De-mystifying Cryptocurrency: Beyond Bitcoin

With all of the hype surrounding Bitcoin right now, everyone and their mother wants a piece of this seemingly endless stream of profit. You would have a hard time finding a bank, accounting form, software company, or government that doesn’t have an enormous amount of research ongoing in cryptocurrencies. While still somehow geeky and not understood by most people, banks, governments and many companies are aware of its importance.

But many people, including myself, are keen to learn more about cryptocurrencies – being both intrigued and cautious. Before delving into the minutia of cryptocurrencies, it is prudent to first ask a few questions: What are cryptocurrencies? What’s a Bitcoin? What is an altcoin? How are these even useful??

I made it my mission a couple of months ago to do some investigative work on the world of cryptocurrencies to answer those questions for myself and disseminate that knowledge among the community right here.

In 2008, Satoshi Nakamoto (the creator of Bitcoin) tried to build a digital cash system without a central entity that functions much like a Peer-to-Peer network for file sharing. He never actually intended on creating a digital currency, it was merely a result of this quest to create a digital cash system.

After sifting through countless pages of technical jargon, I found the site BlockGeeks to be the most useful when looking for accessible yet satisfyingly in depth answers to my questions. Rather than attempt to explain what exactly a cryptocurrency is, I’d like to share the definition they came up with:

“If you take away all the noise around cryptocurrencies and reduce it to a simple definition, you find it to be just limited entries in a database no one can change without fulfilling specific conditions. […] Take the money on your bank account: What is it more than entries in a database that can only be changed under specific conditions? You can even take physical coins and notes: What are they else than limited entries in a public physical database that can only be changed if you match the condition than you physically own the coins and notes? Money is all about a verified entry in some kind of database of accounts, balances, and transactions.

Basically, cryptocurrencies are entries about token in decentralized consensus-databases. They are called CRYPTOcurrencies because the consensus-keeping process is secured by strong cryptography. Cryptocurrencies are built on cryptography. They are not secured by people or by trust, but by math. It is more probable that an asteroid falls on your house than that a bitcoin address is compromised.”

(you can read the rest of the article here if you want the full explanation)

Even if they do not accurately understand how it works, most people are at least somewhat familiar with Bitcoin. However, once they begin to get involved with cryptocurrency, they may be surprised to learn that there are actually hundreds of types of cryptocurrencies known as altcoins.

The word “altcoin” is an abbreviation of “Bitcoin alternative,” and thus describes every single cryptocurrency except for Bitcoin. There are hundreds of altcoins and more appear each day. Of the many hundreds of altcoins, the successful coins innovate by experimenting with useful features Bitcoin does not offer. For example, Darkcoin hopes to provide a platform for completely anonymous transactions, BitShares describes itself as “a fair version of Wall Street,” and Ripple serves as a protocol users can employ to make inter-currency payments with ease.

One cryptocurrency that I found particularly interesting, especially considering the rising prominence of IoT in the industry, is IOTA. In a blog post discussing IOTA’s road map, David Sonstebo, co-founder of IOTA, wrote that it was developed to enable the “paradigm shift” to the Internet of Things by establishing a “de facto standardized “Ledger of Everything.” Simply put, this means the cryptocurrency will enable data exchange between sensor-equipped machines that populate the Internet of Things.

If this article piqued your interest in this up and coming area of technology, check out some of these links! Who knows, maybe you’ll get sucked down the rabbit hole too.

https://www.investopedia.com/terms/c/cryptocurrency.asp

https://cointelegraph.com/bitcoin-for-beginners/what-are-cryptocurrencies

https://blockgeeks.com/guides/what-is-cryptocurrency/

http://cryptocurrencyfacts.com/how-does-cryptocurrency-work-2/

http://www.reddit.com/r/CryptoCurrencies