Difference between revisions of "Cybercurrency"
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{{initial|C}}ybercurrency, commonly referred to as cryptocurrency, is made up of digital assets with the use of cryptography to ensure the security of the online transactions <ref> Scutify [http://www.minyanville.com/business-news/markets/articles/2524blockchain/10/19/2017/id/61031 "Looking into What Makes Cryptocurrency Unique and So Popular"] ' 'Minyanville' ', Oct 19, 2017</ref>. Cybercurrency is unique because it allows people to not have to rely on central banks and their services. There is an emphasis on decentralization and more privacy for users. As Luciano Floridi explained, the value of privacy lies in the fact that users are allowed to control their use to a larger extent <ref> Luciano Floridi, "Fourth Revolution", 2014 </ref>. As society evolves, the issue of privacy online becomes more prominent, therefore this is an extremely important aspect of cybercurrency. While banking institutions suffer from cyberattacks quite often, cybercurrencies do not due to their strong security through technologies such as blockchain. On the other hand, cybercurrencies can also be a very risky investment because the price of a coin can change drastically in a short span of time due to trends in the financial market. Cybercurrency does not have value in the real world. The value is given because people are willing to trade goods and services for it. | {{initial|C}}ybercurrency, commonly referred to as cryptocurrency, is made up of digital assets with the use of cryptography to ensure the security of the online transactions <ref> Scutify [http://www.minyanville.com/business-news/markets/articles/2524blockchain/10/19/2017/id/61031 "Looking into What Makes Cryptocurrency Unique and So Popular"] ' 'Minyanville' ', Oct 19, 2017</ref>. Cybercurrency is unique because it allows people to not have to rely on central banks and their services. There is an emphasis on decentralization and more privacy for users. As Luciano Floridi explained, the value of privacy lies in the fact that users are allowed to control their use to a larger extent <ref> Luciano Floridi, "Fourth Revolution", 2014 </ref>. As society evolves, the issue of privacy online becomes more prominent, therefore this is an extremely important aspect of cybercurrency. While banking institutions suffer from cyberattacks quite often, cybercurrencies do not due to their strong security through technologies such as blockchain. On the other hand, cybercurrencies can also be a very risky investment because the price of a coin can change drastically in a short span of time due to trends in the financial market. Cybercurrency does not have value in the real world. The value is given because people are willing to trade goods and services for it. | ||
Revision as of 21:36, 27 March 2019
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Contents
Background
Cybercurrency began in 2009 after a mysterious, anonymous paper was written in 2008 about an “Electronic Cash System” called Bitcoin Bitcoin [3]. The identity of the author is still unknown, but this paper initially sparked the creation after many people had attempted to create online currencies, such as B-Money and Bit Gold, in prior years but failed. Bitcoin was the first cybercurrency to become available to the public, and then in 2011 many alternative, rival cybercurrencies came about as improved versions of Bitcoin’s source code. Cybercurrency then began to run into some issues as the value of one Bitcoin fell to nearly $300 shortly after hitting $1000 in 2013. Since then, cybercurrencies have been subject to a large amount of scams due to the nature of the online market [4].
How it works
To send money, the user broadcasts to the cybercurrency network the amount of money they want to send from their account to another user’s account. Both ledgers are updated with the new amount in a public infosphere. The order must be authenticated before the transaction can be processed. The authentication happens with a digital signature. Each account comes with a private key and a transaction message, and with that the digital signature is created. A new digital signature is created every time a transaction goes through in order to strengthen the security. New transactions go into a pool of public transactions and then are moved into a chain to select the order in which they are processed. The order is selected in a somewhat mathematical lottery [5]. In fact, avid users spend many hours trying to figure out the lottery.
Trading Vs. Mining
Trading
Cryptocurrency trading is exchanging one cryptocurrency for another and buying and selling coins. There are two types of trading – margin and leverage [6]. Margin trading is when a user makes a transaction with funds that have been borrowed from another user. In order to borrow from another user, a certain amount of funding must be allocated that will be taken from the user buying and will not be given back until the funds borrowed are returned in full [7]. Leveraging can occur in long term or short term positions. For example, leveraging in the long term means that the user believes the value of their cybercurrency will rise over time. On the other hand, leveraging in the short term means that a user believes the value of their cybercurrency will drop and therefore they sell their coins and buy them back for less than they sold them [8].
Mining
Cryptocurrency mining is adding transactions to the blockchain and releasing new currency. Adding transactions to the blockchain means securing and verifying the transactions. In order to mine, people must have a computer with a special program, and significant computer resources overall [9].
Technology
Blockchain
Blockchain was originally created for cybercurrency but is now used in several different aspects of technology. It is basically a digital spreadsheet that is duplicated to computers thousands of computers within the network. This network has been designed to regularly update and automatically check in on the database every ten minutes is designed to regularly update the spreadsheet. One of the most unique aspects of blockchain is that information shared on the blockchain exists as a shared and regulated database and it cannot be copied. In addition, blockchain makes sure that people are not using the same cybercurrency for more than one transaction. Blockchain essentially takes out the middle man and allows consumers to connect directly [10]. In addition, blockchain allows for transactions to be public, but the user still has a right to a private identity as discussed by Floridi [11]. Blockchains are also sometimes known as digital ledgers [12].
