- 1 Background
- 2 How it works
- 3 Technology
- 4 Types
- 5 Advantages
- 6 Ethical Issues
- 7 See Also
- 8 External Links
- 9 References
The first "attempts" at foundational principals of cryptocurrency date back to the late 1980s. David Chaum created a "binding" algorithm that became the foundation for web-based encryption. When Chaum saw the potential for digital e-commerce involving this "binding" algorithm, he moved to the Netherlands to start a profitable company called Digicash. Digcash was not a decentralized online currency but a monopoly for electronic secure payments. Digcash eventually went bankrupt in the 1990s. While fiat currencies have dominated the exchange market, these currencies are highly susceptible to manipulation motivated by “economic and political gain” . This notion led individuals to search for a more trustworthy way to attain financial solidarity through a decentralized medium of exchange which had the power to throw the presumed ambiguous, centralized economic central banking system out of the equation..
In 2009 after a mysterious, anonymous paper was written in 2008 about an “Electronic Cash System” called Bitcoin, a new version of decentralized currency online had started to form and adopted the name "cryptocurrency". . 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 cyber-currency to become available to the public, and then in 2011 many alternative, rival cyber-currencies came about as improved versions of Bitcoin’s source code. Cyber-currency then began to run into issues as the value of one Bitcoin fell to nearly $300 shortly after hitting $1000 in 2013. Bitcoin quickly gained a lot of media popularity, and became the point of example for the general public as representative of cryptocurrency. Since then, cyber-currencies have been subject to a large amount of scams due to the nature of the online market .
How it works
The decentralized nature of cryptocurrencies and their security of user transaction is achieved through signing the key protocol and the public ledger based blockchain technology. This is primarily due to the public not having the higher level knowledge of how the currency actually works. To send money, the user broadcasts to the cyber-currency 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 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 . In fact, avid users spend many hours trying to figure out the system behind the lottery.
Trading Vs. Mining
The two main interactions individuals have with any form of cryptocurrency is through trading the currency online or mining the currency themselves.
Cryptocurrency trading is exchanging one cryptocurrency for another and buying and selling coins. There are two types of trading – margin and leverage . Margin trading is when a user makes a transaction with funds that have been borrowed from another user. Therefore, in simpler terms, it is similar to taking out a loan from a bank. 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 . There are two types of leverage trading – short term and long term. For example, leveraging in the long term means that the user believes the value of their cyber-currency will rise over time. On the other hand, leveraging in the short term means that a user believes the value of their cyber-currency will drop and therefore they sell their coins and buy them back for less than they sold them 
Cyber-currency mining is adding transactions to the blockchain ledger and releasing new currency. The reason this is done is to validate transactions. Each time a transaction is made, the miner must secure and verify the transactions to the blockchain ledger. In order to mine, people must have a computer with a special program, and significant computer resources overall. Mining is encouraged because those who participate obtain portions of the new cybercurrency. This makes the price of mining more than the reward. . Since cyber-currency usage is increasing, so is the mining associated with it.
In his article, Possible State approaches to Cryptocurrency, Jane Lansky describes cryptocurrency as a system that must meet the following criteria:
- The system does not require a central authority.
- The system keeps an overview of cryptocurrency along with it's ownership.
- The system decides whether new cryptocurrency can be created and who receives ownership of the new currency.
- Ownership of cryptocurrency is proved through cryptography.
- The system allows transactions in which the ownership of cryptocurrency is changed.
- The system can perform at most one update at any given time, even when two updates on the same cryptocurrency occur simultaneously.
Blockchain was originally created solely for cyber-currency but is now used in several different aspects of technology. It works like a digital spreadsheet that is duplicated to thousands of computers within the cyber-currency network. The design allows the technology to be regularly updated which allows it to automatically check the database every ten minutes and update the spreadsheet. In a sense, blockchain promotes privacy because it protects individual’s personal data by decentralizing control  Information shared on the blockchain exists as a shared and regulated database and it cannot be copied. Blockchain makes sure that people are not using the same cyber-currency for more than one transaction. Blockchain essentially eliminates the middle man and allows consumers to connect directly . It allows for transactions to be public, but the user still has a right to a private identity as discussed by Floridi . Blockchain creates legitimacy by enforcing authenticity because it creates a sense of security within the users .
