Learning Objectives:

  • Define cryptocurrencies and understand their key features.

  • Explain how Bitcoin and Ethereum work and their respective roles.

  • Understand stablecoins and their significance in the digital economy.

  • Analyse the digital asset market and its key trends.

2.1 What are Cryptocurrencies?

Cryptocurrencies are digital or virtual currencies that use cryptography for security and operate on decentralised networks, typically based on blockchain technology. The Seneca course focuses on “cryptocurrencies and the impact they have had on financial services” and requires students to “Assess the disruptive impact of cryptocurrencies, and discuss their potential for future adoption as fiat currency or as a legally recognized means of transferring value” .

Key Features of Cryptocurrencies:

  • Decentralisation: Operate without a central authority, relying instead on distributed consensus.

  • Immutability: Transactions are recorded permanently on the blockchain and cannot be altered.

  • Pseudonymity: Users are identified by cryptographic addresses rather than real-world identities.

  • Global Accessibility: Anyone with internet access can participate.

  • Borderless: Transactions can be sent across the globe without the need for intermediaries.

2.2 Bitcoin: The Pioneer

Bitcoin, launched in 2009, was the first cryptocurrency and remains the most valuable and widely recognised. The UCL module covers the “mechanics of the pioneering cryptocurrency Bitcoin, including basics of cryptography, proof-of-work consensus algorithm and peer-to-peer networking” .

Bitcoin’s Key Features:

  • Proof of Work (PoW): The consensus algorithm that secures the network, where miners compete to solve cryptographic puzzles.

  • Fixed Supply: Only 21 million Bitcoins will ever exist, creating a deflationary monetary policy.

  • Decentralised Network: Operates without a central authority or single point of failure.

2.3 Ethereum: The Platform for Decentralised Applications

Ethereum, launched in 2015, is a blockchain platform that enables the creation of decentralised applications (dApps) and smart contracts. The UCL module covers “other major blockchain platforms such as Ethereum XRP Ledger and associated cryptocurrencies” .

Ethereum’s Key Features:

  • Smart Contracts: Self-executing contracts with terms written into code.

  • Turing-Complete: Can run any computation, enabling complex applications beyond simple value transfer.

  • Proof of Stake (PoS): Ethereum transitioned from PoW to PoS in 2022, reducing energy consumption and improving scalability.

The UCL module includes a “more hands-on part… devoted to smart contracts design and deployment on public and permissioned blockchains,” requiring students to conduct “wallet installation, inter-wallet transactions, smart contracts creation and deployment on test nets” .

2.4 Stablecoins: Bridging the Gap

Stablecoins are cryptocurrencies designed to maintain a stable value relative to a reference asset, typically a fiat currency like the US dollar. The World Economic Forum identifies stablecoins as “the first truly universal blockchain use case,” noting they “move value instantly across borders, bypassing multiple intermediaries, with a singularity of value” .

Key Stablecoin Types:

  • Fiat-Collateralised: Backed by reserves of fiat currency (e.g., USDC, Tether USDT). The WEF notes that stablecoins have become “a signal of something larger: the underlying financial rails are starting to change” .

  • Crypto-Collateralised: Backed by other cryptocurrencies, offering decentralisation but requiring over-collateralisation.

  • Algorithmic: Maintained by algorithms that adjust supply based on demand, though these have proven less stable (e.g., Terra/Luna collapse).

Key Trends:

  • “Stablecoin deposit volume surged 138% above the 2025 monthly average” according to WEF platform data .

  • “Stablecoins now move value globally in seconds, anytime to anyone” .

  • Frost & Sullivan notes “the need for digital payments, virtual wallets, and embedded finance solutions is expanding across verticals” .

Regulatory Developments:
The Fordham Law Journal analyses the divergent US and EU approaches to cryptocurrency regulation, noting that the EU has implemented “a comprehensive regulatory framework with its Markets in Crypto-Assets Regulation (‘MiCAR’)” while the US has adopted a “market-driven” approach . The Chinese Academy of Social Sciences notes that “the US announced the creation of a strategic Bitcoin reserve and digital asset reserve” and the EU’s MiCA “classifies crypto-assets into electronic money tokens, asset-referenced tokens, and utility tokens” .

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