Truth or Hype: Bitcoin and other Cryptocurrencies
The meteoritic rise of cryptocurrencies from seemingly nowhere has confounded lawmakers and bankers, and polarised opinions. Some have heralded them as the future of currency, while others have dismissed as an elaborate e-Ponzi scheme. Cryptocurrencies or cryptocoins are neither new nor few.
To put it Simply, cryptocurrencies are digital assets similar to any currency held in e-wallets. But unlike them, cryptocurrencies are not issued or controlled by any bank or corporation. Their value is derived from the belief that others users will also value them.
The first attempt at creating a cryptocurrency goes back to the early 1980s with 'ecash', but it was in the 1990s that researchers began to make key advancements which led to the launch of 'b-money' and 'bit gold.' Then in late 2008, the bitcoin.org domain was registered, and a paper titled 'Bitcoin: A Peer-to-Peer Electronic Cash System.' was published by the pseudonymous 'Satoshi Nakamoto.' Then in January 2009, Nakamoto published Bitcoin's open source software, and the bitcoin network came into existence.
Nakamoto became the first to solve the problem of double-spending in digital currencies. Another thing that made bitcoin unique was the fact that it was the first truly decentralized digital currency, where the transaction took place directly between the users using the 'peer to peer' model with no centralised intermediary.
Bitcoin used the 'trustless verification' model to secure these transactions. The 'trustless verification' model does not mean that there is no trust among the users of the system, but that the trust is distributed or decentralised.
In a normal face-to-face cash transaction, one person gives money to another person and they mutually verify on the spot that the amount is correct and that the currency is valid. However, if the two persons are not able to meet face-to-face, then they have to employ a third party that is 'trusted' by both; such as a bank, e-wallet, remittance agency, etc. In such cases, the trust resides completely with the third party.
Cryptocurrencies use the blockchain technology as the 'trusted' third party to facilitate two individuals to carry out a peer-to-peer transaction, to authenticate the sender's identity, and to validate the transaction using a transparent and decentralised infrastructure.
The Bitcoin model is the foundation on which other cryptocurrencies have been built.
How does it work?
In the bitcoin model, a transaction consists of an input (receipt) or an output (payment). A group of these transactions generated by different users is recorded in a public ledger known as a 'Block'. For a transaction to be valid, one cannot spend more than what one has, and each transaction must have an encrypted digital signature attached to it. This encrypted digital signature is generated by the system and ensures the authenticity of the sender and also prevents any alterations being made to the transaction once it is issued.
Since the Blockchain technology has no centralised system, the Blocks are maintained transparently on a decentralised global network of computers, all of whom share the same information regarding the transactions and therefore all share the same 'truth' at the same time.
This network uses what is known as the 'Machine Consensus' protocol to incentivise all the machines to come to a 'consensus' on the activities occurring within the network. The machines performing these tasks are known as miners.
Bitcoin, for example, uses a 'Machine Consensus' protocol known as 'Proof of Work,' which gives financial incentives to the miners to compete with one another to find new Bitcoin transactions, validate them, and add them to a Block. They then have to solve a complex mathematical problem to prove that they did the work of putting together the block of transactions. The Solution to this complex mathematical problem is what is known as a 'Hash' of the Block and is attached to the block as a seal and acts as a second layer of encrypted authentication on top of the transaction signature mentioned earlier.
Once a Block is complete with its list of transactions and its Hash, it gets attached to the end of an existing chain of Blocks based on a sequence determined by the Block's Hash. A chain of these Blocks is called a Blockchain. Once a new Block gets attached to the Blockchain and broadcast, everyone on the network update and synchronises to the new information. The longer a Blockchain gets, the more secure and incorruptible it becomes.
The system rewards the miners for the work done in two ways. First, every time a miner successfully completes a new Block, the system rewards the miner with cryptocurrency. Second, the miners are also given the transaction fees collected from the payers every time a transaction occurs.
