What is Crypto?

Cryptocurrencies are digital tokens that use cryptography for their creation and security. Bitcoin was the first, but thousands more have come.

In the past few years, thousands of new cryptocurrencies have appeared, all claiming to offer something a little different. Bitcoin was the first, and its value famously rose to around $20,000 in late 2017, then crashed more than 60% in early 2018. Bitcoin took three years to get back to its prior high, and then, at the end of 2020, it doubled in less than a month. In 2021, big companies are buying in, and notable Wall Street skeptics are changing their tune.

Crypto is becoming impossible to ignore.

But let's zoom out. What are cryptocurrencies, how do they work, and why are people so excited by them? You're in the right place to learn.

What is cryptocurrency?

A cryptocurrency is a digital-only token. It uses cryptography(hence the shortened name, "crypto") to regulate how the tokens are created, how they're traded, and how secure they are. And (here's the key appeal for many) it doesn't use or need a central bank or government to control or manage them.

BITCOIN Bitcoin is a decentralized digital currency created in January 2009. It follows the ideas set out in a white paper by the mysterious and pseudonymous Satoshi Nakamoto.The identity of the person or persons who created the technology is still a mystery. Bitcoin offers the promise of lower transaction fees than traditional online payment mechanisms do, and unlike government-issued currencies, it is operated by a decentralized authority.

Bitcoin was the first cryptocurrency, created by a person (or persons) using the pseudonym Satoshi Nakamoto, first outlined in October 2008 in a white paper calling the concept "A peer-to-peer electronic cash system." The Bitcoin blockchain, the network on which Bitcoin runs, launched in January 2009. (Nowadays there are many other blockchains.)

In essence, cryptocurrencies are:

• Digital: Cryptocurrencies are completely native to the internet. You can't physically touch or hold them. (Yes, those illustrations of Bitcoins as physical gold coins with a B on them can be misleading.)
• Decentralized: All cryptocurrency transactions are stored on a public, global list or ledge. That means the records are stored in many different places (nodes)at once.
• Peer-to-peer: Cryptocurrencies are exchanged between parties electronically without one central party or middle man needed to approve the transaction.

How are cryptocurrencies created?

Most cryptocurrencies (but not all) generate new units or coins through the process of mining. This is where individuals or groups (miners) use expensive computers that race to solve complicated cryptographic puzzles to verify bundles of transaction records (blocks) to the ledger.

Miners get rewarded for their efforts, which is how new coins get created. (On the Bitcoin blockchain, the mining reward is halved every four years as a measure to slow the creation of new Bitcoins.)

How are cryptocurrencies being used?

These days, there are debates over whether cryptocurrencies really behave like currency, or if they're treated more like commodities. (Some people say they should be called "digital assets" rather than cryptocurrencies.) But cryptocurrencies weren't created just to be an alternative to your $ and £. They can be used for lots of different things. These are just three examples of those that followed Bitcoin:

1. LITCOIN The Litecoin blockchain was created in 2011 as a fork (tweak in the code) of the Bitcoin blockchain; its creator Charlie Lee intended it as silver to Bitcoin's gold. Its token is LTC.
2. ETHEREUM The Ethereum blockchain launched in 2015 and is specifically designed to power decentralized apps (Dapps) and smart contracts on its network. Its token is Ether or ETH.
3. BNB COIN Binance Coin is the cryptocurrency issued by Binance exchange and trades with the BNB symbol. As of June 2021, Binance Exchange is the largest cryptocurrency exchange in the world, supporting more than 1.4 million transactions per second.

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