Crypto currencies are the talk of the century. Value and any other transactions can occur and be validated on a network.
Bitcoin - Crypto Currencies & Blockchain Facts and Thoughts
As a controversial topic, I thought I would give my two cents or should I say: My two Satoshis on the topic. My background is in Computer Science, Distributed Systems, Mathematics such as Discrete Mathematics, yes, Cryptography as well as Information Systems like Middleware and databases. I have read the white paper on Bitcoin and also the book “Mastering Bitcoin” by Andreas M. Antonopoulos, who also spent most of his life learning about cryptography, networks such as Distributed Systems, Mathematics and yes, Crypto Currencies. I can say that I am an A student in Information Systems Security and Discrete Mathematics and all of the above and have come from a script kiddy background to what I believe is a white hat hacker now. I actually like to think of me as a gray hat hacker, because, common, who is only good all the time ;-). I do not claim to understand all the details of even Bitcoin or other Crypto Currencies. It is a full-time job. However, I believe that I have a firm grasp on logic, mathematics, cryptography and what blockchain technology is and how it works. I am not a financial expert, but also believe I have a grasp on the topic.
Everyone, in a nutshell, knows what Bitcoin is. It is the first Crypto Currency. It is best understood and most popular. It has almost 50% of the Crypto market share. It is an open source project supported by almost 500 contributors. Note that the Linux Kernel is the biggest, most supported software (not only Open Source!) project that has ever existed. It has about 14,000 contributors. So, Bitcoin has developer support of about 3.6% of the biggest software project mankind has and probably will see. That is huge!
It has parameters that are melded into the protocol and cannot be changed, because they are melded into the first block. Like the 21 million limit on coins. Its parameters are based on game theory by the famous mathematician John Nash, who won the nobel prize for his efforts. The mathematics and cryptography its security is based on is what underlies all modern cryptography used by all banks, national security agencies and everything that we believe in is secure. The hashing algorithms used are the most secure that mankind has come up with so far plus the blockchain, the data structure that revolutionises everything that involves transactions of any sort make the foundation, that hundreds if not thousands of security experts confirmed to be secure. Furthermore, Bitcoin itself has not been hacked for almost 9 years now. If there was an attack vector, it probably would have been found already. Of course there is the 51% attack, but that is well known and possible in any consensus protocol.
However, there is, currently more than ever, a weakness of Bitcoin. The amount of transactions per seconds is far lower than that of databases or is acceptable for real world use by everyone. Databases are simple compared to blockchain technology, which is also, why databases are and always will be hackable or at least compromisable by their creators or controllers.
Other crypto systems promise to solve the scalability problems. However, it seems to have almost gone unnoticed, that Bitcoin has a solution for this as well called the Lightning Network and Segwit. Now these are not just buzzwords, they are valid technologies and promise to solve the scalability problems. Lightning has recently been tested and confirmed working on the blockchain. A Crypto Currency will never scale as easily as a database, but that is not the point of crypto.
A database can never be secured from its system admins and developers maintaining it. Credit card details, bank accounts, all this type of information is stored by multiple parties. Every single online store you used has the ability to store and retrieve the information you entered. And if you haven’t noticed, your credit card details don’t change, at least for a few years. Bitcoins on the other hand change with every transaction that is ever made. In fact, the Bitcoins you own are not even in your wallet. Your wallet just contains private keys to sign the transactions you make and your received funds can only be spent with your private keys.
Comments on the recent exit of one of the founders of Bitcoin.com:
Bitcoin.com is NOT Bitcoin! It is a company invested in Bitcoin.
A founder of a company, legitimately, also the founder of Bitcoin.com is after returning a profit of whatever it is that is most valuable to them. It is still hard to spend Bitcoin on anything one might want. Bitcoin is nowhere near everywhere accepted. And there is currently this transactions per second limit which combined with demand, drives the transaction costs up. As a founder of Bitcoin.com (not Bitcoin!), he understands that something needs to happen. And since he does not seem to know an algorithm to fix Bitcoin Core, he bailed out. This could have had the following reasons:
- He wants the best for Bitcoin, so wants to stop more people getting into Bitcoin so quickly potentially driving Bitcoin exchange to a halt and stopping the whole thing while it’s being repaired.
- He understands his power and thought: “I can dump my Bitcoin, the price will fall rapidly when the news gets out and then I can get some cash, get rich and buy back the same amount of Bitcoin, Bitcoin Cash or whatever crypto currency I fancy at the moment and basically double my money”.
- He is very uncertain about Bitcoin’s future, because many are and saw an opportunity to get out rich.
After all, he is a young human being, I believe only 22 years old if I read correctly and driven by many things.