Mining is required because the system periodically changes the key number attached to each hash, thus requiring fresh decryption every time the key changes. In the bitcoin system, it takes an average of 10 minutes for a new Block to be found by a miner. As more and more miners join, it gets that much harder for a miner to find a new Block. The average time to find a new Block varies between cryptocurrencies. For example: Litecoin is 2.5 minutes, Ethereum is 15 Seconds and Ripple 3.5 seconds. The faster a new Block can be found and added to the Blockchain, the faster a transaction can be verified.
The encrypted transaction signature and the hash sequence means that any alteration to a transaction, or to the Block sequence in a Blockchain, once it is published is practically impossible to alter. Therefore, the longer a Blockchain, the more trustworthy the transaction becomes.
Nakamoto mined the first 'Genesis Block' on the Bitcoin system, and was the first to make a Bitcoin payment. There are now well over 12,000 cryptocurrencies and the number is growing. About 25 of them have a market capitalisation exceeding $ 1 billion, and the top ten have a combined capitalisation exceeding $ 300 billion (2018 Q1). Cryptocurrencies are not all clones of one another; they have differences in their protocols, their algorithms, and their levels of centralisation.
To invest, or not to invest in cryptocurrency?
In reality, cryptocurrencies are just a series of ones and zeros within a computer network. Their real value as a medium of exchange will depend on three key determinants: their real-world usability or acceptance, their convertibility which will depend on their recognition by established financial institutions, and on them remaining legal. These are three simple yardsticks one should consider if investing in cryptocurrencies.
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London, Nov 22: A bomb disposal squad deployed as a “precaution” to the South Terminal of Gatwick Airport concluded an investigation into a "security incident" on Friday after making a “suspect package” safe.
The South Terminal of Gatwick Airport, the UK's second busiest airport after Heathrow, which was briefly shut owing to the incident reopened following the incident.
The Gatwick is around 45 km south of London.
Two people detained during the enquiries have since been allowed to continue their journey as the airport was opened.
“Police have concluded their investigation into a report of a suspect package at Gatwick Airport. Officers from the EOD (Explosive Ordnance Disposal) team made the package safe, and the airport has been handed back to its operator,” Sussex Police said in an updated statement.
“Two people detained while enquiries were ongoing have subsequently been allowed to continue their journeys. There will remain an increased police presence in the area to assist with passengers accessing the South Terminal for onward travel,” the statement added.
Earlier on Friday, the incident caused severe disruption at the busy airport’s South Terminal, while the North Terminal of Gatwick Airport remained unaffected.
“Police were called to the South Terminal at Gatwick Airport at 8.20 am on Friday (November 22) following the discovery of a suspected prohibited item in luggage,” a Sussex Police statement said.
“To ensure the safety of the public, staff and other airport users, a security cordon has been put in place whilst the matter is dealt with. As a precaution, an EOD (Explosive Ordnance Disposal) team is being deployed to the airport. This is causing significant disruption and some roads around the South Terminal have been closed. We’d advise the public to avoid the area where possible,” it said.
Footage on social media taken outside the airport showed crowds of frustrated travellers being moved away from the terminal building.
Gatwick said it was working hard to resolve the issue.
“A large part of the South Terminal has been evacuated as a precaution while we continue to investigate a security incident," the airport said in a social media post.
“Passengers will not be able to enter the South Terminal while this is ongoing. The safety and security of our passengers and staff remain our top priority. We are working hard to resolve the issue as quickly as possible.”
Train and bus services that serve the airport were also impacted while the police carried out their inquiries.
In an unrelated incident in south London on Friday morning, the US Embassy area in Nine Elms by the River Thames was the scene of a controlled explosion by Scotland Yard dealing with what they believe may have been a “hoax device”.
“We can confirm the 'loud bang' reported in the area a short time ago was a controlled explosion carried out by officers,” the Metropolitan Police said in a post on X.
“Initial indications are that the item was a hoax device. An investigation will now follow. Some cordons will remain in place for the time being but the majority of the police response will now be stood down,” it added.
