on their market cap:

• • Large Cap: Cryptocurrencies with a market cap above $10 billion. These are generally considered stable and established.
  • Mid Cap: Cryptocurrencies with a market cap between $1 billion and $10 billion.
  • Small Cap: Cryptocurrencies with a market cap under $1 billion. These are often more volatile and risky but have higher growth potential.

NFTs (Non-Fungible Tokens) – Non-fungible tokens (NFTs) are assets like a piece of art, digital content, or video that have been tokenized via a blockchain. Tokens are unique identification codes created from metadata via an encryption function. These tokens are then stored on a blockchain, while the assets themselves are stored in other places. The connection between the token and the asset is what makes them unique.

Nodes – In the context of cryptocurrencies, a node is a computer that participates in a blockchain network by performing specific tasks related to verifying transactions and storing data.

Polygon (MATIC) – A layer 2 multi-chain scaling solution built on top of the Ethereum blockchain to improve its scalability, reduce transaction costs, and enhance the user experience for decentralized applications (dApps). Polygon aims to address the issues of Ethereum’s high gas fees and slower transaction speeds by providing faster and more affordable alternatives without sacrificing security.

Private key(s): A secret, randomly generated string of letters and numbers that allows you to access and control your cryptocurrency. It lets you access and manage your coins. Both seed phrases and private keys need to be kept safe and private to protect your funds. Here’s a breakdown of what a private key is and its role:

Key Features of a Private Key:

1. Unique and Secure: A private key is generated using complex cryptographic algorithms to ensure it is unique and cannot be easily guessed or recreated.

2. Access Control: It grants you access to your cryptocurrency wallet, enabling you to send or spend your funds. Think of it as the digital equivalent of a password or PIN.

3. Paired with a Public Key:

• The private key is mathematically linked to a corresponding public key.
• The public key is used to generate your wallet address (where funds are sent), but only the private key can authorize transactions from that wallet.

4. Confidentiality: The private key should always remain secret. Anyone with access to your private key can control your funds.

Proof Mechanisms: The method or protocol used to achieve consensus within a decentralized network. It is the process by which participants in the network agree on the validity of transactions and the current state of the blockchain ledger without relying on a central authority. Proof mechanisms are distinct consensus protocols designed to validate transactions, secure the network, and ensure its integrity.

Each Proof of mechanism has its pros and cons, but they all aim to achieve the same goal: ensuring the blockchain network is secure, decentralized, and operates without a central authority. The choice of which mechanism to use depends on factors like scalability, energy efficiency, and the specific use case of the blockchain.

Ripple (XRP) – A digital payment protocol and its native cryptocurrency, XRP. It was designed to enable fast, low-cost cross-border payments and facilitate real-time international transactions. Ripple, the company behind the protocol, aims to replace traditional banking systems and networks like SWIFT, which are slow and expensive, with a more efficient decentralized alternative. (Layer 1)

Satoshi (often abbreviated as sat) is the smallest unit of Bitcoin (BTC). It is named after Bitcoin’s pseudonymous creator, Satoshi Nakamoto.

Key Details:

• 1 Bitcoin (BTC) = 100,000,000 satoshis

This means that a single Bitcoin can be divided into 100 million smaller units, called satoshis.

• Value of 1 satoshi: The value of 1 satoshi depends on the current price of Bitcoin. For example, if 1 Bitcoin is worth $20,000, then 1 satoshi would be worth $0.0002 (20,000 ÷ 100,000,000).

• Purpose: Satoshis allow for microtransactions and fine divisions of Bitcoin, making it possible to transfer very small amounts of Bitcoin (such as for tips or small purchases) even when the price of Bitcoin rises significantly.

Example:

If Bitcoin is worth $50,000, then 1 satoshi would be worth:
\frac{50,000}{100,000,000} = 0.0005 \text{ USD}

So, 1 satoshi would equal $0.0005.

The satoshi is useful in situations where Bitcoin’s value is high, enabling users to transact with tiny fractions of a Bitcoin.

Satoshi Nakamoto – Satoshi Nakamoto is the pseudonymous creator or creators of Bitcoin, the first decentralized cryptocurrency. The identity of Satoshi Nakamoto remains unknown, despite various claims and speculations over the years.

Key Points About Satoshi Nakamoto:

1. Creator of Bitcoin: Nakamoto introduced Bitcoin in a 2008 white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System”, which outlined the principles behind Bitcoin’s decentralized, trustless, and secure network.

2. First Blockchain: Nakamoto also developed the underlying technology for Bitcoin, the blockchain, which is a distributed ledger that securely records all Bitcoin transactions without a central authority.

3. First Bitcoin Block: Nakamoto mined the first block of Bitcoin, known as the genesis block, in January 2009. This block included a message referencing a newspaper headline about the banking crisis, suggesting motivation tied to economic discontent.

