What is cryptocurrency?

Cryptocurrency is a digital or virtual form of currency that uses cryptography for security, making it nearly impossible to counterfeit or double-spend.

Unlike traditional currencies issued by governments (fiat money), most cryptocurrencies operate on decentralized networks based on blockchain technology. A blockchain is a distributed ledger enforced by a disparate network of computers.

Key characteristics include:

• Decentralization: They generally function without a central authority, such as a bank or government, meaning they are theoretically immune to government interference or manipulation.
• Cryptography: Transactions are secured using complex mathematical algorithms, which protect the integrity and safety of the network.
• Transparency and Anonymity: While transactions are typically recorded on a public ledger (the blockchain), the identities of the participants are often represented by alphanumeric wallet addresses rather than names, offering a degree of pseudonymity.

Popular examples include Bitcoin, which was the first decentralized cryptocurrency, and Ethereum, which is widely known for its ability to host "smart contracts"—self-executing agreements coded directly into the blockchain.