8. What is cryptocurrency?

I don’t really know what cryptocurrency is, and you probably don’t either. So here’s what I’m discovering:

  • It’s digital.
  • It’s not backed by the government, like fiat currency is, but you can use fiat currency to buy cryptocurrency.
  • It has no real value.
  • It is used more to invest and make a profit than to actually pay for things, but it can still be used to pay for things.
  • Bitcoin is the most popular cryptocurrency, but there are lots of them.
  • Blockchain makes cryptocurrency work. A blockchain is a chain of records on a network, and it exists for everyone who owns a cryptocurrency. Blockchain makes it impossible to just create numbers and engage in fraud.
  • There has to be some sort of scarcity to make cryptocurrency work–if new cryptocurrency can be made, then it has to be some sort of regulated process.
  • There has to be a way to verify and prove that you actually own and use cryptocurrency–this is related to cryptography, so there has to be strong security involved.
  • You can mine bitcoin. Mining bitcoins is getting new bitcoins as a reward for auditing/verifying bitcoin transactions using computers doing intense computer things.

So could I start my own cryptocurrency? If I spent enough time and energy learning about computers and coding and blockchain, I could. But starting a new cryptocurrency doesn’t mean that it is worth anything.

Am I going to get cryptocurrency anytime soon? I’m not planning on it. But while I haven’t really trusted cryptocurrency, I still do trust the numbers in my bank and Venmo and Amazon and PayPal and the stock market–and cryptocurrency doesn’t seem that much crazier.

1 thought on “8. What is cryptocurrency?”

  1. I had wondered about this. Thanks for clarifying. I sometimes call it all funny money. A number here to a number there. Not really meaning much at all.

    Like

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