Blockchain Starter Guide: From Bitcoin to NFTs
Blockchain. What started as a tech buzzword is now everywhere in the media. It has created new business models, reinvented the Internet, and is on its way to replacing banks.
There have been many achievements, and Bitcoin is the most successful project. Still, barely 100 million people are using cryptocurrencies in 2022. So while it’s been over a decade, most of the population is unfamiliar with blockchains.
Maybe that’s you, and that’s ok. Blockchain often isn’t beginner-friendly. It may seem exclusive for developers, traders, or collectors.
But it’s not all about investing. Blockchain can become as seamless as the Internet. So whether you know how it works or not, anyone can use it.
Here’s why blockchain is relevant for everyday people (and why companies invest so much in it).
Blockchain 101: What It Is, What It Does
In formal terms, a blockchain is a digital database secured by distributed ledger technology (DLT).
Broken down word by word:
- The block is a data container that allows multiple formats. Thus, a transaction block may include the date, amount, name, and address. The combination of all these creates a unique ID number for each block (known as hash).
Blocks also need the hash from the previous before adding to the chain.
- The chain is the chronological sequence of blocks. To add a new block, users need to confirm that the new block includes the exact hash from the previous one. As new blocks chain after yours (known as confirmations), the transaction becomes irreversible.
- The ledger is the database that records these transactions.
- A distributed ledger (LTD) means that all involved users have a copy of this database in real-time. You don’t rely on a single device to verify these entries, but thousands.
How Blockchain Works
While blockchains divide into many types, public blockchains are the default. That’s what most cryptocurrencies are. Here are some common properties:
- Autonomous. Blockchains have hard-coded rules (AKA consensus models) to verify their blocks. In Bitcoin, the blockchain validator is often whoever uses the most computing power. In chains like Ethereum, it might be whoever holds the most coins (AKA staking), or whoever other members vote.
- Decentralized. There’s no central authority in charge of the database or the rules. Even blockchain code updates rely on collective decisions. The more the members, the more decentralized.
- Trustless. There’s no link between your identity and the transaction details. However, blockchains hold records available for the public. Because of this transparency, users can trade without intermediaries needed.
- Secure. You can only add a new block if the majority of nodes confirm it. Once the block is public, it becomes more secure as the chain goes on. After enough blocks are built after yours, the transaction is permanent.
When you change these properties, you get blockchain variations such as:
The Real Deal Behind Blockchain
Blockchain has contributed to efficiency and innovation in business. Companies that implement blockchain will simply outperform those that don’t. And it’s only getting started.
Blockchain businesses can save money on transaction and escrow fees. So they can either improve their profits or lower prices for their customers. Most decentralized applications (Dapps) charge a few cents at most.
Because blockchains rely on distributed nodes, thousands of users can share their control. Rather than trusting the goodwill of some board of directors. Decentralized organizations (DAOs) gain users rapidly because of this opportunity.
To show how relevant blockchains have become, let’s look at their broadest applications.
Top 5 Blockchain Use Cases
Ironically, almost all cryptocurrencies have centralized markets. Bitcoin still has ridiculous price influence, whether your coin is the real deal or just hype. As if blockchain was all about Bitcoin’s technology.
Over time, blockchain projects will be freer from this influence. Here are five places where to look:
Dapps: Decentralized Applications
Decentralized applications are autonomous programs that offer user features. The utility code can be the same as in traditional apps. The code that interacts with the blockchain is called smart contract.
What do Dapps do? As much as any other app, plus expanded transactional features. Platforms that make it easy to pay and get paid.
Dapps can be foundational (used to build bigger dapps) or niche-focused (from investing to gaming). Most use the Ethereum blockchain because it was the first one with smart contracts. Now with more efficient options, you can find Dapps on Solana, Avalanche, Binance Smart Chain, and a dozen others.
Decentralized exchanges, play-to-earn games, and marketplaces like Cloudname are Dapp examples.
Decentralized Finance: Trustless Financial Services
Blockchains introduce new ways to put your (crypto) money to work, which we call DeFi. Based on your goals and risk preference, you’ll find countless instruments:
- Staking: Lock a coin amount you own to earn Annual Percentage Yield (APY)
- Liquidity Mining: Provide funds to collect platforms fees and influence its policies
- Yield farming: Earn three-digit APYs by leveraging crypto lending
- Arbitrage trading: Profit from price differences between pool prices and live markets.
- Fractionalized trading: You can profit from assets that you’d otherwise need to buy. On Cloudname for example, you could buy a $1000 fraction of a $1M domain. If the domain appreciates or sells for $2M, you get $2,000.
DeFi apps have little to no fees. Most of which go either to reward liquidity providers or improve the platform. There are also aggregators which automatically find you the lowest quotes.
Unlike Bitcoin, DeFi wasn’t a thing until 2020. How fast is it growing? It’s already a $130B+ market, which is 17% of Bitcoin’s.
Decentralized Autonomous Organizations: Empower Consumers
DAOs empower those who invest the most. While that often means money, it could also mean the number of transactions, years holding X token, or participation. DAOs are collectively-managed companies where the most-valued members get the most decision-power.
Let’s say you want a group to help you trade domains on Cloudname. You build a $1M fund with other people and contribute 10% to it. How do you agree on what domain to trade?
If you’re the best contributor, your decision has more weight. DAOs do this automatically. And to avoid manipulation, they may involve multiple decision-makers and voting randomness.
