Raiders of the Lost Coins

From antiquity, banking as an activity followed the development of commerce, assuming its current form in the early 15th century in Europe — more specifically in Italy, the financial center of a budding Renaissance world. The use of the word “bank” to describe financial activities probably dates back to this time, since transactions were carried out in bancas, the old Italian word for “table.” Despite its long history, some banking business features remain virtually unchanged — such as the concept of currency as a store of value. We have already discussed here the considerable changes taking place in several financial services. Now, technology disrupts the traditional banking model.
Financial institutions — banks in particular — provide a broad list of services: loans, transfers, payments, fund management. They are carefully regulated and monitored around the world, due to the dependence of agricultural, industrial, and service activities on a healthy financial system. Their main product is money, which is undergoing a major innovation with the introduction of the cryptocurrencies. Traditionally, financial systems are centralized and coordinated by each country’s monetary authorities — which also combine efforts globally to maintain the system’s stability, robustness, and security. The monetary base — the amount of currency in circulation — is defined by central banks, which can emit more money according to their views on the economic scenario, thus providing more liquidity to the system.
The most well-known cryptocurrency implementation — bitcoin — was devised by a mysterious figure known only as Satoshi Nakamoto. This person (or these people) worked for about two years developing the model launched in 2009 probably from the East coast of the US, Central America or South America. Unlike traditional currencies, there is no central controlling agent: when a cryptocurrency is first launched, the rules concerning its maximum overall amount or availability and the time in which it will reach this limit are determined. Like precious ores, which exist in finite quantity on the planet, every cryptocurrency also has a predefined stock. And just as precious stones are extracted from the earth by miners, cryptocurrencies are also mined by a community of virtual miners at a speed that by design is similar to the extraction of gold in the real world.
Cryptocurrency mining is a computationally intensive process through which more “currency units” are put into circulation. Currently, there are hundreds of types of cryptocurrency, each with its digital implementation: bitcoin, ethereum, ripple, dash, litecoin, and monero are just a few examples. The price of bitcoin, for example, fluctuates significantly: at the end of 2016, one bitcoin (BTC) was quoted below $1,000; by mid December 2017, it was worth around $16,500 and at the time of this writing it fluctuates around $7,000. As there are about 17.2 million bitcoins in circulation, its total value already exceeds $100 billion. There are still about 3.8 million bitcoins to be mined in the world, and many are hunting for these coins (the total original and final issuance was of 21 million bitcoins). For its part, ethereum (ETH) has the second largest market value among cryptocurrencies, close to $30 billion (also at the time of this writing).
But those willing to go hunting for these coins need to spend time and computing resources solving complex problems, with the goal of creating a stable, secure and fraud-proof environment. The mining control and transaction registration system of a cryptocurrency — including the addition of new coins in the market — is called the blockchain, literally a “chain of blocks.” Its relevance transcends the cryptocurrency world, and this will be our next topic. See you then.
