Cryptocurrency Definition & Meaning

Popular cryptocurrencies can be broken down into several main ‘types’. There are those intended to offer an alternative to fiat currencies. These include Bitcoin, Bitcoin Cash , Bitcoin Cash ABC and Litecoin.

All crypto transactions also require two-factor authentication. Cryptocurrency units are created through a process called mining, which requires considerable computer power to carry out complex mathematics, resulting in earned crypto coins or tokens. However, most people purchase cryptocurrency through specialized brokers rather than mining. To some, a completely digital form of currency may seem alien.

what is cryptocurrency

Digital currencies have all the characteristics of traditional currencies but exist only in the digital world. Unlike traditional currencies, cryptocurrencies exist only as a shared digital record of ownership, stored on a blockchain. When a user wants to send cryptocurrency units to another user, they send it to that user’s digital wallet. The transaction isn’t considered final until it has been verified and added to the blockchain through a process called mining.

Nonfungible tokens, or NFTs, are yet another type of cryptocurrency, denoting that it is a one-of-a-kind asset and cannot be replaced. A Bitcoin, for example, is fungible, meaning you can exchange one for another and get precisely the identical thing. However, a one-of-a-kind trade card, on the other hand, cannot be duplicated. You’d get something altogether different if you swapped it for a different card. A number of figures have significantly impacted the cryptocurrency industry throughout its time. Satoshi Nakamoto kickstarted the sector with the creation of Bitcoin .

What is crypto?

The most obvious answer is that some people seek a second source of income and others want more financial freedom without the interference of governments or banks. For instance, crypto miners verify the legitimacy of transactions in exchange for Bitcoin as a reward for their efforts. Cryptocurrencies like Bitcoin have traditionally had little price correlation with the stock market in the United States, so owning some can help diversify your portfolio. If you believe that cryptocurrency usage will grow in popularity over time, it’s probably a good idea to invest in crypto as part of a balanced portfolio.

  • Bridges connect different blockchains as a way to transfer coins between their native networks.
  • On 9 July 2018, the exchange Bancor, whose code and fundraising had been subjects of controversy, had $23.5 million in cryptocurrency stolen.
  • Your crypto can be stolen if a bad actor has access to your crypto wallet’s private key.
  • Every time someone pays a fee to transfer cryptocurrencies, this fee goes to miners/validators.
  • All blocks are linked through an encoded system, so if you try to change one of the blocks in the chain, every link after it will break down.

Because cryptocurrency isn’t issued or regulated by a central authority, crypto is immune to currency manipulation and government interference. A digital currency, or cryptocurrency, is an alternative payment method developed utilizing encryption methods. By utilizing encryption technology, cryptocurrencies may act as both a medium of exchange and a virtual accounting system. You need a cryptocurrency wallet in order to utilize cryptocurrencies. A blockchain is simply a growing collection of digital blocks that serve as a ledger.

Welcome to Ethereum

That is why cryptocurrency is often described as “decentralized.” Cryptocurrencies are typically not controlled or operated by any single entity in any single country. It takes an entire network of volunteers from around the world to secure and validate transactions made with cryptocurrency. Cryptocurrencies are not regulated or controlled by any central authority hence cryptocurrency works outside the banking system using different types of coins. They use decentralized control in contrast to central bank digital currency.

Where can I buy cryptocurrency?

Databases store a large volume of data electronically on a computer or on servers made up of powerful computers. These servers are often centralized in a location and built for easy storage and retrieval of data. Sotheby’s became the first auction house to accept cryptocurrency last year, and some colleges even accept bitcoin for tuition.