[For Beginners]Simple but technical questions

[Whited35 15285]

Last time, I got encountered from my friend @Calvinpriva with some  questions😜.You can see questions are looking simple but actually not, they are technical cryptocurrency and blockchain technology related questions.He asked me questions not due to reason he does not know about them but main intention was to help newcomers on this forum. I tackled his questions in PM and thought like it will be also helpful for this community. Let's see how did I face him. 

1. Those who own crypto wallets, where do they store those coins?
Cryptocurrency is utterly into blockchain technology. Blockchain forms an irreversible database where all wallet addresses and funds into it are stored. Your crypto wallet address has two important things or variables i.e.Public key and private key which will be directly related with coins/tokens stored to that wallet and it is followed by complex cryptographic codes. 
So if the wallet is non-custodial, you can have full control over your private key but in the case of custodial or hot online wallets, they store your private key in their separate server but still, your crypto will be stored in blockchain.  

 

2. We can stake,save and invest our coins in some exchanges/wallets and earn a profit, how do they get that interest to give us?
It is quite relatable, how your bank gives you interests for saving the amounts😜? They also invest funds collected from their customers into productive fields like agriculture, hydro-power, etc, right? Exactly the same, if exchanges or wallets are giving you returns for investing or saving the amounts means they are also using your funds to invest in something stable or productive sectors to gain profits and some portion will be given you as a return.Staking works to strengthen the network and exchange or wallet give you reward for that purpose.

 

3. How do crypto wallets generate coin addresses for their wallet users to receive coins?
I give you an answer which will be applicable for all the blockchain networks.Crypto wallets are such special programs that are capable of creating unmatched and irreversible alphanumeric characters(will be stored in blockchain while sending or receiving crypto into it) which you might represent as identifier or crypto wallet address with a set of two variables i.e. public key and private keys. If you have a multi-coin wallet means it is capable of creating addresses to support so many coins or tokens from different blockchain networks. 

 

P.S.I really appreciate your feedback if there are any corrections needed in my answers 🙏

Edited September 25, 2020 by Whited35
Minor error in texts.

[Pathakayush 213]

Thank you for sharing this information even though I have completed more than 200 posts but still I haven't known about this and that too in very deep. I can see that you have a very deep knowledge on this.

[rincewind__ 24]

@Whited35

First of all thank you very much for sharing those questions. 

 

I would like to add something to point 1: 

"Not your keys, not your coins"

Many of us leave purchased coins on exchanges because it is quite convenient and you don't have to take care of your coins yourself. But it must be clear to everyone that in case of a hack of the exchange or an exit-scam you have no access to the coins and they are gone. 

The solution is in my opinion very simple: A hardware wallet like Ledger Nano or Trezor which allows you to keep your private key safe -> "Your Key, your Coins" 😉

[Dorjoy12 8962]

35 minutes ago, Whited35 said:

We can stake our coins in some exchanges/wallets and earn a profit, how do they get that interest to give us?
It is quite relatable, how your bank gives you interests for saving the amounts😜? They also invest funds collected from their customers into productive fields like agriculture, hydro-power, etc, right? Exactly the same, if exchanges or wallets are giving you returns for staking the amounts means they are also using your funds to invest in something stable or productive sectors to gain profits and some portion will be given you as a return. 

@Whited35  can you please mentioned Some exchange or wallet where we can get interest without investment our currency.. Because if you give the legit site        name with full explanations then it will be more helpful for us but please dont mind.. And another point you have mentioned is     right in my own idea.. Thanks for share this nice information and also thanks to @Calvinpriva as he asked this kind of question to you so that we can have this information now..          

[ayyanmalik 0]

Tha bank offers us an interest in the form of a bond which is useful for both

Edited September 25, 2020 by ayyanmalik

[peter55 459]

Thank you for this good information.  This is very important for the safety and security of the wallet.  You should not give any information about your wallet to anyone.  And also investing in reputable and trusted platforms.  There are hundreds or even thousands of fraudulent websites that steal your money.  Likewise, the address of your wallet for any currency is a specific pattern of numbers and letters, which is impossible to repeat at any time.  This distinguishes cryptocurrencies and makes dealing with them easy and safe at the same time.  Only from wary of scammers.  Often there is no person or site that will give you huge profits in a short period.  Be responsible for the security of your wallet and funds.

[George10 9932]

 Indeed the questions are technical they sound simple but giving tuff time when trying to make a response and I didn't even think about such until now when I have come across your post and now I have some knowledge there and the clarifications are quite understandable and well narrated thanks. 

