1 As seen in these examples, cryptocurrencies like Ethereum can provide unfettered access to the global economy when people are cut off from the outside world. Additionally, stablecoins offer a store of value when local currencies are collapsing due to superinflation. When war, economic catastrophes or crackdowns on civil liberties struck the residents of Venezuela, Cuba, Afghanistan, Nigeria, Belarus, and Ukraine, cryptocurrencies constituted the quickest and often the only option to retain financial agency.
Block "roots" are basically little pieces of information that users can use to prove things about the contents of those blocks. However, unlike sidechains, the "root" of each plasma chain block is published to Ethereum. For example, a user could use a block root to prove that they made a transaction in that specific block. Just like sidechains, plasma chains have a consensus mechanism that creates blocks.
This is similar to how a Bitcoin wallet works, with a key difference being that while a debit card is controlled by a centralized entity (a bank), no person or organization controls Bitcoin. The debit card in your wallet is not money, but it does grant you access to your money. Well, most people already have something similar to this in their physical wallets right now: a debit card. This difference means that Bitcoin wallets must function somewhat differently than bank accounts.
Newfound uses for blockchain have broadened the potential of the ledger technology to permeate other sectors like media, government and identity security. Thousands of companies are currently researching and developing products and ecosystems that run entirely on the burgeoning technology.
To date, there are more than 20,000 cryptocurrencies in the world that have a total market cap around $1 trillion, with Bitcoin holding a majority of the value. These tokens have become incredibly popular over the last few years, with the value of one Bitcoin fluctuating between several thousands of dollars.
We can view this sub-wallet as being roughly equivalent to a debit card. For our purposes, the two key pieces of information are the public bitcoin address and the private key. For instance, debit cards have information associated with them, including an account number and a password. The public address is comparable to the debit card’s account number. A private key is a 256-bit secret number. The private key, meanwhile, is kind of like a debit card’s password in that it grants access to the bitcoin associated with that public bitcoin address. Each Bitcoin "account" within a Bitcoin wallet also has information associated with it. Continuing with the debit card analogy from above, a Bitcoin
wallet holds at least one "account," or sub-wallet.
The blockchain is a digital database, composed of encrypted blocks of data which are "chained" together and secured by complex math problems The math problems involving matching nonces and hashes is almost impossible to change later — the record of previous actions on the blockchain is highly accurate and secure from manipulation. The blockchain is distributed identically across different decentralized nodes, ensuring no one organization can own or manipulate it.
If we want to create an Ethereum sidechain, we first have to create another blockchain. We’re going to create an Ethereum clone for the sake of this thought experiment. Let’s take a look at how this might look in the world of Ethereum.
As you can see, this secret number is a bit unwieldy. One of the key functions of a Bitcoin wallet is to manage the private key. Here is an example of a recovery phrase consisting of 12 words: Bitcoin wallets provide a way to write down this private key in a much more human readable format, referred to as a recovery phrase, secret passphrase, or seed phrase. In fact, private keys are almost never handled directly by users. A recovery phrase is a list of words, usually between 12 and bitcoin 24, that allow you to reconstruct your Bitcoin wallet and gain access to your funds even if your Bitcoin wallet is destroyed.
Storing all those recovery phrases on paper quickly becomes onerous. Further, if you're using a multi-coin wallet (like the Bitcoin.com Wallet), you'll have a separate recovery phrase for bitcoin every different blockchain your wallet supports. Since you shouldn't store your recovery phrase in plain text (unencrypted form) on your computer, for most people the best solution is to write it down on paper. For this reason, the Bitcoin.com Wallet integrates a "Cloud Backup" system. Here you can create a single custom password and use it to unlock all of your private keys, which are stored in encrypted form in your Google or iCloud account. While the recovery phrase is an improvement upon the private key, it still leaves a lot to be desired. This presents problems because safely storing a piece of paper can be hard.
Stablecoins are a novel type of cryptocurrency
that relies on a more stable asset as the basis for its value. Most of them are linked to the United States dollar and therefore maintain the value of that currency. Many current stablecoins are built on the Ethereum network. These allow for a very cheap and stable global payment system.