Evolution and progress in the world of cryptographic currencies
It is rare that a technical invention is perfect at birth. Our cars and planes are not much like the first cars and planes. This is also true of washing machines, televisions, mobile phones, not to mention computers.
Unsurprisingly, this diversification and this gradual improvement occur today in the field of cryptographic or cryptocurrency currencies. The Bitcoin (we will use a capital letter to designate the protocol and the network, and a minuscule to designate the currency and the monetary units that result) was the first and if, oddly, some consider it as unsurpassable, the proliferation of variants shows that it is only the first step in a technical evolutionary process comparable to what has been observed elsewhere. A multitude of companies related to this new technology have emerged that mark the importance of the initial invention and the incredible bubbling that resulted from ideas and developments (see Appendix 1).
What is a cryptocurrency?
Recall what are crypto-currencies - sometimes more cleverly called crypto-active - by describing a kind of simplified model which we will explain how are derived variants that sometimes deviate significantly from the basic model.
The first characteristic of a cryptocurrency is to be digital: you will never hold a bitcoin (Bitcoin network), or a ripple (network Ripple) or an ether (Ethereum network) that are the three most important cryptocurrencies today, in a family of over 2000.
The existence of such a currency is based each time on that of computer accounts and a database, called "blockchain" or "chain of pages", holding all the information on the status of all accounts. This database of accounts is copied into the memory of a multitude of computers, called "complete nodes" or "validating nodes", organized in a network, that is to say communicating with each other via the Internet. . The database, which evolves only by adding new pages or blocks (hence the blockchain name ) allows each complete node to know the status of all accounts: account A has n units of the currency the account B has metc. Everyone else can know about account status by querying some complete nodes.
This copy of the blockchain in the memory of each complete node makes it unfalsifiable: if a holder of the blockchain wants to modify it in his favor, for example to allocate more monetary units to the accounts he controls, the others will refuse his version falsified and will stick to the common version. It is said that the currency is decentralized and without a central authority because nobody has the sole power to disrupt the functioning based on consensus. The precise protocol of operation of a cryptocurrency is determined before its issuance and indicates the particular properties, for example by setting the frequency of adding new pages to the blockchain. The protocol organizes the pace of issuance of new monetary units and their circulation from one account to another.
Hold an account
To hold an account is to know the secret key of the account, which is issued at the moment of its creation to the one who requests the opening of the account. Programs called "wallet" or wallet running on smartphones or micro-computers, allow everyone to create their own accounts, usually for free and without having to provide his identity. This anonymity of holding accounts makes cryptographic currencies similar to cash circulating in the form of coins or banknotes: as for coins or banknotes, monetary units are anonymously held, received and spent.
If you know the key secretes an account you can act on him and for example request a transfer of a unit of this account in favor of another account whose number you know. This operation is a "transaction" and all the nodes of the network that keep the blockchain will be informed; they will modify (by adding a page containing several transactions) exactly the same way their copy of the blockchain to take into account the modification of the balances of the accounts after the transfer. All copies of the blockchain will remain synchronized, that is to say, perfectly identical.
The collective and consensual control of the blockchain - so on the accounts in general - breeds confidence and suggests that holding a unit of cryptocurrency is worth something. This value of a unit is established as for a stock exchange or a work of art, by the meeting between those who want to sell and those who want to buy and who agree on a price of exchange. Websites called exchange platforms (or "exchanges" in English) organize these meetings. Some crypto-currencies are worth almost nothing, others like bitcoins are quite expensive: a bitcoin = $ 3673 on February 9, 2019. To compare the importance of crypto-currencies to each other, we multiply the number of units outstanding by the price of a unit in dollars. This global capitalization reaches $ 64 billion for bitcoins, 12.8 for ripples and 12.5 for ethers (February 9, 2019). Twelve cryptographic currencies exceed a capitalization of one billion dollars (February 9, 2019). Seehere .
Perfect operation
Before the start of the bitcoin network on January 3, 2009, it was thought impossible to operate a currency without a central authority. The Bitcoin protocol has shown that it is possible. It has been running for over 10 years and has never been hacked. Bitcoin scams, theft of bitcoins, their use for fraudulent actions, are like dollar-based scams, the theft of dollars, and the use of dollars to carry out illicit trafficking: they do not concern the currency itself, its issue and its mode of circulation. Repeat it for 10 years the Bitcoin network runs perfectly. It is thanks to the use of cryptology (to organize and consolidate the blockchain and allow the system of signatures that protect the transactions), to the reliability of computer networks and to the computing and memorizing capacity of modern computers that this miracle of a digital currency without central authority has occurred. The inventor of the Bitcoin protocol comes under the name of Satoshi Nakamoto, but it is a pseudonym behind which is probably hidden a group of several American experts who for the moment did not wish to make themselves known.
