What is cryptocurrency?
Related Subjects:
Arts
Social Issue:
  Education
Target Grade Level(s):
Special Education
Future Friendly School Values:
  Global Citizenship
PROJECT DESCRIPTION:

Cryptocurrencies are a form of virtual or digital currency that is secured using cryptography. This means that they are incredibly secure and are near impossible to counterfeit or double-spend.


Various encryption algorithms and other cryptographic techniques are usually involved in any cryptocurrency you care to look at that serve the purpose of safeguarding the networks from outside manipulation. Which cryptographic methods are used does vary, but can include things like curve encryption, public-private key pairs, and hashing functions.


Most cryptocurrencies are, by design, decentralized networks that are based on blockchain technology that acts like a distributed ledger maintained and enforced by a large network of computers. The decentralized nature is one of a cryptocurrency's defining features and, in theory, makes them immune from government interference or manipulation.


It is for this reason, primarily but not exclusively, that makes cryptocurrencies so attractive to the general public. Another reason for their rising popularity is the ability to send and receive "money" across borders faster and cheaper than traditional forms of money transfer.


In a sense, decentralization is the key to what is often termed "Web 3.0". Many experts in the field see this as something revolutionary for the future, akin, almost, to other groundbreaking decentralization events in history like the creation of the printing press.


But, let's not get too ahead of ourselves.


As previously mentioned, central to the appeal and functionality of many cryptocurrencies, like Bitcoin, is blockchain technology. This, as the name suggests, is a set of connected "blocks" of data in a "chain" across an enormous interconnected ledger. When a new block (or entry on the ledger) is created, this triggers a sequence of verification by each node on the network before the transaction is confirmed and authorized.


This system means that it is near impossible to forge changes to historical transactions on the network, as the contents of the ledger must be "agreed upon" by the entire network.


Cryptocurrencies can either be bought and sold on specialist exchanges or brokers or "mined" by using computers or specialized computing hardware (aka mining rigs). It is possible to make real-world purchases using cryptocurrencies, just like with traditional fiat currency, but the high volatility and skyrocketing value of some, like Bitcoin, have meant that cryptocurrencies have become a popular investment and trading instrument for large and small investors.


Cryptocurrencies, or rather the blockchain that underpins them, have far wider implications than just as a means of value exchange. The blockchain that underpins it will, most experts agree, revolutionize many industries and could have very significant implications for many aspects of our lives.


For example, blockchain is already being used for keeping track of supply chains, processing online voting, logging real estate transactions, crowdfunding, managing legal contracts, securing medical information, etc. Blockchain is very much still in its infancy and we are yet to really see just how powerful and important this technology is destined to become.