Let's, go now number one. My name is Nicolas Merton here at day. Two today is December 14th of 2017. Well folks, today, I'm here. To answer a question that I've been getting asked a lot about inside the data'community and it's in regards to the differences of the different generations of crypto currencies.
A lot of people when hearing me talk about it on the data channel and a lot of you out. There have also heard other people in the space talking about the continuous need for innovation and blockchain technology and these crypto currencies that are starting to get very highly valued in the world.
So today I'm, going to answer a lot of key factors. How many generations they're technically, are in the broad sense of definitions for crypto currencies and allowing that as well what each generation brought in the sense of innovation.
You know what was the problem originally with the previous generation that needed to be resolved in the next one and what were the innovations that were brought about to fix those certain problems? Alright, so let's, go ahead and dive into the video.
So, first and foremost, seeing as we're talking about a list of generations, we got to talk about the first generation of crypto currencies. Okay, now, as you all can probably guess there's, no doubt about it.
A perfect example that we all know about in regards to the first generation of crypto currencies is Bitcoin, so we all know about Bitcoin when it was the first original crypto currency ever made back in 2009, and it has revolutionized the way we think about money.
Bitcoin itself, hasn't, really changed all that much it's still pretty much. The same utility has the same utility that it had back in 2009 and we've made upgrades and there's been a lot of debates, and you know discussion that discussions as to where we want to take Bitcoin, but really at The end of the day it's.
It's quite simple after we really kind of factor in all the other cryptocurrency technologies that have come after because but going itself with blockchain technology is really a peer-to-peer accounting system.
So, in very simple terms, peer-to-peer allows us to make transactions. If we appear to pure transactions, we can make transactions between, say Bob and Al without the need of a third party, a centralized institution like a bank or a government or some financial processing company to get in the way of that transaction and to confirm it.
It allows us to use blockchain technology to certify who has what and also make those transactions within a short matter of time and usually for lower fees as well. So again it's, a awesome technology, it's, a borderless currency, and it allows us to do you know simple transactions between one another but notice the key term itself simple.
I really do mean that when I say because really it's very impractical for mainstream adoption in the sense of being used as a currency - and the reason is - is because Bitcoin is quite simple: it just allows us to make peer-to-peer transactions.
Let's, say, for example, that I wanted to send someone five Bitcoin if they went to go pick me up groceries or you know whatever now, of course in you know modern world five bitcoins a little too much, but let's, Say, for example, you know as years ago when Bitcoin wasn't worth that much and I wanted to paying five Bitcoin to go pick me up groceries or do some kind of service or to execute on some form of action.
Well, I can't really trust that, after I send that Bitcoin, I'm, going to get what I want. What if I wanted to make some type of agreement, some kind of digital contract that could make it so between myself and the other party, maybe Bob and Alice, that we're, making a confirmed transaction or an agreement of some sort over the blockchain And this is what led to the second generation of crypto currencies now, for those of you who keep up with Bitcoin, you've, also, probably heard of a very another, very famous cryptocurrency out there, and it's, no other, of course, Than a theorem, so if theorems, of course, a very big cryptocurrency atmos base, what a theorem allows users to do, is it's a little bit smarter than Bitcoin? In fact, vitalic butor and the founder of the theorem wanted to actually build a lot of the functionalities of a theorem on top of Bitcoin, but the original team, a Bitcoin didn't want to do.
They wanted to keep it relatively simple: keep it as a peer-to-peer system. So what did if you're in bring that was new? What's different about aetherium? Well, the biggest thing about aetherium. Is there's? Really two main things: first and foremost, it allows you to use a programming language.
Okay, so allows you to you, use a code of some sort on the blockchain stuff and build both smart contracts and D, apps or decentralized applications. Okay. So, by bringing a programming language to the blockchain, we're allowed to build these applications and smart contracts that allow us to do things much smarter than simply peer-to-peer transactions.
First and foremost, we have the ability to make smarter transactions and smarter agreements over the blockchain with smart contracts. This allows us to do a variety of things. Let's. Go back to our previous example.
Let's say that when MIT, for example, Alice was gonna go pick up, groceries for Bob and Bob was gonna pay. You know five Bickman originally well. Let's. Let's, put in the sense of etherium. Let's say that Bob wanted to pay Alice five etherium and there was a smart contract.
They wanted to execute to make sure that she is only going to receive the five etherium. Once she's done delivering the groceries. That's, an example of how we can utilize smart contracts to make transactions, but this can be used for all kinds of things, such as legal disputes and more advanced financial transactions and a variety of other applications.
On top of the blockchain really endless possibilities, and along with having a programming language, as we stated, we can build decentralized applications. This allows us to build applications on top of the blockchain and use a vaccum style of development to build these applications in a variety of different languages.
