Traditional digital payment systems require users, individuals or companies, to use intermediaries such as banks to circulate money. If Alice wants to send $100 to Bob through the Internet, she has to move that amount to his banking account and tell her bank about Bob’s account details. Alice’s bank moves the money to Bob’s bank where eventually he can withdraw the $100. This procedure is made easy by smartphones and online applications, but relies on the central role of banks, which get paid for their services. In fact, this is an example of how a centralised system works (Fig. 1).
The technology offered by Bitcoin [3] and other digital currencies – the blockchain – allows Alice to transfer her money directly to Bob, without centralised intermediaries. Instead, the transaction is sent to the whole network of nodes which builds, for instance, the Bitcoin system: those nodes, called miners, use computational power to solve complex mathematical problems in order to verify if the transaction is valid and consequently vote in favour or against it. Once a consensus about validity is reached, the transaction is accepted and Bob can spend those $100 after a few minutes. The system generates some new bitcoins to reward the miners for their work.
Thus, networks based on digital currency are distributed, because transactions are processed by multiple nodes, and decentralised, not relying on any authority or middleman. In practice, they reduce the need to trust users or third parties during financial operations. As other decentralised infrastructures and protocols [4], these networks are very robust to perturbations, such as node’s failure and targeted attacks that, conversely, might significantly damage other interconnected centralised systems like the financial system or airline traffic [5]. One of the most remarkable feature of digital currency is pseudo-anonymity, sometimes exploited for illicit purposes through the Dark Web.
Over time, thousands of new projects similar in spirit to, or heavily based on, the Bitcoin system appeared and created a growing ecology of cryptocurrencies [6]. At the moment of writing, more than 1600 cryptocurrencies can be traded, at least in theory, totalling a market cap value of almost $150 billions. Tens of banks – including Accenture, Bank of England, Santander, UBS and UniCredit – have publicly integrated or are experimenting the blockchain technology, whereas companies like JP Morgan have recently started partnerships with blockchain platforms like ZCash to improve the privacy of their customers.
