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Addison and Ali sat down with Prof. Emin Gün Sirer, computer science, to discuss crytocurrency. Specifically, they talked about Bitcoin, which Sirer described as “a collaboratively designed currency system.” The three discussed the stigma that Bitcoin carries, acknowledging that many people do not understand the Bitcoin system and do not completely trust it.
In order to explain how Bitcoin works, Sirer simplified the process and employed several analogies. He primarily used Sudoku puzzles to describe the underlying structure of Bitcoin. Sirer stated that “miners” — the individuals behind Bitcoin’s codes — use computer programs to solve complex puzzles, which are somewhat like Sudoku puzzles.
The puzzles contain all the financial transactions within the Bitcoin system and lock the financial history into place. He explained that the structure, which is built upon puzzles, is what gives Bitcoin its security.
Professor Sirer talked about his own research in the field. In the early 2000s, he “built a virtual currency system way before Bitcoin came along.” Later, when Bitcoin gained popularity, he decided to have a closer look for any weaknesses in the system. Sirer eventually exposed a possible cheat for Bitcoin miners: “It’s kind of like a winning strategy in Blackjack. It doesn’t always win you something, but in expectation it will bring you much more money than your fair share.” He went on to describe how miners can maneuver their Sudoku-like puzzles to take advantage of the system. His research ultimately helped to improve the integrity of Bitcoin.
The structure of Bitcoin has other pros and cons, according to Sirer. On the plus side, “Bitcoin is uninflatable because the rate at which it is created is fixed.” However, Bitcoin is also not managed, which leads to drastic fluctuations in its worth as demand varies.
“As a result, the Bitcoin price has been going up and down,” he said. “So maybe two weeks ago it was $240; it’s $300 now. It’s a big fluctuation.”
With its weaknesses and shortcomings, many people question the use of Bitcoin. Sirer does not expect Bitcoin to become widely used; he expects it to become relegated to aniche for very specific purposes. However, the underlying structure — consisting of miners, puzzles, and ledgers — is already gaining popularity in the financial industry. The self-securing nature of this system might just be the future of banking security.