What is cryptocurrency? Explained in simple words

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Cryptocurrency is a digital currency that is protected by cryptography. Cryptocurrencies are not issued by central banks or other financial institutions, but are created and maintained by a network of computers. Cryptocurrencies are used to pay for goods and services, as well as for investing.

History of cryptocurrency

The history of cryptocurrency began in 2009 with the creation of Bitcoin. Bitcoin was developed by an anonymous programmer or group of programmers under the pseudonym Satoshi Nakamoto. Bitcoin was the first cryptocurrency to become widely known and used to pay for goods and services.

In subsequent years, many other cryptocurrencies emerged, including Ethereum, Litecoin, Ripple and Bitcoin Cash. These cryptocurrencies offer different features and benefits compared to Bitcoin.

Types of cryptocurrencies

Cryptocurrencies can be divided into several types according to various criteria.


  • Proof-of-work (PoW): this technology is based on solving complex mathematical problems.
  • Proof-of-stake (PoS): this technology is based on ownership of cryptocurrency.
  • Delegated proof-of-stake (DPoS): This technology is a combination of PoW and PoS.

By intended purpose:

  • Payment cryptocurrencies: these cryptocurrencies are used to pay for goods and services.
  • Speculative cryptocurrencies: these cryptocurrencies are used for investment.
  • Functional cryptocurrencies: These cryptocurrencies offer various features such as anonymity or decentralization.

Advantages and disadvantages of cryptocurrency

Cryptocurrencies have a number of advantages and disadvantages.


  • Anonymity: transactions in cryptocurrencies can be anonymous.
  • Decentralization: Cryptocurrencies are not controlled by central banks or other financial institutions.
  • Security: cryptocurrencies are protected by cryptography.
  • Fast: Cryptocurrency transactions can be processed very quickly.
  • Low fees: fees for transactions in cryptocurrencies are usually lower than for transactions in traditional payment systems.


  • Volatility: The value of cryptocurrencies can fluctuate greatly.
  • Environmental friendliness: cryptocurrency mining can have a negative impact on the environment.
  • Regulation: Cryptocurrencies are not regulated in many countries.

Cryptocurrency prospects

Cryptocurrencies remain a relatively new technology and their future is yet to be determined. However, there are a number of factors that indicate that cryptocurrencies may become more widely used in the future.

These factors include:

  • Growing popularity of cryptocurrencies: Cryptocurrencies are becoming increasingly popular as a means of payment and investment.
  • Technology Development: The technologies underlying cryptocurrencies continue to evolve.
  • Regulatory Changes: Cryptocurrencies are beginning to be regulated in some countries.


Cryptocurrencies are a new and rapidly developing technology. They offer a number of advantages over traditional payment systems, but also have a number of disadvantages. The future of cryptocurrencies remains unclear, but there are a number of factors that indicate they could become more widely used in the future.

Jonathan Rowe

Jonathan Rowe

The creator and main author of the site is Jonathan Rowe. Trader and investor with many years of experience. A graduate of the Massachusetts Institute of Technology with over a decade of experience developing applications for financial and investment institutions.

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