by Roberto Quaglia – – roberto.info
Today I’d like to spend a few words on a specialistic theme most of the people still know little or nothing about, and which nevertheless in the future will have an important impact on the lives of all of us. You’ve certainly have already heard of Bitcoin. But perhaps, you likely are missing all details.
More than that, you are probably missing the sequels – I’m talking about the other coins which seek to become an alternative to Bitcoin. Of course here we won’t be able to clear all mysteries on this subject, but we can offer you a little panoramic. Bitcoin is an electronic currency which has been created in 2009, and it basically consists in a distributed peer-to-peer database which ideally is shared by everyone who holds any unit of this coin. This ensures that the circulating coins cannot be counterfeit. Also the emission of bitcoin is ruled in a certain way, in a way which is established in advance and is unchangeable, by the way of a process called Proof of Work which consists in the solving of a specific algorithm with variable difficulty. This is a minting process everybody can theoretically take part to, but in the real world it’s now reserved to those who can afford the increasingly expensive dedicated computers and even more than that all the electricity that these machines consume.
When Bitcoin was created, in 2009, it was nothing worth. The first enthusiasts who adopted it where producing thousands of coins every few days and then they had no idea what to do with them. In May 2010 a man called Lazlo offered to pay 10,000 bitcoins to whoever was willing to send him 2 pizzas. It took some time before someone cared to accept his 10,000 bitcoins offer and finally Lazlo succeeded in buying his two nice pizzas. Not too bad, he must have thought, two real, concrete, tasty and eatable pizzas in exchange with a handful of electrons and some weird string of ASCII characters on the screen of his computer. Did Lazlo do a good deal? It depends on how good were those two pizzas in the end. At the exchange rate of a few days ago, May 25, 2017, seven years later those 10,000 bitcoins are today worth more or less 26 million dollars.
Lazlo today can boast about having eaten the most expensive pizzas in the world, which by the way are getting more and more expensive as time goes by. Just in the past few months Bitcoin has doubled once again its value, reaching a max capitalization of 44 billion USD.
But why has Bitcoin had such an incredible success, in spite of the fact that there are still not so many things that Bitcoin can directly buy? There are many, many reasons, so many that I could write a book on this issue, and perhaps one day I will. But if we had to sum up those reasons in a few sentences the keywords are: certainty, determinism, distributed consensus, decentralization and privacy.
We live in a time when on one side money is created by banks through a magic wand, in the quantities they please, and often we’re talking about quantities which are absurd and thus the value of these currencies which are arbitrarily created out of thin air is just a matter of faith. And on the other side each and every of our economic transactions is transparent to our authorities, which by now know about our balances and assets even more than us, especially those of us who don’t spend all their time thinking about money. Bitcoin has offered an alternative to this inconvenient and unsustainable model, and more and more people are perceiving it as the money of the future and is hurrying up to grab some.
However, you believe it or not, Bitcoin is already old. The way it’s made is obsolete, its architecture is out of date and it doesn’t work so well any more. Transferring bitcoins is not any more always a matter of minutes, it can take hours, or days, or even weeks. Or you have to pay extremely expensive fees, more than the common banking fees. Bitcoin must therefore be changed, but in the community there are discussions and quarrels on how it should be changed. This is why Bitcoin will soon most likely split into two different coins and it’s not clear what it will happen then. And this is perhaps why in the past few months we have witnessed a “gold run” on all other cryptocurrencies which are alternative to Bitcoin – which in the crypto-jargon are called “altcoins”. Yes, there are by now hundreds of alternatives to Bitcoin, and most of them are technologically superior. However, general consensus – which is what gives value to a currency – is still mainly gravitating around Bitcoin, the progenitor. But for how long?
The next revolution – a revolution within the revolution – could happen any moment, and we could suddenly find ourselves with the successor of Bitcoin pushing oldish Bitcoin into retirement. Therefore, should you ever put your hands on some new cryptocurrency of good hopes, beware not giving it away too early for buying a couple of pizzas.
There are plenty of cryptocurrencies competing for the succession and you’ll be spoilt for choice. It’s impossible to name them all, especially as I don’t know them all myself. Each of them has its own logic, its own mechanics, its own philosophy. Each of them should be studied and understood before being discussed. After the so called Proof of Work mechanics of Bitcoin, Proof of Stake has been invented by Peercoin, and then copied by many other coins. With Proof of Stake it’s the ownership of the coins to stabilize the network and to mint new coins, instead of the computational power. A more sophisticated solution is the Proof of Importance introduced by NEM coin, which in just a few years has reached a capitalization of over 2 billions of dollars. And in the beginning, again you could get those coins for free.
But the undiscussed star of these past few years in Ethereum, which beyond being a just coin is actually a real platform, with its own programming language. On this platform anyone can build assets which make use of so called smart contracts. That’s a revolution which is not only a monetary one. In future, it will probably change and set new standards of the ways of people legally and commercially relating in a society. So – is it already some years that you are regretting to have missed the boat of Bitcoin? Console yourselves. While you were busy regretting that, you happen to have missed also the boat of Ethereum. Ethereum was born in 2015 and in just two years it has climbed to up to half the capitalization of Bitcoin, and many people forecast that it will soon reach and overtake the forefather of the category.
