The term open source gets thrown around a lot, and most of the time, the people saying it don’t even know what it means. The best way to think of it like a book everyone can edit and make their own version of it. The source code is available to all, which creates the option for developers to look at the code and come up with their own modifications. These modifications won’t necessarily be adopted, but they are at least out there for the community to consider and vote upon.
Bitcoin is the most well-known example of this in the cryptocurrency world. As the website states, the currency is all about making the design public and allowing everyone to take part in its development. What makes the open source protocols in the cryptocurrency world unique is the fact that the users must all be in agreement about the protocols to follow, otherwise no consensus is reached in the ledger. This is where the presence of hard and soft forks comes up. These forks occur when a cryptocurrency community makes changes to the open source protocol. With a soft fork, these changes are backwards compatible and older versions of the software will recognize future versions. Hard forks take things way farther and make it so the software is not backwards compatible and all nodes must upgrade to the new software. This essentially makes it so all who are non-compliant are now operating on a different chain. Thus, a hard fork.
Besides Bitcoin, there are many cryptocurrencies that run using open source protocols. The three we are going to talk about today are Litecoin, Monero, and Zcash.
Litecoin was launched in 2011, which is not long after Bitcoin was launched. For a long time, it has been seen as prime competition for Bitcoin in regards to the space it would fill in users’ lives. The coin gets its name from the fact that it operates similarly to Bitcoin, but generates blocks more quickly and can therefore perform transactions more quickly.
It runs on an open source global payment network and is not controlled by any single entity. The developer of the cryptocurrency, Charlie Lee, foresaw potential scaling issues with Bitcoin and thought that eventually Litecoin could act as a spillover protection for the network. In this sense he always foresaw them trading in tandem, much like silver and gold do.
Zcash and Monero are both based around the idea of having superior levels of privacy, but do it in different ways. A major point to make is when there is a coin that has privacy as a major benefit that is being promoted, it is key to make sure it is open source so outside parties can examine and verify this. This strengthens security and proves privacy.
Zcash takes Bitcoin and adds in an additional ability to shield your transactions. Right now it is all too easy for the flow of funds to be tracked through the Bitcoin ecosystem. There are no safeguards in place to protect users from having their financial history available to all.
This has been developed through an open source protocol that makes all currency fungible. What this means is every coin is treated as equal and there is no differentiating them, so no one can ever track or discriminate against a certain coin. This solves a lot of problems for people who inadvertently end up with Zcash coins that were stolen, but also makes the cryptocurrency act a lot more like cash.
Despite being one of the youngest cryptocurrency representatives, Zcash is steadily growing in popularity. Zcash was introduced only a year ago, but it has already made the top 10 cryptocurrencies by the market capitalization and gained interest of the major exchanges.
Monero was launched in 2014 in much the same way as Bitcoin. The lead developer has never come forward, just like with Bitcoin, which creates a solid mythology around the coin’s invention and emphasis on privacy. This is one of the most popular cryptocurrencies in the sector due to the high level of interest in the protocols that guide it.
The development of this cryptocurrency is based on donations, and the community is very good at driving advancement forward. The currency depends on the use of “ring signatures”, which are signatures that can be given by any member of a group without identifying which member authorized it. This makes it impossible to track the flow of funds and adds significantly more privacy to the network.
Cryptocurrencies grow stronger
With all three of these cryptocurrencies being open source, there are constant developments in the frameworks and protocols that form the software. Bitcoin recently went through a hard fork, and there will likely be more forks in the future of all these coins. This comes from the evolutionary aspects of blockchain technology.
What that means is when you have communities forming and different opinions going against each other, certain opinions have to win over others. The result of this is that the currency grows stronger and stronger as the weak ideas are tested out and cast off. This is just one aspect of the open source protocol that makes working with and developing cryptocurrencies exciting. Many see it as an additional risk, but it is actually the opposite since in the long-run it means that poor ideas are being filtered out rather than being forced into the system by a small group of people.
In terms of governance, being open source is anathema to the idea of a centralized management. This is why decentralized currencies are almost all open source in nature. One person or group did the initial work with the hopes that the protocol would be able to operate autonomously with the occasional upgrade and expansion to the protocol that comes from developers working together. With all the scaling and security issues that need to be solved for these currencies to reach mass adoption, it is a good thing they are open source, because that allows so many good developers to participate in making each coin great.