Cryptocurrency and blockchain: tulip mania or digital promise for the millennial generation? 1. What is a cryptocurrency? Cryptocurrencies and tokens are digital or "virtual" assetsliterally blips on a computer screen or in a computer filethat serve as a medium of exchange just as familiar fiat currencies do. The "price" of a cryptocurrency or token in US$ is an exchange rate at which cryptocurrencies can be converted into US$, in the same way that the JPY/US$ exchange rate is the price at

more »

... JPY can be changed into US$. Bitcoin is the best-known cryptocurrency, but there are now more than 200 others, the most popular being Ethereum, Ripple, Dash, Litecoin and Monero. Bitcoins and "altcoins"alternative coins to Bitcoinsalso have a store-of-value. In September 2018, that aggregate value was around $US220bn, of which 40 per cent or so is Bitcoin as measured by aggregate market cap (though market caps are at best a rough guide to store-of-value in crypto-land). Tokens are issued in Initial Coin Offerings (ICOs) by companies looking to fund development of services, loosely a crowd-funding version of the traditional corporate IPOs; the tokens are rights to future payments or services and trade in Bitcoins or altcoins on a secondary market. There were about US$4bn of ICOs in 2017 and US$17bn for the first half of 2018. Typical fiat currencies are tracked in a centralized database (i.e. ledger) of transactions that are stored, controlled and monitored by a country's central bank and its commercial banks. Central banks create money by printing bank notes that have a unique serial number each. The unique serial number on each note prevents the occurrence of double spending (i.e. preventing an individual from spending the same amount twice). Only legitimate notes with a unique serial number are allowed to be entered into the database of transactions such as our bank accounts. For example, when you deposit cash into your bank account, the teller or ATM will confirm that the notes that you have provided are legitimate and record the transaction as a deposit in your bank account and a withdrawal from the payor account. Blockchains are decentralized databases (i.e. ledgers) of accounts, balances and transactions. The "world's oldest blockchain" is generally considered a hash function produced since 1991 by a New York data storage company called Surety. Surety creates immutable time-stamped digital documents. To do this, the documents are hashed (assigned a unique identifier or "digital fingerprint") and then timestamped to create a seal. "This seal is a cryptographically secure unique identifier that is then [. . .] stored for the customer (Oberhaus, 2018)." To have trust and a consensus beyond Surety's internal processes, though, a hash value for all the new seals is published publicly, not in a ledger per se but, amazingly, in the classifieds section of the New York Times. Bitcoin famously arrived on the scene in 2008 and used blockchains for an immutable chain of cryptographed records of Bitcoin transactions that were public and for which a consensus exists. Nowadays, many transaction applications for blockchains beyond recording Bitcoin and other cryptocurrency payments are being developed. Entries into a blockchain ledger can only be made by fulfilling specific conditions. Different types of cryptocurrency or other assets require the fulfilment of different specific conditions to be met before legitimate transactions are recorded into a decentralized, but networked, database. A moment's thought leads one to appreciate the formidable challenges in designing a consensus protocol for multiple parties to participate in accurate but decentralized transaction updates in a blockchain, e.g. how to handle autonomously the