But is there still any recent project where one could hope to come along for the ride from the beginning or so? Well, in 2016, so in the past summer, some Russian born programmers have launched Waves, another platform where you can do many things and unlike Ethereum it’s easy to use for everyone. Lately the value of Waves has risen by10 times, I mean ONLY 10 times, which in this realm isn’t really too much. I have created myself a very personal currency on Waves, Quagliacoin, as you can see from my wallet. Well, if you’ll make yourself a free waves wallet and send me an email with your waves address I’ll send you some Quagliacoins for free. Today they’re worth nothing, but tomorrow who knows. Perhaps tomorrow they’ll be worth even less than nothing!
Otherwise, even more recently created – just a few months of life – there’s Byteball, another completely new concept, with an architecture different from any other one, where the blockchain has been replaced by a totally new mechanism. Right now, and for the coming months, you can get Byteballs for free if you already have either Bitcoins or already some Byteballs. This airdrop is done to increase its circulation and adoption. I believe it will succeed.
As you see it’s a world of great excitement, and we’ve only touched the top of the iceberg here. It’s difficult to argue that all this won’t be the future in a world where the old styled money is becoming every day more and more an act of faith.
And to complete our brief panoramic in the best of the possible ways, we’ll have now to tell you something about Bancor, the latest entry in this fascinating world, a project which is going to be launched in the coming days and which experts in the sector are already labeling as the Project of the Year, of year 2017, one which is headed to a bright future. And so here we have, finally, a boat which didn’t leave yet and that has still plenty of space on board. You have been warned. To provide a service for the the investors in fiat money who would like to join the ICO, Bitcoin Swisse has entered the game.
Bancor essentially consists in a brilliant protocol which allows the automatic creation of liquidity for any digital asset, cryptocurrencies, loyalty points or whatever. At the base of the protocol are the so-called “smart tokens“, which allow the creation of so called “smart contracts”. Please remember the expression “smart tokens”, it has been invented by Bancor and I’d bet you will hear it more and more in the future, on the long term probably more than you’ll hear the word “Bitcoin”. While Bitcoin is nothing more than a digital coin, and with bitcoins there’s little you can do beyond buying and selling and – yes – speculating, smart tokens are indeed a more complex tool, which allows to do a very wide range of things, most of which still unknown. Imagination is the only limit.
The technical explanation on how Bancor will use smart tokens sounds like voodoo, especially if we’d go into details, voodoo with mysterious math equations, so we’ll skip that now. In plain words, Bancor will first of all solve the Double Coincidence of Wants Problem in Currency Exchange. Otherwise said, if I want to sell something that you want to buy, until now to complete our transaction we’d have to first meet in the same place and time – which could be in a pub in the physical world or in an online exchange, and then negotiate, pay either the drink in the pub or the commission to the digital platform which is hosting our meeting – in other words this process is expensive and muddled and not without risks. Many times it has happened that exchanges have been hacked and all coins were stolen or the owner has been the one to steal all funds of his clients.
Bancor will solve this problem allowing the creation for every asset of a fractionary reserve, a sort of “decentralized central bank” – if you allow me a fancy oxymoron – a reserve which will be kept constant in an automatic way by rising or lowering prices versus the other assets in real time, depending on offer and demand. The existence of a reserve is what makes the asset liquid, which means seller and buyer don’t need any more to meet, the Double Coincidence of their opposite needs is not necessary any more. This Little Big Invention is probably destined to revolutionize once again the world of the new decentralized economy.
Using Bancor’s protocol and applications not only everyone will be able to create their own currencies or assets without any need of technical knowledge, but the created asset if necessary will enjoy liquidity against other assets by the way of an automatic process able to adapt continuously the exchange rates to offer and demand. This will very useful for little communities which want to create their own local economy, for the start-up looking for funds, for crowdfunding operations and much more.
Short term speculations in the world of cryptocurrencies, such as the infamous pump and dump schemes – pumping prices of an asset and luring investors into buying an asset with inflated price and then dumping everything at once – will be more difficult to do. For a long time the world of cryptocurrencies has resembled a giant casino, reason why many preferred to stay away.
From Bancor onward the world of cryptocurrencies will probably become more and more a true financial system, more and more integrated, self-regulating, decentralized and rich of new opportunities. In other words, another step towards that change of paradigm in the world’s financial system that in the long term seems to many inevitable.
This is what has already been named Internet 3.0. While internet 1.0 gave to everyone the possibility, for the first time in history, to express themselves in front of a global audience and to publish freely their own information and opinions, while Internet 2.0 has grouped us all inside social networks where we are now living even more than in our real lives, Internet 3.0 will perhaps give to everyone the possibility, again for the first time in history, to create they own finance. Or something like that. Only time will tell.
Who knows, it may well be that soon even we, our little TV station, will decide to create our own currency to fund our projects.
In the end, if by chance this talk of mine should ever bring you luck and you’d become a stinking rich by the way of cryptocurrencies, don’t forget then to offer a pizza to me. Or better two. Given of course that they cost not less than 26 million of dollars.
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A presentation of Bancor