What are Cryptocurrencies and Blockchains?
The technical definition of a cryptocurrency according to Investopedia is “a digital or virtual currency that uses cryptography for security”. This definition, like most others, is pretty hard to understand and doesn’t cover all types of “cryptos”.
In reality, cryptocurrency has become an umbrella term for different types of online money. For the most part, they involve some form of cryptography, which is a fancy way of saying that it can only be accessed with the correct login info — known as “private keys”. It also means that it is impossible to replicate cryptocurrencies for a fake transaction. Additionally, they are decentralized, meaning that they are not controlled by one person or governing body. Instead, there are protocols in place that allow for cryptocurrencies to run on their own with input from its users.
The technology that allows cryptocurrencies to work is called “blockchain”. Blockchain is basically a database that records every time somebody uses some of their cryptocurrency to do something. Since cryptocurrencies are decentralized, instead of having transactions recorded by a bank or government, transactions are recorded on the blockchain and approved by all the computers on the network automatically. Every transaction is recorded on a “block”, and when there is a new transaction, that block is added to the list of all transactions on the network, creating a chain. Once a transaction is added to the blockchain, it is impossible for it to be removed or changed from database.
Blockchains can also be used without involving cryptocurrency by providing a transparent and decentralized database that can be used for a wide range of tasks. Click here to learn more.
The first cryptocurrency, Bitcoin (BTC), was created in 2009 by Satoshi Nakamoto (his actual identity is not known). Today, Bitcoin is still the most popular and valuable crypto. But, there are now thousands of different types, including Ethereum (ETH), Ripple (XRP), Litecoin (LTC), Bitcoin Cash (BCH), and EOS.
So in short, cryptocurrencies are a decentralized and secure form of online money.
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