Chapter One: What is a crypto Currency?

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Cryptocurrency 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] 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.[2] Since then, numerous cryptocurrencies have been created.[3] These are frequently called altcoins, as a blend of bitcoin alternative.[4][5] Bitcoin and its derivatives use decentralized control[6] as opposed to centralized electronic money/centralized banking systems.[7] The decentralized control is related to the use of bitcoin’s blockchain transaction database in the role of a distributed ledger.[8]
Overview of Cryptocurrencies
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.[9]
As of March 2015, hundreds of cryptocurrency specifications exist; most are similar to and derived from the first fully implemented decentralized cryptocurrency, bitcoin.[10][11] 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.[12]
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][13] 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.”[14] Cryptocurrencies such as bitcoin are pseudonymous, though additions such as Zerocoin have been suggested, which would allow for true anonymity.[15][16][17]
Timestamping
Cryptocurrencies use various timestamping schemes to avoid the need for a trusted third party to timestamp transactions added to the blockchain ledger.
Proof-of-work
The first timestamping scheme invented was the proof-of-work scheme. The most widely used proof-of-work schemes are based on SHA-256, which was introduced by bitcoin, and scrypt, which is used by currencies such as Litecoin.[21] The latter now dominates over the world of cryptocurrencies, with at least 480 confirmed implementations.[53]
Some other hashing algorithms that are used for proof-of-work include CryptoNight, Blake, SHA-3, and X11.
Proof-of-stake
Some cryptocurrencies use a combined proof-of-work/proof-of-stake scheme.[21][54] The proof-of-stake is a method of securing a cryptocurrency network and achieving distributed consensus through requesting users to show ownership of a certain amount of currency. It is different from proof-of-work systems that run difficult hashing algorithms to validate electronic transactions. The scheme is largely dependent on the coin, and there’s currently no standard form of it.
Economics

Cryptocurrencies are used primarily outside existing banking and governmental institutions, and exchanged over the Internet. While these alternative, decentralized modes of exchange are in the early stages of development, they have the unique potential to challenge existing systems of currency and payments. As of June 2017 total market capitalization of cryptocurrencies is bigger than 100 billion USD and record high daily volume is larger than 6 billion USD.[55]
Competition in cryptocurrency markets
As of October 2017, there were over 1100[56] digital currencies in existence.
Indices
In order to follow the development of the market of cryptocurrencies, indices keep track of notable cryptocurrencies and their cumulative market value. One of the noteable indices is cryptomarketcap.com, an incredibly important website for those interested in trading cryptocurrencies.
Crypto index CRIX
The cryptocurrency index CRIX is a conceptual measurement jointly developed by statisticians at Humboldt University of Berlin, Singapore Management University and the enterprise CoinGecko and was launched in 2016.[57] The index represents cryptocurrency market characteristics dating back until July 31, 2014.[58][59] Its algorithm takes into account that the cryptocurrency market is frequently changing, with the continuous creation of new cryptocurrencies and infrequent trading of some of the existing ones.[60][61]Therefore, the number of index members is adjusted quarterly according to their relevance on the cryptocurrency market as a whole.[

 

 

 

 

 

 

 

 

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