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While your double feature in the weekend Magazine (“The cult of crypto” and “The Wall Street whisperer”, September 11) on cryptocurrencies contained good insights, you missed a key point: blockchain-based cryptocurrencies, like bitcoin, do not exist. What does exist, however, is an immutable record of information flows between users.
Just like forwarding an email to someone adds information to their inbox, sending a blockchain token increases the balance inside the recipient’s network address. Moreover, much of the cryptography underpinning the security of email technology is similarly applied in blockchain systems. That said, there is one crucial difference: while you can hit “reply all” on an email, you cannot concurrently send the same blockchain-token to multiple people. This allows users to authenticate unique information flows at points in time, much like signing and dating a contract in the presence of a witness.
This can reduce transaction costs in many “paper-based” sectors such as insurance, banking and law. Thus, the application of blockchain technology in the financial industry is more likely to upgrade, rather than replace it.
Lecturer, Manchester Metropolitan University, Manchester, UK