Back in 2009, an unknown individual under the pseudonym Satoshi Nakamoto published the concept of bitcoin, a decentralized payment network. As well as the internet, nobody owns the bitcoin network, which has a software with the same rules for all users. The fact that there is no central authority, combined with Nakamoto’s anonymity and him leaving the project in 2010, raised some concerns about the safe usage of the network. But, in the lack of authority lies the strength of the concept – everyone has an access to source code and any developer can modify the software code.
How does the Bitcoin work?
Users have their personal “wallets” where they can store bitcoins. Bitcoin network is actually the application, i.e. programme, which allows users to trade with coins, using the public ledger named “blockchain”. Each transaction is recorded in this distributed ledger, which enables verification of every transaction made, limiting the room for fraud. Bitcoin is often called cryptocurrency because it uses cryptography to secure the system.
Hundreds of thousands of individuals and thousands of companies use the bitcoin, making it the largest digital currency with claimed value of $6 billion. The companies such as WordPress.com, Amazon, Victoria’s secret and Tesla accepted it as means of payment.
“Bitcoin is a technological tour de force.” – Bill Gates
However, a threat for Bitcoin, often called Bitcoin 2.0, arose. Ethereum is a public blockchain platform that runs smart contracts, which include projects related to finance and identity management. It was created by Vitalik Buterin using crowdfunding in August 2014 and developed by the Ethereum Foundation, a Swiss non-profit organization.
“Ethereum is meant to be a “world computer”: a decentralized network that tries to simulate the properties of being a single computer as much as possible, while adding blockchain authenticity and security guarantees on top.” – Vitalik Buterin
Many applications built on Ethereum allow new ways of paying bills or placing bets. The cryptocurrency called “ether” is used on the platform for payment for the services. The value of the currency soared 1,000% in the previous three months, attracting finance and technology giants such as JPMorgan Chase, IBM and Microsoft.
IBM announced last year that it was testing the new currency in order to manage objects in the Internet of Things – the network of physical objects with built-in electronics and software that enables them to collect and exchange data. Microsoft’s strategy director Marley Grey said that this platform can be used to solve problems in different industries.
Many of banks are exploring how to use Ethereum to improve transferring money. The value of ether currency is above $1 billion at times, the second largest virtual currency, after bitcoin.
Despite its rising popularity, researchers agree that it will take time to overcome bitcoin, while its growth could depend on development of the real markets around it.
Bitcoin, Ethereum & Namecoin Modern Art Gallery
Namecoin is a cryptocurrency based on the bitcoin code, and it is limited to 21 million coins.