An Introduction to Cryptocurrencies: The Crypto Market Ecosystem (Contemporary Issues in Finance)

The Crypto Market Ecosystem has emerged as the most profound application of blockchain technology in finance. This textbook adopts an integrated approach, linking traditional functions of the current financial system (payments, traded assets, fundraising, regulation) with the respective functions in the crypto market, in order to facilitate the reader in their understanding of how this new ecosystem works. The book walks the reader through the main features of the blockchain technology, the definitions, classifications, and distinct characteristics of cryptocurrencies and tokens, how these are evaluated, how funds are raised in the cryptocurrency ecosystem (ICOs), and what the main regulatory approaches are. The authors have compiled more than 100 sources from different sub-fields of economics, finance, and regulation to create a coherent textbook that provides the reader with a clear and easily understandable picture of the new world of encrypted finance and its applications. The book is primarily aimed at business and finance students, who already have an understanding of the basic principles of how the financial system works, but also targets a more general readership, by virtue of its broader scope and engaging and accessible tone. Cover 1 Half Title 2 Series Page 3 Title Page 4 Copyright Page 5 Dedication 6 Table of Contents 8 List of Figures 10 1.1 The Financial System 13 1.2 First Bitcoin Transaction 15 2.1 Centralized, Decentralized, and Distributed Systems 21 2.2 How Blockchain Works 22 3.1 Types of Currencies in the Digital World 32 3.2 The Public and Private Keys of a Digital Wallet 36 3.3 Example of a Digital Transaction 37 3.4 Crypto Market Shares: January 2019 39 3.5 Crypto Market Shares: January 2014–2018 40 3.6 Types of Stablecoins 43 4.1 Price Increase from an Increase in Demand 50 4.2 Price Increase from a Decrease in Supply 50 4.3 Combined Effect of Monetary Policy and Economics of Utility 54 4.4 USD-BTC Candlestick Bar Chart: January–August 2019 57 4.5 USD-BTC Descending Triangle Pattern Example 59 4.6 Example of MACD 60 4.7 Example of PPO 61 4.8 Example of RSI 62 4.9 Different Forms of Efficient Market Hypothesis 63 5.1 Main Participants in an ICO 67 5.2 ICO vs. VC Funding: 2015–2017 68 5.3 Ten Most Important ICOs during 2013–2018 68 5.4 Number of ICOs and Total Funds Rose: 2017 and 2018 69 5.5 Main Steps in an ICO 70 5.6 Fundraising in Parallel with Token Release 71 5.7 Fundraising Prior to Token Release 71 List of Tables 11 3.1 Market Caps, Market Shares, and Prices of Top Eight Cryptocurrencies per Year 41 3.2 Examples of Stablecoins per Type 45 5.1 ICOs vs. IPOs 76 5.2 ICOs Vs Crowdfunding 77 6.1 Regulatory Approaches of Main Jurisdictions 89 1 The New Era of Encrypted Finance 12 1.1 The Traditional Financial System and Its Main Counterparts 12 1.2 The New Era of Finance: Encrypting the Financial System 14 1.3 Introducing the Main Counterparts of the New Encrypted Financial System 16 2 The Infrastructure: The Blockchain Technology 20 2.1 What is Blockchain Technology? 20 2.2 How the Blockchain Technology Works 21 2.3 How Blockchain Mining Works 23 2.4 Blockchain Consensus Mechanisms 24 2.5 Blockchain 2.0: The Ethereum Platform 26 2.6 Smart Contracts 27 2.7 Alternative Uses of Blockchain Technology 28 3 Traded Assets: Introduction to Cryptocurrencies 31 3.1 Definitions and Taxonomy: Digital Currencies, Virtual Currencies, Cryptocurrencies, and Tokens 31 3.2 How Cryptocurrency Transactions Work 35 3.3 Properties and Main Characteristics of Cryptocurrencies 37 3.4 Altcoins (Alternative Cryptocurrencies) 39 3.5 Trends in the Cryptocurrency Market 39 3.6 Stablecoins 42 4 “Tokenomics” and Valuation 48 4.1 Barriers to Pricing and Valuation 48 4.2 Token Supply and Demand Model 49 4.3 Quantity Theory of Money 51 4.4 Token Economics of Utility 53 4.5 Combining the Monetary Policies and the Economics of Utility 53 4.6 The Discounted Cash Flow Model 54 4.7 Technical Analysis 55 5 Fundraising: Initial Coin Offerings 66 5.1 Defining Initial Coin Offerings 66 5.2 The Road to ICOs 67 5.3 How ICOs Work 69 5.4 Main Features of an ICO 72 5.5 Tokens 72 5.6 The Importance of White Paper in ICOs 73 5.7 Comparing ICOs with IPOs and Crowdfunding 74 6 The Regulatory Framework 80 6.1 Introduction 80 6.2 United States 81 6.3 Singapore 82 6.4 Canada 83 6.5 China and South Korea 83 6.6 United Kingdom 84 6.7 Australia 85 6.8 Switzerland 85 6.9 Japan 86 6.10 European Union (EU) 87 6.11 Comparative Analysis and Conclusions of Regulatory Approaches 88 Index 94 regulation,tokens,traded assets,cryptocurrencies,fundraising,blockchain,payments,blockchain technology,financial system,cryptocurrency ecosystem,crypto market,encrypted finance