Cryptocurrency

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A cryptocurrency is a digital or virtual money variant that uses encryption to ensure the confidentiality of transactions and limit the generation of new units. Cryptocurrencies are not like government-issued fiat currencies, as they are entirely reliant on decentralized blockchain networks rather than power and control centralized by a single entity. This system takes away the banking system and intermediaries, thus allowing people to directly transact with each other.

A blockchain is used to keep track of every cryptocurrency transaction, and it works in the same way as a public ledger where anyone is allowed to take a peek at it. As a result, all fund movement is transparent, but at the same time, it is also guaranteed that the funds cannot be changed or erased once they are confirmed due to the immutability of the system.

Bitcoin is the most popular cryptocurrency. It was launched in 2009 and claimed to be the first-ever decentralized digital currency. The digital currency realm has since expanded to thousands of other coins, including Ethereum, which has innovated with non-cash smart contracts.

There are many reasons why people prefer using cryptocurrencies including online payments, sending money internationally, trading, participating in decentralized finance (DeFi), and even acquiring digital art called NFTs, among others. There might be times when the prices are extremely unstable, but the innovation of cryptocurrency technology keeps going on and has started the process of changing the ways of money transfer, ownership, and most of all the financial systems in the digital world.

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Synonyms:
crypto, cryptos, crypto-assets, crypto asset, crypto assets, crypto-asset

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Related Terms

Alpha

The term alpha refers to a financial measure which shows the extra profits that assets create when their performance exceeds standard market returns. Alpha measures how much a strategy or trader or investment practice increases value beyond standard market performance.  The portfolio needs to achieve a 15 percent increase when the overall market increases by 10 percent because that 5 percent extra gain represents alpha. The traditional asset management concept means that performance assessment uses an index like the S&P

Basis Point

The financial world uses basis points as a measurement unit to show interest rate and yield and percentage changes. The basis point equals one basis point which represents one hundredth of a percentage point or 0.01 percent. The numerical value of 100 basis points equates to 1 percent. The term commonly uses the abbreviation “bps” to refer to it. Basis points provide a solution to avoid confusion during discussions about small percentage changes. The interest rate increase from 5 percent

Proof of Reserve

In the crypto world, Proof of Reserve (PoR) is essentially a digital receipt that proves an exchange actually has the money it says it does. It like a cryptographic audit that shows a platform is holding your assets 1:1, rather than secretly lending them out or spending them. Though the idea had been circulating in crypto communities for some time, it only gained traction as a worldwide industry standard after the disastrous fall of FTX in 2022. Before it filed