A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange using cryptography to secure the transactions and to control the creation of additional units of the currency.[1][2] Cryptocurrencies are classified as a subset of digital currencies and are also classified as a subset of alternative currencies and virtual currencies.
Bitcoin became the first decentralized cryptocurrency in 2009.[3] Since then, numerous cryptocurrencies have been created.[4] These are frequently called altcoins, as a blend of bitcoin alternative.[5][6] Bitcoin and its derivatives use decentralized control[7] as opposed to centralized electronic money/centralized banking systems.[8] The decentralized control is related to the use of bitcoin's blockchain transaction database in the role of a distributed ledger 9
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Decentralized cryptocurrency is produced by the entire cryptocurrency system collectively, at a rate which is defined when the system is created and which is publicly known. In centralized banking and economic systems such as the Federal Reserve System, corporate boards or governments control the supply of currency by printing units of fiat money or demanding additions to digital banking ledgers. In case of decentralized cryptocurrency, companies or governments cannot produce new units, and have not so far provided backing for other firms, banks or corporate entities which hold asset value measured in it. The underlying technical system upon which decentralized cryptocurrencies are based was created by the group or individual known as Satoshi Nakamoto.[10]
As of March 2015, hundreds of cryptocurrency specifications exist; most are similar to and derived from the first fully implemented decentralized cryptocurrency, bitcoin.[11][12] Within cryptocurrency systems the safety, integrity and balance of ledgers is maintained by a community of mutually distrustful parties referred to as miners: members of the general public using their computers to help validate and timestamp transactions adding them to the ledger in accordance with a particular timestamping scheme.[13]
The security of cryptocurrency ledgers is based on the assumption that the majority of miners are honestly trying to maintain the ledger, having financial incentive to do so.
Most cryptocurrencies are designed to gradually decrease production of currency, placing an ultimate cap on the total amount of currency that will ever be in circulation, mimicking precious metals.[1][14] Compared with ordinary currencies held by financial institutions or kept as cash on hand, cryptocurrencies can be more difficult for seizure by law enforcement.[1] This difficulty is derived from leveraging cryptographic technologies. A primary example of this new challenge for law enforcement comes from the Silk Road case, where Ulbricht's bitcoin stash "was held separately and ... encrypted."[15] Cryptocurrencies such as bitcoin are pseudonymous, though additions such as Zerocoin have been suggested, which would allow for true anonymity.[16][17][18]
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Bitcoin ATM
Central bank representatives have stated that the adoption of cryptocurrencies such as bitcoin pose a significant challenge to central banks' ability to influence the price of credit for the whole economy.[27] They have also stated that as trade using cryptocurrencies becomes more popular, there is bound to be a loss of consumer confidence in fiat currencies.[28] Gareth Murphy, a senior central banking officer has stated "widespread use [of cryptocurrency] would also make it more difficult for statistical agencies to gather data on economic activity, which are used by governments to steer the economy". He cautioned that virtual currencies pose a new challenge to central banks' control over the important functions of monetary and exchange rate policy.[29]
Jordan Kelley, founder of Robocoin, launched the first bitcoin ATM in the United States on February 20, 2014. The kiosk installed in Austin, Texas is similar to bank ATMs but has scanners to read government-issued identification such as a driver's license or a passport to confirm users' identities.[30] By May 2017 1189 bitcoin ATMs were installed around the world with an average fee of 8.82%. An average of 3 bitcoin ATMs were being installed per day in May 2017.[31]
The Dogecoin Foundation, a charitable organization centered around Dogecoin and co-founded by Dogecoin co-creator Jackson Palmer, donated more than $30,000 worth of Dogecoin to help fund the Jamaican bobsled team's trip to the 2014 Olympic games in Sochi, Russia.[32] The growing community around Dogecoin is looking to cement its charitable credentials by raising funds to sponsor service dogs for children with special needs.[33]