AFM241 Chapter Notes - Chapter 11: Double-Spending, Distributed Ledger, Digital Currency

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM241
• Professor: Joyce Tian

Document Summary

Definitions of blockchain: replicated ledger that is owned by no one and trusted by everyone. Shared immutable ledger for recording the history of transactions. System where record of transactions made in bitcoin or other cryptocurrency are maintained across several computers linked in a peer-to-peer network: transactions, ledger, digital transactions, digital ledger. Importance of timestamp: bank"s system is designed to queue transactions based on their time stamp, ensures a party does not double spend their amount. Benefits and limitations of centralized ledger: benefits, complete transactions without physical exchange of cash, mitigate double spending problem. Limitations: ledger can be corrupted by bugs or hackers, ledger can crash or be coerced to crash by a criminal or the government, entity keeping the ledger may not be trusted. Background: banks were historically relied on to be a trusted third-party, less reliable during the financial crisis of 2008, cryptocurrency was created as a cure to the corruptions of the traditional financial system.