What is cryptocurrency

Cryptocurrency is digital money. Cryptocurrency exists as transaction records in a blockchain, a database distributed over thousands of computers. When crypto is sent from one wallet address to another, a new transaction record is added to the blockchain.

To put it simply: cryptocurrency is virtual money. You can transfer cryptocurrency, make payments with it (if it is accepted).

Its main characteristics make crypto so valuable:


Decentralized. There is no single organization responsible for cryptocurrency: no one controls issuance of crypto assets or changing of its properties. The crypto capacities are encrypted in its protocol, and all protocol changes are made by the community developing this cryptocurrency. And if the minority does not support proposed changes, it can still use the old version of the protocol, while the cryptocurrency splits into two similar but independent cryptocurrencies. The new crypto is called a fork.  It is a common thing, for example Bitcoin and Bitcoin Cash split in 2017. A fork can be explained as a kind of bifurcation of a cryptocurrency, as all amounts will exist in both versions of the blockchain.

To put it simply: no one controls crypto. No one alone can decide to devalue it or somehow limit its capacity.

Irreversible. Blockchain records are protected by sophisticated encryption algorithms and cannot be changed. Moreover, blockchain protocols can detect and withstand tampering with records. It means, if a cryptocurrency is sent, it is sent. If you made a mistake and sent it to the wrong account, you can’t get it back. An attacker also can't tamper with a blockchain and transfer crypto to his/her own account.

To put it simply: a cryptotransfer cannot be changed or canceled. If you have wrongly transferred your crypto, no one can return it to you (only if a receiver agrees to).

Peer-to-peer. A person just sends a cryptocurrency to someone: no intermediaries involved. It means no one can interfere with the transaction: for example, to cancel it or to steal funds. It is a really important feature, as it implies freedom for cryptocurrencies. No one can authorize a transaction declining if, for example, a recipient lives in another country.

To put it simply: only you decide where to transfer your crypto. You can send assets to anyone anywhere in the world.

Transparent. For most cryptocurrencies all transaction records are available. You can see the type of transaction, its amount, incoming and outgoing addresses (wallets), and most importantly, from what previous transactions the forwarded cryptocurrency came from. In simple cases, when no one was trying to cover the traces, the cryptocurrency can be traced back to all transactions before it occurred.

To put it simply: any crypto transactions are available to everyone. Right after a transaction confirmation, anyone can view it on special platforms, like https://www.blockchain.com/explorer

Anonymous. Transaction records store incoming and outgoing addresses. But keep in mind that cryptocurrency addresses are just long sequences of characters, which reveal nothing about senders and recipients. It is possible though to find out who owns the address if cryptocurrency was exchanged for fiat or other way around, cryptocurrency bought with fiat money was received to this address.

To put it simply: no one knows who owns a crypto address unless crypto is bought with fiat, then an exchange service will know the address owner. But if you bought crypto with more confidential methods (other cryptocurrency, cash, etc.), then the address will remain anonymous.