[rekter 8129]

1 hour ago, Whited35 said:

2. We can stake our coins in some exchanges/wallets and earn a profit, how do they get that interest to give us?
It is quite relatable, how your bank gives you interests for saving the amounts😜? They also invest funds collected from their customers into productive fields like agriculture, hydro-power, etc, right? Exactly the same, if exchanges or wallets are giving you returns for staking the amounts means they are also using your funds to invest in something stable or productive sectors to gain profits and some portion will be given you as a return. 

 

Hmm, banks might be a misleading in wallet staking, because the rewards come directly from being part of consensus, and in banks from elsewhere.

 

I would compare wallet staking to normal (POW) mining. Except in staking you are taking part of the proof of stake (POS) consensus instead of proof of work (POW) consensus. In both ways you are getting incentives to secure the blockchain by being a part of consensus.

 

On the exchanges other hand, things seem technically more easy for the user and bank might be better way to explain it. Because while some exchanges are offering to stake the coins for you and handle all the technical stuff, some in these staking systems require a long lock period in the wallet where you can't transfer the staked coins for a long time. Yet in exchanges you can withdraw coins from exchanges any time you want and i am not sure how they are doing this. 

 

Maybe they just stake a fraction of the coins and pay the rest from their own pockets.

 

But In short, you are getting rewards for securing the blockchain. (AKA -> being part of the consensus)

Edited September 25, 2020 by rekter

[Sanjana321 6]

Thank you brother for a great information contributed, It would help many new members to understand. I was not familiar with many of the things you told but now I am able to overcome many barriers.

[Calvinpriva 17296]

1 hour ago, Whited35 said:

Last time, I got encountered from my friend @Calvinpriva with some  questions😜.You can see questions are looking simple but actually not, they are technical cryptocurrency and blockchain technology related questions.He asked me questions not due to reason he does not know about them but main intention was to help newcomers on this forum. I tackled his questions in PM and thought like it will be also helpful for this community. Let's see how did I face him. 

@Whited35 You gave me the right answers and you did well to share in the community so that many members can learn as well. Many topics of this kind will help a lot of members because i always see almost the same topics in the beginners section until some new members don't know if this is a crypto forum. Keep sharing brother! 

[Whited35 15285]

45 minutes ago, rekter said:

I would compare wallet staking to normal (POW) mining. Except in staking you are taking part of the proof of stake (POS) consensus instead of proof of work (POW) consensus. In both ways you are getting incentives to secure the blockchain by being a part of consensus.

No,I think you meant to say PoS here. PoW mining needs computational resources to solve complex math puzzles it means new block needs to be mined but in other hand for PoS, new blocks are produced and they are verified by staking. Clearly, you do not need computers to solve math problem while staking but block validators(have secured more coins) will be there for your behalf to generate rewards.

I tried to give elaboration in simplest possible way that's why it is tagged as beginners. I gave elaboration combining all of them at a most suitable point. For staking on a wallet or exchange means they are rewarding for securing the blockchain network for its smooth operation.Regarding the  bank and wallet staking, only one point that I tried to give newbie is, there should be dependable funding sources to give you reward no matter it is handled digitally in a wallet staking. Otherwise, staking itself a complex topic for newbie which includes some technical terms like Delegated Proof of Stake (DPoS),staking pool,cold staking,etc. So I do not want to give a headache to newbies by digging more technical aspects. @rekterThanks for your feedback 😊.

1 hour ago, Calvinpriva said:

you did well to share in the community so that many members can learn as well.

@Calvinpriva Expecting more discussions (like this) to exchange ideas with you my brother. File up more questions, I am also collecting some technical questions to ask you 😂

[Calvinpriva 17296]

3 minutes ago, Whited35 said:

@Calvinpriva Expecting more discussions (like this) to exchange ideas with you my brother. File up more questions, I am also collecting some technical questions to ask you 😂

@Whited35 I really appreciate! And of course, there will be more discussions like this because i still have many technical questions.

 

6 minutes ago, Whited35 said:

I am also collecting some technical questions to ask you 😂

My brother, i truly believe you did not mean what you said! Thank you 😂, 😏

[P A Ashif 2409]

I like all the three questions you mentioned and you answered it very well. 

Well I was not aware about the custodial wallet. I thought that only we have the private key of our wallet. But this custodial wallets exists is a shocking fact.

Definitely Exchanges are using our investment to invest on other productive buisness. Also they are getting server fee, withdrawal fee.