The operation of the network is based on the complete nodes which are voluntary computers remaining connected, monitoring transactions and each retaining a copy of the blockchain by updating it according to the transactions that are circulating. Fortunately, it is not necessary to be such a complete node to have an account and use cryptocurrency: the majority of account holders are not complete nodes.
For the work done, a reward is given to the complete nodes : it is "the incentive" that comes to pay the service provided allowing the cryptocurrency to exist. The distribution of this reward is sometimes done (and in particular in the case of bitcoins and ethers) by the creation of new units of the cryptocurrency that are assigned to certain complete nodes according to rules on which we will return. In the case of bitcoins new units are created every ten minutes and are assigned to a network computer as a result of a contest between the complete nodes. The contest rewards the first complete nodesuccessful in solving a problem of a mathematical nature that can only be solved by carrying out many calculations. This mode of distribution of the incentive is called " proof of work " (one has to work to have chances of receiving the incentive); it led to the development of an industry called mining because it extracts new bitcoins as gold is extracted from a mine, here by conducting a calculation rather than digging in the ground. Unfortunately, because of the game of competition between minors, this repeated competition of calculation became energy-consuming. We will return to this at the same time as we will discuss other ways of distributing the incentive.
This general diagram of the cryptocurrency protocol being recalled, let us come to the possible variants and improvements.
Strengthening or abandoning anonymity
The anonymity of the accounts is according to the opinions too weak or too strong.
It is too strong for some who see it as a danger. Indeed, a cryptographic currency such as Bitcoin makes it possible to hold and use an account without ever delivering its identity, which makes it possible to manipulate the units of the cryptocurrency as cash, but in fact much more liquid than tickets or coins, since in a few minutes you can send discreetly the equivalent of millions of dollars or euros from France to for example Australia. This anonymity is prized for money laundering, the payment of ransoms, and all kinds of traffic. This results in mistrust of crypto-currencies. State crypto-currencies are announced without always knowing precisely their properties and in particular their attitude towards anonymity. They may well require users to open accounts only after giving and proving their identity. The cryptographic currency Ripple - the most accepted banking world - has introduced procedures called KYC ("Know your consumer") to precisely limit anonymity. The cryptocurrency Electroneum (672th in February 2019) is a cryptocurrency that demands to know the identity of the holders of its accounts. It should also be noted that the exchange platforms required to buy or sell cryptographic currencies for customary fiduciary currency almost always require the identity of their users. In short, holding and circulating cryptographic currencies is anonymous, but trading for common currencies is much harder!
As a result, the anonymity of a basic cryptocurrency (such as Bitcoin or Ether) is considered imperfect by some users. All transactions are written in clear on the blockchain to which everyone has access; this makes it possible to follow from account number to account number the movement of important sums. In some cases this allowed the account holder to be identified ... and arrested because it was established that illegal traffic was linked to the sums of this account. It resulted from this situation that some minds attached to anonymity have imagined changes in the design of blockchains to prevent tracking the movement of account balances. Among the cryptocurrencies that increased this anonymity by making (almost) impossible the tracking of transactions, mention Monero, Dash, Zcash, Verge, Komodo, PIVX, Hirozen, Zcoin, Nav Coin. Bitcoin today is of much less interest to thugs who have reported on these currencies to increased anonymity and especially on Monero. Several countries including China and South Korea have undertaken to completely prohibit any anonymous exchange involving cryptocurrencies.
Smart-contract, ICO and decentralized applications
A transaction - a transfer - once signed and launched by the account holder from his computer or smartphone circulates on the network of complete nodes that can (in the medium term) only accept it and execute what it asks for the transfer of a certain amount from an account A to an account B. This makes the operation irreversible. This irreversibility does not exist for transfers in the classic banking world where the institutions keep for several days the possibility of canceling a transfer. This irreversibility of transactions in cryptocurrencies is interesting and has been generalized with what we call smart-contracts or "smart-contracts". These are programs that some cryptocurrencies are deposited on the blockchain and have the capacity to hold monetary units, to receive them and to send them automatically. The first crypto-currency to offer a powerful language for writing these smart-contracts was Ethereum (see "From Bitcoin to Ethereum: The Computer-World ", For Science , November 2016, pp. 104-109,).
