‘The farther back you can look, the farther forward you are likely to see.’
— Winston Churchill
Bitcoin which is a new form of currency has been evolving for the past decade. It is developed by a “Satoshi Nakamoto” and maintained by a collective group of the brightest minds in technology.
Bitcoin is a new form of money which is created and held digitally. The most essential part is that it is owned by neither the government or the central bank. Since both the government or central bank cannot decide on its value and operation, a peer-to-peer network community does.
This is why there is a popular saying that fiat currency is owned by a centralised agent, whereas cryptocurrency is technically owned by nobody.
You may read the bitcoin whitepaper here–and at IKIGUIDE we believe that the bitcoin whitepaper is really about human nature. [Sidenote: Always read the whitepaper before you buy a cryptocurrency!]
The name “Satoshi Nakamoto” is in inverted commas because many believe that no such person exists. Some believe that the bitcoin whitepaper is written by a group, and some others even believe that it is written by a country.
Historically, U.S. currency has been backed by gold. What this means is that you can give a dollar to the bank and receive a set amount back in gold.
However, Bitcoin is not based on silver or gold. It is instead based on mathematical proof validated by a public ledger called blockchain technology.
This is a complex sequence composed of mathematical formulas which run on computer s. This algorithm generates Bitcoin. This open-source network likewise shares a public ledger using blockchain technologies which helps in recording and also validating every transaction.
Bitcoin network cannot be controlled by any single institution such as a government. The idea behind the technology is all about decentralisation. This means that bitcoin remains completely independent of a central authority such as a bank, country or government.
The bitcoin code is open-sourced. This means it can accessed by anyone (especially on github). Developers with interest in it may therefore refer to and improve the code.
A Brief History Of Blockchain
People usually confuse blockchain technology with bitcoin.
To simplify matters, let’s use an analogy–Blockchain is to Bitcoin like the internet is to email. Blockchain serves a huge electronic system which can be used for building other applications.
Blockchain technology was first introduced to the world when the original inventor “Satoshi Nakamoto” released Bitcoin whitepaper. Blockchain technology therefore made its public debut on a peer to peer electronic cash system which is known as Bitcoin.
This technology has since developed into one of the outstanding technologies with great potential to impact every industry from educational to manufacturing institutions.
The history of blockchain technology cannot be discussed without starting from that of Bitcoin. Bitcoin was offered up to the open source community in 2009, shortly after the whitepaper was released by Nakamoto.
The answer to digital trust was provided by blockchain because it records essential information which are immutable. Also, the system is time stamped, transparent and decentralised.
Because the histories of blockchain and bitcoin are so intertwined with each other, it might be tempting to confuse both items with each other. Unsurprisingly, there are several people that believe that Bitcoin and blockchain are one and the same, even though they are not.
People that realised earlier that blockchain has more uses invest and explore the potential benefits that can come with blockchain.
Blockchain is mostly used for recording transactions between various entities in a permanent way. It also does not require a third party. This results in an efficient process and one which people predict will dramatically reduce the cost of the transactions.
As blockchain technology came to be increasingly appreciated and understood by entrepreneurs, the result is capital flow into the blockchain industry. Indeed, there was a surge of investment as well as discovery to see how blockchain could impact the supply chain, insurance, healthcare, transportation, voting, contract management as well as other sectors.
Right now, blockchain technology is being used by about 15% of financial institutions.
Ethereum is a relatively new and promising concept. Some say that it is set to overtake Bitcoin as the Number #1 cryptocurrency. Here, we take a brief look at the history of Ethereum and also consider how it differs from bitcoin.
Ethereum is an open-source public software platform focused on blockchain technology. It features Smart Contract functionality and enables developers to build and deploy decentralized applications.
The goal of Ethereum is to make use of blockchain to replace internet third parties. This includes those that store data, transfer mortgages and track various kinds of financial activities.
In addition to this, the Ethereum blockchain provides a cryptocurrency which is known as ether. Ether can used just like other cryptocurrencies. Vitalik Buterin developed this concept in 2013. Though some say that Ether was developed from as early as 2009.
The Ethereum project came about as a result of his work as well as research into the Bitcoin community. You may read the Ethereum whitepaper here.
There are several comparisons that can be made between Ethereum and bitcoin. Both projects utilize blockchain technology. For Ethereum, this is the most essential aspect of the concept.
However, there are essential key differences:
After the creation of Bitcoin in 2009, the first Altcoin came out two years after.
Thereafter, Altcoin launches grew at an increasing rate from 2013/ 2014.
This trend went on till date. In 2017, more than 600 new cryptocurrencies were created and this makes it difficult to study them all. At IKIGUIDE, we aim to simplify the whole process though!
One of the essential metric to understand Altcoins is to study market capitalization. This corresponds to the unitary cost multiplied by the number of coin in circulation.
Using this market cap metric, Bitcoin is still the first cryptocurrency, followed by Ethereum and Ripple. It is possible to check the live situation on the CoinMarketCap website.
Another Altcoins classification can rely on AltCoins genealogy to see how they are related with one another. For instance, there are many Bitcoin-like alternatives which started from Bitcoin basics with some changes through a “fork”. The fight between “bitcoin core” and “bitcoin cash” has been well-documented, for example.
If we look at Altcoins, we can see that many of them come from a fork of famous as well as long-lasting cryptocurrencies such as Bitcoin, Litecoin as well as Ethereum.
However, every Altcoin has something unique in some ways. This includes differences in scripting language, transaction features, additional features or security, mining-based or not, with different consensus algorithms etc.