Now, depending on what a blockchain you're using different networks have different languages that they support. So if theorem supports a few different ones and there's, also different competitors in the space that offer different ones.
Things like this would be like neo, for example, that has different language sets than aetherium, and you can find dozens of other ones that have competed to be this real, almost kind of enterprise solution, allowing people to build these decentralized applications or make smarter transactions with smart Contracts, ok, so we have first generation which allowed us to do simple, peer-to-peer transactions and second generation that allowed us to use programming languages to build these centralized applications as well as smart con.
So we've, definitely seen a lot of innovation in the space, and this has allowed us to really start seeing the potential of blockchain technology, as well as other decentralized methodologies to build these networks that don't need central authority.
However, at the same time as we're fighting against the idea of central authority with blockchain and other decentralized applications, there's, still an issue with first and second generation crypto currencies Bitcoin as well as aetherium, have terrible governance systems.
If you think about it, we can go back and think about a few example. First and foremost, Bitcoin itself has a lot of issues in the sense of scalability. This is in the regards to the amount of transactions that can be processed and scaling the network, because, with each block on the blockchain, then every node on that network having a copy of that blockchain.
If we increase the block size of the blockchain, the network is going to get very heavy in the sense of data, keeping all that prior transaction history, not to mention Bitcoin, can only process three transactions a second right now so, and the fixes that are coming for That are coming very slow and are very, I would say, very drama based and because of that, nothing's, really getting done it.
Doesn't have a good system of governance, because the evolutions for Bitcoin, the forks for Bitcoin, are determined by the miners. The people who mined Bitcoin and it doesn't allow us to start with the community consensus in some regard.
Same to the theorem as well, a theorem has very high power figures in regards to the developers like vitalic who, during the DAO hack, led the effort to rollback the blockchain in regards to the dow hack that led to millions of dollars worth of aetherium getting stolen.
Now I think we could all agree that that was a good move to rollback the blockchain, the problem that arises that in the fact that it was created, that decision was really made by a central authority and blockchain being decentralized.
Shouldn't have that, so this has led us to the need for a third generation of blockchain technology, okay and really a third generation cryptocurrency. Now we don't have an exact example here, yet there's.
A lot competing in the space trying to be third generation cryptocurrency, some of them are coming on the horizon right now we see projects like Cardno and various who are trying to build what both of these do not have, and that is a system of governance.
All right, so I'll. Just do go for short there, but a system of governance, a system where we can make decisions on more of a community-based level and really get consensus on where we want to take this cryptocurrency in the future, because there's.
Still a lot of issues with both of these one that we already listed was scalability, so we need to make sure that the blockchain or whatever technology we're using under the hood for these cryptocurrencies can scale.
This is a very big issue. Right now, Bitcoin can only process three Transat three to four transactions, a second, and we know that if your aim can only process a little more than a dozen transactions, you know if you it's, still double digits and really, if we think of The scalability of demanding transactions in the world, if we think about Visa and MasterCard and just financial transactions alone, that's, thousands of transactions per second that need to be processed.
So we need to have a governance system. They can help us scale. I can help with interoperability. Okay, so interoperability is a fancy term. [, Music, ] interoperability is really a fancy term in regards to being able to interact with other blockchains, to interact with other crypto currencies and to make exchanges along with one another.
So if we can & # 39, t have interoperability, seeing as there's going to be, you know, thousands of crypto currencies, third-generation crypto currencies, wouldn't, be that effective, but third generation is going to be able to communicate with other Different crypto currencies in different networks and that's, really what comes with the whole third generation being a smarter currency.
So last and not least, of course, there's, really sustainability and that's. What comes with the governance system, first and foremost, having a governance system is really the major factor. If we were to take a look back here, you know at the major innovations that each brought first generation brought peer-to-peer network transactions between one another without needing a third party.
The second generation really brought about the use of programming languages on the top of the blockchain, with the implementation of smart contracts in decentralized apps and the third one was a system of governance which allowed scale and Inter operability all right.
So this is a very, very brief summary, but it shows that we are making some serious strides in innovating, crypto currencies and, like I said there are some projects out there that are going for this third generation right now.
It's, not completely in full fruition and, as we know, there are dozens and dozens, if not hundreds to thousands of crypto currencies that meet in the first and second generation. So these are just a few simple examples and very broad.
It's very much brought down into a very simple easy to understand, explanation so anyways. I hope this video helped you all out and helps answer that question, sir. That question, if you all, do have any comments, questions or concerns, please leave it down below in the comments, and I will try to get back to it.
If I can, if not, hopefully, other people in the community will help to answer but anyways that's it for the video everyone. Thank you all so much for watching and I'll, see you all in the next video stay tuned.