Cryptocurrencies Topic 5 Prepared by Dr Alexis Esposto
What are cryptocurrencies or Bitcoin? Simply, Bitcoin and other cryptocurrencies are just another currency. The term Bitcoin refers to the entire currency system, whereas bitcoins are the basic units of the currency. As with dollars, euros, yen, and gold coins, you can save bitcoins, spend them on goods and services, and exchange them for other currencies. Bitcoin is the world’s first currency that is both digital and decentralized. A digital currency is one that can be easily stored and used on a computer, or in the cloud. By this definition, even dollars can be considered a digital currency, since they can be easily sent to others or used to shop online. Their supply is controlled by a centralized bank organization. In contrast, gold coins are decentralized , meaning that no central authority controls the supply of gold in the world. In fact, anyone can dig for gold, create new coins, and distribute them. There are many cryptocurrencies or digital currencies: e.g. Ethereum, Omisego, Ripple and 100s others. What is bitcoin? https://
Why Bitcoin and hundreds of Cryptocurrencies now? Until recently, people could not send digital cash back and forth to each other in a reliable way without a central mediator. A trusted central mediator such as PayPal can track payments and money transfers in a privately held account ledger, but it wasn’t clear how a group of strangers who do not trust each other could accomplish the same transactions dependably. Sometimes referred to as the Byzantine Generals’ Problem, this fundamental conundrum also emerges in computer science, specifically in how to achieve consensus on a distributed network. In 2008, the problem was elegantly solved by Bitcoin’s inventor, known pseudonymously as Satoshi Nakamoto. Satoshi’s made it possible for a digital currency to exist without relying on a central authority. Satoshi described the solution to the Byzantine Generals’ Problem and the invention of Bitcoin in a white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System.”
The Byzantine General’s Problem • The Two Generals Problem was the first computer communication problem to be proved to be unsolvable. • Two armies, each led by a different general, are preparing to attack a fortified city. The armies are encamped near the city, each in its own valley. • A third valley separates the two hills, and the only way for the two generals to communicate is by sending messengers through the valley. • Unfortunately, the valley is occupied by the city's defenders and there's a chance that any given messenger sent through the valley will be captured.
You've reached the end of your free preview.
Want to read all 35 pages?
- One '14
- International Trade, Bitcoins