Classroom Companion: Business

2.3 · Factors Constraining Evolution

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Box 2.4 Cryptocurrencies
Cryptocurrency is a type of digital cur-
rency that uses cryptography to secure 
transactions and generate new units. 
Transactions in cryptocurrencies are per-
formed without any centralized author-
ity. Cryptocurrency uses the blockchain 
technology employing a public and 
decentralized database of encrypted 
records. Blockchain is a versatile tech-
nology that can be used to design smart 
contracts as well as cryptocurrencies. A 
general advantage of cryptocurrencies 
is their ability to support secure trans-
actions of money without a third-party 
stakeholder involved, potentially with 
reduced cost and lower transaction delay.
Bitcoin (2009) was the first decen-
tralized cryptocurrency and the first 
practical implementation of the block-
chain. Bitcoin involves many distrib-
uted miners that confirm transactions 
between two parties. Transactions are 
recorded as a chain of blocks (thereby 
the name “blockchain”) on a decentral-
ized and distributed public ledger.
Bitcoin has the potential to become 
a true global digital currency. It can be 
traded on international digital currency 
exchanges. However, the price of Bitcoin 
has been extremely volatile compared to 
other currencies such as US dollar and euro 
(see 
.
Fig.
2.3
). The current value of 1 
Bitcoin is about 60,000 USD (April 2021), 
rising from about 7000 USD in April 2020. 
Because of this, the use of Bitcoin in the 
trading of goods and services has been 
limited. The popularity of Bitcoin has also 
spurred the creation of many other cryp-
tocurrencies such as Ethereum, Litecoin, 
Ripple, and IOTA. There are currently 
more than 3400 different cryptocurrencies 
in various stages of development.
. Fig. 2.3 The price of one BTC in US dollars from January 2014 to April 2021. (Authors’ 
own figure)