Cryptocurrencies: a look at the inspiration, the origin, and the future
To build a stronger foundation to my knowledge of blockchain technology and cryptocurrencies, I took a look at the Bitcoin whitepaper depicting the first ever cryptocurrency (Nick Szabo deserves a mention here in his work on BitCash, which was before Bitcoin) and A Cypherpunk’s Manifesto, reading from the proponents of crpytography.
To better understand what seems to be a looming threat to blockchain technology and cryptography, I read about quantum computing’s potential effects. Breathing a sigh of relief, I discovered that there need not be too much concern over this matter.
Bitcoin Whitepaper: The start of a revolution
Cryptocurrencies have been around for a while already. The first ones came about in the early stages of the internet, the 1990’s, but major advancements did not come until the breakthrough invention of Bitcoin.
Solving a key problem
Invented by an individual or a group of people known as “Satoshi Nakamoto”, Bitcoin solved the problem of double-spend, when a coin is spent more than once. This invention of 2008 did so through cryptography, namely proof-of-work.
As Bitcoin ran on a public blockchain, where every user can see all transactions made on the network, privacy was necessary. Otherwise, anyone could steal the coins, digital lines of text, when they were transmitted. Cryptography came about as the solution, using a system of public and private keys to allow for verification in transactions.
Consensus
With a more secure system, work still had to be done to generate new coins. Proof-of-work came about as a form of consensus, verifying transactions to then record them onto the blockchain as a new block. Essentially, proof-of-work comprises of one-CPU-one-vote, using computer power to decide the direction of the network. At the same time, generation of new blocks is kept at a rate that is almost fixed due to the adjustment in the difficulty to generate new blocks based on the collective computing power.
Storage
As a distributed ledger, the whole blockchain is stored on every computer within the Bitcoin network. Each newly-generated block then gets downloaded, resulting in an ever-increasing file size. The Bitcoin whitepaper puts an emphasis on Moore’s Law, hoping that technology will continue to advance at an exponential rate in terms of CPU power and storage; unfortunately, this may be a concern as these advancements have come about at a slower rate…
A Cypherpunk’s Manifesto: On Privacy
Written by Eric Hughes in 1993, this piece echoes the need for privacy and the use of cryptography.
Privacy in an open society is said to require anonymous transaction systems, and the writing cites cash as the main example. Hence the appeal of digital currencies. “Privacy is the power to selectively reveal oneself to the world.”
As many cryptocurrencies run on public networks, which anyone can access, there becomes a need for cryptography. Such a tool allows for only the intended recipient to read the contents of a transmission. See the “cypher” in the name, it means “code”.
Although the issue of privacy has gotten more attention recently, most people do not realize the extent to which they are providing data to others. Companies such as Facebook, Google, and Snapchat offer their services for free in return for user data. “For privacy to be widespread it must be part of a social contract.”
Quantum Computing: It’s Coming
With a fancy name, quantum computers are computers that use the concepts of quantum physics, as seen in the picture above. As they possess far greater computing power than traditional CPUs, there is a concern that they may be able to break cryptography.
Quantum computers are a threat because they can find the private keys by overcoming prime factorization, eventually overpowering the nodes of the network that work to verify transactions.
However, according to here, the current power of the nodes are still 10 years ahead. Furthermore, there have also been developments in new hash-based cryptographic structures such as the Quantum Resistant Ledger and Curecoin. Therefore, everything should be okay as long as proactive measures are taken.
This journey on learning about blockchain technology and cryptocurrency has lead only to further questions, which brings more topics to look into. New coins come out and new developments happen all the time. What stays the same are the fundamentals, a key component in making sense of this new technology.
