Crypto-currencies are virtual, private currencies that allow their holders to purchase certain types of goods or services without a bank account. There are more than 1,600 different crypto-currencies in the world. The three most used crypto-currencies are Bitcoin, Ether and Ripple. Their respective capitalizations are 109 billion euros, 50 billion euros and 22 billion euros.
WHAT IS A CRYPTOCURRENCY?
Crypto-currencies are defined by three characteristics:
- they are virtual currencies, ie digital representations of purely fiduciary value; they are not issued or guaranteed by a central bank or a credit or monetary institution;
- they use cryptography: they are designed to transmit value over the Internet in an open and secure environment;
- they operate in a decentralized system, most crypto-currencies are backed by blockchain technology.
The first crypto-currencies were created as soon as the advent of the Internet but their use only developed with the bitcoin, designed by Satoshi Nakamoto in 2009. Bitcoin records every minute nearly 80 transactions in the world. Nevertheless, this figure remains very far from the number of transactions made with Visa and Mastercard payment cards, of the order of 100,000 transactions per minute each.
The crypto-active ecosystem is increasingly attracting public scrutiny as to how their use can be diverted. Anonymity guaranteed by the absence of an account would encourage practices related to money laundering or other criminal activities such as the financing of terrorism. However, this surveillance comes up against the desire to encourage technological innovation, of which crypto-currencies have been one of the representatives in recent years.
Securing exchanges from cryptocurrencies is based on a complex digital architecture based essentially on blockchains. The blockchain allows a decentralized management of the currency without a trusted third party, in contrast to hierarchical and centralized systems of official currencies.
The data is grouped in successive blocks on which all the information relating to the transactions made is stored. These blocks are linked to each other and numbered. A cryptographic link is established between each block and the next.
The digital representation of crypto-active is often operated using digital tokens. It is a digital representation of value, fungible and divisible, able to circulate on Internet and to be exchanged of peer-to-peer without compulsory proof of identity and with a finality of payment.
Future of Cryptocurrencies
The appearance of cryptocurrencies has two major aspects:
- A social movement that challenges traditional banks and financial intermediaries, especially since the 2008 crisis;
- A technological progress that makes it possible to operate “via a totally secure and totally decentralized network of anonymous transactions between a very large number of participants who do not know each other” (Landau report).
Are crypto-currencies likely to upset the economy based on traditional currencies? In the past, no private currency has managed to persist in time. Nevertheless, in the digital era, while traditional currencies are used in dematerialized form, cryptocurrencies could have a different destiny. For example, large trading platforms could use their own currency.