NFTs: Wealth Preservation
Also known as “digital gold,” many are jumping into Bitcoin to protect their money. Still, Bitcoin is volatile, outperformed by many, and doesn’t hedge well against traditional markets. And while it might grow past the $1M Bitcoin eventually, every setback delays this crypto dream.
Could NFTs be different?
Non-fungible Tokens are unique coins that represent a digital collectible backed by blockchains. For example, the famous Bored Apes are collections of ERC-721 tokens. It’s essentially a unique Ethereum token in your wallet, which identifies you as the owner.
NFTs can only trade for cryptocurrencies, which makes them even more volatile. And while many collections are cash-grabs, it’s not uncommon to sell NFTs for 10X-100X. Or better: lifetime passive income.
For example, you can trade domain NFTs on Cloudname. Once you own one, you can offer it to a website owner for a yearly subscription.
Payments: Fast and Worldwide Available
While domains are one blockchain application, they’re not limited to websites. They make it easier to get paid by replacing unreadable addresses. The ones that look like ‘0BvBMSEYstWetqTFn5Au4m4GFg7xJaNVN2.’
Imagine you buy yourname.crypto on Cloudname, and it supports the Ethereum Name System. You link your Ethereum wallet to your domain, so you no longer need to share that long text string. For clients, it looks like this:
- Open the Ethereum wallet
- From your balance, click on Send
- Instead of pasting an address, type yourname.crypto
- Enter the amount and confirm transaction[IMG]
The payment sent to yourname.crypto arrives at the same long address attached.
What Are Blockchain Domains Exactly?
Whatever the project is, all blockchain websites start with a domain. To build decentralized applications, you can use both traditional and blockchain domains. So how are they different?
Let’s start from the basics. A domain is an address naming service that simplifies browsing. There are infrastructure platforms that register these domains (Namecheap, GoDaddy). Traditionally, you would buy your new domain and pay renovation fees every year.
Blockchain domains are NFTs. You pay one time, and once it’s in your crypto wallet, it’s only yours. Nobody can deactivate it if you miss payments (because there aren’t).
Your domain will register on the blockchain (probably Ethereum’s), which is a public registry. So when someone searches yourname.crypto, this happens:
- Your browser runs the IPFS protocol (which allows reading .crypto domains)
- The domain’s smart contracts will point to the blockchain block linked to your website.
- Once it’s found, your device loads the website as normal.
So what are the advantages of using blockchain domains instead?
Get Paid In Fewer Steps
The easier it is to get paid, the more likely it is to. So how easy is it to pay in crypto? Knowing that billions of people don’t know how, probably not easy enough.
Without ENS blockchain domains:
- Go to the website
- Find the 35-character address and copy it
- From your wallet, click on Send and paste it
- Confirm transaction
Most sites will open your browser wallet instead (e.g., Metamask). What if you don’t have one? Here’s a simpler way:
- Click on Send, and type yourname.crypto
- Confirm transaction
Works from any wallet as long as it’s the same blockchain.
Get Full Control of Your Website
The moment you buy your domain NFT, you have full control until you sell it. You pay nothing else, and it can keep appreciating over time. How is it possible?
The name registers on the blockchain, which is public, immutable, and distributed. There’s no central server to verify that the domain is yours. Every node on the blockchain can, which is why you pay once.
Your domain will work for as long as the blockchain does. It doesn’t matter where you bought it from. If whatever domain registrar were to shut down overnight, you’d still keep your domain.
Not only control is safe. It can be an asset itself.
Get Passive Income From Your Domain
You can monetize ‘control’ by selling your domain to others. Just like your traditional domain registrar. Which really means renting for a year.
If you’re investing in domains rather than building websites, renting is smart. You can generate annual passive income while waiting for potential sales. You are lowering your risk in case your domain doesn’t sell.
But if it’s a good one, it might go above $1,000 per year. Maybe you own a four or five-letter crypto domain. Once they’re all taken, yours becomes more valuable.
Also, blockchain domains sell for cryptocurrencies, which tend to appreciate long-term. NFTs also gain value based on who or how many owners came first. If some big brands have owned it before, that’s visible on the blockchain and affects your sale price.
Crypto domains are easy to trade from the Cloudname marketplace. You’ll find 100s of domains available, all with live status and prices for sale, rent, fractionalization. Whether you want to buy domains under $100 or invest $100 in $1M domains, Cloudname allows you to do it.
How To Get Started On Blockchain?
Many believe when Bitcoin gains mass adoption, blockchain will change the world. But crypto payments are far from its only application. Blockchain has a lot to offer to everyone, even those who’d rather stay away from this movement.
If you want to invest in blockchain, opportunities are endless. Anything works as you learn the sector, whether it’s DeFi or metaverse. It comes down to competitive research.
If you want to trade blockchain projects, Cloudname domains are an easy way to start. Blockchain economies are still volatile no matter the asset. With good risk management strategies, arbitrage becomes very profitable.
If you want to develop, easy. Most primitive apps are already built, and you just need to put them together for your niche idea. You can go with the large ETH market or cost-effective blockchains like Solana.
And if you’re getting started and found this helpful, we invite you to check other guides in our blog.
Cloudname is the innovative platform for online domain trading. Discover the world of cloudname and everything you didn’t know about domain trading.
Most valuable Domain extensions: is .eth the next .com? What are Web domain extensions? In the beginning, domains were created as an alternative to the