Previously reserved for those living on the fringes of computing culture, digital currencies are quickly gaining popularity. You've probably heard of Bitcoin, but have no idea what it is. Simply put, it's digital money that is completely secure and doesn't use traditional banking to determine it's value. It is known commonly as a cryptocurrency.
In 2009 Bitcoin became the first popular cryptocurrency. While bitcoin is commonly attributed to the mysterious Satoshi Nakamoto, no one really knows who he is. Since 2009, many alternative cryptocurrencies have been created. Now we have Ethereum, Bitcoin, Gridcoin, Mastercoin, Auroracoin, Titcoin, among others. While these may sound like street names of drugs, these other cryptocurrencies are frequently called altcoins.
As their popularity grows, currencies like Bitcoin and Ethereum are becoming a viable option as a vehicle for personal wealth beyond restriction or confiscation. With growth and adoption comes a new host of challenges, specifically security, as recent digital heists have tempered enthusiasm and trust in digital currency.
Outspeak caught up with two cryptocurrency experts, Ethereum co-founder Taylor Gerring and crypto commentator David Seaman, to get their thoughts on the evolution of cryptocurrency, and what comes next.
How has the cryptocurrency landscape changed since both of you got involved?
David Seaman (DS): [It's become] more mature I'd say overall. The hobbyists are starting to look definitely a few degrees out of place; more suits from real companies and banks at meetups. 2013 crypto isn't coming back. There are arguably less options for risk taking speculators now, less viable alt projects, in my view - but the few that are out there, like Ethereum, offer a lot of promise because of how broad in scope and application they are.
And of course I wouldn't even categorize Ethereum as an altcoin; it's an alternative universe. Bitcoin went one way with the blockchain it has, Ethereum is choosing to go in many other ways with its blockchain.
Taylor Gerring (TG): I agree with David: the space has definitely grown up and more professionals are now involved. Just take a look at Microsoft, Deloitte, KPMG, and many financial-services organizations. None of these were involved with crypto early on, but now there's tons of interest, including from governmental agencies.
Based on his recent public statements, is Australian entrepreneur Craig Wright in fact the undisputed creator of Bitcoin, or are his claims still unverified?
DS: Still very much unconfirmed, so to speak. Although I'm not an expert and haven't reviewed any of his proof first hand, it seems to fall solidly short of the spectrum of certainty demanded for such a bold claim.
TG: It could be impossible to ever truly know. If Craig is Satoshi, I believe he has the ways to prove it, so why didn't he? Jumping straight to the logical conclusion would not be sufficient nor would [the addition of] more superficial proof. Proving that someone is Satoshi beyond a shadow of a doubt would require that many proofs are provided since some may be called under question. After 5 or 6 different cryptographic signatures of known keys by Satoshi, I think we'd have to accept that even if Craig was not Satoshi, he had access to Satoshi's identity. At that point, it would be hard to tell the difference between the original identity and who claims to own that today.
What particular aspects of Ethereum aim to address needs left unaddressed by Bitcoin as a currency?
DS: Complex time-locking of money, royalty payment splits, complex content download/paywall revenue splits, provably fair trust-less gaming, 24/7 medical/health records where all your doctor needs to do is scan a QR code from a piece of paper in your wallet or purse... bring up your whole health history on the blockchain in seconds, decode the data with your permission, check for any allergies, etc.
Passports with a blockchain component; if you lose your passport a simple smartphone app or NFC dongle on your keychain can one day serve as backup. It'll call up the blockchain, verify you are in fact citizen so and so, and back to your travels you go without the headache of going to your embassy in a panic. Token relays for national fiat currencies; nations can decide to save a lot of time & resources when transacting with each other, while retaining their legacy fiat currency 'brands' on the upper layer if they so choose.
These are just a tiny sampling that come to mind of in progress or future use cases that Bitcoin's blockchain would have enormous trouble rendering in any meaningful way, whereas it's my understanding Ethereum and the EVM was built to make this stuff child's play for the right developer or blockchain as a service shop.
TG: Primarily, Ethereum tries to make coding blockchain applications as easy as JavaScript. Conceptually, there are some major changes as compared with Bitcoin, but the overall result is that cryptographic expertise is not required to develop new types of applications on an existing blockchain. With Ethereum, any application can be defined, whether that's currency, an insurance contract, unlocking a physical door, or many things we haven't thought of yet.
