With the hype, I feel compel to make a post about Crypto and share my understanding on the topic. This is not something new and not a financial advise by any means. I am not affiliated with any exchanges, nor making any money out of them. To understand Crypto, you will need to understand Blockchain.
In the wake of recent development where the whole world is still surviving from the post pandemic shock, the traditional system that underpins the society is being questioned. The way government around the world bailed out by spending the money they don’t have is quite staggering, so naturally the decentralisation becoming a popular way people leaning against.
Blockchain’s concept is to remove single point of control by sharing the validation across multiple entity, it is like the beginning of the internet where each node is interconnected and act as the redundancy to hold the information together.
Bitcoin
Let’s talk about Bitcoin, the oldest and most expensive crypto currency which is being created as a proof of concept. Technically there is no practical application of bitcoin apart from sentimental value and the value each person put against it. To transact in bitcoin the transaction fee are quite high, and for the miners (node that validate the transaction) will have to work hard by solving complex computational equation which consume all the GPU that you have, thus electricity and more green house gas as the result of this. The bitcoin algorithm also have a flaw where at some point the computation becomes too difficult to solve and thus there will be no more bitcoin can be mined. Which makes the supply shortage. But people still betting on bitcoin nonetheless.
Etherium
Enter the second most popular crypto currency, Etherium, which addressed some of the flaw but yet still inherit some similarity where the transaction fee is also costly, this is defined as gas, and like bitcoin the consensus mechanism is Proof of Work, which mean that as a miner you will be rewarded based on your successful in performing the complex math problem, which in turn resulting high transaction fees. There is a controversial fork happened in Etherium blockchain which resulting in a split of the Etherium (ETH) and Etherium classic (ETC), this is caused by two sides of group that cannot come to a consensus when there is a security hack on the DAO (decentralised autonomous organisation) that happened during the fork. You could argue this is probably due to the early bug in the code that get exploited, which resulting the hard fork of Etherium because the community can’t come into the consensus. The story of this is for another day.
Algorand
Algorand claimed to have solved all the problem from the existing crypto such as:
- Faster transaction confirmation, according to the website the block are produced every 4.5 seconds and can hold up to 5000 transactions, which means the throughput is about 1000 transactions per second
- Lower transaction fee
- Use less power, due to the consensus mechanism is proof of stake, which means that no one is competing to mine, the selected few is required to confirm the transaction, so as long as you hold some algo you can participate in the conformation which earns you some algo as the result
- No Forking, due to the consensus mechanism of proof of stake, the forking will not happened, the worse case scenario is the confirmation will take a bit longer.
- The owner will get rewarded by simply holding the coin, this is like depositing money in the bank and earning interest
Some of the Algorand use cases include:
- smart contracts
- Defi
- Used in NFT
- dApps. – https://developer.algorand.org/docs/get-started/dapps/
There are more other crypto that I will not discuss in this post, and I will post them separately to make sure that I can explain it properly. I hope you enjoy this small knowledge that I shared.