What is Cryptocurrency?
Cryptocurrency is a form of digital currency that uses cryptography to secure and verify transactions. One of the main benefits of cryptocurrency is that it can be decentralized. Transactions can go from point A to B without a payment service in the middle such as a bank or payment gateway. Another one of the major benefits is that it can be somewhat anonymous, with the only thing being traceable is the wallet address.
Bitcoin was the first one of these cryptocurrencies and the first to hit the mainstream. It was created by Satoshi Nakamoto in 2009. Nobody knows exactly who Satoshi is, or if it was a group or an individual. Since then multiple cryptocurrencies have emerged. Each one has their own name but you will often hear of people referring to it as either Bitcoin or Altcoins. An altcoin is essentially a cryptocurrency other than bitcoin.
Side Note: Although you will most often hear of cryptocurrencies in the context of currency, there are also types of cryptoassets which use the same technology for other uses, such as ownership of items.
Cryptocurrencies use cryptography along with a public ledger that anybody can download and view. This public ledger is stored on what is known as the blockchain. We will explain the blockchain in more detail later, but for now just think of it as a bunch of transactions stored in blocks. As new transactions happen more blocks are added to the blockchain. Before blocks are added to the blockchain they need to be verified. Computers that verify transactions are called miners. You’ll often hear of bitcoin mining. What these people are doing is verifying transactions for a reward.
There have been many attempts to create a digital currency before bitcoin and cryptocurrency came around. One of the major problems they struggled to overcome was the double spending problem. Double spending means spending the same money twice. This problem is solved by having multiple miners verifying a timestamped transaction. As soon as you spend your bitcoin it will show up as a pending transaction on the network. It then needs to be verified by multiple sources before it is confirmed and then added to the blockchain. If someone tries to spend some bitcoin and then tries to spend the bitcoin again before the previous transaction is confirmed then the first transaction is considered the real transaction and the second one is simply rejected by the system