The idea of getting lots of money for not working very hard is an attractive notion. That is why the thought of mining Bitcoins, a cryptocurrency, seems to be particularly tantalising. At the time of writing, a single Bitcoin is worth about $12,700 so the idea of running some software on your laptop to earn Bitcoins has a certain appeal.
According to Assistant Professor Prateek Saxena of the NUS School of Computing however, you should not bother. He is not some old fuddy-duddy, risk-averse academic though. The 35 year-old computer scientist, with a PhD from the University of California, Berkeley, is the co-author of major papers on blockchain, the technology at the heart of cryptocurrencies such as Bitcoin and Ethereum. And his objections to mining Bitcoin are simply practical ones. “An ordinary laptop running 24-seven will take 10 years to mine one Bitcoin on average,” he says. And in fact, he does not have a single Bitcoin himself. “I have turned away all Bitcoins offered to me. I have never felt the need to own Bitcoin.”
That does not mean he is not a believer in cryptocurrencies though. On the contrary, Asst Prof Saxena and his research lab members have co-founded a company that is planning to launch a new cryptocurrency called Zilliqa which promises to be much faster, more scalable and use less power than Bitcoin. If Zilliqa does everything it promises, it will give Bitcoin a run for its money — and may even usurp its crown.
CRYPTIC SPEAK
To understand how and why, it is first vital to understand cryptocurrencies and blockchains. Most of the world’s currencies have a centralised party that keeps track of transactions. Among other things, the centralised party ensures that people do not double spend, which is where a digital token is spent more than once. While solving the problem of double spending is important, the downside is that the centralised party has a monopoly over the infrastructure and there is no competition to bring charges down.
Cryptocurrencies, on the other hand, do not have a centralised record of transactions. It is a currency that uses cryptography for security. The technology underlying cryptocurrencies is something called blockchain. A blockchain stores the record of the transactions. “You can record a set of facts as blocks, you chain them up in time, and you cryptographically secure them,” says Asst Prof Saxena. It is an “immutable ledger”, which means you cannot make changes to it. It is public, you do not need to ask permission to use it, and is gives transparency and security. As these blocks are heavily encrypted, they are akin to complicated math puzzles that only powerful hardware can solve. Mining refers to the process of solving the puzzles and adding them to the public blockchain. Miners verify the transactions and keep the infrastructure going. Instead of having one record held by a central body, every node on the network has the same record. The costs of transactions go down because thousands of computers (miners) compete to participate in the transaction.
Bitcoin is the best-known example of a cryptocurrency but others include Ethereum and Litecoin. However, existing cryptocurrencies such as Bitcoin are not perfect. Bitcoin, for example, has a number of different problems: it is slow, not scalable and uses a lot of power. That is where Zilliqa comes in. Built around a 2015 paper that Asst Prof Saxena co-authored, Zilliqa promises to allow much faster transactions than Bitcoin or Ethereum. The Bitcoin network handles between four and seven transactions per second while Ethereum handles between 10 to 12 transactions per second. In October 2017, Zilliqa ran an internal test that was able to handle 2,488 transactions per second. And while Bitcoin slows down when the network gets bigger, Zilliqa gets faster when its network increases.
For cryptocurrency miners, the promise is that using the same hardware, they will earn more by mining Zilliqa than they will for Ethereum because Zilliqa can handle more transactions. And unlike with Bitcoin where the cost of mining goes up with each year as more miners join in, with Zilliqa, the mining rate will remain the same. Zilliqa is currently still building its platform, so it is not possible to become a Zilliqa miner at the moment but the company promises that within a year, anyone with a laptop can join in.