What is a Cryptocurrency?
Cryptocurrency is a digital currency in which transactions are verified and records maintained by a decentralized system using cryptography, rather than by a centralized authority. It typically does not exist in physical form (like paper money) and is typically not issued by a central authority.
Let us view what cryptocurrency actually is, by understanding the differences between a normal currency and cryptocurrency:
A currency (fiat) has a physical base, paper money.
Cryptocurrency does not have a physical base, it is digital (non-physical).
A typical currency is controlled by a central authority like the government.
Cryptocurrency is decentralized; it is not controlled by any specific entity.
Currency is stored in physical spaces like banks (bank vaults).
Cryptocurrencies are stored in digital spaces called ‘wallets.’
The value of a typical currency is decided by the entity controlling it which all of its users have to accept.
The value of cryptocurrency is decided by its users.
Fiat currency is secured by ‘vaults’ and physical security systems.
Cryptocurrency is secured by ‘cryptography’ (codes and algorithms).
Records of a typical currency are stored in a central database, i.e., currency records are in centralized databases.
Cryptocurrency records are stored in a database existing in form of a computerized distributed ledger i.e., cryptocurrency records are in decentralized and distributed databases).
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