Cryptocurrencies.docx - BU691 Discussion on Cryptocurrencies Introduction to Cryptocurrency Money in one form or another has been around for thousands

Cryptocurrencies.docx - BU691 Discussion on...

This preview shows page 1 - 2 out of 6 pages.

BU691 Discussion on Cryptocurrencies Introduction to Cryptocurrency Money, in one form or another, has been around for thousands of years. Before the dawn of money as we know it today, commodities were exchanged between micro-economies in the barter system. This system worked for a while, but it was unreliable. With no set exchange rate to support the barter system, it relied entirely on the subjective valuation of the parties involved. Eventually, this system evolved, resulting in the birth of paper money and coins issued by the ruling government and backed by federal reserves. Cryptocurrency is a medium of exchange similar to government issued currencies. However, unlike traditional money that is controlled by a centralized system, cryptocurrencies are based on a decentralized system that uses cryptography to secure the exchange of digital information and control the creation of new units. Cryptocurrencies are fully self-contained systems that control and track each unit of cryptocurrency within the system. Each unit is a piece of data moving around in a cryptographic network, where its size and value depends on the algorithm used to generate the currency and verify transactions. The introduction of the internet made it possible for people to buy and sell almost anything to anyone around the world using electronic payments as a substitute for physical money. The problem with this system is that it relies on third party financial institutions such as banks and credit card companies to verify and process the electronic payments. Since these financial institutions are “trusted” to facilitate the transactions, they must ensure that the system is trustworthy. To do this, they spend a significant amount of time resolving disputes and dealing with fraud, which ultimately increases the cost of performing a transaction over the internet. to overcome this problem, cryptocurrency offered the internet a new way of verifying and processing transaction without using a third-party. Instead the system uses cryptography to verify transactions. Since the cryptographic transactions would be computationally impossible to reverse, users of the system would be inherently protected from fraud. The methodology of cryptocurrency is based on two key aspects (1) cryptographic generation and verification of cryptocurrency units (2) the public ledger – the blockchain. The definition of a cryptocurrency is just “a chain of digital signatures” (blockchain) that can be passed from one person to another using a verified electronic signatures (hash). The process of transferring cryptocurrencies between parties involves the sending party signing the previous transaction of the cryptocurrency ledger (blockchain) with their private key (personal signature) and the public key of the recipient.
Image of page 1

Subscribe to view the full document.

Image of page 2

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Ask Expert Tutors You can ask 0 bonus questions You can ask 0 questions (0 expire soon) You can ask 0 questions (will expire )
Answers in as fast as 15 minutes