Financial cryptography is the use of

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

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 (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. Verifiers can subsequently confirm this expe ...

and various

auction An auction is usually a process of buying and selling goods or services by offering them up for bids, taking bids, and then selling the item to the highest bidder or buying the item from the lowest bidder. Some exceptions to this definition ex ...

protocols fall under the umbrella of Financial cryptography.

Hashcash Hashcash is a proof-of-work system used to limit email spam and denial-of-service attacks, and more recently has become known for its use in bitcoin (and other cryptocurrencies) as part of the mining algorithm. Hashcash was proposed in 1997 by Adam ...

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 systematic engineering approach to software development. A software engineer is a person who applies the principles of software engineering to design, develop, maintain, test, and evaluate computer software. The term '' ...

, rights, accounting,

governance Governance is the process of interactions through the laws, norms, power or language of an organized society over a social system ( family, tribe, formal or informal organization, a territory or across territories). It is done by the gove ...

value Value or values may refer to: Ethics and social * Value (ethics) wherein said concept may be construed as treating actions themselves as abstract objects, associating value to them ** Values (Western philosophy) expands the notion of value beyo ...

, 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 and

are each built upon multiple disciplines.

History

Cryptographers think the field originated from the work of Dr David Chaum who invented the

blind signature In cryptography a blind signature, as introduced by David Chaum, is a form of digital signature in which the content of a message is disguised ( blinded) before it is signed. The resulting blind signature can be publicly verified against the origin ...

. The blind signature is a special form of a

cryptographic signature A digital signature is a mathematical scheme for verifying the authenticity of digital messages or documents. A valid digital signature, where the prerequisites are satisfied, gives a recipient very high confidence that the message was created b ...

which allowed virtual coins to be signed without the signer seeing the actual coin. It permitted a form of digital

token money Token money, or token, is a form of money that has a lesser intrinsic value compared to its face value. Token money is anything that is accepted as money, not due to its intrinsic value but instead because of custom or legal enactment. Token mo ...

that prevented traceability. This form is sometimes known as digital currency. 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 cry ...

, which was used primarily for the protection of electronic funds transfers. However, it was the work of David Chaum that excited the cryptography community about the potential of encrypted messages as actual financial instruments. 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 online money transfers, and serves as an electronic alternative to traditional paper ...

and

e-gold e-gold was a digital gold currency operated by Gold & Silver Reserve Inc. (G&SR) that allowed users to open an account on their web site denominated in grams of gold, or other precious metals, and that let users make instant transfers of value ...

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, 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