224

Blockchain Technology

2009. “Cryptographic methods are at the middle of their execution” (He et al., 2016),

and factually, the idea and perception of storing significant information by utilizing

cryptography techniques is considered to be much older, as the word “crypto” is

from an ancient Greek term kryptos, meaning “hidden”. In some records, it is stated

that “ancient Egyptians also made use of cryptography as it is evinced by practicing

cipher by Julius Caesar in 100BC to 40BC” (Fry, 2018).

Cryptocurrencies bear some similarities to regular currencies. Unlike regular cur­

rencies, cryptocurrencies are purely digital assets, supported by blockchain-enabled

encryption techniques and using cryptography for securing transactions, regulating

the formation of extra elements and authenticating the transmission of resources.

The critical difference between the two is that cryptocurrency can be created inde­

pendently of CBs and can be used independently of typical regulated financial inter­

mediaries (such as banks). Unlike sovereign authorized currencies, cryptocurrencies

are not legal tender (i.e., guaranteed by government). Forms of money and the cat­

egorization of cryptocurrencies are shown in Figure 13.2.

Crypto tokens are a form of cryptocurrency that may appear as typically as equity,

security or utility tokens, whose purchasing power and right of exchange is limited

to a specific asset, product or service for which the token is issued. Additional kinds

of tokens consist of “asset-backed tokens” – tokens that represent a physical asset

such as real estate, “vote tokens” – tokens that confer on their holder the right to be

involved in a project development and “hybrid tokens” – tokens that are a hybridiza­

tion of more than one form of tokens or their representation.

Cryptocurrencies are championed by their advocates due to their ability to con­

duct strictly peer-to-peer exchange without intermediaries like banks involved. Their

critics are concerned with their being used in illicit transactions, as the system is

essentially decentralized and formally unregulated. Another problem for cryptocur­

rencies is their volatility. As such, the most recent phenomenon is the creation of

stablecoins.² Likewise, the CBs of major economies have begun to rethink their own

FIGURE 13.2  Forms of money and the categorization of cryptocurrencies. (Author’s own.)