What Is Cryptocurrency? Simplified In 200 Words

Cryptocurrencies are digital money work as a medium of exchange just like normal currency.

Bitcoin is the first cryptocurrency.

As its name suggests, it’s created, maintained, and stored using cryptography. A cryptocurrency is secure and does not involve any central authority to perform a transaction.

American cryptographer David Chaum developed anonymous cryptographic money and after that, considerable efforts made in that direction.

The technical architecture of cryptocurrencies was created by Satoshi Nakamoto, a pseudonymous person or group of persons.

Highlights:

• Decentralized nature
• Eliminate central authority like governments and banks
• Transactions can be performed directly via public/private keys
• Can’t be removed or altered
• All transactions are cryptographically secured (hash functions)

It has been making headlines worldwide since its launch and people are still skeptical about its use in day-to-day transactions.

Some challenges in adoption:

• Use for illegal activities
• Vulnerabilities of the underlying platform
• Exchange rate instability
• Lack of knowledge
• High infrastructure and transaction cost

There are a number of cryptocurrencies in the market in either evolving or dying phase.

All transactions are represented by ledger entries into the system and are managed by a community of miners.