Part 02: What is Cryptocurrency?
Defining Cryptocurrency
Cryptocurrency is digital or virtual money that uses cryptography (complex mathematical codes) for security. Unlike traditional currencies issued by governments (like dollars or euros), cryptocurrencies operate on blockchain technology and aren't controlled by any central authority.
Key Characteristics of Cryptocurrency
- Digital Only: You can't hold a physical Bitcoin or Ethereum coin in your hand (though commemorative physical coins exist, they're just collectibles).
- Decentralized: No government, bank, or single entity controls it.
- Cryptographic Security: Advanced mathematics secures transactions and controls the creation of new units.
- Transparent Yet Pseudonymous: All transactions are public on the blockchain, but your identity is represented by a random string of characters rather than your name.
- Limited Supply (Usually): Many cryptocurrencies have a maximum supply.
- For example, only 21 million Bitcoin will ever exist.
Common Cryptocurrencies
- Bitcoin (BTC): The first and most well-known cryptocurrency, created in 2009.
- Think of it as "digital gold"—primarily a store of value.
- Ethereum (ETH): Beyond being a currency, Ethereum is a platform for creating decentralized applications and "smart contracts" (self-executing contracts with the terms written in code).
- Stablecoins (USDT, USDC): Cryptocurrencies designed to maintain a stable value, usually pegged to traditional currencies like the US dollar.
- Altcoins: Any cryptocurrency other than Bitcoin.
- There are thousands of these, each with different purposes and features.