) 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 blockchain
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 entrepreneur and crypto evangelist James Altucher, "the rise of cryptocurrencies is part of a 3,000-year-old historial 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."
What's Cryptographic About It?
Two things. First is a digital signature, which uses the public key cryptography system made up of a private key and public key. 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 anyone 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. See cryptographic hash function
How Are Cryptos Generated?
New digital coins such as Bitcoin and Ether (Ethereum) are automatically generated by their blockchain algorithm and added to the accounts of the "miners" that win the competition to commit new transactions to their blockchains. There are also cryptocurrencies being invented all the time that are funded with Bitcoin and Ether (see ICO
and Ethereum token
). See crypto mining
and Bitcoin mining
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 www.CryptoCompare.com. The site tracks several thousand cryptos.