12 Crypto as in cryptocurrency?

 

This chapter covers

  • Consensus protocols and how they make cryptocurrencies possible
  • The different types of cryptocurrencies
  • How the Bitcoin and Diem cryptocurrencies work in practice

Can cryptography be the basis for a new financial system? This is what cryptocurrencies have been trying to answer since at least 2008, when Bitcoin was proposed by Satoshi Nakamoto (who to this day has yet to reveal his or their identity). Before that, the term crypto was always used in reference to the field of cryptography. But since the creation of Bitcoin, I have seen its meaning quickly change, now being used to refer to cryptocurrencies as well. Cryptocurrency enthusiasts, in turn, have become more and more interested in learning about cryptography. This makes sense as cryptography is at the core of cryptocurrencies.

What’s a cryptocurrency? It is two things:

12.1 A gentle introduction to Byzantine fault-tolerant (BFT) consensus algorithms

 
 

12.1.1 A problem of resilience: Distributed protocols to the rescue

 
 

12.1.2 A problem of trust? Decentralization helps

 

12.1.3 A problem of scale: Permissionless and censorship-resistant networks

 
 
 
 

12.2 How does Bitcoin work?

 
 
 
 

12.2.1 How Bitcoin handles user balances and transactions

 
 
 
 

12.2.2 Mining BTCs in the digital age of gold

 

12.2.3 Forking hell! Solving conflicts in mining

 
 

12.2.4 Reducing a block’s size by using Merkle trees

 
 

12.3 A tour of cryptocurrencies

 
 
 

12.3.1 Volatility

 
 

12.3.2 Latency

 
 
 

12.3.3 Blockchain size

 
 
 

12.3.4 Confidentiality

 
 
 

12.3.5 Energy efficiency

 
 
 

12.4 DiemBFT: A Byzantine fault-tolerant (BFT) consensus protocol

 

12.4.2 A round in the DiemBFT protocol

 
 
 
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