What is cryptocurrency? How digital tokens are reshaping the global economy one blockchain at a time
Cryptocurrencies have been a major topic of conversation as of late, with talks of an impending crash for Bitcoin since China’s crackdown on mining and Tesla’s suspension of purchases through Coinbase. Since the birth of Bitcoin in 2009, Crypto has transformed from a ‘short-lived trend’ over a decade ago to “digital gold”, with over 2000 cryptocurrencies in existence and huge global uptake.
Cryptocurrencies have changed everything we thought we knew about finance. What is “money?” Do we really need banks and what do assets look like? So, what impact does this disruptive technology have on the global economy?
What is cryptocurrency?
Cryptocurrency is a digital or virtual currency designed to serve as a medium of exchange. The ‘crypto’ prefix comes from the fact that cryptocurrencies use cryptography to secure and verify transactions, as well as create new currency units (coins). Cryptography makes it easy to encode something that is simple to decipher with a key and challenging to decipher without a key, which means that coins can be difficult to create but transactions can be easy to verify.
At their core, cryptocurrencies are entries in an immutable and pseudo-anonymous database, known as a ‘blockchain’, which no individual can change. The blockchain is a public record that is verified by many different nodes, which makes counterfeiting coins extremely difficult or impossible.
Much of the global appeal surrounding cryptocurrencies comes from them being outside of the control of central authorities, more resistant to M0/MB inflation, transparent and portable.