Pub. 7 2016 Issue 3

www.wvbankers.org 18 West Virginia Banker T o most people, the concept of digital currencies is synonymous with the name Bitcoin. However, hundreds of digital currencies exist. In fact, World- CoinIndex.com tracks 445 currencies, and CoinMarketCap.com tracks 732. Bitcoin is by far the largest, with a market capitaliza- tion of almost $10 billion (at the time of this article). A Peer-to-Peer Exchange of Value in an Electronic Currency In their book, Blockchain Revolution, authors Don Tapscott and Alex Tapscott explain the origins of digital currency and the underlying technological platform of the blockchain or distributed ledger. Most people’s first experience with these cur- rencies occurred when they heard of the somewhat recent failure and bankruptcy of the Mt. Gox exchange or the arrest of Ross William Ulbricht, the founder of the Silk Road underground internet market. However, digital currencies can trace their birth back to 1993, when a mathematician named David Chaum created eCash, a digital payment system that allowed for anonymous payment for goods over the internet. It was, in a sense, a forerunner of today’s digital currencies. However, while Chaum appears to have guessed correctly where online transactions were going, he guessed too early. Chaum’s eCash never gained traction with consumers, and like many first movers into any industry, it didn’t survive. By 1998, Chaum’s compa- ny DigiCash went bankrupt, and eCash ended. On November 1, 2008, a person or persons using the pseudonym Satoshi Nakamoto published a paper online proposing what the paper called a peer-to-peer electronic currency. The paper discussed the rise in commerce over the internet and the fact Digital Currencies and Blockchain Technology Threaten to Disrupt Traditional Banking Services By Nicholas P. Mooney II, Spilmam Thomas & Battle