What is a Cryptocurrency?

Updated: Aug 3

Cryptocurrency is one of those words that pretty much everybody knows, and yet not quite everybody knows what it means. 

It's also a word that people tend to get very excited about, although not always for the right reasons.

From the shady beginnings of the blockchain and the enigmatic Mr(?) Satoshi Nakamoto, both of which we covered in our last post in the series, to the "live fast, die young" tales of boom and bust in the online market, crypto doesn't always get viewed in the best light.

The fact that several governments around the globe have elected to ban cryptocurrency trading has only added to the "bad boy/girl" image.

But let's keep calm here. Let's ignore all the hype and hyperbole for a minute, and get down to facts.

  1. Cryptocurrency is nothing to be afraid of.

  2. Cryptocurrency is simpler than many people realize.

  3. Cryptocurrency is going to be even more of a big deal in the coming years, so it pays to be well informed.

With this established, let's get into our beginners' guide to all things crypto.

What exactly is a cryptocurrency?

What is a cryptocurrency

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In our last post, we took a close look at the blockchain, and explored how this digital structure works. Today, we're taking that a step further, and looking at the cryptocurrency networks that are built upon this blockchain.

Simply put, a cryptocurrency is a digitized form of currency that is traded across a blockchain-based network.

But let's go deeper than this. Let's start right at the beginning...

What does the word "cryptocurrency" actually mean?

Well, for starters, it is a portmanteau word, combining two components – "crypto" and "currency."

It's safe to assume that you already know what a currency is, so let's focus on that other component: "crypto."

The word "crypto" sounds... well... it sounds weird. It's a pretty mysterious word, and adds to the intrigue surrounding the whole idea of cryptocurrency.

In reality, though, the meaning itself is not weird. It simply means "cryptographic." Remember, in the last chapter, we talked about network nodes needing to solve certain puzzles to register their proof of work? Well, these puzzles are cryptographic puzzles. Hence, cryptocurrency.

What is a cryptocurrency unit?