Cryptocurrency – definition and meaning
A Cryptocurrency is a type of digital money, i.e., it only exists electronically. The creators of cryptocurrencies designed them to be secure, and in most cases completely anonymous. In other words, you cannot follow the cryptocurrency money trail like you can with dollars, pounds, and other currencies. It is an online currency that uses cryptography.
Cryptography is the process of converting ordinary, legible text into unintelligible code, and vice-versa. In other words, cryptography is the art of solving codes and also creating them.
A cryptocurrency is a digital currency. In other words, it is an online currency that exists electronically. The creators used encryption techniques to regulate the generation of currency units. They also used encryption techniques to verify the transfer of funds.
We also refer to it as an alternative currency or virtual currency.
The surge in cryptocurrency popularity is often attributed to the decentralized nature of the technology, which appeals to users seeking alternatives to traditional financial systems.
Cryptocurrencies, unlike traditional currencies, have no central bank regulating them. They operate independently of a central bank.
The Oxford Living Dictionaries have the following definition of the term on their website:
“A digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.”
People go to specialized exchanges when they want to buy or sell cryptocurrencies. Apart from digital money, the exchanges also accept payment using fiat money (dollars, euros, pounds, etc.). Fiat money is money that governments legally declare as legal tender.
Ever since the birth of cryptocurrencies, experts have been debating on whether they have a future. Billionaire investor Howards Marks once said that cryptocurrencies were “nothing but an unfounded fad (or perhaps even a pyramid scheme), based on a willingness to ascribe value to something that has little or none beyond what people will pay for it.”
Etymology of cryptocurrency
Etymology is the study of the origin of words and how their meanings have evolved.
The term ‘cryptocurrency’ first appeared in the English language at the end of the first decade of this century. It is the result of joining the words ‘crypto‘ and ‘currency‘ together.
Crypto is short for cryptography, i.e., the art of making and deciphering codes.
A currency is the system or kind of money that a particular country uses. Currency also refers to banknotes and coins, especially as part of the money supply. The US dollar, British pound, European Union’s euro, Swiss franc, and Japanese yen, for example, are currencies.
Therefore, a cryptocurrency is an encrypted code that people use as a currency. The code or cryptography makes the currency secure. It is extremely difficult to make counterfeit cryptocurrencies because of their security feature.
A blockchain provides the validity of each cryptocurrency’s chain. It is a growing list of blocks (records), which are secured and linked using cryptography.
One individual block usually has a hash pointer as a link to a block that preceded it. It also has a timestamp and transaction data. Cryptocurrency creators designed blockchains to be resistant to data modification.
The first block in a blockchain is the Genesis Block. Genesis Blocks have no data on previous blocks because there is no block before them.
Webopedia says the following regarding blockchains:
“Blockchain refers to a type of data structure that enables identifying and tracking transactions digitally and sharing this information across a distributed network of computers, creating in a sense a distributed trust network.”
“The distributed ledger technology offered by blockchain provides a transparent and secure means for tracking the ownership and transfer of assets.”
Miners check that transactions are correct and add data to each block. When the miners complete each process, they receive a reward in the form of new currency units. We call what the miners do cryptocurrency mining.
We refer to the computers that link to the blockchain network as nodes.
The blockchain stores smart contracts, i.e., lines of code. These lines of code allow the contract to be self-executing. There is not need for intermediaries such as lawyers.
Top ten cryptocurrencies
The most famous cryptocurrency in the world today is Bitcoin. Satoshi Nakamoto, who claims to be Japanese, created Bitcoin in 2009 using C++, a programming language.
We call all cryptocurrencies other than Bitcoin ‘Altcoins.’ Altcoin stands for ‘alternative coin.’
According to USA Today, the top 10 cryptocurrencies today (February 2024) are (in order of importance):
- Bitcoin (started in 2009).
- Ethereum or Ether (started in 2015).
- Binance (started 2017)
- Solana (2020)
- XRP, XRP, the digital asset for the Ripple payment protocol (started 2012)
- Cardano (started 2018)
- Avalanche AVAX (started 2020)
- Dogecoin DOGE (started 2013)
- TRON TRX (started 2017)
- Polkadot DOT (2020)
The cryptocurrency Dogecoin started off as a joke, but caught on rapidly and strongly. Its market capitalization has reached over $2 billion.
If you want to buy, sell, or store Bitcoins, Litecoins, etc., you must have a cryptocurrency wallet. It is a software program that stores public and private keys. The keys interact with blockchains and enable users to send and receive cryptocurrencies. The wallets also monitor the owner’s balance.
Additionally, technological advancements are expected to further enhance the security features of cryptocurrency wallets, making them even more resilient to cyber threats.
Cryptocurrencies and the future
Do cryptocurrencies have a promising future? Are they here to stay or will nobody be talking about them in a decades’ time. Experts seem to disagree on the prospects of digital currency.
Ethereum’s co-founder, Vitalik Buterin, warned in February 2018 that cryptocurrencies could lose virtually all their value at any moment.
Did you know that several universities today offer Bitcoin and blockchain courses?
There are many compound nouns containing the word “cryptocurrency” or “crypto,” such as “crypto mining.” Let’s have a look at some of them, their meanings, and how we can use them in a sentence:
A digital wallet that stores the public and private keys needed to buy, sell, and store cryptocurrencies securely.
Example: “He checked his cryptocurrency wallet to see if the transaction had been processed.”
A platform where customers can trade cryptocurrencies for other assets, such as conventional fiat money or other digital currencies.
Example: “She used a crypto exchange to diversify her investment portfolio with different cryptocurrencies.”
The process by which new cryptocurrency coins are created and transactions are verified and added to the blockchain ledger.
Example: “Crypto mining requires a significant amount of computational power and electricity.”
A digital asset that uses cryptography, peer-to-peer networking, and a public ledger to regulate the creation of new units, verify transactions, and secure the transactions without the intervention of any middleman.
Example: “His portfolio includes several crypto assets beyond Bitcoin and Ethereum.”
An individual or entity that allocates capital with the expectation of receiving financial returns through the investment in cryptocurrency markets.
Example: “The crypto investor was enthusiastic about the long-term potential of blockchain technology.”
The set of rules or guidelines designed to control or govern the use, trade, and legal implications of cryptocurrency.
Example: “Governments around the world are working on crypto regulation to prevent money laundering and fraud.”
A collective term for the network of developers, investors, enthusiasts, and companies involved in the development and promotion of cryptocurrencies.
Example: “The crypto community gathered online to discuss the impact of recent market changes.”
These three educational YouTube videos come from our sister channel, Marketing Business Network or MBN. They explain what the terms “Cryptocurrency”, “Cryptocurrency Mining”, and “Cryptocurrency Exchange” mean using easy-to-understand language and examples:
What is (a) Cryptocurrency?
What is Cryptocurrency Mining?
What is a Cryptocurrency Exchange?