Bitcoin is a combination of several technologies – it is a balance sheet with who owns how much a torrent system and several algorithms that safeguard it.
Bitcoin is a Spreadsheet
Yes it is a little bit hidden with Pseudo names and addresses. But it is also public and open to participants to review.
What About the Smart Chains and Coins/Tokens?
The smart contracts blockchains are like Excel sheets with a special functions that could be inserted in the Excel sheet cell.
- The Excel sheet address or cell could be the owner of the function that could be applied to other cells.
- The address could be the owner of the calculation of the function and the calculation could be a list of stuff or even a whole another Excel sheet (tokens).
This is the power of meta programming above the blockchain.
Control over the Account
The direct ownership and control over the amount that is in the spreadsheet is one of the most important philosophical advantages of cryptocurrencies over the banks. It is using the Public-Private Key Cryptography. This algorithm is broadly used on a lot of levels on the Internet – SSL, Authentication, Encryption and more. It is like having the money in your hand and you can give it to anyone without asking any authority if it is okay. It is killing the purpose of the whole area – if you store your coins or tokens in Crypto Banks.
Torrent Like System
Being able to look into the torrent is what makes it public analyzable reviewable and in some sense secure. Everybody could have the copy of the data and verify it even offline without internet connection.
One of the key features of the block chains that have made cryptocurrencies possible is the way the torrent is extending.
Security
What makes the blockchain unique to any other linked list structure is the resolution of the Byzantine generals problem. This algorithm resolves – the validity of new blocks in the blockchain. They are approved by the majority of the network. The bigger the network the less likely anyone could acquire so much computing power or percentage of the network to be able to hack it and modify the Excel sheet.
Hashing
Part of that solution is the sha256 algorithm and the adoptable complexity in the mining process – that is programmed into the blockchain.
- Another hashing algorithm is the Merkle Tree build-in to the nodes/transactions. To change the torrent file, someone will need to update the hashes of whole tree after his “hack”.
- If someone acquires a lot of computing power, he will get more new coins for certain amount of time. Unfortunately for him – the network will adapt and get harder for him over the time. This will force participants to be stronger and more competitive.
- The price value will go up and down and this will or rebalance the network of old participants. Being profitable is the key to participation. This is the key aspect that makes me think – the price will go up – in the long run.
Prices in Legal Currencies
Sometimes the price will go down and to make certain people less likely to mine. But in general – the requirement of the network to achieve consent will go up with the advancements of hardware. This means the price will most likely go up also. The whole another area is the degrees of inflation of new coins in the increase of inflation of the official currencies. As they are limited amount by design – any non limited resources will be cheaper in terms of bitcoins.