Irreversibility becomes for a smart-contract the impossibility of stopping the operation which is simultaneous on each complete node. This forbids the program to perform anything other than what is planned. These programs which, once defined, can no longer be stopped or modified because their operation comes from the network execution consensus, constitute an extraordinary new computer. It's like having a global, decentralized, perfectly reliable computer that does what you want it to do without anyone being able to interrupt or corrupt it: a kind of computer animated by a God imperturbable and obeying the instructions of the programs entrusted to him. This allows for example to schedule gambling and betting games where the Organizer can not refuse to pay and leave with the crate when he loses too much. The termDecentralized applications (DAPP) is often used to refer to these smart-contracts.
Thanks to these smart-contracts, we create crypto-currencies that have the same properties as those based on specific blockchains: they are without central authority and monitored - indirectly now - by the complete nodes of a network. Clearly, thanks to crypto-currencies allowing smart-contracts, it is very easy to define new decentralized currencies without having to set up a new network of complete nodes each time.
This possibility of having the equivalent of a particular blockchain at a lower cost, relying for example on the Ethereum blockchain, has led to the rapid appearance of new crypto-currencies whose number has exploded since 2016. Crypto- currencies related to certain companies seeking to raise funds were introduced by dozens. The monetary units of these crypto-currencies are called tokens and these fundraising operations are called ICO for Initial Coin Offering by analogy with IPO for Initial Public Offering . See some details in Appendix 2.
Several billion dollars could thus be found for the financing of start-ups, which generally work in the field of cryptocurrencies or blockchains. Let us point out, however, that unlike highly regulated IPOs, ICOs are not yet sufficiently regulated and that they have been used to organize various scams. They are banned in China, and financial authorities in many countries are wary of them. The issue and handling of these chips is reliable but not what they represent because the companies that are financed by the purchase of these chips are sometimes empty shells. In France, the Autorité des marchés financiers (AMF) will award labels so that buyers interested in the ICO can see clearly.
See an example of an ICO in Appendix 2 and the AMF report published early in 2019.
To conclude on the smart-contracts, other cryptocurrencies have followed Ethereum by offering the possibility on their blockchain to deposit smart-contracts. The network of bitcoins does not allow the writing of smart-contracts which would be deposited on its blockchain, but a blockchain connected to that of the bitcoins denominated Rootstock allows it. The cryptocurrencies Ripple, EOS, NEO, Cardano also allow the creation of smart-contracts.
Cryptocurrencies without proof of work
Coins working with "proof of work" to reward those who agree to be complete nodes of the network and contribute to what it works have two serious flaws. The first is that their mere existence and security require a continuous and significant expenditure of electricity. The article by Pour la science " The Electrical Insanity of Bitcoin " (February 2018, pp. 80-85) detailed this problem. Several methods of convergent calculations on the electrical expenditure of Bitcoin are explained in the document here .
An update of the figures in these documents leads to the conclusion that at least today (9 February 2019) the annual electricity expenditure of the bitcoin network is 40 TWh of electricity, despite a recent decrease (in the order of 30 %) due to the fall in Bitcoin prices since December 2017. This 40 TWh (minimum) is equivalent to that produced by 5 nuclear reactors, and that is more than all the French wind turbines produce (24 TWh). By comparison, Google's data centers spend less than 6 TWh per year. Many people consider this absurd, if only because of the pollution that results.
The second serious defect of crypto-currencies using proof of work is that it creates a competitive disadvantage for them with respect to cryptographic currencies that do not use work proofs. The reasoning is the following.