4. Mysterious Identity: Nakamoto’s true identity remains a mystery, and despite various theories and claims of discovery, no one has definitively proven who they are. Nakamoto stopped communicating with the Bitcoin community around 2010, leaving the project in the hands of other developers.

5. Bitcoin’s Impact: Nakamoto’s creation has led to the rise of an entire industry focused on cryptocurrencies, blockchain technology, and decentralized finance (DeFi), radically changing how we think about money and transactions.

Satoshi Nakamoto’s identity, whether it be an individual or a group, remains one of the greatest mysteries in the world of cryptocurrency and technology.

Seed phrase: A special set of words (12-24) that acts like a backup for your cryptocurrency wallet. It helps you restore your wallet if you lose access to it.

Smart Contracts – A smart contract is a self-executing program that automates the actions required in a blockchain transaction. Once completed, the transactions are trackable and irreversible. The best way to envision a smart contract is to think of a vending machine—when you insert the correct amount of money and push an item’s button, the program (the smart contract) activates the machine to dispense your chosen item.

Solana (SOL) –  A high performing layer 1 blockchain platform designed for fast, low-cost transactions and decentralized application (dApp) development. Launched in 2020, Solana uses a unique combination of technologies, including Proof of Stake (PoS) and Proof of History (PoH), to achieve high scalability and throughput.

Store of Value –  SOV is an asset that maintains its value over time without depreciating significantly. It can be saved, retrieved, and exchanged in the future while preserving its purchasing power. Common examples include gold, real estate, and, increasingly, cryptocurrencies like Bitcoin. For something to be a good store of value, it should be durable, scarce, and widely accepted.

Stablecoins – Stablecoins are cryptocurrencies whose value is pegged, or tied, to that of another currency, commodity, or financial instrument. Stablecoins aim to provide an alternative to the high volatility of the most popular cryptocurrencies, including Bitcoin (BTC), which has made crypto investments less suitable for everyday transactions.

Stellar (XLM) – A decentralized blockchain platform designed to facilitate fast, low-cost cross-border payments and enable the seamless transfer of any type of currency or asset. It was created in 2014 by Jed McCaleb (co-founder of Ripple) and Joyce Kim, and its native cryptocurrency is XLM (Lumens). (Layer 1)

Tether (USDT) – A stablecoin, which means it is a type of cryptocurrency designed to maintain a stable value by being pegged to a traditional fiat currency, usually the U.S. Dollar. Tether is one of the most widely used stablecoins and plays a crucial role in the cryptocurrency ecosystem as a bridge between volatile cryptocurrencies and the stable value of fiat currencies. (TOKEN)

Token – A token is a type of cryptocurrency that represents an asset or utility within a blockchain network. Unlike coins, which typically represent a currency or store of value (like Bitcoin or Ethereum), tokens are often used for a variety of purposes, such as accessing specific services or assets, participating in governance, or representing ownership or rights within a decentralized system.

Tokenomics refers to the economic model of a cryptocurrency or token within a blockchain ecosystem. It outlines the supply, distribution, and utility of the token, as well as the incentives and mechanisms that govern its use. Essentially, tokenomics is the study and design of the token’s financial structure and its role in the broader ecosystem, and it helps determine how the token will maintain value and function within the project.

USD Coin (USDC) – A stablecoin that is pegged to the U.S. Dollar. Its value is maintained at a 1:1 ratio with the U.S. Dollar, meaning that 1 USDC is always equivalent to 1 USD. USDC is issued by Centre, a consortium founded by Circle and Coinbase, and is one of the most widely used stablecoins in the cryptocurrency ecosystem. (TOKEN)

Web3 Wallets: Digital wallets designed to interact with Web3 technologies, which are decentralized applications (dApps) built on blockchains such as Ethereum, Binance Smart Chain, and others. Unlike traditional Web2 wallets, which are primarily used for storing and transacting fiat currency or digital assets, Web3 wallets allow users to interact with decentralized networks, manage cryptocurrencies, and access various blockchain-based services, such as decentralized finance (DeFi), non-fungible tokens (NFTs), and more.

White Paper: in cryptocurrency is a detailed document that outlines the goals, technical specifications, and workings of a specific cryptocurrency or blockchain project. It is often used to explain the purpose of the project, the problem it aims to solve, the technology behind it, and how the system will operate. White papers are typically released by the project team before a cryptocurrency or blockchain project is launched, and they serve as an important tool to communicate with potential investors, developers, and the broader community.

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Please note that we are not financial advisors; any information provided should not be construed as financial advice. All content provided is for informational purposes only. You should consult a qualified financial professional or advisor before making investment decisions. Based on the information provided, we do not assume any responsibility or liability for any actions. Always conduct your research and consider your financial situation before making any decisions.