A digital signature is a mathematical way of proving you have a password to an account that created a transaction, without giving away the underlying password. Each user gets a private key, and a public key used to sign and verify messages. The private key and is a secret known only to the true user. Using a special function, a user signs a transaction using their private key, which puts a signature at the bottom of the transaction. Anyone can verify the transaction is legitimate by using the public key and a different function to verify the signature was created from the matching private key. If anyone adjusts the message or the signature then the verify function will return an error and the transaction will be rejected. Without a users private key it is impossible to falsify a transaction from them since the signature cannot be created without the full pair.
With the explosion of so many new cybercurrencies, it’s important to recognize the differences between coins and tokens.
Cybercurrencies that are built from their own platform represent the value of the currency with a coin. They are the main unit of transaction for their currency, and can be subdivided to a certain point, at which point you have the atomic unit for a currency. For example, Bitcoin, the most well known crypto currency has a main unit called the Bitcoin, and an atomic unit known as the Satoshi, which has the value of one hundred millionth of a single bitcoin. The market capitalization of a particular cryptocurrency can be determined by finding the fiat value of its main token, and multiplying it by the number of current issued coins.
|Bitcoin||BTC/XBT||Bitcoin/Satoshi||Bitcoin, created in 2009, was the first cyber-currency, but the creator is still anonymous. The creator went by the pseudonym Satoshi Nakamoto, however, this is 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. In May 2010 that bitcoin was used to make a purchase by Laszlo Hanyecz. Hanyecz paid for a pizza with 10,000 bitcoins. That day is now known within the bitcoin community as Bitcoin Pizza Day. |
|Litecoin||LTC/XLT||Litecoin/Photon||Modeled after Bitcoin, Litecoin is similar but still presents very slight differences. It is supposed to have faster processing speeds due to advanced technology . Litecoin was created by Charlie Lee in 2011, who designed Litecoin as an open source tool available to the public. Litecoin has advertised that it can produce a new block in its blockchain in 2.5 minutes, which is comparably faster than Bitcoin's speed to add a new block. Litecoin also has a higher max supply of coins in circulation, 84,000,000.|
|Ethereum||ETH||Ether/Wei||Defined, on its website, as a blockchain app platform with an "enormously powerful shared global infrastructure that can move value around and represent the ownership of property." Ethereum is similar to Bitcoin but with a faster processing speed due to updated programming using if-then statements. Although Ethereum is newer than Bitcoin and Litecoin, it is more popular than Litecoin and follows closely behind Bitcoin .|
|Ethereum Classic||ETC||Classic Ether/Wei||Ethereum Classic is a forked version of the Ethereum Blockchain. The fork occurred when the first Ethereum Classic block that was not included in the Ethereum chain was mined at block height 1920000 on July 20th, 2016. The only major change between the Ethereum Classic and the Standard Ethereum blockchain was the handling of a hack of the DAO, a decentralized autonomous investor-directed venture fund, where 3.6 million Ether, at the time worth around $50 million, were stolen. Technically Ethereum Classic is the original Ethereum Blockchain, as it did not include the voted solution to this problem, which was to roll back the network to before the hack. Ethereum Classic is not supported by the Ethereum Foundation and it is developed separately from the main Ethereum blockchain.|
|Monero||XRM||Monero/Tacoshi||Originally called BitMonero, Monero is another cryptocurrency originally forked from Bitcoin, created in April 2014. Its key differences are that it scrambles its public transaction book. Unlike Bitcoin, and many of its other derivatives, you are unable to tell the sending account(s), receiving account(s), or the transaction amount. This has made it widely used in illegal activity as it is harder to blacklist accounts and stolen funds in the same manner as one can on other blockchains.|
|Ripple||XRP||Ripple/Drop||Ripple is a real-time token settlement system created by Ripple Labs officially launched in 2012. Using a distributed open source network Ripple allows the the trading of tokens representing anything from currency, both crypto and fiat, commodities and more. Its native token is known as XRP which has one of the largest market capitalizations outside of Bitcoin.|
