Understanding Cryptocurrencies !!
1- Introduction
In 2008, the pseudonymous “Satoshi Nakamoto” posted a white paper describing animplementation of a digital currency called bitcoin that used blockchain technology. More than ten years later, hundreds of cryptocurrencies and innumerable other applications of blockchain technology are readily available. The rise of cryptocurrencies poses an existential threat to many traditional functions in finance. Cryptocurrencies embrace a peer-to-peer mechanism and effectively eliminate the “middle man”, which could be a financial institution. For example, no bank account or credit card is needed to transact in the world of cryptocurrencies. Indeed, a cryptocurrency“wallet” serves the same function as a bank vault. With a smart phone and the internet,
the potential exists for a revolution in financial inclusion — given that over two billion people are unbanked (GlobalFindex, 2017; World Bank, 2017).
2 - Cryptocurrencies and Blockchains
The concept of supplementary (Delmolino et al., 2016), alternative (Ametrano, 2016), or
digital currencies (Chaum, 1983) is not new, but the concept of an open-source currency
without a central point of trust, such as a central distribution agency or state lead control, is new (King and Nadal, 2012).
A cryptocurrency is a digital asset designed to work as a medium of exchange using cryptography to secure transactions, to control the creation of additional value units, and to verify the transfer of assets. Many different cryptocurrencies
exist, each with their own set of rules, see, for example, coinmarketcap.com (Iwamura
et al., 2014; Abraham et al., 2016; Bartos, 2015; Park et al., 2015). Differences among
the cryptocurrencies may involve, for example, the choice of the consensus mechanism,the latency, or the cryptographic hashing algorithms.
- Wolfgang Karl Härdle
- Campbell R. Harvey
- Raphael C. G. Reule
The research consists of 39 pages prepared by a group of professors: