Also referred to as “coins”, “crypto”, or “virtual assets” for the AML crowd, cryptocurrencies are digital currencies that are secured through cryptography, and, for the most part, rely on blockchain technology.
The terms “crypto” and “blockchain” are often used interchangeably, and are often seen as one and the same. This is incorrect. To differentiate the two, we can think of blockchain technology as the equivalent to the Internet, with cryptocurrency being Email. Blockchain technology is what powers cryptocurrencies.
Since the launch of bitcoin (one of many cryptocurrencies, and the most popular) in January 2009, cryptocurrencies have been developed and proposed as an alternative to the current financial system.
There exists thousands of different cryptocurrencies, with varied purposes, values, and technology. Some were created to solve the shortcomings of other coins, or to build upon the capabilities of others. Some have a transparent ledger that is publicly viewable by everyone, and some have their ledger shielded to increase anonymity. Some offer the ability to create applications and smart contracts, in addition to acting as a medium of exchange.
A key difference between cryptocurrency and fiat (a government-issued currency, such as US Dollars, Canadian Dollars, British Pounds, the Euro, etc), is that they are not controlled by any central government or authority. The ledger that records the transactions and balances, the protocol for issuing new coins and managing the supply, and the process of validating transactions is all managed and secured through a publicly accessible, decentralized, peer to peer network. You can read more about this topic in the “Blockchain Technology” article.
For the most part, cryptocurrencies were created as open-source software. This is both an advantage and disadvantage to the technology. On one hand, any issues with the code is easily remedied by community developers. On the other hand, unlike the traditional financial system, there is no one to take on the liability when users make mistakes (i.e. sending bitcoin to the wrong address). However, the technology is still in its infancy stage, and new features and updates are constantly added to lessen the chances of these mistakes happening, and to evolve the technology to promote mass adoption.
Some of the most popular cryptocurrencies: Bitcoin (BTC), Ether (ETH), XRP, Tether (USDT), Bitcoin Cash (BCH), Litecoin (LTC), EOS (EOS), Bitcoin SV (BSV), Monero (XMR) and Tezos (XTZ).