|Bitcoin Cash (Bcash)||BCH/XBC||Bitcoin/Satoshi||Bitcoin Cash is a hard-fork of the Bitcoin blockchain, meaning they share identical data up to a certain point. The major difference in the two implementations is that Bitcoin Cash has a larger block size, 8MB versus Bitcoin's 1MB blocks, meaning more transactions data can be included in a block. This increases the number of transactions the network can process as more can be stored and validated in the same block height compared to traditional Bitcoin. This also lowers transactions fees, as there is less of a need to incentivize a miner to include your transaction, since most blocks are not at capacity. The split from Bitcoin occurred on August 1st, 2017 at block height 478559. At this point, anyone who had Bitcoins, received an equal amount of Bitcoin cash and the protocols split.|
|Zcash||ZEC/XZC||Zcash/Zetoshi||Zcash is a cryptocurrency, forked from the Bitcoin source code, with added privacy functionality compared to the normal Bitcoin Core. It uses a cryptographic method known as zero-knowledge proofs to allow for both public and private transactions. Public transactions recorded in a nearly identical to way Bitcoin showing sender address, amount, and receiver address. Meanwhile, private transactions hide all identifying information. This allows users to select how private they want to be on a transaction-by-transaction basis, instead of being locked into all public or all private like Bitcoin and Monero respectively.|
|Dogecoin||DOGE||Doge||Dogecoin is a cryptocurrency hypothetically featuring the Shiba Inu breed of dog, popularized on the internet as the "doge" meme. While Dogecoin was originally released as a joke currency on December 6th, 2013, the coin has achieved a $2 billion market cap on January 2018 due to its cult status and community. The cryptocurrency has few practical applications as most other popular currencies such as Ethereum or Bitcoin have, and was instead marketed for “tipping” purposes on internet platforms when users wanted to reward others for providing insightful or funny content. The status of Dogecoin as a joke currency did have some ramifications, however, as on December 25, 2013 a major theft of the currency occurred when the wallet platform DogeWallet was hacked. Despite this, no concentrated major funds were lost due to the low value of individual coins. Since the incident, Dogecoin has continued to grow as the trading volume of Dogecoin briefly overshadowed Bitcoin and all other cryptocurrencies in January 2014 (although still much lower in market cap). |
|Dash||DASH||Dash||Originally launched in January of 2014 under the name “Xcoin” by Evan Duffield, and later rebranded as “darkcoin”, Dash is the current name of the cryptocurrency as a result of a rebranding in March 2015. “Dash” comes from “digital cash” and despite the name change, the cryptocurrency still operates the same way, with functions such as “InstantSend” and “PrivateSend.” It is credited with being a “more secretive version of bitcoin” and was “the first digital currency to offer secure instant transactions based on the masterode network,” according to the site’s FAQ. Their FAQ also explains that in utilizing a decentralized network of masternodes, they are able to validate funds within seconds and lock any transactions attempting to use the same funds without the completion of the initial transaction.|
|Neo||NEO||NEO||Initially founded under the name “AntShares” in February of 2014 by Da HongFei and Erik Zhang, the cryptocurrency was newly named in June 2017 as NEO--“An open network for Smart Economy”--and marketed as “a cryptocurrency and open-source, community driven platform for decentralized applications.” NEO is the largest cryptocurrency which has emerged from China, and due to the good relationship the company has with the Chinese government, the site has experienced benefits. NEO has been referred to as the “Chinese Ethereum” due to its success and “similar use of smart contracts.” Through the use of digital assets, digital identity, and smart contracts, NEO builds a “smart economy”. Due to multi-language development, which supports programming in languages such as C#, Java, and Python, smart contracts can be developed with relative ease and speed. Some have attributed NEO’s success to this support.|
|Cardano||ADA||Cardano||Cardano is an open-source cryptocurrency project and decentralized public blockchain that was created by Charles Hoskinson, one of the co-founders of Ethereum, in September of 2017. On its website, Cardano is described as being “more than a cryptocurrency.” The site states that it is the “first blockchain project to be developed from a scientific philosophy, and the only one to be designed and built by a global team of leading academics and engineers.” Cardano also prioritizes being a technological platform “capable of running financial applications currently used everyday by individuals, organizations and governments all around the world.” In addition to this, Cardano had aims to fix the issue of long payment processing for international transactions, and was able to speed up processing time to seconds from days. Another noteworthy innovation, as described on their website, states that Cardano will balance the needs of users with those of regulations in hopes that this will combine privacy and regulation for greater financial inclusion.|
