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What is a Cryptocurrency?

Bitcoin was the first blockchain and presented the first use-case: money. Creating cash in an entirely digital manner was a problem that remained unsolved until Satoshi Nakamoto (an alias) released software in 2008 as an experiment to see if his version could prevent coins from being copied and incentivise people to join the network. Bitcoin is referred to as a cryptocurrency because user’s coins are kept secure from theft using asymmetric encryption (the same technology that keeps credit card details safe when shopping online).

Today the term cryptocurrency refers to digital tokens that are represented on a blockchain such as bitcoin (lower-case b, BTC), or ether (from ethereum, ETH). Generally these tokens have value and are interchangeable (fungible) with each other on their own network. Cryptocurrency is distinct from fiat (government-issued) currency whether its digital or cash, although the lines are becoming blurred with the approach of central bank digital currencies (CBDCs). Cryptocurrency is also distinct from utility tokens and security tokens. And all of these are separate from NFTs! (non-fungible tokens).

Economists, historians, central bankers, and Bitcoiners, will all debate their own version of what a currency is, how is it different from a cryptocurrency, and what is bitcoin and all those other coins? These are interesting and important questions worth thinking about.

A good place to start is with the OG: Bitcoin.

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Featured Topic: DeFi

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