Episode 16 - Protocols, yield farming, staking and mining in cryptocurrency.
I need to start off by saying this is not financial advice so if you are looking for that this show isn’t for you. The content of this podcast episode is for informational purposes only. The opinions expressed here are not meant to be taken as financial, investment, or any other advice.
These may sound like some big terms but there’s no need to worry. We will simplify these and make them easier to digest. It’s important to understand cryptocurrency may be decentralized but it still has rules you have to follow especially when it comes to the blockchain. Let’s understand that Bitcoin's blockchain is different from Ethereum's blockchain. And to clarify quickly each coin can have its own blockchain but tokens do not. Blockchain’s rules are called protocols. Protocols allow digital money to be securely exchanged on the internet. They are the basic sets of rules that allow data to be shared between computers or nodes and that data can be either peer to peer payments, or file exchanges between to nodes, or even digital art work. The specific blockchain running will set the rules.
Why am I mentioning protocols? Because these rules help you understand what exactly you can and can’t do with cryptocurrency and specific coins and tokens. Especially when it comes to staking, mining, and yield farming. People often think decentralization means there’s no rules, but that just strictly means there is no central authority like we have learned in previous episodes. For a quick example, one of Bitcoin’s protocols is the double-spend problem, meaning Bitcoin can’t be spent simultaneously more than once. Think of it like if you bought a concert ticket from a stranger only to discover that it’s already been scanned by someone else. Bitcoins blockchain protocol prevents this from happening. So what does this have to do with mining or staking?
So et’s get into it.