Cryptocurrencies have been attracting a lot of interest lately.
You can regularly find them being mentioned on the news, from a relative, or on Netflix. Decryptionary is a dictionary covering the subject of cryptocurrency and its technology.
I created Decryptionary as a point of entry for those who know very little about the subject.
Let’s start with the key terms:
What is cryptocurrency?
Cryptocurrency is an electronic money created with technology controlling its creation and protecting transactions, while hiding the identities of its users.
Crypto- is short for “cryptography”, and cryptography is computer technology used for security, hiding information, identities and more.
Currency simply means “money currently in use”.
Cryptocurrencies are a digital cash designed to be quicker, cheaper and more reliable than our regular government issued money.
Bitcoin: How Cryptocurrencies Work
Instead of trusting a government to create your money and banks to store, send and receive it, users transact directly with each other and store their money themselves. Because people can send money directly without a middleman, transactions are usually very affordable and fast.
To prevent fraud and manipulation, every user of a cryptocurrency can simultaneously record and verify their own transactions and the transactions of everyone else.
The digital transaction recordings are known as a “ledger” and this ledger is publicly available to anyone. With this public ledger, transactions become efficient, permanent, secure and transparent.
With public records, cryptocurrencies don’t require you trust a bank to hold your money. They don’t require you trust the person you are doing business with to actually pay you.
Instead, you can actually see the money being sent, received, verified, and recorded by thousands of people. This system requires no trust.
This unique positive quality is known as “trustless”.
The first cryptocurrency was bitcoin.