"Cryptocurrency is such a powerful concept that it can almost overturn governments" - Charles Lee
It’s 5 am and along with the rising birds, 5 men in a small warehouse call it a night. Had the water-cooling system not disrupted the operations of the mine, the ongoing block would’ve been broadcasted by the night. “It is fine though, the new Antminer S9 will speed up things soon and we wouldn’t have to worry about blocks delayed because of other systems”, says one amongst the five. “You know we’re going to be super rich right, if only it is outside the reach of the devil.” “Well then, we better begin early tomorrow” (Sichuan, China)
Let’s leave it to wonder how working in a mine and extracting some commodity would make these guys rich? For one, this isn’t a coal mine, where all a diligent employee achieves is dark, hard hands. These guys are mining what is known to the world as Bitcoins (BTC). Nowadays, anybody remotely connected to society has heard a lot about this Bitcoin thing floating around workplaces, restaurants, even homes, ever wondered why the fad?
So, what’s the fuss about?
Well, here’s the fuss - From being traded at a price of $0.39 in 2010, to its peaking point of $19,665.39 on 16/12/2017, it gave Earth an opportunity to create a living out of scraps. Imagine a $100 investment in 2009 yielding a return of $1.7Mn in less than a decade, how about a game of housie with identical tickets. Now given that a fool proof opportunity of doubling your wealth is the only reason our peers, colleagues, and every other human would fuss about. What is it that makes Bitcoin so powerful, which makes the common man rant about it every day without fail. Moreover, what could reverse this trend and send the world into yet another frenzy.
Stepping back a little
Bitcoins come under an infamous bracket of cryptocurrencies, enumerating several other coins that I might mention in the following article. These cryptocurrencies are used for a specific purpose that can be considered very robust as the world has provided enthusiasm and a means to convert these cryptocurrencies into dollar bills or Euros or any other currency to enjoy the luxuries of life. So, what is a cryptocurrency and why as socially aware readers one should give a hoot about it.
Let’s begin with some examples, when you receive money from your parents, or send money to your college or a business partner, why do you always crosscheck whether the transaction has been completed or keep a copy of the invoice? Something more basic, when you had put in a vote for Trump or Clinton, could you ever tell with full confidence if your vote was ever considered and if it played a role in the election at all? Or wait, the scrumptious black pork pie that you ate at the diner for lunch today, are you certain it was from Alentejo as the diner claims? - We do realize from that it is very important to humans that they be informed about the activities they participate in daily. From the food we eat to the clothes we wear and the real-time whereabouts of money we earn. If only the farmers owned grocery stores, and every human a bank wire machine.
These basic but essential difficulties in life brings us to the very premise of what Bitcoins and cryptocurrencies are a device of, The Blockchain technology. Rudimentary needs of integrity, transparency, durability, and user empowerment that has been left to chance, which induces helplessness in the one-off case of an emergency is now on the verge of extinction.
Do you’ll remember FAX machines? where 2 people can send and receive real time information without the need of a third party, just like sending a mail without having to log on to Gmail or sending a picture without having to open WhatsApp. Well, that’s where blockchain comes into the picture, now imagine every person in the whole world using a fax machine where each human can connect with each other and in fact multiple people can connect with each other at the same time, without the need of a Vodafone or a WhatsApp. Well, that is exactly what the blockchain does but for purposes manifold, which are valuable to the interests of individuals as well as larger institutions.
The different roles of Blockchain:
As a Database: Blockchain is like a large record of financial transactions which are publicly displayed on the network of blockchain, which are available to everyone. Any edits and changes are recorded on a real-time basis and this adds to the transparency provided by the blockchain. It can be considered as a Google document that is shared with several participants.
As a source of transparency: Blockchain also plays the role of any Companies ledger, wherein any transaction made by such a company is recorded in real time and available to view and scrutinize by the public. So, no more water buffalo in the name of Wagyu at Jacks BBQ Grill.
As an institution: Ever imagined a bank, where each person’s details are available in the public to view, however, the money in it is in an intangible bulletproof glass box which is impenetrable. This is considered one of blockchains breakthrough invention. I can deposit, withdraw, send, and receive money on a public domain without the need of a Bank or any Government intervention and the details of the transaction is available to the required parties for scrutiny. Imagine hungry ever-growing institutions omitted from these financial processes whereas all the parties within the business transaction have the power to chaperone the transactions in real-time. This seems like a new way of life, well for the most part of it.
So, let’s work towards integrating what we have read so far. We came across Bitcoins and then the term Blockchain, what do they mean to each other? So, just like car companies aim at making cars that are safer to drive while augmenting its speed and installing state of the art features, and architects look to build comfortable, safe, and good-looking structures. The 5 men mentioned at the beginning of the article, are miners or hired specialists to improve the functioning of the blockchain technology. How do they improve it, well miners are not so much solving a math problem as they are spending a lot of effort making guesses until they guess correctly.
