Cryptocurrency = Coin backed by the energy it took to secure it.
A startup on the Ethereum platform vanished from the internet on Sunday after raising $374,000 USD from investors in an Initial Coin Offering ( ICO ) fundraiser.
Confido is a startup that pitched itself as a blockchain-based app for making payments and tracking shipments. It sold digital tokens to investors over the Ethereum blockchain in an ICO that ran from November 6 to 8. During the token sale, Confido sold people bespoke digital tokens that represent their investment in exchange for ether, Ethereum’s digital currency.
But on Sunday, the company unceremoniously deleted its Twitter account and took down its website.
A consensus algorithm, like bitcoin's proof of work (the one we hear about most often), does two things: it ensures that the next block in a blockchain is the one and only version of the truth, and it keeps powerful adversaries from derailing the system and successfully forking the chain.
In proof of work, miners compete to add the next block (a set of transactions) in the chain by racing to solve a extremely difficult cryptographic puzzle. The first to solve the puzzle, wins the lottery. As a reward for his or her efforts, the miner receives 12.5 newly minted bitcoins – and a small transaction fee.
Common criticisms include that it requires enormous amounts of computational energy, that it does not scale well (transaction confirmation takes about 10-60 minutes) and that the majority of mining is centralized in areas of the world where electricity is cheap.
Bitcoin creator Satoshi Nakamoto woke us up to the potential of the blockchain, but that doesn't mean we can't keep searching for faster, less centralized and more energy-efficient consensus algorithms like CryptoNight in Monero to carry us into the future.
Cryptoeconomics is about using a collection of cryptographic and economic building blocks in order to build systems that have some desirable informational security properties not just printing a token and expecting people to trust that you will deliver value.