What is a cryptocurrency?

Bitcoin Whitepaper | Stratis Academy: Blockchain 101 | Mastering Bitcoin, Andreas M. Antonopoulos

A cryptocurrency is a digital asset which uses cryptography to verify and secure transactions. A currency is a medium of transfer. For example, money is a currency which is a medium of transfer of value. Most cryptocurrencies are value bearing currencies, however not all cryptocurrencies are designed to be money; many cryptocurrencies are principally designed to be a medium of transfer of utility. In fact, there are cryptocurrencies with coins which bear no value at all (see What is the Stratis DLT?).

Unlike fiat currencies, which require a central body to manage monetary policy, authority in cryptocurrencies is decentralized and the legitimacy of a transaction is confirmed by consensus of a network of computers which interact with one another. Transactions cost the sender a small transaction fee. A decentralized ledger gathers these transactions into blocks, which together form a blockchain. Cryptocurrencies provide solutions to a number of difficulties faced by currencies. For example, they solve the double spending problem of digital currencies without the need for a trusted central authority.

Cryptocurrencies represent a new and powerful technology. The decentralized, transparent and immutable nature of the technology can be leveraged by applications to do things that weren’t possible before. Cryptocurrencies are fuelling powerful, disruptive new ideas and the cryptocurrency space is a hotbed of innovation. You can find more on this here.

A typical cryptocurrency is made up of three parts: a coin, a blockchain and a network. The coin is the unit of account for transactions, the blockchain is a record of every transaction and the network is a peer-to-peer web of computers which interact with one another to secure and use the cryptocurrency.