Cryptocurrency is a form of digital currency that relies on cryptography to remain secure. Cryptography is the translation of data into a code that only authorized users can translate back into readable language. Cryptography prevents the theft and counterfeiting of cryptocurrency. Unlike traditional fiat (government-backed) currencies like the euro or the dollar, cryptocurrencies only exist in digital form.
A cryptocurrency is regulated by software protocols (sets of rules). The protocols regulate ownership of the digital tokens (cryptocurrency units). Protocols also set the conditions by which new tokens can be created and distributed. Cryptocurrencies feature a number of potential advantages over fiat currencies, including increased transparency and a higher resistance to counterfeiting. Some cryptocurrency transactions can occur much more quickly than traditional transactions. Cryptocurrencies are also useful because they can be programmed for specific purposes. For example, an individual might program a cryptocurrency token so that it can only be spent on someone’s birthday.
In 2009, an anonymous person or group using the pseudonym (fictitious name) Satoshi Nakamoto created bitcoin, the first decentralized cryptocurrency. A decentralized currency is one that is not controlled by any single authority, such as a bank or a government body. Instead, maintenance of the currency is distributed across users’ computers, which are called nodes. Bitcoin was the first real-world application of blockchain technology. A blockchain is a database of transactions shared across a digital network of users. The value of a single bitcoin has fluctuated wildly, from a few cents at its adoption to tens of thousands of dollars.
Since the introduction of bitcoin, many other cryptocurrencies have been created. In 2013, the Russian-born Canadian programmer Vitalik Buterin worked with other developers to create Ethereum, a computing platform based on blockchain technology. The Ethereum platform generates a cryptocurrency called Ether, which became one of the most valuable cryptocurrencies after its introduction in 2014. A number of other cryptocurrencies, such as Binance Coin (BNB), Litecoin, and Solana, have also attained high values at one time or another. Some people believe that cryptocurrencies will continue to become more common as time passes, and that they will be used in a variety of ways to change and improve systems of exchange around the world.
