A cryptocurrency or crypto, is a virtual currency secured by cryptography. It is designed to work as a medium of exchange, where individual ownership records are stored in a computerised database.

The defining trait of [1] a cryptocurrency is that they are not issued by the government agency of any country making them figure 1 shown below immune against any interference and manipulation from them.

Figure 1: Crypto Currency

In simplistic terms, Cryptocurrency is a digitised asset spread through multiple computers in a shared network. The decentralised nature of this network shields them from any control from government regulatory bodies.

The term “cryptocurrency in itself is derived from the encryption techniques used to secure the network.

As per computer experts, any system that falls under the category of cryptocurrency must meet the following requirements.:

1. Absence of any centralised authority and is maintained through distributed networks
2. The system maintains records of cryptocurrency units and who owns them
3. The system decides whether new units can be created and in case it does, decided the origin and the ownership terms
4. Ownership of cryptocurrency units can be proved exclusively cryptographically.
5. The system allows transactions to be performed in which ownership of the cryptographic units is changed.

Cryptocurrency is a form of payment that can be exchanged online for goods and services. Many companies have issued their own currencies, often called tokens, and these can be traded specifically for the good or service that the company provides. Think of them as you would arcade tokens or casino [2] chips. You’ll need to exchange real currency for the cryptocurrency to access the good or service.

Cryptocurrencies work using a technology called blockchain. Blockchain is a decentralized technology spread across many computers that manages and records transactions. Part of the appeal of this technology is its security.

In the early 1990s, most people were still struggling to understand the internet. However, there were some very clever folks who had already realized what a powerful tool it is.

Some of these clever folks, called cypherpunks, thought that governments and corporations had too much power over our lives. They wanted to use the internet to give the people of the world more [3] freely. Using cryptography, cypherpunks wanted to allow users of the internet to have more control over their money and information. As you can tell, the cypherpunks didn’t like trusted third parties at all!

As decentralized platforms, blockchain-based cryptocurrencies allow individuals to engage in peer-to-peer financial transactions or enter into contracts. In either case, there is no need for some trusted third-party intermediary such as [4] a bank, monetary authority, court, or judge. This has the potential to disrupt the existing financial order and democratize finance. The size of the cryptocurrency space has grown exponentially in the past decade, with new innovations and a collective market cap of nearly $2 trillion.

References:

1. https://byjus.com/current-affairs/cryptocurrency/
2. https://www.nerdwallet.com/article/investing/cryptocurrency-7-things-to-know
3. https://www.bitdegree.org/crypto/tutorials/what-is-cryptocurrency
4. https://www.investopedia.com/tech/most-important-cryptocurrencies-other-than-bitcoin/

Cite this article:

Nandhinidwaraka.S (2021) The Invention of Crypto Currency, Anatechmaz, pp. 44