The operation of a cryptocurrency network inevitably has a certain cost, which in one way or another has to be paid by the users (those who have accounts, and circulate the tokens of the cryptocurrency) . The new issues of monetary units (in bitcoins, ether, etc.) to pay the complete nodes are the equivalent of the famous billboard of the usual currencies. They create an inflationary pressure and thus by losing value to the units already issued are an indirect means of charging users. Even if the strong price variations today mask this cost, in the medium term it will have to be taken into account. The commissions directly paid to the complete nodes of the network (for example in the case of the Bitcoin network), or of users to the complete nodes . In the case of cryptographic currencies using proof of work, the cost of mining equipment and electricity will be, directly or indirectly, paid by users. Yet these paid sums will only partially go into the pockets of complete knots, because they have to pay for their equipment and electricity. All in all this mode of operation introduced as a tax puncturing what goes from the users of the network to the complete nodes that make it work. Today, after falling bitcoin prices, full nodes often spend more than 90 percent of what they earn on their equipment and electricity. Compared to a cryptocurrency that does not use this means of distribution of the incentive, all things being equal and retaining this figure of 90%,
The other systems most used to replace work proofs are "proof of stakes" and "evidence of delegated stakes". In the issue evidence system , the complete nodes of the network (sometimes called masternode) are remunerated in proportion to the amounts they deposit and are sequestered by the network. This temporary cash deposit replaces the investment in equipment and the electricity expenditure of the work proofs . Here, finally, it costs nothing to the complete nodes that can recover the temporarily sequestered amounts. As a result, being a complete node on a blockchain that is evidence-based is considerably less expensive than in the proof of work system.which will consequently make the cost of operating such a network much cheaper for its users.
In the variant of "delegated stakes proofs", the complete nodes or validating nodes are elected by those who have a certain amount of cryptocurrency. Crypto-currencies operating with the evidence of stake or delegated evidence of stake, hold today several billions of dollars and resist as well attacks as the crypto-currencies functioning by the proofs of work.
Another advantage of challenge evidence or delegated challenge evidence is that the number of complete nodes can be limited, which allows faster consensus building between nodes and speeds up the operation of the exchanges and leads to a higher number of nodes. large capacity in number of transactions per second.
The over-network Lightning network built over the Bitcoin network has been to allow the Bitcoin network to exceed 6 transactions per second which is its limit (when the size of the added pages is 1 mega, which is the case today and can not seem to change). Lightning Network is a technological marvel, but it no longer works on a principle of multiple copies of information and multiple validation of transactions and pages and is, in this sense, more in line with the basic principles that Nakamoto introduced. by inventing blockchain technology, principles that are always used to explain that they are safe and robust ways to build trust.
For its part, the network EOS (which uses a proof of delegated stake ) easily reaches several thousand transactions per second without having to give up the basic principle of blockchains.
Other systems that do not involve energy consumption are also used, such as "burned tokens": to use the services of the blockchain, you must buy tokens and they are destroyed when you use their services, which is comparable to the system of postage stamps ... practiced for almost two centuries around the world.
The fight against volatility: the stable-corners
One of the most serious shortcomings of crypto-currencies is their volatility. For example, the price of bitcoin rose from around $ 1,000 in early 2017 to $ 20,000 in December 2017, before falling back to around $ 3,500 today (February 9, 2019). It may be related to the relative youth of these currencies, but many experts believe that volatility is inevitable due to the lack of regulation by an issuing authority. The existence of a direct counterparty - when, for example, a currency is backed by gold (like the dollar between 1944 and 1971) - or indirectly - when it is linked to a State which guarantees it - is also mentioned as a factor of price stability, lacking in cryptocurrencies.
Hence the idea of creating and backing a cryptocurrency to a pool of values. This was done, giving birth to what are called stablecoins(stable chips) The most important is the tether issued by the company Tether Unlimited which ensures that for every tether unit issued, it keeps a dollar reserve. Although the reality of this counterpart has sometimes been questioned, it seems serious enough that more than two billion dollars today circulate in the form of tethers. Another proof of confidence that has been established about this stable cryptocurrency is that the tether price is $ 1.00 (February 9, 2019) and that for more than a year, it has always remained between $ 0.96 and $ 1.03. The year 2018 was the year of this new type of cryptocurrency and 2019 will see it develop further. Increasingly scrupulous auditing systems have been introduced to ensure that the announced counterparties are real.
The fact that a firm is linked and guarantees the issue of such a cryptocurrency is opposed to the ideal of total decentralization which was one of the motivations of the creators of the Bitcoin network. However, the relative failure of conventional cryptographic currencies due to, among other things, the extreme volatility of their prices, and the strength of counterparty control procedures offered by stablecoins suggest that they will soon play an important role in this new period. of the history of currencies, started ten years ago with bitcoins.
It should also be noted that apart from the backing of a store of value, a stablecoin like the Tether is decentralized for the monitoring of transactions and that fully decentralized models of stablecoins are tested, which, if they prove satisfactory, will meet the expectations of those who attach importance to total decentralization.
