Crypto Pt2 – The invisible web: Nodes, crypto mining and DAO

Nina Kazmierczak- Partner and Principal Adviser

Sovereign Wealth Partners

 

The next piece in our cryptocurrency series builds on last month’s blockchain introduction. This month we look at what needs to  go on deep in the web to support crypto activity.

 

Nodes  (Yes, I node off all the time once I start reading into the world of crypto…)

 A crypto currency needs one or more nodes to keep score of what’s been going on.  The more the better, which protects against error, fraud or destruction of any one blockchain.

Gadgets360 tells us that “every transaction has to be chronologically recorded and distributed to a series of connected devices. These connected devices are called nodes. These nodes communicate with each other within the network and transfer information about transactions”.

A Node is basically a computer running an app that processes crypto transactions and communicates them to others. I’m told its technically possible to run a node yourself on your home pc, yet these days home technology has become vastly inefficient and expensive to run.

 

 

Crypto Mining (No-one digs a hole…)  

 Crypto mining is somewhat similar to mining precious metals. While miners of precious metals will unearth gold, silver, or diamonds, crypto miners process the ledger and trigger the release of new coins into circulation.

FreemanLaw further explains that “new coins are generated to reward miners for their work in securing the network. Since distributed ledgers lack a centralized authority, the mining process is crucial for validating transactions. Miners are, therefore, incentivised to secure the network by participating in the transaction validation process that increases their chances of winning newly minted coins”.

 

 

DAO is the main idea behind cryptocurrency … the ultimate decentralisation.

DAO is short for Decentralised Autonomous Organisation. This means that a system is not controlled by a single institution like a government or central bank.  Instead the system can run itself whilst divided among a variety of computers, networks, and nodes.

The goal of a Decentralized Autonomous Organization (DAO) isn’t just to reduce human inputs—it’s to eliminate them entirely.

DAOs are the most cost-effective and fair business model ever conceived. They shore up the weaknesses of traditional centralised businesses subject to central points of weakness – middlemen, and unaligned stakeholder interests. A true DAO has only a single interest to protect – that of the business itself. It requires no employees or executive managers, thereby providing a service without consideration of salaries, intermediaries, or even profits. DAO businesses can survive on the most razor-thin margins imaginable, and only need to cover the cost of transaction processing.

There are many blockchain leaders already working to bring the DAO revolution to real businesses.

 

 

YOWZAS! Learning cryptocurrency is almost like learning a new language!  Next month we’ll explore tokens and NFTs.

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