Bitcoin 2.0: Sidechains And Ethereum And Zerocash, Oh My!

Strange, interesting, and wildly ambitious things are afoot in the world of Bitcoin and blockchains. I give you Zerocash, a completely anonymous currency; Ethereum, a blockchain platform designed to decentralize much of the Internet; and sidechains, a proposal to accelerate the evolution of Bitcoin itself. Any one of these could conceivably become a very big deal. All three? Prick up your ears.

Of Bitcoins And Blockchains

If youre not au fait with blockchains, your head may already be swimming. Some background: Bitcoin, the infamous cryptocurrency, is built on a new kind of distributed-consensus technology called a blockchain, which allows transactions to be securely stored and verified without any centralized authority at all, because (to oversimplify) they are validated by the entire network.

Its success has spawned scores of variant cryptocurrencies, known as altcoins, the most famous of which is Dogecoin. But Bitcoin remains, by far, the big dog.

If you control more than half of the computations that power any cryptocurrency, then you can spend the same money more than once: a 51% attack. Altcoins are especially vulnerable. But the stunning amount of computing power being poured into the Bitcoin network renders it (probably) effectively immune to such an attack, as per this mindboggling graph from blockchain.info

The Bitcoin mining network is currently performing some three hundred quadrillion hash computations per second to secure and verify Bitcoin transactions. (If you think thats environmentally wasteful, compare it to gold mining.) Meanwhile, despite its much-publicized decline of late, Bitcoin still has a collective market capitalization of nearly $5 billion, twice what it was a year ago.

Why You Should Care

Bitcoin is only mildly interesting as a store of value; there are many good alternatives. Its more interesting as a means to transfer money to anywhere and anyone, with greater speed and lower transaction fees than most alternatives, with no ID requirements.

But its really interesting because its the worlds first form of programmable money.

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Bitcoin 2.0: Sidechains And Ethereum And Zerocash, Oh My!