Definitions[]
A cryptocurrency is
| “ | [a] digital currency that incorporates cryptography, and often has anonymity characteristics. Many cryptocurrencies are decentralized; i.e., no single institution controls the currency.[1] | ” |
| “ | a math-based, decentralised convertible virtual currency that is protected by cryptography — i.e., it incorporates principles of cryptography to implement a distributed, decentralised, secure information economy.[2] | ” |
| “ | an encrypted data string that denotes a unit of currency. It is monitored and organized by a peer-to-peer network called a blockchain, which also serves as a secure ledger of transactions, e.g., buying, selling, and transferring. Unlike physical money, cryptocurrencies are decentralized, which means they are not issued by governments or other financial institutions.[3] | ” |
Overview[]
"Cryptocurrencies, like Bitcoin, are built to allow the exchange of some digital asset of value (the cryptocurrency) for a good or service. They are frequently permissionless and use a proof of work model to add blocks. In these systems, anyone can create a wallet which includes their private key, their public key, and an address which is derived from their public key. They then acquire (through mining or purchase) the cryptocurrency, and add that as a transaction to the blockchain, so that their address is linked to their value. If they purchase something, they will then unlock the cryptocurrency with their private key, transfer it to the seller who then locks it with their private key. This transaction is published to the blockchain so all users are able to validate that the buying user has that much less of the cryptocurrency and the selling user has that much more of it. Bitcoin and other cryptocurrencies each have their own blockchain."[4]
"Cryptocurrency relies on public and private keys to transfer value from one person (individual or entity) to another, and must be cryptographically signed each time it is transferred. The safety, integrity and balance of cryptocurrency ledgers is ensured by a network of mutually distrustful parties (in Bitcoin, referred to as miners) who protect the network in exchange for the opportunity to obtain a randomly distributed fee (in Bitcoin, a small number of newly created bitcoins, called the "block reward" and in some cases, also transaction fees paid by users as a incentive for miners to include their transactions in the next block).
Hundreds of cryptocurrency specifications have been defined, mostly derived from Bitcoin, which uses a proof-of-work system to validate transactions and maintain the block chain. While Bitcoin provided the first fully implemented cryptocurrency protocol, there is growing interest in developing alternative, potentially more efficient proof methods, such as systems based on proof-of-stake."[5]
References[]
- ↑ Markets for Cybercrime Tools and Stolen Data, at 48.
- ↑ Virtual Currencies: Key Definitions and Potential AML/CFT Risks, at 5.
- ↑ Trend Micro, Definition (full-text).
- ↑ Blockchain: Background and Policy Issues, at 5-6.
- ↑ Trend Micro, Definition (full-text).