A cryptocurrency, crypto-currency, or crypto is a digital asset designed to
work as a medium of exchange wherein individual coin ownership records are
stored in a ledger existing in a form of a computerized database using strong
cryptography to secure transaction records, to control the creation of
additional coins, and to verify the transfer of coin ownership.[1][2]
It
typically does not exist in physical form (like paper money) and is typically
not issued by a central authority. Cryptocurrencies typically use
decentralized control as opposed to centralized digital currency and central
banking systems.[3] When a cryptocurrency is minted or created prior to
issuance or issued by a single issuer, it is generally considered centralized.
When implemented with decentralized control, each cryptocurrency works through
distributed ledger technology, typically a blockchain, that serves as a public
financial transaction database.[4]
Bitcoin, first released as open-source software in 2009, is the first
decentralized cryptocurrency.[5] Since the release of bitcoin, other
cryptocurrencies have been created.
History
In 1983, the American cryptographer David Chaum conceived an anonymous
cryptographic electronic money called ecash.[6][7] Later, in 1995, he
implemented it through Digicash,[8] an early form of cryptographic electronic
payments which required user software in order to withdraw notes from a bank
and designate specific encrypted keys before it can be sent to a recipient.
This allowed the digital currency to be untraceable by the issuing bank, the
government, or any third party.
In 1996, the National Security Agency published a paper entitled How to Make a
Mint: the Cryptography of Anonymous Electronic Cash, describing a
Cryptocurrency system, first publishing it in an MIT mailing list[9] and later
in 1997, in The American Law Review (Vol. 46, Issue 4).[10]
In 1998, Wei Dai published a description of "b-money", characterized as an
anonymous, distributed electronic cash system.[11] Shortly thereafter, Nick
Szabo described bit gold.[12] Like bitcoin and other cryptocurrencies that
would follow it, bit gold (not to be confused with the later gold-based
exchange, BitGold) was described as an electronic currency system which
required users to complete a proof of work function with solutions being
cryptographically put together and published.
In 2009, the first decentralized cryptocurrency, bitcoin, was created by
presumably pseudonymous developer Satoshi Nakamoto. It used SHA-256, a
cryptographic hash function, in its proof-of-work scheme.[13][14] In April
2011, Namecoin was created as an attempt at forming a decentralized DNS, which
would make internet censorship very difficult. Soon after, in October 2011,
Litecoin was released. It used scrypt as its hash function instead of SHA-256.
Another notable cryptocurrency, Peercoin used a proof-of-work/proof-of-stake
hybrid.[15]
On 6 August 2014, the UK announced its Treasury had been commissioned a study
of cryptocurrencies, and what role, if any, they could play in the UK economy.
The study was also to report on whether regulation should be considered.[16]
