* Cryptocurrencies can become units of account only if there is a friendly and conducive regulatory environment.
* This could then allow businesses to accept cryptocurrencies as payment systems in a broader context.
* The wider use of cryptocurrencies is the next natural step in reducing friction in the global economy, supported by the adoption of tokens in local contexts, be they specific to geographies or industry-sectors.
Key Blockchain Concepts – Distributed Ledger Technology
A distributed ledger is an immutable database that is governed by a predetermined set of rules, consensually shared and synchronized across multiple sites, institutions or geographies. It enables untrusting parties with common goals to co-create a permanent, immutable and transparent record of exchange and processing, while making the database more secure and resilient.
DLTs can be categorized according to certain characteristics.
1. the ledger may be publicly available or not; namely, public versus private.
2. they can differ in terms of which set of verifiers are authorized to validate transactions; namely, permissionless versus permissioned.
Key Blockchain Concepts – Cryptocurrency
Cryptocurrencies such as Bitcoin consist of a peer-to-peer network of nodes which jointly maintain a common tamper-resistant record of historical transactions without relying on a central authority or trusted third party.
The key innovation is a novel transaction-recording mechanism known as the blockchain. The latter is made up of blocks – that is, batches of validated transactions – which are chained together – that is, logically linked or tied to each other in such a way that any attempt to edit or otherwise corrupt the historical record is either prohibitively expensive or becomes immediately evident.
A DLT such as Bitcoin, enables its participants to co-create an irrefutable record of transactions.
Cryptocurrencies have popularly been used as a catch-all synonym for what is actually a broader term, namely cryptoassets. Cryptoassets include any digital asset that utilizes cryptography.
Three subclasses of cryptoassets have been identified in the recent literature:
Barriers to cryptocurrencies becoming the future of money
There are technical, legal, economic and social challenges currently restricting the degree to which cryptocurrencies are fulfilling the three traditional functions of money:
1. Medium of exchange
2. Unit of account
3. Store of value
More specifically, the 6 issues listed below and discussed in detail throughout the report, hold the key to the adoption process and improving trust:
6. Usability/Design thinking