What is CryptoCurrency?

Posted on August 01, 2019 at 10:45 AM

What is cryptocurrency

The definition taken from Wikipedia [1] is as follows – “A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange that uses cryptography to secure its transactions, to control the creation of additional units, and to verify the transfer of assets.”

Simply;

  • It’s digital/virtual.
  • It’s decentralised.
  • It’s a means of exchange.
  • It uses advanced security mechanisms when transacting.
  • At present, it’s mostly seen as an alternative currency to current fiat currencies (existing legal tenders e.g. Dollar, Yen, Pound, Euro, Rand etc.).
  • There are, at time of writing 1384 cryptocurrencies [2].
  • They are not all mineable, e.g. Bitcoin is, as well as Ethereum, Litecoin, Dash etc. On the other hand – those that are not mined are Ripple, Cardano, NEM, Iota etc.

To elaborate slightly more. There are 2 category types, namely; (i) AltCoins (ii) Tokens.

  • AltCoins – A means of payment, think money. They are alternatives to Bitcoin, most of them being clones (with modifications) of Bitcoin e.g. of clones of bitcoins are Dogecoin, Litecoin.
  • Tokens – More than just a means of payment. Cannot be considered as money but a means of allowing payments, even voting for that matter.

To conclude AltCoins are like fiat currency (which emphasises transactions). Tokens can be seen as methods to reward, whether via currency or a rewards schemes, e.g. think rewards programmes, shares, bonds, board voting privileges etc.

REFERENCES

[1] Cryptocurrency, https://en.wikipedia.org/wiki/Cryptocurrency, [Accessed: 4 January 2018].

[2] Cryptocurrency Market Capitalizations, https://coinmarketcap.com/all/views/all/, [Accessed: 4 January 2018].

Categories