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What Is Cryptocurrency?

Cryptocurrencies like Bitcoin are reshaping business and finance—here’s what you need to know about the digital phenomenon

Thu Jan 28 2021


Cryptocurrency has been a financial buzzword ever since Bitcoin burst onto the scene over a decade ago. 

The brainchild of an anonymous creator—known by the pseudonym Satoshi Nakamoto—Bitcoin, the virtual, decentralized currency, generated hype, enormous price fluctuations, and a slew of imitators like Ethereum and Litecoin.


The cryptocurrency hype even found its way into big tech. Facebook has been experimenting with its own digital currency, Diem (formerly Libra), since 2019

The uptake and growth of cryptocurrency—and the blockchain technology it relies on—means it’s important for today’s business leaders to have a working knowledge of what this tech is, and how it can be leveraged.

“All businesses have to deal with issues such as electronic payments, customer privacy, network security, and database systems,” says Will Cong (right), associate professor of finance at Cornell University’s Johnson Graduate School of Management.

“A basic understanding of cryptocurrency and blockchain is not only necessary to survive, but also useful for future innovations.”

So, what is cryptocurrency, what are its uses, and how might this branch of tech be leveraged in the coming years?

What is cryptocurrency?

Cryptocurrency is a form of digital money. Unlike traditional currencies, it has no physical equivalent and exists purely online in a network of computers.

It’s usually decentralized, meaning that no single authority controls its circulation. Instead, transactions happen directly between peers, and the flow of money is typically tracked using blockchain technology.


A blockchain is essentially a virtual database. It’s spread across multiple computers and secures in a single place a chronological ledger of transactions. To be added to the chain, blocks must be approved by a majority of computers in the network. Because the blocks are chained together, to alter one you’d need to change the entire chain, for every computer across the network.

This makes removing or amending a block almost impossible and creates an enhanced level of security. It resolves issues of financial fraud and counterfeiting that often plague fiat currencies—government-issued currency not backed by a commodity, like gold.

In the case of Bitcoin, the security process also generates new currency. When a computer in the network completes the work of adding a block, it may randomly be rewarded with a Bitcoin: a process known as “mining”.

Producing Bitcoin at this slow rate helps prevent inflation within the system, but that hasn’t stopped the dollar value of Bitcoin fluctuating wildly since its launch. The value of Bitcoin dropped by 12% in the space of a week at one point, toppling from an all-time high valuation of $34,000 to $29,000.

The volatility comes down to the intense speculation that surrounds it, explains Seen Meng Chew (above right), associate professor of practice in finance at the Chinese University of Hong Kong (CUHK) Business School.

“The value of cryptocurrencies is still mainly driven by speculative activities,” he notes. The perceived value of these currencies has been influenced by their reputation in the media, as well as events like the 2014 bankruptcy of Mt. Gox—the largest cryptocurrency exchange platform at the time.


The uses of cryptocurrency

The use of cryptocurrency is expanding. Many major retailers already accept cryptocurrency payments, including Starbucks, Whole Foods, Virgin Mobile, and several airlines.

“If a digital currency becomes universally accepted as a medium of exchange of value, then it has the potential to replace fiat currencies,” thinks Seen Meng.

Greater accessibility to cryptocurrencies could greatly help people without access to traditional banking. In the US alone, this amounts to around seven million unbanked people.

Anyone with a smartphone can send and receive cryptocurrency payments, removing the need for a central bank. Easier access to this credit would provide the unbanked or underbanked with wider access to goods and services.

Another key application is in smart contracts. These contracts use blockchain technology and cryptocurrency—usually Ethereum—to facilitate the terms of a contract more easily, and ensure legality is upheld and funds transferred between client and customer. 

Popular digital currencies 


Bitcoin is also an enticing opportunity for investors, explains Kai-Lung Hui, chair professor of information systems at the Hong Kong University of Science and Technology (HKUST).

“Bitcoin is sometimes called ‘digital gold’ because of its ability to retain value even as fiat currencies experience inflation,” he says. 

In the midst of the recession triggered by coronavirus, Kai-Lung predicts this use will become more popular. However, the pandemic does not seem to have caused an increase in cryptocurrency spending among consumers. 

“Cryptocurrencies do not necessarily help with the contactless payment the pandemic has demanded,” comments Will Cong of Cornell Johnson. “Other payment technologies—such as biometric contactless payment systems—are more likely to be accelerated by the pandemic.”


The future of cryptocurrency

Digital currencies don’t seem to be going anywhere.  

“Decentralized currencies like Bitcoin and Ethereum are gaining momentum,” observes Kai-Lung. “More accounts are being created every day, which shows that more and more people are participating in the network.”

At the same time, many governments are working on digital currencies of their own.

“More than 80% of the world’s central banks are now examining the feasibility of introducing central bank digital currencies,” says Seen Meng. “China has already tested its digital currency electronic payments in several cities.

“If these digital currencies are successfully introduced in the next few years, it could really change the current monetary system.”

These digital currencies would not necessarily use blockchain technology since they could be secured by a central government authority. 

Rather than increased security, the main advantage for governments would be leaving behind third-party payment platforms like Visa, Mastercard, ApplePay and AliPay, thereby lowering transaction fees for themselves and customers. 

Government-backed cryptocurrencies could compete with the likes of Bitcoin and Ethereum and find it easier to gain mainstream traction. 

But Kai-Lung (Right) doesn’t think that government-issued currencies will quash the market for Bitcoin altogether. People who want to make anonymized transactions and avoid central banks won’t be deterred, he says.


The blockchain technology that underpins cryptocurrencies like Bitcoin is also here to stay. 

