Cryptocurrency Defined and Explained

Cryptocurrency or cryptocurrencies are digital or virtual assets which are assigned a value and are used as a medium for transaction and exchange. Cryptocurrencies utilize programming and cryptography in order to provide security of transactions, maintain features such as anonymity, and control the creation and distribution of new assets or coins. In layman’s terms, cryptocurrencies are a digital currency based on cryptography.

Although there have been early attempts at developing a digital currency – DigiCash or the Netherland’s electronic cash card – the cryptocurrency considered to have started it all is Satoshi Nakamoto’s Bitcoin (BTC). Like most cryptocurrencies today, Bitcoin was developed to be decentralized. This meant there would be no single agency or institution controlling the currency. It was designed as a peer-to-peer digital cash/asset system.

Cryptocurrencies utilize what is called Blockchain technology to conduct transactions. A blockchain is basically a chain of blocks where each block contains certain information about a transaction. No single block will contain all the information for a transaction which aides with security. In addition, multiple ledgers are utilized to log the transaction thus ensuring no single person, server, computer or institution can control the transaction or currency. Miners then confirm the transaction and broadcast it throughout the network where it is logged. All this helps provide anonymity if so desired, security and universality.

This is a general overview of what cryptocurrencies are. Some cryptocurrencies are centralized where developers can make changes to the currency. Other require user verification, thus not allowing anonymity. Check our other articles in the education section to learn more about cryptocurrencies, including buying and selling goods, trading for fiat, and more.

Author: Saul DeLuzoro

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