About fake cryptocurrencies (Ethereum, Tron, Ripple, etc.)

Hornbeam

12 min

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In numerous popular videos and texts explaining the principles of operation of cryptocurrencies, this explanation is usually given using the example of Bitcoin, the first of the cryptocurrencies. Bitcoin is actually a pure and clear implementation of the principles necessary for cryptocurrency: openness of transaction history, the ability to verify the source of money along the chain, clear rules for the appearance of money, clear rules for creating new transactions. New coins appear only as a result of mining new blocks, and the mining reward gradually decreases according to a logarithmic law, as a result of which the total amount of bitcoins issued will never exceed the limit (21 million). Any spending of money (transaction input) must match the output of another transaction, money cannot appear from nowhere. To spend, you need to sign the transaction with a private key. A simple scripting language allows you to do multisig and all sorts of other useful things, including creating new currencies (tokens) based on the Bitcoin blockchain (omni layer, this is how USDT lives). There is no central node, the new block is determined by the consensus of all nodes - if there are several options, they accept the branch in which the maximum number of calculations has been made, this is a formal criterion that does not allow discrepancies. Any user can run their own node, the source code is open. not allowing for discrepancies. Any user can run their own node, the source code is open. not allowing discrepancies. Any user can run their own node, the source code is open.

Unfortunately, the concept of cryptocurrencies, despite its elegance, did not find understanding among the majority of users. The “average user” doesn’t care if their money is in a distributed blockchain or on a specific site. For him, it’s still “somewhere on the network.” When the money on the site is even calmer, because it is clear who is responsible for it, in which case you can quarrel or write on the social network about what scoundrels they are, or even sue, and if the money is "lost" in the blockchain, then there is no one to complain to. Users who buy bitcoins do not store private keys with themselves, but basically delegate it to third-party sites, so there really is no difference for them. And even if they store it at home, they first generate this key somewhere, and then download it. It is clear that this is no longer completely their key. As a result, rumors are spreading about a “bitcoin hack”, when money goes to hackers, and similar tales. On the other hand, smart and authoritative people explain that the blockchain and the cryptocurrencies built on it are reliable and correct, and there is no reason not to believe them.

This naturally led to the emergence of dummies of cryptocurrencies that supposedly use the same technologies, but at the same time give preferences to their creators, i.e. not so decentralized. It’s all the same for users, but it’s a profit for creators. The most common of these dummies is Ethereum.

In the zero block of ether , 72_009_995 Ether was distributed to 8903 addresses , this is more than the total rewards received for mining blocks (at first there were 5 Ether per block, then they made 3 Ether, now 2 Ether) for the entire time. Once again: more than half of all the ether that is now available was distributed in the zero block at the start of this cryptocurrency, and a smaller part appeared as a result of block mining . Try to google this fact in the description of this cryptocurrency - most likely nothing will come up, it is not advertised, and even hidden.

The geth ether node does not show these starting transactions as if they do not exist. Says block zero is empty.

Explorers either show their existence, but do not allow you to view details ( etherscan.io , blockchair.com ), or do not show them at all, as a result of which the transaction history at the address looks strange : only expenses, no income, but a positive or zero final balance. This information acquires particular piquancy in combination with the declared plans for the transition from proof-of-work to proof-of-stake, i.e. changing the consensus algorithm from “he who has done more calculations is right” to “he who has more money is right.”

Essential smart contracts are a different matter. In essence, this is no different from executing some kind of binary file on your computer; its code is not open, and the logic of its operation is unknown. The fact that it is in the blockchain, and not on someone’s website, does not fundamentally affect anything except the psychology of users who trust the word “blockchain”. Which is exactly what is required. The ERC20 standard defines "recognizable" function signatures, such as "transfer so many tokens from such and such an address to such and such", but ERC20 does not regulate what other functions this smart contract can have (for example, "take all tokens from all users" ). The code of a smart contract, like the code of a regular program, can be opened by the author, but this is a matter of good will.

Open source smart contracts, of course, have more reasons to trust - to the same extent as regular open source programs. But how many users care that Chromium and Firefox are open source, while Chrome and Safari are closed source?

Since purity and elegance of technical implementation were not the goal when creating Ether, these qualities suffered greatly compared to Bitcoin on Ether. Let me give you a few examples.

