Dogecoin ($DOGE), a cryptocurrency which was born as a joke, is the sixth largest in terms of market cap ($31 bn) today, overtaking Ripple, Binance and USDC. Of the over 1,800 cryptocurrencies listed on coinmarket. com, Bitcoin and Ethereum are the largest and the most well-known. Bitcoin came into being in 2009 and Ethereum was launched in 2015. A natural question is what’s the difference between the two cryptocurrencies? They may appear similar, but there is a sea of difference between the two. While Bitcoin is purely a digital money built on blockchain, Ethereum is much more than digital money. It is a general purpose technology with an underlying cryptocurrency. Ethereum supports smart contracts – snippets of code capable of executing themselves when certain pre-conditions are met, and comes with its own programming language Solidity. The power of Ethereum comes from its ability to create applications called dApps or Distributed Apps (referring to distributed nature of blockchain technology). Ethereum is also Turing complete (meaning the ability to build any logic in the computer code). A serious limitation of Bitcoin is the delay in achieving finality as a block of information gets generated once every 10 minutes or so. One is supposed to wait for an average of six blocks, to be reasonably assured of the irreversibility of one’s transaction. This means you can be sure of your recorded transaction only after about an hour of its recording in the Bitcoin ledger. In Ethereum, this time is barely a minute! No wonder Ethereum is the most popular blockchain platform for the Decentralised Finance apps (DeFi). DeFi apps bring conventional financial tools (loan, collateral, interest, arbitrage etc) to the crypto world. Today, most of the cryptocurrencies (also called AltCoins) exist on Ethereum or Ethereum compatible platforms. This dominance of Ethereum platform has created a humongous transaction load on the Ethereum main net, triggering massive delays and high transaction cost. All cryptocurrencies rely on market forces to determine the transaction fee (to be paid to the miner of the block). In Ethereum, the transaction fee is paid in Gas units (analogous to gasoline used in vehicles), and the price of gas is set by the user requesting the transaction. When the transaction queue is huge, miners prefer picking those for verification which offer a higher gas price. On May 19, the gas prices were so high that transaction fee on Ethereum was an astronomical figure of $71. Ethereum just like Bitcoin uses Proof of Work (PoW) protocol and is an energy guzzler. This also contributes to higher transaction cost. Ethereum is working on improving its scaling and energy consumption issues. Ethereum 2.0, slated to be rolled out through 2022, would migrate from PoW to Proof of Stake protocol, making it super-fast and energy-efficient.
(The author is Transport Commissioner, TN. The opinions expressed here are his own)
Crypto, Cricket and CoinDCX
CoinDCX, the Cryptocurrency exchange platform, has become the first official overseas sponsor of Team Sri Lanka, when the neighbouring country will be pitched in a T20 series with India starting on July 21. Shikhar Dhawan, leading the Indian team, will take on Sri Lanka in three One Day Internationals. CoinDCX has emerged as the first crypto brand to come on board as a cricket sponsor. R Subramaniam, Head of Brand-Communication, CoinDCX, said this attempt is to create awareness and educate retail investors about new age assets.
Altcoin: An altcoin is a digital currency other than Bitcoin. Another way of describing the term “altcoin” is referring to it as an alternative protocol asset, meaning that it follows a protocol (set of rules) that’s different than that of Bitcoin.