💡 Introduction
Cryptocurrency is an emerging digital payment system that functions without centralized banks. It allows peer-to-peer money transfers from anywhere, at any time. Unlike physical money, crypto exists only as digital entries on a blockchain — a public ledger that records every transaction. These assets are stored in digital wallets.
The term "cryptocurrency" comes from the encryption used to verify transactions. This secure system ensures that data is safely stored and transferred.
📘 Understanding Cryptocurrency
🧾 Definition
Cryptocurrency (or crypto) is virtual/digital money that uses cryptography to secure transactions.
🔁 How Does It Work?
The backbone of crypto is blockchain — a decentralized ledger that tracks ownership and records all transactions. It prevents double-spending and ensures integrity without needing a centralized authority.
⚙️ How Is It Created?
- Mining: Uses hardware/software to validate transactions and add them to the blockchain, producing new coins.
- Hard Forks: A split in the blockchain that creates new cryptocurrencies (not always mineable).
- Token Creation: Developers can launch non-mineable tokens for use in apps or ecosystems.
🔐 Key Components: Wallets, Keys & Transactions
- Wallets:
- Hot wallets: Connected online (e.g., browser extension)
- Cold wallets: Offline storage (e.g., USB drive)
- Keys:
- Public Key: Shared for receiving funds
- Private Key: Secret key used to sign transactions
- Transactions: Confirmed by miners and stored on the blockchain.
💱 Types of Cryptocurrency
🟠 Bitcoin (BTC)
- First cryptocurrency (2009)
- No central control
- High volatility but remains dominant
- Used for speculative investment and payments
🟣 Ethereum (ETH)
- Also a blockchain, not just a currency
- Powers decentralized apps and smart contracts
- Ether (ETH) is used to pay gas/fees on the network
🟢 Altcoins
- All other coins that are not BTC (e.g., Litecoin, Ripple)
- Many are forks of Bitcoin/Ethereum or created for specific use cases
🔵 Tokens
- Run on top of existing blockchains (like Ethereum)
- Used in DeFi, gaming, governance
- Can be traded or used for utility/access
