Introduction to Crypto: Definitions

Cryptocurrencies are virtual currencies that have no physical form and are based on a distributed accounting system. Distributed accounting allows online transactions to take place directly between users without intermediaries or third parties. This system provides faster transactions and greater security than traditional accounting.

Cryptocurrencies use cryptography to secure financial transactions which is where the name cryptocurrency comes from. Cryptography uses complex mathematical calculations to send encrypted messages between parties. Cryptography allows cryptocurrency transactions to be anonymous, better protected and without intermediaries such as governments, banks and other financial institutions.

Records of cryptocurrency transaction processes are stored on a Blockchain – a digital ledger, which is a type of database created to secure transaction records. All transactions are recorded in the so called blocks. Bitcoin blocks are created on average every 10 minutes and saved one after the other, without an option to edit the transaction records in previous blocks, creating a kind of blockchain.

Blockchain can be compared to a spreadsheet, storing the balances of all those who hold a particular cryptocurrency, which can transfer funds via user signatures.
Blockchain technology was first used when the Bitcoin cryptocurrency was introduced. A common mistake is to use the words Blockchain and Bitcoin interchangeably because they are in fact two different concepts. Bitcoin is the world’s first cryptocurrency and Blockchain is the registration system that, among other things, allows transactions to be made through this cryptocurrency.

A distinguishing feature of cryptocurrencies is that they are not issued by a central authority. The decentralized control of cryptocurrencies makes it independent of government decisions or central bank influence.