What is cryptocurrency?
Cryptocurrency is a form of payment that can be exchanged for goods and services. “Crypto” fulfills much the same need as existing currencies (euros, dollars, pounds, rubles), but unlike these traditional “fiat” currencies which are controlled by central banks, cryptocurrency is controlled by many, many, many computers running the same software. This common software powers a distributed ledger, called a blockchain, which increases in power and security as more computers join this network. There are many different blockchains in existence, with as many different stated goals, the two largest are Bitcoin and Ethereum.
A blockchain can only have new blocks added; existing blocks can never be changed or removed. Each new block to be added to a blockchain is immediately sent to all participants for verification using encryption; cryptocurrency got its name from this heavy use of (elliptic curve) cryptography. With copies of the data in all participants’ hands, even if some are hacked, the overall consensus remains safe. The likelihood of a flaw in the core algorithm is very low, it is much more likely that a disreputable exchange (discussed in the next section) will run off with your money.
Trillions of dollars course through electronic networks protected with encryption. So, for what it’s worth, in the digital apocalypse an implosion of bitcoin would be the least of our concerns.William Baldwin – https://www.forbes.com/sites/baldwin/2020/02/16/can-all-of-bitcoin-be-hacked/
As an Aside … Tokens
Many organizations have issued their own currencies, often called tokens, on top of this common blockchain technology 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 chips. You’ll need to exchange real currency for the cryptocurrency to access the good or service.
Why would some blockchain projects choose proof of stake instead of proof of work?
- Read – What is Bitcoin? – https://www.kraken.com/learn/what-is-bitcoin-btc
- Read – What is Ethereum? – https://www.kraken.com/learn/what-is-ethereum-eth
- Read – Proof of Work vs Proof of Stake – https://www.kraken.com/en-us/learn/proof-of-work-vs-proof-of-stake