A bitcoin transaction can have multiple inputs and multiple outputs. As a result, I can, for example, give each of my counterparties a separate address for transferring money to me, see when one of them paid, and when I need to pay myself, I can pay from several of these addresses at the same time. And for change, generate some new address. The result is a certain degree of anonymity: the one to whom I paid does not know how much money I have in other addresses, how many clients I pay to, etc. Tracing the history of each of the transaction inputs in which he received money from me will not give him any interesting information.

In ether, a transaction has one input and one output. To pay someone, if I don’t want to pay in several installments (that’s why it’s a transaction), I first need to collect enough money at one of my addresses, and then pay from it, and the change will remain there. The transaction history of the address from which the person received the payment from me will give a lot of information about me.

And it's not just about privacy. When making a payment, I place the public key for this address on the blockchain. Obtaining a private key from a public one is currently unrealistic, but with the advent of quantum computers, anything can happen. With Bitcoin, as I said, change goes to a new address (this is exactly what is recommended to do), and to those addresses from which the payment was made, i.e. whose public keys are published in the blockchain, there is nothing left, there is nothing to hack.

The rules for the appearance of new coins in Bitcoin are laid down from the start - it is predetermined from which blocks the “halving” will take place (halving the reward for a block), thus the code determines how many bitcoins will be issued in total. On air, the situation is different: the size of the reward is written as a constant in the code, and the code needs to be updated regularly, and some updates change the size of the reward. Changing the node algorithm with loss of compatibility in Bitcoin leads to a fork, essentially creating another cryptocurrency. Because by buying Bitcoin, I express my trust in the algorithm and the starting block (chain). On the air, this is a standard "upgrade" process that all nodes must regularly apply, otherwise they will simply fall out of the network, losing compatibility. Buying ether now, I don’t know what protocol this currency will use tomorrow, i.e.

Transaction fees (gas) are a separate issue. It is built from two components: the price of “gas” and how much gas is spent. The price of gas is set by the originator of the transaction based on how quickly he wants his transaction to become confirmed and the current “market price” - something like Bitcoin. But how much gas will be required to spend on a transaction is not known in advance; the sender does not know. Even the same function of the same smart contract may require a different amount of gas, and not only because of possible branches, but simply depending on the amount on the addresses at the time of its inclusion in the blockchain. Therefore, the sender sets the maximum amount of gas that he is willing to spend, and how much was actually spent will become clear only when the transaction becomes confirmed. Respectively,

For the same reason, “spend unconfirmed”, which is so convenient and familiar in Bitcoin, is also impossible in Ethereum. That is, if there is a transaction to receive money, then I can create the next transaction to send that money somewhere else, without waiting for the first transaction to become confirmed. If it is cancelled, the second one will automatically be cancelled. Or they will both be confirmed. This is not possible on the air, because until the transaction is confirmed, it is unknown how the balances on the addresses will change as a result. For example, if I have an address with tokens, but without ether, I cannot spend these tokens, because I need to pay a commission, and from the exact address from which the tokens are sent. Accordingly, I must first send ether to this address, and then send tokens from there. And I can’t send these two transactions in a row - no,

Where did the idea of ​​this unpredictable gas come from? In bitcoin, the commission is set in proportion to the size of the transaction in bytes. This is logical: the block size is limited, and you can include either one large transaction or ten small ones in its place. In ether, gas is determined by the number and complexity of operations in a smart contract, and this is illogical: the mining node, although it must execute this smart contract to include the transaction in the blockchain, but the volume of these calculations is completely incomparable with the calculations of the block hash itself, necessary for proof-of-work. These are different units of measurement, like meters and kilograms. And it is more profitable for a miner to include “expensive” smart contract transactions in a block than cheap simple transfers, because in this case he will receive a larger reward. Here is the idea of ​​a miner that brings a lot of profit. And in order for simple transactions to be confirmed, too, you need to set more gas_price on them - and as a result, we will come to the conclusion that we consider the market commission for the transaction (taking into account its size), then we divide it by the estimated gas consumed, and write the result in the gas_price field. It's nonsense, isn't it?

