Cryptocurrencies
Cryptocurrencies are digital or virtual currencies that use cryptography for secure financial transactions. They operate on decentralized networks based on blockchain technology, which ensures transparency and security. Bitcoin, Ethereum, and Litecoin are some well-known examples of cryptocurrencies. Their value is determined by supply and demand in the market, and they have gained attention as an alternative form of investment and payment method.
8 Key excerpts on "Cryptocurrencies"
eBook - ePubChina's Trump Card
Cryptocurrency and its Game-Changing Role in Sino-US Trade
- Raymond Yeung(Author)
- 2020(Publication Date)
- Wiley(Publisher)
...Proponents of Cryptocurrencies suggest their inventions can replace trusted intermediaries and hence provide a cost saving to the economy (Bitcoin 1). They claim that the system can improve financial access of underprivileged populations and small- and medium-sized enterprises (SMEs) (Libra 2). Blockchain participants who help validate a block of transactions are rewarded with a new coin. Hence, the value previously enjoyed by licensed providers of financial services is shared amongst the participants. The system creates “money” when Bitcoin miners can prove their work. The idea that anyone can create the money is in stark contrast to our current regime, which relies on central banks to issue paper notes. With the economy deglobalizing and decentralizing, the world is also looking for a consistent currency option. Prior to the twentieth century, the international monetary regime was not institutionalized. During that time, physical gold was widely accepted in the physical economy. It was apolitical and did not require a government to issue (although it did need an authoritative gold mint for quality assurance). As the global economy becomes more digital than physical, there is a quest for a compatible regime. Admittedly, none of the existing Cryptocurrencies in the market have become common means for legitimate and genuine economic transactions. Bitcoin and Ether remain a special interest of speculative investors. Calling cryptocurrency money remains premature. This chapter serves three purposes. First, it reviews the development of digital currencies. Our discussion will stay conceptual rather than technical. I also describe the recent development of the cryptocurrency market. Secondly, I attempt to assess whether cryptocurrency can be a qualified form of money. It is an important question. If cryptocurrency cannot perform the function of a medium of exchange, it will not be useful to denominate transactions...
eBook - ePubHandbook of Digital Currency
Bitcoin, Innovation, Financial Instruments, and Big Data
- David Lee Kuo Chuen, David LEE Kuo Chuen(Authors)
- 2015(Publication Date)
- Academic Press(Publisher)
...However, most of these new creations will cease circulation within a relatively short time. With many alternative currencies in competition, only a few will be globally adopted, reach a sufficient scale, or find a suitable market. Unless the idea of national digital currencies takes off, it is likely that many of these alternative currencies will cease circulation because of superseding advancements in technology, tighter regulation, and insufficient demand. 1.3 Cryptocurrency 1.3.1 The nature of cryptocurrency Cryptocurrency in its purest form is a peer-to-peer version of electronic cash. It allows online payments to be sent directly from one party to another without going through a financial institution. The network time-stamps transactions using cryptographic proof of work. The proof-of-work Bitcoin protocol is basically a contest for decoding and an incentive to reward those who participate. For Bitcoin, first participant to crack the code will be rewarded with the newly created coins. This contest will form a record of the transactions that cannot be changed without redoing the proof of work. Cryptocurrency is a subset of digital currency. Examples of the many digital currencies are air miles issued by airlines, game tokens for computer games and online casinos, Brixton Pound to be spent only in the Brixton local community in the Greater London area, and many other forms that can be exchanged for virtual and physical objects in a closed system and, in the case of an open system, exchanged for fiat currency. 1.3.2 The beginning: eCash Commercially, it all began with DigiCash, Inc.'s eCash system in 1990, based on two papers by its founder (Chaum, 1983 ; Chaum et al., 1992). Payments were transferred online and offline using cryptographic protocols to prevent double-spending...