The combination of smart-contracts and stablecoins is perhaps about to create the real beginning of a world of digital currencies
(a) Programmable (especially through the use of smart-contract);
(b) able to move quickly in a safe and irreversible manner;
(c) with almost no cost of operation and in particular without insane energy expenditure;
(d) partially or totally decentralized;
(e) possibly anonymous, and
(f) whose courses are no longer subject to the wild variations we have seen for Bitcoin and its sisters.
Annex 1 An industry around cryptocurrencies
Various types of activities are organized around crypto-currencies giving birth to companies, sometimes important, based on various economic models. Let us mention a list, noting that often several types of activities are mixed within the same society.
Companies sell training or application development services related to crypto-currencies and blockchains.
Companies collect information around crypto-currencies, publish them, sell them, etc.
Exchange platforms play the role of exchange bureau, they allow for example to buy ethers in exchange for euros. They often offer the possibility to keep your purchases which saves you from having to manage the keys of your accounts. They earn money by charging commissions for the operations they carry out. In France and in many countries, they must know their users who to register indicate and prove their identity.
Developers and manufacturers sell electronic wallets software or hardware to own own cryptocurrencies, that is to say, to manage the keys of his accounts. For example, the French company Ledger offers hardware devices for securing keys and crypto-currency accounts; it is the first of its kind and has sold more than a million of its security devices.
The designers and manufacturers of mining tools. Specialized materials are often required to participate in computational competitions that are proof of work. They are either ASIC (Application Specific Integrated Circuit) assemblies or, for example, for ethereum, graphic cards. In 2017 and 2018, the market for these materials was worth billions of dollars. Firms are born of this trade (the Chinese firm Bitmain for example) or took advantage of it (manufacturers of graphic cards).
Companies buy mining equipment and electricity and set up "mining farms" to operate. They earn cryptocurrency units. Their profitability depends on competition, the price they pay for electricity and the price of cryptocurrencies. Several billion dollars are to be earned each year. This caused the appearance of important firms. They are in China, Iceland, Canada and where you can buy electricity cheaply. Following the fall in the price of cryptocurrencies in 2018, they are many today to encounter difficulties and sometimes have to stop their activity. The French firm Bigblock datacenter has built an original model: it moves, installs and runs for mining tools in its factory in Kasakhstan where it manages to buy very cheap electricity (0.026 euro KWh)
Annex 2. ICOs
An ICO (Initial Coin Offering) is a fund-raising method based on a cryptocurrency linked to the company that wants to finance itself. Cryptocurrency tokens are usually created using a smart-contract (see the text of the article). Tokens can be purchased during the start-up phase of the business. These tokens are exchangeable on the cryptocurrency trading platforms. Most often bitcoin or ether is used as intermediate money: we buy bitcoins and then exchange them for ICO chips.
The ICO tokens give special rights to the company that issued them: voting rights, rights to use services at attractive prices, etc. Unlike shares issued during an IPO (initial public offering), tokens do not represent shares of the company. To buy the chips of an ICO is to prepay the services which will be proposed.
Example. Storj Labs in Atlanta, USA, creates a massive, decentralized storage service. The computer files to be stored are encrypted and cut into pieces. They are then copied - with redundancy to protect themselves from accidents - in the memory of computers that agree to participate in the storage network. The capacity of the network exceeds 100 petabytes (= 10 ^ 17 bytes), and the goal is to arrive at several exabytes (10 ^ 18 bytes). The network is already composed of 150,000 computers capable of holding pieces of files entrusted to Storj in 200 countries.
In early 2017, Storj Labs raised the equivalent of $ 30 million via an ICO. Their token, the storjcoin, makes it possible to buy storage space on the Storj network; it therefore represents privileged access to developed services. The capitalization of the Storj tokens in February 2019, (victim of the general fury of the courses of the year 2018) amounted to 18 million dollars. If the company succeeds its chips will be valued.
Unlike SOPs, ICOs are poorly regulated and it is considered risky to enter these markets before laws clean up and control their operation, which is ongoing.
Appendix 3. Serious Weaknesses of Work Evidence
(A) Competitive handicap.
There is a competitive disadvantage created by the money spent on investment, operation and purchase of electricity to operate the mining.
