By Eli Levi, Business Editor
There is a not-so-new fad taking the markets by storm called cryptocurrency, which enabled innovations in finance that were not possible prior. Most significantly, crypto allows for direct online payments without the use of a third party. Previously, when it came to digital transactions, there was no way to tell that someone was not double-spending money unless there was a third party to verify that this was not the case. This is why third parties, like banks and companies such as Venmo, PayPal, Zelle, etc., exist- they ensure that no one promises to send out the same funds to multiple external accounts i.e. double spend the money. More than 90% of dollars are digital, existing only on a database as lines of code. Therefore, digital money can be infinitely replicated and needs some form of third-party verification. Bitcoin acts similarly to hand-held bills, in the sense that it is individualized. So too, Bitcoin, the most famous form of cryptocurrency, utilizes blockchain technology that allows each bitcoin to be spent only once.
Another problem inherent in the conventional economy was the level of expected fraud in digital transactions. Bitcoin solved this issue through the use of a distributed ledger. In the most simple sense, this means that whenever any transaction takes place, every single other bitcoin confirms that transaction. A side effect of the distributed ledger is that the more bitcoin mined, the more secure all of bitcoin is.
Mining means “finding” the cryptocurrency using compute power. In order to mine bitcoin one has to solve an extremely complex math problem and, once solved, miners are rewarded with a bitcoin. The proof that a bitcoin is owned by a particular miner is that they can point to all of the compute power that was used to solve this complex math problem. As of today, over 19 million of the 21 million bitcoin have been mined.
Finally, one of the most unique features of Bitcoin is that the code is public and the rules have already been written. Once Bitcoin was launched, there is no way to change it unless over half of all Bitcoin owners would agree to change the way it functions. It is even impossible for the founders to do so without a consensus. If a company is created nothing stops the CEO from changing their mind the next day and changing the rules they put in place for the company. With Bitcoin, there is no going back.
Ethereum is the second-largest and second-oldest cryptocurrency. Ethereum is interesting because it is a platform that allows almost anything to be built on it. The limit is one’s imagination, as opposed to Bitcoin, which has only specific functions and abilities such as a money supply network. Vitalik Buterin, the creator of Ethereum, intended the Ethereum network to be the infrastructure for anything (a company, art, logos, NFTs, other cryptocurrencies, other blockchains, different protocols, software, etc.) to be built on top of and secured by the network through blockchain technology. Vitalik also included ‘Eth’ which is the currency used to transact within the Ethereum network. Ethereum created pieces of infrastructure that are secured by the blockchain and, therefore, do not require a trusted third party eliminating potential foul play. Ethereum is a computer to Bitcoin’s calculator; it is much more efficient than Bitcoin in the way that it secures its network and its capabilities.
Solana was born out of the fire of the first crypto-crash (2015). Anatoly Yakovenko created the Solana blockchain in about two and a half years, inspired by his time working at Qualcomm. It is helpful at this point to recap and expand on Bitcoin to better understand what problem Anatoly was trying to fix within the existing crypto ecosystem. Bitcoin’s security is based on its proof of work, a form of objectively measurable security, that creates a store of value In the same way that gold can be tested to show that it is, in fact, gold and then be accordingly measured, Bitcoin can be “tested” and measured objectively, with no trust necessary; the expended energy is the proof of ownership. This, however, makes Bitcoin extremely slow for transacting across the network. If the amount of energy needed to prove ownership would be lowered, the security of the blockchain would also decrease. Therefore, while Bitcoin is extremely secure, it is limited to about seven transactions a second. With this understanding in mind, Anatoly came up with the core idea upon which Solana would be built: Instead of the blockchain being a real-time game where whoever hits the key faster has their transaction take place first, Solana implements a turn-based game where each user has a scheduled time. Within their allotted time slot, they can do whatever they want to do on the network. Whereas with Bitcoin all users’ coins have to confirm that a transaction was executed before moving on to the next payment, Solana’s pre-secured one-minute slots significantly expand capacity. As everything is scheduled in advance, nothing needs to be confirmed in real-time. This makes Solana a much faster network to transact on with a theoretical limit of 700,000 transactions per second at this stage. When it comes to more complex and distinct types of transactions Solana slows down, but even so, in comparison to Ethereum or Bitcoin, there is a huge increase. In the future, when they integrate new pieces into the Solana blockchain, there could be a theoretical limit of 10 million transactions per second.