Types
Bitcoin
Bitcoin was the first cybercurrency and was created in 2009, but the creator is still anonymous. The creator went by the name of Satoshi Nakamoto, but it is apparent that this was not his real identity. Nakamoto mined the first bitcoin and embedded in the bitcoin was the date, January 3, 2009, which is now believed to be the date of the first ever mined bitcoin. It was not until May 2010 that bitcoin was used to make a purchase by Laszlo Hanyecz. Hanyecz paid for a pizza with 10,000 bitcoins and now this day is known within the bitcoin community as Bitcoin Pizza Day [13].
Litecoin
Litecoin is quite similar to Bitcoin, but with very slight differences. It was modeled after Bitcoin. It is supposed to have faster processing speeds due to advanced technology [14].
Ethereum
Ethereum is, once again, similar to Bitcoin but with faster processing speeds due to updated programming using if-then statements. Although Ethereum is newer than Bitcoin and Litecoin, it is more popular than Litecoin and falls just behind Bitcoin [15].
Issues
Although decentralization from the financial institutions often seen as a very positive aspect of cybercurrency, the lack of authority overseeing it can cause some issues. All of the responsibility is placed on the user. Users have a responsibility to be truthful and work as somewhat of a community which also enforces authenticity [16]. In addition, all transactions within cybercurrency are irreversible, therefore there must be some sort of trust between people involved.
Price Manipulation & Whales
The volatility in cybercurrency prices seems to be a growing issue due to the fact that some tradable assets have dropped by extremely large margins in just a days time span. It causes the cybercurrency market to be very risky and not completely trustworthy. A large part of this fluctuation in the market stems from whales. Whales refers to people who have a significant amount of cybercurrency capital therefore they have the ability to sway the cybercurrency market by manipulating the prices. In order for whales to be able to do this effectively, they "buy and sell walls." Buying and selling walls means that a person buys in on a cybercurrnecy that they expect to value of to go up. Due to the fact that whales have a lot of power within a market since they have large amounts of capital, they can cause the market to change significantly without even investing in it [17].
Illegal Markets
Illegal markets account for a significant amount of cyber currency users [18]. The way that blockchain works allows for law enforcement officers to basically work backwards because of the way that cybercurrencies work in a public aspect. By working backwards they are able to find out who is working in illegal markets. One of the largest illegal markets that began due to cybercurrency was the Silk Road created by Ulbricht. The Silk Road was a free market that was not controlled by the government and was part of the dark web. Almost all of the purchases made on the Silk Road were drugs and weapons and the only way to make purchases on the Silk Road were by using bitcoin. One of the main issues that arose was the fact that just as Kathleen Wallace had focused on in the "Concept of Anonymity,"[19] anonymity requires action that is not traceable, people using the Silk Road believed their actions were not traceable, yet they were [20].
References
- ↑ Scutify "Looking into What Makes Cryptocurrency Unique and So Popular" ' 'Minyanville' ', Oct 19, 2017
- ↑ Luciano Floridi, "Fourth Revolution", 2014
- ↑ Satoshi Nakamoto "Electronic Cash System" 2008
- ↑ Bernard Marr "A Short History of Bitcoin and Cryptocurrency Everyone Should Read" , ' 'Forbes' ', Dec 6, 2017
- ↑ "How Does Cryptocurrency Work" , ' 'CryptoCurrency Facts' '
- ↑ Connor Blenkinsop "Margin Trading, Explained" , ' 'Cointelegraph' ', Sep 26, 2018
- ↑ "What is Crypto Trading" , ' 'NatureForex' '
- ↑ Connor Blenkinsop "Margin Trading, Explained" , ' 'Cointelegraph' ', Sep 26, 2018
- ↑ Shanthi Rexaline "Cryptocurrency Mining: What It Is, How It Works And Who's Making Money Off It" , ' 'Benzinga' ', Aug 21, 2017
- ↑ Rosamond Hutt "All you need to know about blockchain, explained simply" , ' 'World Economic Forum' ', Jun 17, 2016
- ↑ Luciano Floridi, "Fourth Revolution", 2014
- ↑ "What is Blockchain Technology? A Step-by-Step Guide For Beginners" , ' 'Block Geeks' ', Mar 1, 2019
- ↑ Matthew Cochrane "The History of Bitcoin" , ' 'The Motley Fool' ', Apr 2, 2018
- ↑ "What is Crypto Trading" , ' 'NatureForex' '
- ↑ "What is Crypto Trading" , ' 'NatureForex' '
- ↑ Haimson, Oliver & Hoffmann, Anna Lauren, "Constructing and Enforcing Authenticity", 2016
- ↑ Katalyse "Major Problems in the Cryptocurrency Market" , ' 'Hackernoon' ', Feb 19, 2018
- ↑ Sean Foley "Sex, drugs, and bitcoin: How much illegal activity is financed through cryptocurrencies?" , ' 'University of Oxford' ', Jan 5, 2018
- ↑ Kathleen Wallace, "Concept of Anonymity", 2018
- ↑ Andrew Norry "The History of Silk Road: A Tale of Drugs, Extortion & Bitcoin" , ' 'Blockonomi' ', Nov 20, 2018
