By Zoheb Sirguroh
Starting from today, The Kashmir Monitor will cover the world of cryptocurrencies fortnightly.
However, before we deep-dive into various types of cryptocurrencies, their trends, and practical implications, this article will quickly focus on understanding the concept of cryptocurrencies.
There are six specific properties of any cryptocurrency:
- The system of any cryptocurrency doesn’t require a central authority. It is maintained through a distributed consensus.
- The system keeps an entire overview of crypto units and the ownership of those units.
- It depends whether new crypto units can be created or not. This is much like printing of notes or minting of coins. If new units are permitted to be created by the system, then the circumstances of creation are defined as also the rules of determining the ownership of these units.
- If you own crypto units, your ownership can be proved cryptographically.
- Exchange of units can take place under a transaction by proving the current ownership of units.
- Two different instructions to execute transaction involving exchange of ownership of the same units cannot be executed simultaneously. Only one gets executed.
Feeling lost? Do not worry. As we progress further into the series, these properties shall become clearer through practical examples. We are avoiding the same in this article to avoid a paralysis of analysis.
Cryptos have experienced rapid growth in their popularity since the introduction of Bitcoins in 2008 – 09. Till date, 4000+ different cryptos have been created. Some had a short lifespan. Some were created for fraudulent purposes. Others introduced innovations in existing cryptos.
However, most of these cryptos adhere to the same mechanisms and underlying principles derived from the original Bitcoin protocol. They differ explicitly from Bitcoin in terms of their block intervals as also the maximum number of their units. They may also have different consensus approaches, additional features, and algorithms from those of Bitcoins.
Here’s a snapshot from CoinMarketCap of the top eleven cryptos in terms of market capitalization as on 14 Nov, 2021:
The massive increase in the value of cryptos has been gaining extensive news coverage. There is an increasing interest from different communities such as tech enthusiasts, businesses, investors as well as criminals and law enforcement agencies.
It is arguable that bitcoin fundamentals are hard to understand for non-expert users and there is perplexity in reconciling them with the models of traditional currency. Bitcoins are as modern as currency can get. The most interesting aspects about Bitcoin are that it is a decentralized cryptocurrency, combines innovative engineering, and has a probabilistic distributed consensus approach.
Probabilistic distributed consensus – feeling lost again? Crudely put, only if 51% of bitcoin owners in this world agree for hacking, only then hacking can be executed. A very crude explanation. Not necessarily accurate though.
The underlying tech behind cryptos like bitcoin is blockchain. Blockchain has applications even beyond cryptos. However, the problem of finding a sweet balance between performance, scalability, security, decentralization, and anonymity is always a concern in blockchain.
Starting from the next fortnightly article, we shall cover the trends in the world of cryptos.
Watch out for this series!