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Cryptocurrency

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A cryptocurrency is a peer-to-peer, decentralized, digital currency whose implementation relies on the principles of cryptography to validate the transactions and generation of the currency itself.[1][2] At present, all cryptocurrencies are alternative currencies, as no nation has adopted a cryptocurrency alternative to fiat money. Cryptocurrency implementations often use a proof-of-work scheme to guard against digital counterfeiting. While over 30 different cryptocurrency specifications and protocols have been defined, most are similar to and derived from the first fully implemented cryptocurrency, Bitcoin.[1][2][3][4][5][6]

Most cryptocurrencies are designed to gradually introduce new units of currency, placing an ultimate cap on the total amount of currency that will ever be in circulation. This is done both to mimic the scarcity (and value) of precious metals and to avoid hyperinflation.[7][8] Compared with ordinary currencies held by financial institutions or kept as cash on hand, cryptocurrencies are less susceptible to seizure by law enforcement.[7][9] Existing cryptocurrencies are all pseudonymous, though additions such as Zerocoin have been suggested, which would allow for anonymity.[10][11][12][13]

History of Cryptocurrencies

Early attempts to integrate cryptography with electronic money were made by David Chaum, via DigiCash and ecash, which used cryptography to anonymise electronic money transactions.[14]

The first cryptocurrency was Bitcoin, which was created in 2009 by pseudonymous developer Satoshi Nakamoto, and used SHA-256 as its proof-of-work scheme.[3][15][16] Later on, other major cryptocurrencies, such as Namecoin (an attempt at a decentralized DNS, which would make internet censorship very difficult), Litecoin (which uses scrypt as a proof-of-work, as well as having faster transaction confirmations) and Peercoin (which uses a proof-of-work/proof-of-stake hybrid, and has inflation of about 1%) were also created.[1] Many other cryptocurrencies have been created, though not all have been successful, especially those that brought few innovations.

For the first couple years of existence, cryptocurrencies gradually gained attention from the media and public.[17] Since 2011, interest has rapidly increased, especially during the rapid price rise of Bitcoin in April 2013.

Proof-of-work schemes

The most widely used proof-of-work schemes are SHA-256, which was introduced by Bitcoin, and scrypt, which is used by currencies such as Litecoin.[1] Some cryptocurrencies, such as Peercoin, use a combined proof-of-work/proof-of-stake scheme.[1][18]

Notable cryptocurrencies

Further information: List of cryptocurrencies
Currency Code Year Est. Founder Active Website Value of money supply Algorithm Note
Bitcoin BTC 2009 Satoshi Nakamoto (pseudonym) Yes bitcoin.org ~8,500 million USD[19][20][21] SHA-256
(proof-of-work)		 The first mainstream decentralized ledger currency.
Litecoin LTC 2011 Coblee Yes litecoin.org ~220 million USD[20][21] Scrypt
(proof-of-work)		 The first Scrypt cryptocurrency.
Peercoin PPC 2012 Sunny King Yes peercoin.net ~23.5 million USD[20][21] SHA-256
(proof-of-work/proof-of-stake)		 The proof-of-stake is designed to give Peercoin increased energy efficiency and a small amount of decentralized inflation; however, this is mitigated by its deflationary aspect caused from destroyed transaction fees.
Namecoin NMC 2011 Vinced Yes dot-bit.org ~8 million USD[21][22] SHA-256
(proof-of-work)		 Namecoin is meant to act as a decentralized DNS, which would make internet censorship very difficult. Namecoin serves the .bit domain.
INFINITECOIN IFC 2013 N/A Yes [1] ~90.5 Billions USD[20][21] scrypt
(proof-of-work/proof-of-stake)		 The proof-of-stake is designed to give INFINITECOIN increased energy efficiency and a small amount of decentralized inflation; however, this is mitigated by its deflationary aspect caused from destroyed transaction fees.

Criticism

  • Some people, such as bitcoin developer Gavin Andresen, have expressed concern that some cryptocurrencies might be scams.[23]
    • Some have expressed concern that the smaller cryptocurrencies are pump and dump schemes.
    • Some of these coins are pre-mined by parties affiliated with coin, have hidden launches, or have erroneous rewards for the first miners of the coin.[24][better source needed]
  • Many smaller cryptocurrencies have very few users and are only traded on cryptocurrency markets.

Major markets

See also

References

  1. ^ a b c d e Wary of Bitcoin? A guide to some other cryptocurrencies, ars technica, 26-05-2013
  2. ^ a b What does Cryptocurrency mean?, technopedia, 01-07-2013
  3. ^ a b BITCOIN A Primer for Policymakers, JERRY BRITO AND ANDREA CASTILLO, Mercatus Center, George Mason University, 31-08-2013
  4. ^ California dreaming: The CoinDesk Weekly Review, Coindesk, 26-05-2013
  5. ^ From your wallet to Google Wallet: your digital payment options, The Conversation, 26-05-2013
  6. ^ About, The Cryptocurrency Legal Advocacy Group, 01-07-2013
  7. ^ a b Crypto currency, Forbes, 26-05-2013
  8. ^ How Cryptocurrencies Could Upend Banks' Monetary Role, American Banker, 26-05-2013
  9. ^ The FBI's Plan For The Millions Worth Of Bitcoins Seized From Silk Road, Forbes, 04-10-2013
  10. ^ 'Zerocoin' Add-on For Bitcoin Could Make It Truly Anonymous And Untraceable, Forbes, 26-05-2013
  11. ^ Zerocoin: Anonymous Distributed E-Cash from Bitcoin, The Johns Hopkins University Department of Computer Science, 26-05-2013
  12. ^ zerocoin.org, 26-05-2013
  13. ^ This is Huge: Gold 2.0 - Can code and competition build a better Bitcoin?, New Bitcoin World, 26-05-2013
  14. ^ Chaum, David (1983). "Blind signatures for untraceable payments" (PDF). Advances in Cryptology Proceedings of Crypto. 82 (3): 199–203.
  15. ^ What is Bitcoin Mining?, The Genesis Block, 26-05-2013
  16. ^ Bitcoin developer chats about regulation, open source, and the elusive Satoshi Nakamoto, PCWorld, 26-05-2013
  17. ^ Cryptocurrency, MIT Technology Review, 26-05-2013
  18. ^ "PPCoin: Peer-to-Peer Crypto-Currency with Proof-of-Stake" (PDF). http://www.ppcoin.org/static/ppcoin-paper.pdf, 19-08-2012. Sunny King, Scott Nadal. Retrieved 12-05-2013. {{cite web}}: Check date values in: |accessdate= (help); External link in |work= (help)
  19. ^ "Market Capitalization". Blockchain.info. Retrieved 21 March 2013.
  20. ^ a b c d Simonite, Tom. "Bitcoin Isn't the Only Cryptocurrency in Town". MIT Technology Review. Retrieved 5 May 2013.
  21. ^ a b c d e "Crypto-Currency Market Capitalizations". Retrieved 18 November 2013.
  22. ^ Cryptocoin Mining Information, 18-05-2013
  23. ^ Andresen, Gavin https://bitcointalk.org/index.php?topic=42465.0 (accessed 6 Apr 2013)
  24. ^ "Scamcoins". 2013. {{cite web}}: Unknown parameter |month= ignored (help)
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