To produce or mine a bitcoin, Miners use a special software tool to solve some typical mathematical problems. And in exchange of that, they are issued a certain number of bitcoins. The main idea is to create a new block which gets added to the existing blockchain. Each block contains a list of all the recent transactions happened within the bitcoin network. And the blockchain is a ledger of every block created since the very beginning of the network. But mining is not as simple as it sounds. Adding a new block to the blockchain is never easy. A bitcoin miner needs to show the proof of work to create a new block. Now the question arises, what is this proof of work? A proof of work or POW is a hash below a target value that can be obtained by performing a certain amount of force work. A hash is a simple way to represent a large amount of data in a concise manner. The bitcoin uses a hashing algorithm to produce a number in hexadecimal format. The algorithm used by bitcoin is SHA-256 which produces a 256-bit long number in hexadecimal format. Finally, if this number is below a threshold value, then other miners and the system accepts the new block and it is added to the chain of blocks which is on its path of becoming the most immutable currency that is bitcoin to the most fool proof tech that is Blockchain.
In Summary, Miners are those individuals or bodies responsible for verifying the legitimacy of the various transactions processed using bitcoins on the blockchain network, which are recorded and verified through the consensus of every such miner/individual with the goal of adding this set of records (block) to the chain thereby, creating a fool proof, secure, impenetrable network of data for conducting day to day electronic communication/transaction.
I would like to start this section by quoting the famous George Bernard Shaw – “We are made wise not by the recollection of our past but by the responsibility of our future.” We are not new to words like crashes, recessions, bubbles, and we shouldn’t be surprised to be hearing such words associate itself with Bitcoins. Might I add that I bitcoin has already seen its worst crash so far, just this week and it doesn’t surprise any person remotely educated in the field of finance, business, investments, or human behaviour. My keenness on sharing this enthusiasm with you is not about this crash or the hundred crashed to follow, but to make you all realize the power of having a true peer-to-peer decentralized system. Yes, the blockchain invariably is the front runner to this and this isn’t nearly the beginning of what’s in store for our ill at ease earth. However, there are certain implications of creating such a system and nothing in the world really can be free from evil when its used for a purpose detrimental to the well-being of society.
Now that we understand the working of the blockchain and how bitcoins are a medium used to validate and strengthen the system and is simultaneously also the currency to enjoy the benefits of the blockchain, one should also be aware of the possible risks associated with its growth, integration, acceptance, and viability.
As we have figured it is far from easy to destroy cryptocurrencies as there is no central server, but many servers all connected via the nodes usually operated by miners. So where is the threat right? One might suggest tracking miners and abolishing them, which I can confidently claim will be in vain as miners are not responsible for helping bitcoins survive but in amplifying the security of the blockchain therefore, as miners get tracked and suspended new miners will arise and it will be an ever-growing chain. However, there are certain ways, theoretically that can destroy Cryptocurrencies.
A restrictive movement on a global scale: Governments all over the world restrict the contact points with regular money and make it very, very hard to exchange Bitcoins. Which would make it useless for transactions outside the network.
Malicious Hacking: You break the cryptography behind the Proof of Work algorithm. It’s a mathematically sound approach, as it’s mathematically possible but just very, very, very hard. In simple terms: You can fake the complete chain if you manage to re-create a new chain which is longer than the real chain, which is completely sound to all the mathematical constraints for blocks and transactions, in the time it takes the other miners to create the next valid block
Bloating the Ledger: There is fear of people adding junk and spam onto the public ledgers thereby slowing the efficiency of the blockchain. As there are no restrictions in terms of what data u add onto the chain, there is freedom of irrelevant junk which should be avoided. There are still strategies being devised to keep these spammers at bay, however, nothing concrete has been thought of yet. Moreover, with high traffic of transactions and an overflow of data, The speed of processing such data has reduced considerably. Making the technology slow, while increasing the transaction price. These effects make the Blockchain an outdated form of achieving an efficient P2P platform. “I believe that it's a big waste of resources to bloat a public ledger with information that's irrelevant to that specific ledgers purpose. If the ledger's purpose is to facilitate high-speed, transparent transactions online, then that should remain the sole purpose of that particular ledger.” -Jackson Palmer (Founder of Dogecoin)
Recently the bitcoin world saw a movement which induced fear to many, this was guided by both fraudulent activities and changes in the opinions of regulators but was controlled before the opinions of many could enter. Amongst several reasons, this has to do with certain Bitcoin pools - companies who pool power to amplify hashing processes, this in turn churns them more currency per unit time thereby giving them majority control. For example, This Bitcoin pool called Ghash owned 51% of all the worlds BTC for a brief period. Economically this might not make them the richest people in the world but the fear of a single body having the majority control could be a scary thought.
Today, the world has seen development in various technologies that have given the Blockchain a run for its money. For example, the Tangle technology, which along with the same intention of creating a decentralized ledger system as a means of transaction, also ensures no transaction costs, no room for forks and is based on the structure of a Directed Acyclic Graph (DAG). It has a higher transaction per second than the blockchain system, and its Proof of Work is based on algorithmic systems more compatible for simpler domestic devices, thereby making it a leading player in the development of Device-to-device communication in the world of Internet of Things (IoT).
Honestly, I don’t know what’s in store for the world. It is a place where technological enforcement leads to ground-breaking discoveries, and along with the good it induces a fear of ill-usage that further makes man create regulators to maintain order, who then become hungry for control, and lastly, humans fall back on technology to stop mankind from vices like Greed. Innovation intensity has been the frontrunner of man’s purpose in achievement for decades now, but with it I can conclude that technological singularity will cease to be a myth soon.