But the situation is even more comical. Why register a smart contract at all, why can’t you write data in a regular transaction? This is exactly how the omni layer works on top of the bitcoin blockchain, and USDT was launched on it. After all, this is only a matter of interpretation, and nothing prevents us from agreeing and interpreting certain data in eth transactions as the transfer of some tokens, paying for this the minimum gas. There is only one reason why registering a smart contract might be necessary: ​​if it sends ether to someone, i.e. those same “internal transactions” that cause so many problems and destroy the harmony of the blockchain. A regular ERC-20 smart contract (of which the majority is a simple implementation of another currency or tokens) does not imply any sending of ether using the smart contract (although it does not prohibit), i.e. they do not require registration, and you don't need to pay extra gas either. In other words, by paying gas for smart contract transactions, we do not pay for the distributed execution of this smart contract by miners and not for storing data in the blockchain, but only for the algorithm used. Let's launch our slightly modified algorithm on the same ether blockchain - and voila, we get tokens without additional gas, similar to the omni layer in Bitcoin. Moreover, we absolutely do not need this software to be launched by all the nodes or even a noticeable part - it is enough for the owners of the tokens to launch it, i.e. it could just be a wallet. a slightly modified algorithm on the same ether blockchain - and voila, we get tokens without additional gas, similar to the omni layer in Bitcoin. Moreover, we absolutely do not need this software to be launched by all the nodes or even a noticeable part - it is enough for the owners of the tokens to launch it, i.e. it could just be a wallet. a slightly modified algorithm on the same ether blockchain - and voila, we get tokens without additional gas, similar to the omni layer in Bitcoin. Moreover, we absolutely do not need this software to be launched by all the nodes or even a noticeable part - it is enough for the owners of the tokens to launch it, i.e. it could just be a wallet.

This list can be continued for a long time, but this is no longer so important. It is important that Ethereum is a dummy cryptocurrency that parasitizes on the ideas of decentralization, distribution and openness implemented in Bitcoin, but has distorted these ideas for the sake of the business interests of the creators of this currency.

Ripple, Tron

Their essence is similar. Decentralization, distribution, everything is declared. Is it possible to raise your own node - yes, no problem, here are the sources, anyone can raise it.
But upon closer examination, it turns out that this node does not participate in consensus, but only receives information about transactions from other nodes and sends its transactions to other nodes. If you dig deeper, you can find information that you can raise a mining node; to do this, you need to take another software, pay someone some money and submit an application for consideration. That is, these currencies are not decentralized either administratively or technically (a new mining node is connected to the network manually). The question of how money is distributed is no longer important in such a situation: it is clear that in any case, complete control over the appearance of coins, as well as over consensus mechanisms, is in private hands.
This refusal from decentralization fundamentally simplifies the issues of consensus - a new block can be accepted even by a simple majority of nodes without expensive signature calculations in proof-of-work, and the issue of generating new coins disappears altogether - they all initially belong to the owner of the currency and are issued only by him (or by trusted nodes, which is essentially the same thing).

To please business, there has been a shift in terminology. Initially, only “real” decentralized currencies with a completely open and uniform emergence of new coins, as in Bitcoin, Litecoin and the like, were called cryptocurrencies. Then Ethereum began to be called a cryptocurrency, which, however, hid the “features” of the starting issue. Further, smart contract tokens living in the ether blockchain, even with a closed code (i.e. with unknown rules), became a cryptocurrency. Then any currencies using blockchain began to bear the proud name “cryptocurrency”; decentralization ceased to be mandatory. And finally, the blockchain also ceased to be necessary: ​​Ripple does not have it, but essentially any electronic money began to be called cryptocurrency.

Separately, it is worth mentioning stablecoins like USDT. They also exist in a distributed blockchain, as if they were real cryptocurrencies, and their difference is that there is an owner who can create new coins in any quantity. This owner declares that he issues new coins in exactly the same quantity as he was paid in real money, stores this real money in a safe, and thus guarantees that these coins can always be sold at a rate of 1: 1 to USD. Users find the predictability of the exchange rate more convenient than the high volatility of Bitcoin, and the magic words “cryptocurrency” and “blockchain” inspire more trust than just someone’s electronic money like perfectmoney. It is quite obvious here that the blockchain in this case is nothing more than an open registry, and the owner has complete control over the currency. The exchange rate is kept stable insofar as it can be prevented from rising by additional emission, but if it starts to fall, the owner is unlikely to compensate for it with too large infusions; he will simply run out of money. After all, hardly anyone actually believes that they actually keep all the money they receive in a safe and do not spend it. Although such a declaration may probably be beneficial in terms of paying taxes, it turns out to be zero profit.

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