) A digital currency that resides in a decentralized network known as a "blockchain." Cryptocurrencies (cryptos) are not maintained or governed by any bank, financial institution or nation, and this absence of a middleman is one of crypto's most touted advantages. Each cryptocurrency is a global entity, and Bitcoin was the first in 2009. In 2015, Ethereum debuted, the second major crypto.
Since then, thousands of other cryptos have been introduced with names such as Litecoin, Namecoin, Peercoin, Mastercoin, BlackCoin and Dogecoin. However, most are nothing more than scams that take advantage of the latest craze with the creators hoping to make a killing and depart. Some even clearly state they are just for fun! See ICO
Here to Stay or Soon Forgotten?
Although cryptocurrencies are used in illegal transactions on the Dark Web and other venues, they help millions of people move money in countries with authoritarian leaders and formidable financial restrictions. Pundits of cryptocurrencies claim crypto is the greatest paradigm shift in the history of finance; a societal shift even greater than the Internet. According to crypto evangelist James Altucher, "the rise of cryptocurrencies is part of a 3,000-year-old historical trend in the direction and evolution of money. It's not a fad, but irrational investors are swarming in and treating it like it is, and they are going to get burned."
Why Is It Called Crypto?
Because three cryptographic technologies are used. The first is a digital signature, which uses the public key cryptography system made up of private and public keys. People send crypto using their private key, and it is verified with the public key. Parties receive crypto using their public key, which is visible to everyone but does not directly identify them by name. See digital signature
, public key cryptography
and crypto tumbler
Secondly, blockchain transactions are linked together using a cryptographic "hash" algorithm. This hash linkage prevents stored transactions from being altered without detection. As a result, blockchains are said to be tamperproof. See cryptographic hash function
Finally, as for Bitcoin, new native coins are digitally created and added to the account of the "miner" that is first to solve a mathematical puzzle using a cryptographic hash function. Ethereum uses a different method (see Ethereum 2.0
). See crypto mining
Prices Fluctuate Based on Demand
Except for "stablecoins," which are backed by fiat currencies, the value of a crypto is based on market demand. The cryptocurrency exchanges function like stock exchanges. Once worth less than a penny, a single Bitcoin topped $60,000 in 10 years. See stablecoin
, crypto craze
, Bitcoin pizza
and crypto glossary
Real-Time Crypto Updates
For the latest cryptocurrency prices, go to CryptoCompare.com or CoinMarketCap.com. The sites track thousands of cryptos. Since this example was taken in 2021, Bitcoin dropped more than 40 thousand dollars before it began to climb back.