eBook - ePubA Beginner's Guide to High-Risk, High-Reward Investing
From Short Selling to SPACs, an Essential Guide to the Next Big Investment
- Robert Ross(Author)
- 2022(Publication Date)
- Adams Media(Publisher)
...CHAPTER 2 Cryptocurrencies Cryptocurrencies are digital currencies in which transactions are monitored by a system that uses cryptography rather than a centralized authority. Cryptography is a discipline that explores how to securely transfer information while allowing only the sender and the recipient of the message to see the content. Think about the currency you’re familiar with—dollars, cents, and so on. It’s issued by and maintained by the federal government. That’s not the case with Cryptocurrencies such as Bitcoin and Ethereum. Cryptocurrencies have their roots in a concept that may seem totally different: digital music. Back in the late 1990s and early 21st century, a new software program called Napster was blowing people away. Founded by Shawn Fanning and Sean Parker in 1999, the Napster file-sharing service allowed anyone in the world to easily send music to other people over the Internet. While Napster was eventually shut down due to copyright infringement, its legacy as the first widely used application of peer-to-peer software lives on. For the first time in history, the service made it possible for people outside the traditional brick-and-mortar music market to exchange music without the use of an intermediary. Although peer-to-peer software was revolutionary at the time, Napster is hardly its most influential application. Just over a decade later, a mysterious figure named Satoshi Nakamoto applied the same concept to his project: Bitcoin. Satoshi’s creation allowed people to send money outside the traditional banking system without the assistance of a financial intermediary. This digital currency, known as “cryptocurrency,” now makes up a market that’s worth more than $2 trillion. And the world’s first cryptocurrency is—you guessed it—bitcoin. BITCOIN WHAT IS BITCOIN? Let’s start with some general points about cryptocurrency. A cryptocurrency is a digital asset that works as a medium of exchange...
- Nicholas Ryder, Umut Turksen, Sabine Hassler, Nicholas Ryder, Umut Turksen, Sabine Hassler(Authors)
- 2014(Publication Date)
- Routledge(Publisher)
...In particular, there was the risk of double spending, whereby the value expressed in bits and bytes could be reused with other vendors if they were unaware that the value had already been expended. 4 The abstract of the paper is available online at: http://blog.koehntopp.de/uploads/chaum_fiat_naor_ecash.pdf (accessed 29 August 2014). See also Bitcoins, E. Southall and M. Taylor, C.T.L.R. 2013 177. The nature of virtual currency has evolved to encompass crypto-currencies such as Bitcoins 5 due to the meteoric rise of the World Wide Web and the attendant development of peer-to-peer technology. Crypto-currencies are qualitatively different from traditional virtual currencies. The defining feature of crypto-currencies is that they are created and exist in digital form, using cryptography as both the means of creation and method of protection. They essentially take advantage of the decentralised nature of the internet and are hosted on peer-to-peer networks. Thus, unlike traditional currencies, including virtual currencies, there is no central authority in control of the creation and regulation of the currency. Crypto-currencies generally need to be ‘mined’, that is when a complex mathematical computation is completed, the solver of the equation is rewarded with a set number of the cryptocoins. 5 The Bitcoin website is available at https://bitcoin.org/en/ (accessed 1 March 2014). The Bitcoin community maintains a wiki which contains details of the currency. The wiki is available at: https://en.bitcoin.it/wiki/Main_Page (accessed 1 March 2014). The twin factors of the gigantic growth in interconnected computers via the World Wide Web and peer-to-peer technologies offered a novel solution for the problem of double-spending. In a decentralised peer-to-peer network a hash chain of connected transactions would provide a reliable proof of work historical chain of previous transactions, thus almost entirely eliminating the opportunity for fraudulent reuse of financial value...
eBook - ePubUnderstanding Bitcoin
Cryptography, Engineering and Economics
- Pedro Franco(Author)
- 2014(Publication Date)
- Wiley(Publisher)
...Critics argue that many Cryptocurrencies will be created, competing with each other in a race to the bottom that will end in hyperinflation and collapse. This view assumes that all Cryptocurrencies achieve the same level of acceptance. Proponents of Bitcoin reply that Cryptocurrencies are subject to network effects, due to infrastructure investment, marketing, mind-share and liquidity. Bitcoin currently holds the lead due to its first moving advantage, but if other Cryptocurrencies were to replace it in the future, the network effect would favor the leading cryptocurrency, as the market tends to gather around this leading cryptocurrency due to the network effect. The issue of alternative Cryptocurrencies is discussed in more detail in section 11.8. Critics argue that Bitcoin cannot be used as a store of value because of its volatility. Contrary to fiat currencies, there is no authority, such as a central bank, to ensure the stability of its value. Thus the price of bitcoin could be subject to self-fulfilling dynamics, where an incident could feed back on itself, becoming a full-blown confidence crisis. There is no control over the money supply. The money supply can be changed through a majority process, first through the open source project, and then through miners and users agreeing to the change. Holding bitcoins is not a good protection against inflation because if the price of bitcoin relative to fiat rises as a consequence of inflation, the gains would be taxable. Bitcoin proponents argue that this is true for most assets, and in any case holding bitcoin would constitute a partial hedge against an inflationary increase in the money supply of fiat currencies. Cryptocurrencies do not have legal tender status. In contrast, fiat currencies usually have legal tender status, meaning all debts can be settled with them in their respective countries. Governments could ban the use of Cryptocurrencies...
