Emergence of Crypto Currency and the Digital Financial Landscape: A Critique

Introduction: Overview Of Cryptocurrency

As rightly said by Stewart Brand, ‘Once a new technology rolls over you, if you are not the part of steamroller, you are part of the road’. Till last decade, cash permits businesses to exchange currency with a central authority in the physical world, and there was no technological equivalent to this trade previously. David Chaum presented an anonymous electronic cash system based on blind signatures in 1982, he established DigiCash as an electronic cash corporation in 1990. Between 1997 and 1998, DigiCash and the banks that had developed electronic currency systems went bankrupt, thus, no electronic cash systems were implemented between 1998 and 2008. On October 30, 2008, a man who called himself, Satoshi Nakamoto, has published a paper titled “Bitcoin”, which is aPeer to Peer Electronic Cash System, detailing a digital money named “Bitcoin” (A peer-to-peer electronic cash system,). Electronic cash is the payment system, which will allow internet payments to be transmitted directly from one person to another without an intervention of intermediary or banking system as it is fully peer to peer. The Bitcoin network was started on January 3rd, 2009, at a price of $0.0008 per Bitcoin, which has increased to $42,500 per Bitcoin in January 2022 (Best, 2022).

Digital currencies were unknown outside of the online video gaming world only a few years ago, but they are now widely used (Themistocleous et al., 2020a). Virtual currencies have become a worldwide phenomenon that most people are aware of. Unlike traditional currency, which is backed by gold or silver, cryptocurrency is a digital currency created by a public network rather than a government, and it uses encryption to ensure that payments are issued and received securely. From a technological standpoint, cryptocurrency is defined as a “kind of digital currency that uses cryptography to create and maintain the currency, usually in conjunction with a proof-of-work method.” Governments or banks issue new currency under a centralised system, whereas cryptocurrency is known to the public from the start, insulating it from political interference. These transactions are much secured, Cryptography aids security to these transactions. Transactions are recorded in a public ledger and the minor verifies and secures them in exchange for a specific amount of bitcoin, allowing for the addition of new currencies to the system. The creation and validation of transfer of said money is done thorough a decentralised network of computer nodes which is of peer-to-peer, that are in sync and are part of main network. Ametrano (Ametrano, 2016) provides a more practical definition, cryptocurrency “can be exchanged immediately and securely between any two parties, using Internet infrastructure and cryptographic security, without the need for a trusted third party, the worth isn't guaranteed by any government or institution.” Wiatr (Wiatr, 2014) also defines the cryptocurrency as “a modern digital means of trade.”

The majority of cryptocurrencies were created in order to provide new units of currency with a finite total value. Cryptocurrencies have grown in popularity in recent years as a result of its decentralised distribution and peer-to-peer protocols. As of November 21, 2021, there were more than 10,000 Cryptocurrencies available around the world, and the number is growing (Investopedia, n.d.). At any time, a new cryptocurrency can be generated. Because of their high market capitalization, prominent currencies such as Bitcoin, Etherum, Bitcoin cash, Litecoin, and Ripple have emerged as fascinating phenomena in the financial markets in recent years. Bitcoin, the world's largest decentralised cryptocurrency, was launched in 2009, and since then, a slew of other cryptocurrencies known as “altcoins” have emerged. They've also been linked to controversy as their popularity soared, accompanied by a surge in public attention.