Cryptocurrency is a digital form of money secured by cryptography. It is designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank.

How It Works: A Digital Currency with a Twist

The most well-known cryptocurrency is Bitcoin, which introduced the core principles that all cryptocurrencies follow. Unlike fiat-currency (like the U.S. dollar), a cryptocurrency exists only on a digital ledger known as a blockchain. This ledger is distributed across a massive network of computers, making it virtually impossible to alter or counterfeit.

The term "crypto" in cryptocurrency refers to the use of powerful encryption techniques to secure the network and verify transactions. These cryptographic puzzles are solved by miners, who are then rewarded with new units of the cryptocurrency. This process of mining also controls the creation of new coins, preventing inflation and ensuring a predictable supply.

Why It Matters

Cryptocurrency represents a monumental shift in how we think about money. It introduces the concept of a transparent, censorship-resistant, and permissionless financial system that is not controlled by any single entity. This decentralization has paved the way for a new digital economy, with innovations like DeFi and NFTs, and has given individuals greater control over their financial assets.