How Do Cryptocurrencies Work?

Abstract

From early forms of bartering to modern-day cryptocurrencies, this chapter presents the history, development, and management of money. We begin our discussions by understanding the nature of money. We then discuss the emergence of financial exchange from commodity-backed transactions to cryptocurrency and learn that all forms of monetary exchange rely on trust. Our discussions progress to the design and implementation of Bitcoin, the oldest form of cryptocurrency. We present how Bitcoin uses various technologies—from hashing to blockchains—to ensure a transparent, secure, and reliable implementation of a cryptocurrency. In the Advanced Section, we also learn that Bitcoin&s;s underpinnings—blockchain technology—can serve as the basis for many applications.