TOP-3 cryptocurrency misconceptions
Throughout its existence, blockchain technology has acquired not only loads of popular projects and promising startups, but also many myths. We would like to introduce you a few of the most common cryptocurrency errors
It all started with Satoshi Nakamoto
Blockchain technology is the most commonly used one with cryptocurrencies. Both terms have grown so much together for an average person, so that when you try to ask: “who invented the blockchain?” as a common response, we would get a confident chorus of the same answer: “Satoshi Nakamoto”. But it is a false judgment.
The idea presented by Satoshi Nakamoto wasn’t new. Back in 1991 (which is, 17 years before the “birth” of Bitcoin), two engineers, Stuart Haber and Scott Stornette, were looking for a solution to the problem of digital document verification. Developers began to use a cryptographic hashing algorithm in order to create a unique identifier for each file. Such ID changes every time when the document has been edited. In fact, Haber and
Stornett’s software can be considered a prototype of modern blockchain technology.
Later, in 1998, an engineer Wei Dai introduced the concept of B-money. This is an anonymous system that distributes electronic media. It describes in detail the most of the properties of modern cryptographic systems, if not all of them. By the way, Satoshi Nakamoto in his White Paper refers to Wei Daya’s work several times.
At the same time in 1998, a scientist and an engineer - Nick Sabo created the Bit Gold digital currency algorithm, which has the same principles as Bitcoin. It lies in the fact that network participants solve cryptographic tasks using computing power and are rewarded in the form of BitGold.
And these are just a few popular names in computer engineering. But this list is much longer. So when answering the question: was Nakamoto the first one - then the anwer is “No”. But it was he, who presented the best implementation of blockchain technology at the time of 2008.
Everything has been recorded forever
It is believed that the information stored in the distributed database can not be edited.
But it is important to understand that cryptocurrencies have different designs and might be not completely decentralised. For example, “Chinese ethereum” NEO has a very small number of authorized central nodes. All of them are controlled by OnChain (the creators of NEO - Ed.). In such case the holder of a node can manipulate the blockchain in any manner he wants - i.e. simply rewrite it.
Moreover, from a technical point of view, there is always the possibility of cancellation of the operation or even a block.
Perhaps the most notorious case of transactions cancellation was the case of The Dao platform. Attackers withdrew about 50 million tokens from users' wallets. Then The Dao simply canceled all operations that followed the robbery. That allowed to return all the crypto assets to their legitimate owners, but also demonstrated that “nothing lasts forever under the moon.”
The complete anonymity of cryptocurrency transactions is considered one of the main advantages. And indeed it is. All transactions are publicly available and in most cases are associated only with an email address. However, users will not be able to keep incognito forever.
In order to understand who is who, it is enough to connect the address of the wallet and the IP of the computer or any other digital identifier from which operations were carried out. And then all the actions with cryptocurrency within any period of time chosen would immediately become "tied" to the purse owner identity.
Of course, these days there are special services-mixers, that mix the funds and bring them to new addresses. There are cryptocurrencies “designed for" the anonymization - Zcoin or Dash. But those are ready-made solutions of anonymity problem for the main cryptocurrencies.
In addition, crypto owners’ identities will have to be revealed when one need to exchange cryptocurrency for Fiat.
As an example, one of the parts of LetKnow project is LetKnow Exchange - a cryptocurrency exchange. Users’ verifications on our platform is a mandatory procedure (KYC - know your customer). The company took this step, as it intends to work exclusively within the legal field. For this reason, licenses for both cryptocurrencies and fiat operations were obtained, as well as a multi-level client identification system was built, etc. These measures allow you to secure digital assets within the system. However, at the same time, users may remain anonymous only up to a certain level.
Author: Igor Krayushkin, Technical Director, LetKnow HQ Ltd.