Ever thought why the wallet address is so long. The reason is to provide a unique address. In fact every coin has different address so one crypto users will have thousands of wallet addresses. 

[Ridam 7455]

Well every beginers should know that the assest they hold is just the value written in the blockchain database and it's verified by all the miners of the community. 

I was also confused about these questions as they are uncommon in traditional means of payment and Crypto currencies aren't backed up by any assest. 

 

[Zeshan Khalid 2577]

I appreciate your knowledge specially before starting to earn through this platform this knowledge is extremely important and helpful for the beginners

[Ridam 7455]

4 hours ago, Dorjoy12 said:

@Whited35  can you please mentioned Some exchange or wallet where we can get interest without investment our currency.Thanks for share this nice information and also thanks to @Calvinprivaas he asked this kind of question to you so that we can have this information now..          

@Dorjoy12 As far I know there is no such projects that gives you interest without investment of your currency. You need to invest to get Returns in any currency. That's why the term staking has been derived. But there are some projects like Pi-Network(mainnet isn't launched) which gives your fixed rewards for being the part of community according to your participation (mining+referal) . You can check @Whited35 topics for more information about it.

Edited September 25, 2020 by Ridam
Information added

[el-Muhammady 718]

This is an example of a senior member in the forum because without being a good member he wouldn't have thought of sharing this wonderful information with us in this forum, I have been in cryptoworld for some time now but never knew how exchangers get the profit they give investors untill now and i am happy to know this @Whited35 you have done well keep it up my friend.

[Nicole018 4548]

This is such an amazing piece of information. These are things that even existing members wouldn't have known. I can see that using crypto wallets we can generate coin addresses. Moreover the users can also save and invest coins in these crypto wallets. Thank you so much for this informative post.

[SuperCrypto 7193]

 

5 hours ago, Whited35 said:

Last time, I got encountered from my friend @Calvinpriva with some  questions😜.You can see questions are looking simple but actually not, they are technical cryptocurrency and blockchain technology related questions.He asked me questions not due to reason he does not know about them but main intention was to help newcomers on this forum. I tackled his questions in PM and thought like it will be also helpful for this community. Let's see how did I face him. 

 

 

An excellent educational article and I hope that you will continue to ask such useful questions and publish them in an easy-to-read manner. I add to these questions a question:
How does blockchain technology ensure the security of your wallet and protect it from hackers?

[rekter 8129]

3 hours ago, Whited35 said:

No,I think you meant to say PoS here. 

I thought that's what i said, i compared Wallet staking (POS) To normal mining (POW), both are just different means to archive decentralized consensus. But i totally forget the target audience and the meaning of this topic. I suck at explaining things and you are doing a better job. Carry on.

[Honny143 13612]

This topic really useful @Whited35 and I need your help mate, can you provide any genuine staking platform, because iam also interested to invest my funds in staking and I want earn passive income,

but I don't know any legit platform, if you share any platform that you previously trusted and invested then its really useful for me.

[Whited35 15285]

2 hours ago, SuperCrypto said:

How does blockchain technology ensure the security of your wallet and protect it from hackers?

@SuperCrypto Thanks for your questions.Highly, encrypted cryptographic codes are the key to ensure security. You get surprised, so many functions are used to generate the complex codes which can not be broken by normal computers. If highly powerful quantum computer come in this existence, I am not sure it may break the cryptographic codes otherwise no way 😊

[duncun007 3577]

thats a very informative post, can I have your permission @Whited35 to copy this and send it to few friends of mine? I have few newbie friends that are interested in crypto and this post is put together very well.

[Whited35 15285]

3 hours ago, Honny143 said:

I need your help mate, can you provide any genuine staking platform, because iam also interested to invest my funds in staking and I want earn passive income

@Honny143 Thanks for your question. Do you have idea about lending protocol, yield farming or liquidity mining ? 

If not, let me allow sometime, I am about to create a detailed topic about that. Until then, you might love to check, staking option on Atomic wallet, Binance Staking, Coindeal staking, etc

1 hour ago, duncun007 said:

can I have your permission @Whited35 to copy this and send it to few friends of mine?

@duncun007Glad to hear, you are going to help newbies😍 ! I kindly ask you to send this post link instead of copying this entire texts. Since forum has to pay me amounts for this post, I do not have full rights to give you authorization to copy it. Use source link, it will safe both of us. 

[Telvin George 331]

This is great information, many members may not know about these things. I understand now about the wallets for generation of coins. This really helped me, thank you my friend.