|EOS||EOS||EOS||EOS is a digital currency founded in June of 2018 by Dan Larimer, who is the CTO of Block.one, creator of the cryptocurrency platform BitShares, and co-founder of Steem, a blockchain based social media platform. EOS, as explained in their website, is made up of the EOS.IO software and the EOS coins. The software, according to their FAQ, “introduces a blockchain architecture designed to enable vertical and horizontal scaling of decentralized applications”. EOS’s initial coin offering raised $4 billion, making it one of the most profitable in history. |
Tokens are an indicator, or representation, of the currency. The token is commonly the value of the currency, but can represent anything, such as data storage. Tokens and coins are commonly used interchangeably, however tokens are built off the platforms that coins represent. A token can be obtained through an Initial Coin Offering, or ICO as an exchange for an investment into a company. The process is similar to an Initial Public Offering, or IPO, where one receives stock for their investment.
Utility tokens serve as future access to the products or services of the company. While many utility tokens aren't designed as an investment, they are sold at an ICO in order to fund the project of the company. Since cybercurrency is still new, these coins are commonly held for speculation and later used or sold when the product or service of the company is fully developed. 
Security tokens serve as a representation of an external asset that can be traded and recorded on a ledger. For example, a security token can be a digital representation of the stock's of a company and can benefit from a secure and protected decentralized ledger.
As Luciano Floridi explained, the value of privacy lies in the fact that users are allowed to control their own use to a larger extent. As society evolves, the issue of privacy online becomes more prominent which is prevalent in the foundation of cyber-currency. Similarly, cyber-currency promotes authenticity due to the way that users must hold one another reliable for their actions. While banking institutions suffer from cyber attacks quite often, cyber-currencies do not, due to strong security through technologies such as blockchain.
Decentralization in cybercurrency describes the control over the ledger of the coin transactions. It gives control to all participants in the system and removes one central authority that may act selfishly against the participants. Decentralization prevents price manipulation and fraud. By have a distributed ledger, faulty transactions can be detectable through the peer-to-peer network. Through history, a central power, such as a government system or business leader, can abuse their power and cause harm to those part of the system. The current framework of the internet is centralized which enables governments to remove content deemed unsuitable to its internet users. However, centralization leaves vulnerability as data is stored locally on a server. The server acts as a central point that can malfunction and lose the data or information that its consumers relied on. In a decentralized system, information is stored by every participant of the network and can allow data recovery if one node of the network is lost.
Lower Transaction Fees
Cybercurrency avoids typical transaction fees that occur with most credit card companies. While credit card companies have fees for writing checks, or even transferring funds, cybercurrency avoids this process since the data miners that are in charge of number-crunching are incentivized in other ways. Since data mining allows individuals to take a portion of the new cybercurrency that is generated, transaction fees are no longer required since jobs do not depend on the income. Although a fee can be involved with the use of a third-party management service, the fee is likely to be much smaller since cybercurrency already brings in funds when managed.
In his paper titled, "Anticipating Ethical Issues in Emerging IT", Phillip Brey argues that contemporary ICT ethics aren't equipped to deal with new and emerging technologies, especially those that are generally unregulated like cyber-currency. Although decentralization from the financial institutions is often seen as a very positive aspect of cyber-currency due to the privacy it brings to users, the lack of authority overseeing is a large concern. In these models, all of the responsibility and trust is placed on the user. Users have a responsibility to be truthful and work as a community which also enforces authenticity . Users have to keep their fellow users responsible for their actions. All transactions within the cyber-currency network are irreversible, therefore there must be some sort of trust between people involved.
