What Terra’s Collapse Teaches About “Crypto” And Bitcoin
Really great piece by Namcios a Bitcoin Magazine on sh!tcoins versus Bitcoin and why there should be no comparison.
In short, it can be argued that the lesson learned from this is: alternative cryptocurrency projects (altcoins) are but an experiment, while Bitcoin is the only tried and tested peer-to-peer digital money.
Bitcoin was born out of the ideals of the cypherpunks, a group of early cryptographers with a shared vision that got together to explore what privacy could mean in the then-upcoming digital world – especially as it relates to money.
The cypherpunk movement was spun out, for the most part, of the work of Dr. David Chaum, a cryptography pioneer that brought the mathematical technology out of the hands of government bureaucrats and into the realm of public knowledge. His explorations kick-started an entire line of work, dedicated to finding how society could port peer-to-peer money – cash – to a digitized economy.
With a clear goal in mind, those mathematicians began crafting what a solution could look like through research and experimentation. Decades later, Satoshi Nakamoto would put it all together and add their own spin to arrive at Bitcoin, the first and only decentralized and trustless form of digital money.
As Bitcoin grew in popularity, alternative forms of what came to be known as a cryptocurrency – a currency that exists in the digital realm through the usage of cryptography – started to be created. While those coins initially were born to compete with Bitcoin, a whole new slew of projects later began to emerge with different value propositions while putting their own spin to the blockchain, consensus and cryptography that made Bitcoin work.
Nakamoto designed the Bitcoin protocol to leverage PoW, a consensus mechanism that relies on computing power and free competition to mint new BTC on Bitcoin’s blockchain. The bitcoin mining race, as it is known, comprises thousands of miners scattered around the world with a single objective – find the next valid block and receive bitcoin as reward.
The altcoins, however, have mostly drifted away from PoW to favor other novel consensus mechanisms. The most popular alternative, PoS, allows participants to lock their holdings of the given project’s native token to become block creators instead of letting them compete with mining hardware and electricity to mine new coins.