What Is Cryptocurrency?
A cryptocurrency is a digital or virtual currency that is protected by encryption, making counterfeiting and double-spending practically impossible. Many cryptocurrencies are built on blockchain technology, which is a distributed ledger enforced by a distributed network of computers. Cryptocurrencies are distinguished by the fact that they are not issued by any central body, rendering them theoretically immune to government interference or manipulation.
Today, there are tens of thousands of different cryptocurrencies to choose from. Bitcoin, which was founded in 2009, is the most popular — and the first. Ethereum, XRP, and Bitcoin Cash are three more popular cryptocurrencies. Each of these currencies has a distinct function, with some meant for use as a substitute for cash and others for private, direct transactions.
Because cryptocurrencies are entirely digital, there is no tangible coin, token, or bill associated with the one you own. Owners instead store cryptocurrencies in a digital wallet and trade it on an internet exchange. Your wallet may be online (some popular exchanges like binance.com offer an in-app wallet) or stored offline on a hardware device similar to a USB drive.
How Does Cryptocurrency Work?
Since cryptocurrency is a digital, encrypted, and decentralized method of exchange. There is no central body that administers and maintains the value of a cryptocurrency, unlike the US dollar or the Euro. Instead, these responsibilities are divided throughout the internet among the users of a cryptocurrency.
Satoshi Nakamoto first proposed Bitcoin as a peer-to-peer electronic cash system in a 2008 paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System.” “An electronic payment system based on cryptographic proof instead of trust,” Nakamoto said of the concept.
That cryptographic proof takes the shape of transactions, which are validated and stored in a blockchain-like program.