This IDC Financial Insights Perspective is Part 1 in a six-report series on bitcoins and the use of digital currencies. Part 1 looks at the total ecosystem of a network-based electronic process that records and transfers value using technology that is usually referred to as a blockchain. The technology involves distributed legers, cryptology, and unique algorithms. The result is a secure core process that functions without central control. A common use of this technology is the support of digital currencies like bitcoin, which is currently the dominant virtual currency. Digital currencies and the associated technology are described in detail in this Perspective.
Blockchain has taken everything known about the Internet, security, and cryptography to build a value exchange and settlement system designed for the Internet. No party owns and controls the network, and access is available to everyone. This is a powerful concept -- one that can be applied to many other situations involving electronic transactions and record keeping. The end result is that the open source community is producing innovative technologies that have the potential to change how we think about the fundamentals of value exchange in an open market. In this Perspective, the terms virtual currency, digital currency, and cryptocurrency are used interchangeably with the name of the leading virtual currency bitcoin. All dollar amounts are U.S. dollars unless otherwise noted.