12 CRYPTOCURRENCIES www.captiveinternational.com
the digital coin
s part of its research into
alternative risk transfer,
captive solutions and the
usage of new technologies
in these sectors, the BlockART Institute
has got to grips with the use of
cryptocurrencies as the payment method
of the future. The future? Aren’t bitcoin et
al already a fixed component of today’s
currency landscape? Yes and no.
Bitcoin futures have been traded
on the Chicago Mercantile Exchange
(CME), the US derivatives exchange,
since December 2017, and even the
tabloids of various nations are busying
themselves with the value of digital
currencies. However, they are currently
more of an object of speculation
than serious currencies for paying for
services or goods.
The following article is intended to
give an insight into the status quo in
terms of cryptocurrencies and show
how cryptocurrencies are connected to
What is the blockchain?
You can’t talk about cryptocurrencies
without mentioning the blockchain. But
what is behind this technology? It is a
technology that the rather financially
conservative World Economic Forum
states will “permanently change the
financial world in the future”. The
blockchain is a very large, distributed
database. This is what makes it possible
for the bitcoin system, independent of
central banks and nations, to exist in the
The necessary trust is placed in
cryptography, not in intermediaries, such
as banks or contractual partners. Like
a gigantic, self-managing accounting
system, it saves all the transactions
ever carried out with the well-known
The peer-to-peer approach
In order to be completely independent of
central institutions, the participants must
correspond directly, which corresponds
to ‘peer-to-peer’ topology. Every active
computer can be used as an entry point to
All the computers connected within
the network are completely equal.
Decentralisation is a basic requirement
for a free, transparent currency—the
blockchain differs fundamentally from
most of the internet in this regard.
As the computers communicate
with each other, there is no need for
a supervisory body such as a bank—
which is its biggest advantage, and also
the reason why transfer via blockchain
technology is speedy and cheap. The
advantages can be quickly summarised:
transparency, security and efficiency.
According to the June 2017 study by
the World Economic Forum, Realizing the
Potential of Blockchain, the blockchain
solution “has great potential to promote
simplification and efficiency”. Along with
other solutions (eg, artificial intelligence
AI), it will form the basis for the next
generation of financial services. This
is because the spectrum of potential
applications is broad and capable of
exposing the traditional financial sector
to enormous pressure to modernise.
“Blockchain’s execution of international
payments could enable precisely timed
accounting records and reduce costs,”
the study says.
What are cryptocurrencies and how
many are there?
“Unlike central bank money,
cryptocurrencies are exclusively digital.
Payments are processed electronically
from point to point without the
involvement of an intermediary such as a
central bank,” explains Simon Kolkmann,
blockchain expert at the BlockART
The digital currencies are based on
blockchain protocols. The transactions
are stored in ‘blocks’ in a decentralised
network on many different servers
(security through redundancy). The chain
(blockchain) is extended by one link with
each block. Because the exact order
of all blocks can be verifiably traced
by cryptography, it is impossible to
manipulate the blockchain and thus the
resulting account balances.
Even experts find it difficult to keep
track of all the cryptocurrencies. The
specialist website coinmarketcap.com
lists almost 1,500 virtual means of
payment with a market value of around
$530 billion. It is nearly impossible to predict
how many and which ones will survive.
Nevertheless, the market capitalisation
shows in which cybercurrencies investors
have particularly high hopes.
An overview of current cybercurrencies
is shown in Figure 1 (above).
Tatjana Winter, head of research at BlockART
Institute, explores cryptocurrencies and how
they are connected to blockchain technology.