Price Manipulation & Whales
The volatility in cyber-currency prices seems to be a growing issue due to the fact that some tradable assets have dropped by extremely large margins in very short timespans. Therefore, the cyber-currency market is known to be very risky and not completely trustworthy. A large part of this fluctuation in the market stems from whale, people who have a significant amount of cyber-currency capital. Whales gaining the ability to sway the cyber-currency market by manipulating the prices. Whales "buy and sell walls" in order to do this. Buying and selling walls occur when a person buys in on a cyber-currency that they expect the value to go up. Whales have a lot of power within a market since they have large amounts of capital, therefore they can cause the market to change significantly without even investing in it. They can also use the price fluctuation to buy coins for cheaper prices.
Laat defines trust as reliance on others and social institutions. It had previously been argued that virtual trust was impossible. Laat provides evidence of several online communities which demonstrate virtual trust, including online markets. The presence of whales and their ability to disrupt the market at will requires Bitcoin traders to have trust in the community. They must trust that the whales will not use their power to negatively sway the market. A report by Chainalysis found that the whales, on the whole, stabilized the market more than they destabilized it, showing that the apparent trust is not unfounded.
A significant portion of cybercurrency users participate in illegal markets . Although there is a lot of illegal use in cyber-currencies, the way that most blockchains work allow law enforcement officers to work backward due to the public manner of the ledger. Because of this, they are able to find out who is participating in these illegal markets. One of the largest illegal markets in the cyber-currency world was the Silk Road created by Ulbricht. The Silk Road was a free market that was part of the dark web and unregulated by the government. Almost all of the purchases made on the Silk Road were drugs and weapons. The currency for Silk Road purchases was the cryptocurrency Bitcoin. One of the main issues that arose Kathleen Wallace addresses in the "Concept of Anonymity," is that anonymity requires action that is not traceable, but people using the Silk Road wrongfully believed their actions were not traceable. While the combination of Tor and Bitcoin provided a shield for most users, chat logs and other incriminating evidence exposed many of the admins and sellers.
One can also compare the usage of these cryptocurrencies to the expressive values of the cryptocurrencies designers. It is clear to see that the designs of these currencies operate around decentralization and the movement toward a currency not controlled by a central authority that might be nefariously influenced by said authority. At a surface level, this is a very altruistic goal of these currencies to achieve. However, when the embedded values of the cryptocurrency system are examined, one can see that these illegal markets are instead promoting much more negative values in its users. That is, cryptocurrencies have given people the agency to perform illegal transactions that they couldn't otherwise with more traditional forms of currency, and in terms of embedded values, promoting these illegal values is a consequence of using said cryptocurrencies. This offers a unique challenge for these currencies, to balance achieving a secure and popular decentralized currency and a system that does not promote and enable illegal activities.
Cryptocurrencies, being relatively new technologies, have become vulnerable to multiple different attacks and hacks. While more traditional financial institutions are also vulnerable to attackers, cryptocurrencies face a new challenge as their design is completely transparent and public to the world, whereas the implementations of a bank’s online platforms are highly guarded and heavily maintained by security engineers. As outlined in Mia Consavlo’s piece “Cheaters”, people will seek out numerous ways to exploit and gain an advantage in a system. The specific study in the piece was multiplayer games, a rather innocuous medium for cheating to take place. However, when this cheating happens with a system which holds incredibly large sums of money, the dangers and importance of keeping said system secure become imperatives. If society must expect cheaters in every form of system, cryptocurrencies need to keep up with its security or risk devastating attacks on peoples’ livelihoods. To give some examples of attacks already committed on cryptocurrencies, the storage tool BlackWallet had $400,000 in XLM coins stolen, Crypto exchange Coincheck had 530 million in coins stolen, and Bitcoin Gold was attacked by a 51 percent attack. Thinking back to Brey’s argument of ICT’s ability to handle these new technologies, it can be easily argued that cryptocurrencies need more oversight and proven security before being entrusted with these increasingly large sums of money, especially with such a number of cases of exposing vulnerabilities in cryptocurrencies already.