What is cryptocurrency?
Cryptocurrency, bitcoin being one of them, is a virtual medium of exchange.
Each transaction made with cryptocurrencies is confirmed and stored by the public ledger, “blockchain”¹, through the use of cryptography² via an operation, called mining. Mining is basically the process in which the so called “miners” solve complex mathematical problems, thereby making transactions work and generate new units of a cryptocurrency.
Since cryptocurrency works through a peer-to-peer network², the digital currency is decentralised. This meaning that, as opposed to fiat money, it is independent from any centric, modulatory authority, like the government or the central bank.
¹ Is every cryptocurrency based on blockchain?
There are only very few cryptocurrencies that do not use blockchain e.g. IOTA
² What is Cryptography?
Cryptography (crypto=concealed) refers to encryption techniques involving complex algorithms. Those are used for storing and transmitting data, so that the normal, legible data is transformed into an inscrutable form. It can only be deciphered for the intended receiver.
³ What is a peer-to-peer network?
A peer-to-peer, or short P2P, network refers to two or more computer systems, the “peers”, being directly connected via the internet. This means that the data can be transmitted between them without involving any separate central server.
Other terms you might come across
-altcoin =
an altcoin basically is any other cryptocurrency than bitcoin.
Alt coins intend to improve, update, compete with and offer an alternative to bitcoin (as they have all been launched after bitcoin).
-cryptocoin =
different to a cryptocurrency having its own, independent blockhain, crypto coins are digital assest based on already existing blockchains.
Key terms to remember
Key terms to remember:
-virtual/digital currency
-cryptography
-blockhain
-mining
-peer-to-peer network
-decentralised