The Ethereum community has nearly unanimously voted for a Hard-fork. For those not in the know, what does this mean?
DS: Basically it means the community is deciding to upgrade to a new software version for the currency itself, which will require people to upgrade their wallet versions. This method has been used before to push meaningful updates to Ethereum.
TG: What we're observing is that the community is openly discussing a whole handful of possibilities to deal with anticipated problems. This was true when we hard-forked from Frontier to Homestead, adding new features to the protocol and will remain true if the chain is forked to handle a malicious actor. In either case, it demonstrates a willingness of the community to act during important times. This is something that the Bitcoin community has been struggling [with] for the better part of a year. Although their halving has passed, the Bitcoin protocol is backlogged with transactions due to a 1MB block size cap. Forking is important for all open source software and communities should welcome new ideas rather than entrenching themselves on "the way it used to be".
Is the marriage of Blockchain tech and physical gold an inevitability? If so, what happens when this occurs?
DS: We're already there in the sense that BitGold, owned by the publicly traded and globally regulated Goldmoney, accepts Ether and Bitcoin as payment for physical gold. This creates a very intimate connection between the price of certain cryptocurrencies and the massive multi-trillion dollar gold market.
To answer the other part, what happens: it makes cryptocurrency more "real" in my view to have a quick ability to buy real gold with my Ether or Bitcoin balance. Users will start to treat these currencies more seriously as a result. If you think about it, it's a perfect kind of synergy, because whereas cryptocurrency only has about seven years of economic history tied to it, gold has 5,000+ years of historical value. Gold can tie crypto to humanity's financial past and its future.
TG: Blockchains are generally superior to precious metals as a value transfer mechanism. This is because they enable uniqueness without ceding control to a central issuer (such as gold or silver). If the Global Financial Crisis continues and we have a complete deadlock amongst traditional financial institutions, how will people move money around the world? Suitcases of cash? Gold bars? Internal blockchain transfers would be much more effective than any traditional instruments as long as we still have network connectivity.
How does the average 'outsider' get involved in the mining and acquisition of cryptocurrencies like Bitcoin or Ethereum. What sort of 'starter kit' does one need?
DS: my very simple answer is don't even start with the whole mining road. Unless you have significant resources and time to learn, it's probably easier to just get your favorite cryptocurrencies by doing some work for them if you can find someone willing to pay you in crypto, or by purchasing some with your old school fiat money. I continue to recommend Coinbase as an easy way to buy Bitcoin and Ether.
TG: The the layperson, "mining" simply is no longer worth the effort. This has been professionalized to the degree that most modern equipment is expensive and runs in data centers. Today, many people swap fiat for crypto on an exchange, but there may be more opportunities to get involved in providing a network resource through disk-sharing, bandwidth-sharing, or once the transition to a new validation protocol (proof-of-stake) takes place. In my ideal world, you can get started by turning your computer on for 15 minutes and having enough tokens to, for example, start paying micro transactions for content.
Any suggestions or advice for people looking to get educated on cryptocurrencies?
DS: Start small, don't put in more than you can afford to lose, yadda yadda. Seriously though, this space can be a lot of fun, and very rewarding. Do your research, take your time, understand one layer before jumping to the next. And while crypto is still risky, it's not reckless. It's not a reckless use of your time: this very well could change the world, and all you're doing is swapping one default currency you're allowed to use by virtue of your birth/citizenship with another voluntary currency you're allowed to use by virtue of having an Internet connection and a free piece of software, the wallet. So at least for me, when part of my paycheck goes into crypto speculation, there's no remorse any more: we're improving and fine tuning currency, not throwing our money away on the silly things many people in their 20s and 30s throw their money away on. So, it's fine, as long as you're having fun.
TG: Look for a local cryptocurrency Meetup community near you. There are hundreds around the world encompassing tens of thousands of people. YouTube is an excellent source of informational videos as the industry is advancing rapidly. Diversify your news, and if you choose to hold crypto tokens inform yourself about the differences between them rather than just "playing the numbers". We're still at an early stage for this technology, so there is plenty of time to get involved slowly as time & interest allows. In this industry we joke about "falling down the rabbit hole". If it's any indication of the excitement in this space, I fell in 4 years ago and still haven't wanted to find my way out.