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Cryptocurrency

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A cryptocurrency is a type of digital currency (which in turn is a type of alternative currency) that relies on cryptography, usually alongside a proof-of-work scheme, in order to create and manage the currency.[1][2] Cryptocurrencies are peer-to-peer and decentralized, and are currently all based on the first cryptocurrency, Bitcoin.[1][2][3][4][5][6] They are generally designed to have no inflation (once all the currency has been produced), in order to keep scarcity and hence value.[7][8] However, a few cryptocurrencies, such as PPCoin, do have a small amount of inflation. Cryptocurrencies are also designed to ensure that funds can neither be frozen nor seized.[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

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,[15] and used SHA-256 as its proof-of-work scheme.[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 PPCoin (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 PPCoin, use a combined proof-of-work/proof-of-stake scheme.[1][18]

List of cryptocurrencies

This is a list of the major cryptocurrencies, for a full list, see list of cryptocurrencies.

Currency Code Year Est. Founder Active Website Value of money supply (June 2013) Note
Bitcoin BTC 2009 Satoshi Nakamoto Yes[19] bitcoin.org ~$1.2 billion USD[20][21][22] Decentralized ledger currency, SHA-256 proof-of-work
Litecoin LTC 2011 Coblee Yes[23] litecoin.org ~$55 million USD[21][22] Scrypt proof-of-work
Namecoin NMC 2011 Vinced Yes dot-bit.org ~$3.5 million USD[22][24] 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.
PPCoin PPC 2012 Sunny King Yes[25] ppcoin.org ~$2.6 million USD[21][22] SHA-256 proof-of-work/proof-of-stake, the proof-of-stake means that PPCoin has a small amount of inherent inflation.

Criticism

  • Some people, such as bitcoin developer Gavin Andresen, have expressed concern that some cryptocurrencies might be scams.[26]
  • Some have expressed concern that the smaller cryptocurrencies are pump and dump schemes.
  • Many smaller cryptocurrencies have very few users and are only traded on cryptocurrency 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. ^ California dreaming: The CoinDesk Weekly Review, Coindesk, 26-05-2013
  4. ^ From your wallet to Google Wallet: your digital payment options, The Conversation, 26-05-2013
  5. ^ About, The Cryptocurrency Legal Advocacy Group, 01-07-2013
  6. ^ Exposing the Ripple Scam, OpenCoin Inc's Cash In on Bitcoin's Popularity, ripplescam.org, 07-07-2013
  7. ^ a b Crypto currency, Forbes, 26-05-2013
  8. ^ How Cryptocurrencies Could Upend Banks' Monetary Role, American Banker, 26-05-2013
  9. ^ Here's why Bitcoin is the future of money, cnet, 26-05-2013
  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. ^ Bitcoin developer chats about regulation, open source, and the elusive Satoshi Nakamoto, PCWorld, 26-05-2013
  16. ^ What is Bitcoin Mining?, The Genesis Block, 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. ^ "Bitcoin Exchange Rate in USD". Retrieved 5 May 2013.
  20. ^ "Market Capitalization". Blockchain.info. Retrieved 21 March 2013.
  21. ^ a b c Simonite, Tom. "Bitcoin Isn't the Only Cryptocurrency in Town". MIT Technology Review. Retrieved 5 May 2013.
  22. ^ a b c d "Crypto-Currency Market Capitalizations". Retrieved 26 June 2013.
  23. ^ "Litecoin Exchange Rate in USD". Retrieved 1 March 2013.
  24. ^ Cryptocoin Mining Information, 18-05-2013
  25. ^ "PPCoin Exchange Rate in BTC". BTC-E.
  26. ^ Andresen, Gavin https://bitcointalk.org/index.php?topic=42465.0 (accessed 6 Apr 2013)
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