“One of the main benefits of blockchain technology is that it helps people verify the integrity of information stored,” Kai-Lung comments. It can make it easier to verify the provenance of goods in a supply chain, secure digital elections, or even track who has been infected or vaccinated during the COVID-19 pandemic.

By 2026, the global blockchain technology market is expected to reach a value of $22 billion, according to predictions by market researchers at Data Intelo.

The growth of digital currencies means it’s crucial that business leaders understand the advantages and challenges posed by this technology. Seen Meng asserts that once we have a widely accepted digital currency that can be used universally businesses will have to adapt quickly to introduce accommodating payment mechanisms.

The blockchain technology that underpins cryptocurrencies has huge potential. Like other tech though it will require deep understanding and a commitment to digital transformation for companies to grasp the opportunities it provides. 

Over a decade on from the emergence of Bitcoin it’s clear that the digital payments revolution is only just underway.

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One of a kind

I studied Bioinformatics at CUHK last year. It was the only Master's degree in Hong Kong in this field. This program developed my analytical skills and equipped me to be a Bioinformatician in a very practical way. I enjoyed my year here and met classmates from different parts of the world. If you are thinking to enhance your profile, this degree program would be a good option.




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general education courses, unique college system, large campus

The university facilitates multi-dimension and interdisciplinary learning. In social science faculty, we need to choose courses as our faculty package from other departments (architecture, psychology, sociology, etc.) to learn more than our major required courses. We are also required to finish general education courses, which aid our critical thinking and humanistic sensibilities. I do recommend the social science broad-based program, and the professors I met so far are all responsible and erudite.





The faculty of law is relatively new. You do not need to have a LLB to pursue a LLM, which is special. The taught programme is great for mature students who want to obtain legal knowledge. CUHK has good teaching staff too.




Amazing Campus and Great Educational Environment

Not only is CUHK's main campus breathtaking, it provides for a good educational environment for students. The university is well-equipped with modern and up-to-date facilities to help students with their study. We have 8 libraries in total around the campus; one for media, one for architectural studies, the medical library and the law library. The Professors are always helpful and are happy to talk to students when needed. Moreover, the college system within the university brings forth the uniqueness of CUHK. Each student belongs to a different college, and in that students are able to meet different peoples from different countries and students from different faculties. I think CUHK provides for a well-rounded university life for all students.





One of the most down to earth places in HK. A great opportunity to learn and embody the local culture. Also had one the most beautiful campus in Hong Kong up on the hillside. Glad to have graduated here.




Innovative and Supportive

My university provided me with all the support I needed, and encouraged me to be up to date with all the new developments in the world. They also provided me with the incentive to excel at what I do, and they take much pride in my achievements. I have had a very rewarding university experience.




Small, New But Friendly Law School

To being with, I think the campus of CUHK is the best and the biggest in Hong Kong, with fresh air and trees everywhere. I am an undergraduate Law student at CUHK and I think the teaching here is great, with very friendly and nice professors and the new Lee Shau Kee Building. In terms of the courses offered by CUHK, as one of the largest universities in Hong Kong, CUHK is an all-rounded university, offering a wide range of courses to students. Students may take the introductory courses of discipline other than their own major, or even declare a minor. For law electives, due to the small amount of intake, the variety of law electives are not that huge. However, the Faculty is offering some international programmes, which can be treated as law electives, but at the same time, provide us with an opportunity to travel and know more about the legal system of another country. The career support from the Faculty of Law is also amazing. The Faculty will organise CV Sessions and talks on how to get an internship from law firms or mini-pupillage from barrister's chambers. Each student will also have a Distinguished Professional Mentor, which is a current legal profession, providing us with practical advices and updates of the legal field. Finally, from my personal experience, I think the students in CUHK are friendly and genuine. As Law students, competition is inevitable for grades, GPAs, vacation schemes and training contract. However, I think the competition in CUHK Law School is a positive one, in a sense that help us grow together, instead of fighting with each other no matter what. That is the biggest reason why I am having a very good time here in CUHK Law School.




A place to explore your interests

As a law graduate from CUHK (both undergrad and post-grad), I realise that I had many opportunities to explore my areas of interests (legal and non-legal both). The faculty/university requires us to take a certain number of non-law electives, and offers a plethora of courses to choose from. Personally, I took 3 modules in Korean --I can't say it's made me highly proficient, but it's definitely given me a good foundation (I can walk into a Korean restaurant and confidently order food, at the very least). The fact that language courses are offered also provides students who are more financially constrained an opportunity to learn a language without having to shell out a premium for a decent language course. On top of that, we have a range of law electives as well. I know of classmates who have developed lasting interest in different areas of law because of the electives they took in school. The two electives that I would say have changed me is (i) mooting and (ii) family law. I think my experience in an international commercial arbitration moot competition has helped tremendously in formulating legal arguments and legal writing. On the other hand, taking a family law elective has made me very interested in the family law practice, especially in terms of child rights. For these experiences which I have gained, I'm grateful for the opportunities provided by the school. One main issue most students I know have is with the way our GPA is calculated and the lack of transparency in terms of how the honours system works. As our GPA is marked on a curve. it's highly unrepresentative of what we have achieved as individuals. Given that our GPA is the only criteria that is looked at when we apply for the compulsory post-graduate law course (mandatory should we want to practise law and/or be trainees in Hong Kong), it will put our own students at a distinct disadvantage when we compete for limited spaces with students from schools where GPA is not on a bell curve.




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Valuable time in CUHK

I like the learning environment and people at CUHK. Surrounded by hills and Tolo Harbour, CUHK provides a balance between nature and hustle. You can always escape from the busy study life and meet your friend around the big campus for different activities.