eBook - ePubCryptocurrency Regulation
A Reflexive Law Approach
- Immaculate Dadiso Motsi-Omoijiade(Author)
- 2022(Publication Date)
- Routledge(Publisher)
...The description of the multi-player cryptocurrency ecosystem, consisting of developers, nodes and miners, exchanges, and wallet and payment providers highlighted both the complexity and system-like features of Cryptocurrencies, which are fundamental to understanding how Cryptocurrencies work. This understanding of the fundamental role of the underlying technology to the conceptualising of cryptocurrency, and the complex and system-like functioning of Cryptocurrencies form the contextual and conceptual foundation for this thesis. 137 Discussions on whether or not Cryptocurrencies qualify as ‘money’ are peripheral to and beyond the scope of this thesis. For further discussions on this topic see O Bjerg, ‘How Is Bitcoin Money?’ (2016) 33 Theory, Culture & Society 53; European Parliament, ‘Virtual Money: How Much Do Cryptocurrencies Alter the Fundamental Functions of Money? (European Parliament Monetary Dialogue Papers, December 2019) < https://www.europarl.europa.eu/cmsdata/189495/LSE-original.pdf > Accessed 8 December 2019. The second half of this chapter identified the issues of regulatory concern presented by Cryptocurrencies, in order to consider why Cryptocurrencies are in need of regulation. These concerns have to do with the potential use of Cryptocurrencies for the purposes of cybercrime, money laundering, financing of terrorism and tax evasion, consumer and investor protection, and finally, prudential and systemic risk...
eBook - ePub- J. Mark Munoz, Michael Frenkel, J. Mark Munoz, Michael Frenkel(Authors)
- 2020(Publication Date)
- Routledge(Publisher)
...Regarding bitcoin trading, our findings show that Cryptocurrencies might be an alternative investment and offer a way to conduct financial transactions in countries that suffer from sanctions or hyperinflation, such as Iran or Venezuela (e.g., Haseborg et al., 2019), which future research could explore.Over time, as blockchain costs decline and scalability increases, we expect increasing cryptocurrency adoption by governments and institutions, particularly in emerging markets with simultaneous global coordination of governance. Practically, the results of our study also imply that the potential benefits of cryptocurrency trading may outweigh their societal costs and, by extension, that rapid adoption in the wider financial services sector and the rise of specialized cryptocurrency investment advisories can be expected.Notes1https://thenextweb.com/hardfork/2019/12/13/satoshi-nakaboto-bitcoins-market-cap-is-now-on-par-with-costcos/(accessed January 10, 2020).2Narrow stock of money is the “total quantity of currency in circulation (notes and coins) plus demand deposits denominated in the national currency, held by non-bank financial institutions, state and local governments, nonfinancial public enterprises, and the private sector of the economy” (www.cia.gov/library/publications/the-world-factbook/rankorder/2214rank.html) (accessed September 12, 2018).3Government-backed digital tokens are also referred to as central bank digital currencies (CDBCs).4Certainly, the speed of both legal and illegal transactions can be greatly accelerated with blockchain technology...
eBook - ePubThe Cryptocurrency Revolution
Finance in the Age of Bitcoin, Blockchains and Tokens
- Rhian Lewis(Author)
- 2020(Publication Date)
- Kogan Page(Publisher)
...If you have been engaged in activities, whether criminal or political, that mean you fall short of the ideal behavioural standards demanded by a state of its citizens, it would be easy for the government to limit your activities by restricting your ability to buy airline or even train tickets, while leaving your ability to buy food and other essentials untouched. Much of the talk of the benefits of government digital currencies has focused on financial inclusion and ensuring that even those who are too poor to be profitable bank customers are not excluded from modern life, but it is also crucial to bear in mind that having a financial system that enables cheap and easy targeting of particular policies towards particular individuals could be invasive to the point where it is positively harmful. Macroeconomics and global affairs As we have seen throughout this chapter, while CBDCs share some attributes with public Cryptocurrencies such as Bitcoin, such as the ability of the holder to sign transactions with a cryptographic key, and with all records being written to one ledger that may be distributed over multiple nodes, there are many differences. Probably the main difference is that while a cryptocurrency such as Bitcoin has a value that is determined entirely by supply and demand and the cost of the effort miners are prepared to expend in order to generate new Bitcoins, a currency issued by a government is issued on the same basis – by fiat – as the notes and coins we are used to seeing today. This means that the supply of a government currency is entirely at the discretion of the government that issues it, just as it is today. Macroeconomic models allow economists and policymakers to decide when and how they should release additional cash into the economy in order to stimulate and dampen demand. Money supply is one way, along with interest rates and various tools, of influencing how the economy behaves...
