Cryptocurrencies like Bitcoin, Ethereum, and dozens of lesser-known digital currencies frequently appear in the news, often following wild price spikes, and sometimes to cover the revolutionary blockchain technology they are built upon.
What Is Cryptocurrency? 8 Common Questions Answered
Cryptocurrency is any digital store of value that one can exchange for goods and services. Bitcoin is the oldest and most well-known example of a digital currency, invented by a person or persons using the pseudonym “Satoshi Nakamoto” in 2009.
The cryptocurrency was initially conceived as a way of making international trade easier. Consumers in developing countries often lack consistent access to conventional fiat currency options such as U.S. Dollars or European Euros.
Every transaction includes three critical pieces of information: Input, Output, and Amount. The Output is the name of the cryptocurrency account (called a wallet) that is receiving funds, while Amount is self-explanatory.
Each wallet consists of two random strings of characters. The first string acts like a username to signify your account on the blockchain, while the second is a private key or password.
Blockchain technology is often described as “hack-proof” because any hacker would need to modify all blocks simultaneously to ensure that the chain was in agreement.
For cryptocurrencies, miners must add a nonce (or arbitrary input data) to all of the inputs on the block to make the output begin with a set number of zeroes, “solving” the block and adding it to the blockchain.