1 Cryptocurrencies: The Underlying Technology

Subject(s):

Electronic money — Intermediated securities — Currency

This chapter provides an overview of decentralisation and distributed consensus, two components that distinguish cryptocurrencies from other forms of electronic payments which use intermediaries and electronic bank money, such as Paypal, WorldPay and BACS. These characteristics also account for the common notion that cryptocurrencies are ‘trustless’ — that is, transacting parties do not have to trust one another in the real world; their trust is in the payment protocol consensus on which cryptocurrencies are based. After explaining decentralisation and distributed consensus in this context, the chapter discusses the features shared by various cryptocurrencies and distributed ledger platforms like Bitcoin. It also introduces the reader to the chapters that follow, each of which considers a particular area of public or private law, and offers either a solution to — or a workable means of approaching — the problems that have either already arisen, or are bound to arise soon, in their application to cryptocurrencies.