This argument is detailed in the text in the paragraph "Cryptocurrencies without proof of work"
(B) the illusory security against attacks 51%
To defend the massive use of energy brought about by "proof of work", one evokes the high cost (and thus dissuasive or insurmountable) that they require to conduct a "51% attack":
"A minor who has more than half the computing power of the network can disrupt its operation and for example spend twice the money of an account. "
This high cost of attacks 51% according to the defenders of the evidence of work would protect the network of the crypto-currencies concerned, it would secure it. The more money a cryptocurrency would spend for mining, the better it would secure its blockchain.
We will explain that this argument is false.
Note first that the cost required is not so high. This is why some important crypto-currencies (for example "Ethereum classic", a variant of Ethereum) using the proofs of work suffered attacks 51%. More than a million dollars were stolen in January 2019 by a 51% attack on Ethereum classic.
The cost of a 51% attack is less than what all miners earn in a year - about $ 2 billion for the Bitcoin network - so it's within the reach of an agency like the NSA or a firm like Apple that has more than $ 200 billion reserve.
In addition, this cost can be reduced in several ways:
(a) By leasing the necessary computing power rather than buying the equipment that produces it.
(b) By gradually installing the necessary materials, depreciating them with the money earned by mining, before leading the attack; he who undertakes this gradual acquisition of more than 50% can do so without attracting attention by distributing the power he accumulates on several mining poles;
(c) By diverting the computing power to his advantage by an intrusion method targeting one or more important minors; it's probably not easy, but how to be sure it's impossible!
In fact, the 51% resistance to attacks is linked to the surveillance of the network by the community of those who have an interest in what it works and who will react to stop it (and this is what often explains fierce advocates of Bitcoin like Andreas Antonopoulos). It is true, moreover, that the Ethereum classic attack was made less serious, because once spotted the major exchange platforms stopped accepting to exchange the units of this currency, making it impossible to profit from double expenses.
In conclusion on this point: if the collective surveillance of the network and its reactivity protects it from an attack 51% and not the cost itself of the attack, then as much to rely on a consensus algorithm like that of the "proofs" stakes' comparatively very low in energy consumption and which can equally benefit from collective supervision. The electrical expenditure of the proofs of work then appears as absurd and constitutes a second serious defect of this method of consensus.
(C) Centralization
Competition among miners leads to a specialization of certain mining actors. These players gain an advantage over other miners either because they buy electricity cheaper or because they design specialized mining tools (ASIC chips) which they benefit primarily (following major investments like Bitmain). As a result, the mining market is focused on a few players.
This is what was observed for Bitcoin for which China still holds 70% of the mining power (see here ).
This is obviously contrary to the objective of decentralization put forward by the defenders of cryptographic currencies. In the case of Bitcoin, as has been recently demonstrated, the result of this concentration is that China can kill Bitcoin when it wants. On this point, see here : "We're having a lot of possibilities and strong motives for performing a variety of attacks against Bitcoin. "
Some geographical reorganization of the mining seems to be taking place, with for example the construction of factories in Kazakhstan ( here ), or Georgia ( here ). These changes, not yet very important, do not change the fundamental problem of centralization that can be considered inevitable, something long noticed by some analysts (see for example here )
(D) Blockchains trapped.
The power on a blockchain working by proof of work belongs collectively to those who undermine. To undermine, they bought expensive specialized equipment. They do not want to change the functioning of the network, and do not want to replace the method of consensus proof of work by another less energy consuming that would make the purchased equipment useless. As a result, a network that adopts proof of work is trapped in it. This may explain why today the Ethereum network despite the promises of Vitalik Buterin does not pass to the evidence of stake .
(E) Crypto-jacking.
Crypto-jacking is a money-making method for hackers who successfully install hack programs on computer devices that do not belong to them. Of course the programs that will participate in the mining will do it without the owners of the contaminated machines know it. What will be gained by the calculations made by the mining programs will go to the hacker who managed to install the programs without the knowledge of the owners of the computers. The operation of installed mining programs may impair the performance of infected machines, and may even lead to serious malfunctions. The electricity expended by the operation of the clandestine programs will of course be paid by the owners of the machines.
In summary: the owner of the machine pays for electricity, suffers from possible consequences resulting from the clandestine operation of the program of which he does not know the existence, and the gains resulting from this program go to the hacker.
Two things need to be clarified:
The cost of electricity for the victim will usually be much higher than the gain of the hacker. There are two reasons for this. (a) The hacker does not care because he does not pay. (b) The machines on which these mining programs are set up have no reason to be particularly adapted to mining and probably never (as opposed to machines that undermine an operator who pays for electricity). On an ecological level, we reach a summit of absurdity: the owners of infected machines will spend considerably more than it will pay hackers and therefore the amount of electricity consumed will be much greater than the value of the crypto-currencies produced. Crypto-jacking is not just a robbery, but a terrible mess and an ecological crime!
