Cryptocurrencies are a recent global financial and technological phenomenon, one that has emerged in the last 10 years. Yet the folklore of cryptocurrencies has grown as quickly as the origination and dissemination of the number of currencies themselves. Folklore is no longer circumscribed as being chronologically old or obsolete. Those, who study folklore, analyse and evaluate “the traditional artefacts of a social group and how they are transmitted”.
The myths and legends around the development and use of crypto-currencies have grown as quickly as their adoption. The myths and legends have added to the mystique or even magical properties of what, under the laws of most jurisdictions, are no more than tokens which are accepted by some communities within the jurisdiction as a means of storing and exchanging value.
Before observing some of the myths and legends surrounding crypto currencies, it be helpful to explain in more detail the principles and operational workings of crypto- currencies. A cryptocurrency is a digital asset, that is an asset stored electronically, designed to work as a medium of exchange using cryptography to secure the transactions and to control the creation of additional units of “the currency”. Crypto currencies are decentralised. Decentralised crypto currency is produced by the entire crypto currency system collectively. The rate of production is defined and publicised when the system is created. By contrast centralized banking and economic systems such as the UK through the Bank of England or in the USA through the Federal Reserve, other sovereign jurisdiction boards or governments, control the supply of currency by printing units of “fiat money” or demanding additions to digital banking ledgers. In case of decentralized crypto currency, companies or governments cannot produce new units. To date they not provided backing for other firms, banks or corporate entities, which hold assets valued measured in it. The underlying technical system, upon which decentralized crypto currencies are based, was created by the group or individual known as ”Satoshi Sakamoto” of Bitcoin fame.
Over a thousand crypto currency specifications exist. Most of them have similar characteristics to the first fully implemented decentralised crypto currency, “Bitcoin.” Within crypto currency systems the financial integrity and balance of its records (“ledger”) is maintained by a community of mutually distrustful parties, affectionately termed “miners.” Holders and users of crypto currencies use their computers to help validate and timestamp transactions, which they adding to the ledger in accordance with a particular time stamping scheme. Miners have a financial incentive to maintain the security of a crypto currency ledger.
Most crypto currencies are designed to gradually decrease production of currency. They place an ultimate cap on the total amount of currency that will ever be in circulation, mimicking precious metals. Compared with fiat currencies held by financial institutions or kept as cash on hand, crypto currencies can be more difficult for seizure by law enforcement authorities. This difficulty is derived from using cryptographic technologies.
Many themes which resonate in Folklore are present in the development of cryptocurrencies:
Bob McDowall is a former President of the Folklore Society and is also engaged in the research and analysis of cryptocurrencies and the technology which supports their operation.