Financial cryptography is the use of

cryptography Cryptography, or cryptology (from "hidden, secret"; and ''graphein'', "to write", or ''-logy, -logia'', "study", respectively), is the practice and study of techniques for secure communication in the presence of Adversary (cryptography), ...

in applications in which financial loss could result from subversion of the message system. Financial cryptography is distinguished from traditional cryptography in that for most of recorded history, cryptography has been used almost entirely for military and diplomatic purposes. Financial cryptography includes the mechanisms and algorithms necessary for the protection of financial transfers, in addition to the creation of new forms of money.

Proof of work Proof of work (also written as proof-of-work, an abbreviated PoW) is a form of cryptographic proof in which one party (the ''prover'') proves to others (the ''verifiers'') that a certain amount of a specific computational effort has been expended ...

and various

auction An auction is usually a process of Trade, buying and selling Good (economics), goods or Service (economics), services by offering them up for Bidding, bids, taking bids, and then selling the item to the highest bidder or buying the item from th ...

protocols fall under the umbrella of Financial cryptography. Hashcash is being used to limit spam. Financial cryptography has been seen to have a very broad scope of application. Ian Grigg sees financial cryptography in seven layers, being the combination of seven distinct disciplines: cryptography,

software engineering Software engineering is a branch of both computer science and engineering focused on designing, developing, testing, and maintaining Application software, software applications. It involves applying engineering design process, engineering principl ...

, rights,

accounting Accounting, also known as accountancy, is the process of recording and processing information about economic entity, economic entities, such as businesses and corporations. Accounting measures the results of an organization's economic activit ...

governance Governance is the overall complex system or framework of Process, processes, functions, structures, Social norm, rules, Law, laws and Norms (sociology), norms born out of the Interpersonal relationship, relationships, Social interaction, intera ...

, value, and financial applications. Business failures can often be traced to the absence of one or more of these disciplines, or to poor application of them. This views Financial cryptography as an appropriately cross-discipline subject. Indeed, inevitably so, given that

finance Finance refers to monetary resources and to the study and Academic discipline, discipline of money, currency, assets and Liability (financial accounting), liabilities. As a subject of study, is a field of Business administration, Business Admin ...

and

are each built upon multiple disciplines.

History

Cryptographers think the field originated from the work of

David Chaum David Lee Chaum (born 1955) is an American computer scientist, List of cryptographers, cryptographer, and inventor. He is known as a pioneer in cryptography and privacy-preserving technologies, and widely recognized as the inventor of Digital cur ...

who invented the blind signature. The blind signature is a special form of a cryptographic signature which allowed virtual coins to be signed without the signer seeing the actual coin. It permitted a form of digital token money that prevented traceability. This form is sometimes known as

digital currency Digital currency (digital money, electronic money or electronic currency) is any currency, money, or money-like asset that is primarily managed, stored or exchanged on digital computer systems, especially over the internet. Types of digital cu ...

. Similar concepts are now being applied to modern blockchain technologies. A system that was widely used during the 1970s-1990s and previously developed cryptographic mechanism is the

Data Encryption Standard The Data Encryption Standard (DES ) is a symmetric-key algorithm for the encryption of digital data. Although its short key length of 56 bits makes it too insecure for modern applications, it has been highly influential in the advancement of cryp ...

, which was used primarily for the protection of electronic funds transfers. However, it was the work of

that excited the cryptography community about the potential of encrypted messages as actual

financial instrument Financial instruments are monetary contracts between parties. They can be created, traded, modified and settled. They can be cash (currency), evidence of an ownership, interest in an entity or a contractual right to receive or deliver in the form ...

s. As part of a business model, Financial cryptography followed the guide of cryptography and only the simplest ideas were adopted. Account money systems protected by SSL such as

PayPal PayPal Holdings, Inc. is an American multinational financial technology company operating an online payments system in the majority of countries that support E-commerce payment system, online money transfers; it serves as an electronic alter ...

and

e-gold E-gold or eGold was a digital gold currency operated by Gold & Silver Reserve Inc. (G&SR) that allowed users to make payments, which it called "spends", in grams of gold, silver, and other precious metals. E-gold was launched in 1996 and grew to ...

were relatively successful. In 2001, PayPal processed $3.1 billion in payments, averaging 189,000 transactions daily totaling $9.6 million. But more innovative mechanisms, including blinded token money, struggled to gain traction. David Chaum's

DigiCash DigiCash Inc. was an electronic money corporation founded by David Chaum in 1989. DigiCash transactions were unique in that they were anonymous due to a number of cryptographic protocols developed by its founder. DigiCash declared bankruptcy in ...

, opened in 1989, filed for bankruptcy protection in November 1998. Two competitive rivals also failed to remain viable. First Virtual Holdings abandoned its business in August 1998. CyberCash ceased its "CyberCoin" in early 1999.

Associations

Financial cryptography is to some extent organized around the annual meeting of the ''International Financial Cryptography Association'', which is held each year in a different location.http://www.ifca.ai/ Financial Cryptography

References

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External links

International Financial Cryptography Association
Banking technology Cryptocurrencies

History

Associations

See also

References

External links