It is the principle of proof of work that makes possible this type of scam, which has no equivalent for example for evidence of stake . This type of theft is related specifically to work proofs : it is a serious defect of work proofs .
Annex 4. Evidence of an issue
The idea of proof of interest is not to run a competition where you win in proportion to what you are able to burn as electricity, but in proportion to what you are able to commit as money (like in poker). The complete nodes that make the network work agree to sequester certain amounts of money in cryptocurrency units. These sums will be recovered, if the complete node performs the tasks entrusted to it correctly: to circulate the transactions, and to validate certain parquets of transactions to compose the new pages which are periodically added to the blockchain. Certainly such a system rewards those who are rich (it is necessary to deposit money to have chances to win), but it is also a lack of work proofs that reward those with the ability to burn a lot of energy. In general, the proof of interest protocol requires that the nodes that retrieve the incentive change on each new page, which is enough to prohibit attacks 51%, since these are only interesting if a complete node succeeded to be the winner several times consecutively.
A two-tier system has also been devised and implemented, the "evidence of delegated stake" or "evidence of delegated stakes" system, which is based on reputation. This time the nodes that will make the exchanges work, validate them and keep a copy of the blockchain are designated by a vote, where the weight of the ballots is linked to the monetary units that each has. The blockchain EOS whose capitalization reaches about 2 billion dollars works according to this scheme. Its resistance to attacks proves that it is a credible alternative to work evidence, and evidence of stake.
Annex 5. Soaring stablecoins
Since the volatility of the prices of cryptographic currencies makes it impossible to use them as a "store of value", or even as a payment instrument, it was necessary to prevent this volatility.
The simplest idea is to offer any holder of a cryptocurrency unit the ability to exchange it for a specific asset with a value that by definition will be considered fixed, for example a dollar. The possibility of this exchange makes it absurd to attribute a lower value to the unit in question. If in addition, whenever someone wants to have a unit of this cryptocurrency, it is given the opportunity to acquire at this cost fixed in advance, the price of cryptocurrency can not not go up. This is the idea of "stablecoins".
These stablecoins rely directly or indirectly on a blockchain which ensures the decentralized and irreversible nature of the transactions and the operation of the accounts, and allows anonymity. However it is necessary that the one who proposes these exchanges 1 against 1 (for example with the dollar) is credible. It requires that it organizes an independent audit system attesting that it reserves the counterpart of the units it circulates. This counterpart, kept in reserve by a certain actor, is a centralized aspect of cryptocurrency. It is considered regrettable by those who are committed to the idea of complete decentralization. Let us insist that the management of the accounts is decentralized and that such a stablecoin is not centralized like the is a state currency. What one gains with a stablecoin is therefore (a) a certain degree of decentralization; (b) fluidity and, in particular, the possibility of involving this currency in the actions of smart-contracts and (c) perfect price stability.
The main stablecoins :
USD Tether: $ 2,033,096,000 1 USDT = $ 1.02
USD coin: $ 349,144,000 1 USDC = $ 1.01
TrueUSD: $ 209,485,000 1 TUSD = $ 1.01
Paxos Standard: $ 141,051,000 1 PAX = $ 1.01
Gemini Dollar: $ 86,592,000 1 DUSD = $ 1.01
Dai: $ 73,083,000 1 DAI = $ 1.02
The Dai stablecoin operates according to a mechanism different from that described above. This mechanism is totally decentralized and relies on a counter-counterpart in cryptocurrency (for example 1.5 dollars of cryptocurrency for 1 dollar of stablecoin) which guarantees stability ... on the condition that the price variations of the cryptocurrency used to back up the stablecoin are not too abrupt. New models of fully decentralized stablecoins are being tested.
The success of stablecoins in 2018 has been remarkable. From 30 stablecoin projects (including 9 in operation) at the beginning of 2018, in early 2019, more than 160 projects (of which 28 are in operation) have been completed. The total market capitalization of these stablecoins doubled during the same period from about $ 1.5 billion to almost $ 3 billion. Note also that these stablecoins seem to be more easily accepted by the monetary authorities: the financial regulators of the State of Texas in the United States consider for example to give stablecoins a currency status in the same way as the euro or the yen .