A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it impossible to counterfeit or double-spend. Cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a network of computers.
A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation. Cryptocurrencies are based on distributed ledger technology, which enables users to make payments from one account to another without using a central institution.
Rather than transacting with a central intermediary, users can securely transfer currency between two parties using Public-Key Cryptography. This process, referred to as a “peer-to-peer” (P2P) transaction, is facilitated by an electronic ledger that records and verifies each transaction.
Each transfer of a digital coin is publicly recorded on the ledger and can be validated by anyone with the appropriate cryptographic keys. In addition to cryptographic security and anonymity, cryptocurrencies offer several advantages over fiat money, such as low transaction fees, irreversibility of payments and the ability to store value in a digital commodity.
Cryptocurrencies also provide greater accessibility than traditional banking systems, allowing users in some countries to obtain and transfer digital funds without going through cumbersome bank or government bureaucracy. As cryptocurrencies become more widely accepted, the use and understanding of these digital assets is likely to increase exponentially.