Hashgraph and other emerging technologies
Bitcoin or other blockchain technologies are still in their infancy and are already being challenged by other technologies. Hashgraph is the most recent one I have heard of. While Hashgraph is intriguing and I believe works from what I understand, Hashgraph has a proprietary license which really only makes it viable for B2B (Business to Business) such as banks. Something else I found as a weakness was that the main website, hashgraph.com had a mixed content warning, at least on my machine when I read it. A company that develops a security algorithm that has not proper SSL (HTTPS) support on their website and promotes its algorithm as a proprietary SECURITY! technology seems a bit dodgy to me.
However, this may change in the future or other people, knowing the Hashgraph algorithm now, can come up with something new and make that completely free and Open Source. Heck, the ideas of Hashgraph could contribute to Bitcoin and other Crypto Currencies to fix the problems they have such as scalability. I am 99% sure that there will be a solution to the scaling problem of Bitcoin and that Bitcoin can be fixed in one form or another. Maybe a fork will happen again. But remember, the Bitcoin one buys now will be available on the fork to you, which essentially doubles your money, however much value it then has. Note that for this to be the case you absolutely need to control your own private keys! Bitcoin Cash is a fork of Bitcoin Core and the people who had Bitcoin before the fork earned the same amount of Bitcoin Cash that they had in Bitcoin Core. I know, this is confusing. So many currencies, all springing out of nowhere with no real value attached to them other than people believing in them and mathematicians telling us that they are proven to validate reliably? Sounds like a scam, but I am certain it is not. Just out of interest, I have invested some time in Bitcoin, reading the white paper back in 2010. I then had doubts that this may work, at the time mainly because of the dependency on a secure hash function and MD5 and other hash functions have been found to be insecure. However, Bitcoin and other cryptos use multiple hashes that are believed to be secure now and are used in SSL and TLS certificates. If the hash functions are the security problem, we have far bigger problems than Bitcoin going bust. When I read the white paper the first time, as I said, I did not believe this would work. Bitcoin had only been around for a year then and I didn’t dare to invest in something that I cannot be certain works. I still cannot be 100% there won’t be a fundamental flaw stopping the whole system. However, time has proven that it does indeed work. Millions of people believe in the blcokchain technology underlying Bitcoin not only because of pure faith, but because it has proven itself over time and in mathematical algorithms. It has had an extensive test of time and the problems with it are engineering problems that imho will be solved.
When I first heard about Bitcoin and blockchain I thought: “OMG, think of all this electricity that is wasted!”. I am an environmentalist and work for an environmental organisation to do my part in saving the planet from climate change and trying to at least postpone the certain doom of our species, at least on this planet.
This is one of the major arguments of an article I read just recently. The person who wrote the article clearly does not understand the potential that blockchain has unleashed like I did when I first heard about it. Think of all the effort of mankind that goes into validating truths and transactions! Not only human time, but precious resources such as paper, water and electricity are consumed in the process. I don’t need to come to you with numbers, because, as we all know, people pull statistics from everywhere to make a point. I believe in the logic that we can attain by pure reasoning is much more valid than even mathematics that are proven that we do not understand.
The point is that by pure reasoning we can understand that much more energy and time will go into validating contracts and money transactions than any blockchain can use in the same time it validates those transactions. I bought a house recently and the amount of paper work and human time involved was outrages. Imagine all this could happen with smart contracts and value transactions that self-execute and take care of all this boring stuff while being more reliable, more secure and letting people get on with life. Sure there still have to be a seller and buyer and they have to agree on something, but the whole process could be so much easier.
Conclusions & thoughts
None of this demotes blockchain technologies or even Bitcoin. The things that threaten blockchain and therefore all alt coins as well, is scalability. Bitcoin Cash just has a bigger block size, which just postpones the problem for example.
If the scalability problem is solved, which I strongly believe is possible, the blockchain technologies that adapt it will be the winners. Maybe the solution can be applied to all alt coins including Bitcoin. Maybe there just needs to be a hard fork. However it will play out, I strongly believe that Bitcoin Core is not flawed enough to fail or even devalue quickly like a bubble. It is based on mathematics and strong computer security. It has trust of many people and has grown into an economy of its own. It has been working for 9 years, hasn’t been hacked or crashed. A lot of work has gone into it. A lot of human effort and time as well as machine time. Hardware has been created specifically to mine blockchain coins and technologies. Smart people are invested in Bitcoin related technologies. Bitcoin, blockchain or in its most basic sense Distributed Consensus Algorithms are not going away because of some news in the media. After all, media can be made up, but mathematics is ingrained in nature and cannot be put away as bull shit.
This is why I believe in Crypto Currencies or more precisely blockchain in the long term and I believe Bitcoin Core or at least future forks are not stoppable now and will at least retain or more likely increase massively in value.
If people spent every dollar they spend on lotto on a crypto currency, their chances of winning, by my estimates, are at least 1 million times higher.
Now or in a few days when it’s at its lowest, is a good time to invest btw. Yet another media craze is happening right now, people who don’t understand Bitcoin will plunge either way of what they hear. ;-)