Cryptocurrency is a type of digital or virtual currency that uses cryptography for security. It operates on a decentralized system based on blockchain technology—a distributed ledger maintained by a network of computers (nodes).
**Key Concepts:**
1. **Blockchain:** A digital ledger where transactions are recorded in blocks and linked together in a chain. This ensures transparency and security.
2. **Decentralization:** Unlike traditional currencies controlled by governments or banks, cryptocurrencies are usually decentralized and operate on a peer-to-peer network.
3. **Bitcoin:** The first and most well-known cryptocurrency, created by an anonymous person or group known as Satoshi Nakamoto in 2009. It introduced the concept of blockchain and decentralized currency.
4. **Altcoins:** Other cryptocurrencies besides Bitcoin, such as Ethereum, Litecoin, and Ripple. Each often has unique features or uses.
5. **Wallets:** Digital tools that allow users to store, send, and receive cryptocurrencies. Wallets can be software-based (online) or hardware-based (physical devices).
6. **Mining:** The process of validating transactions and adding them to the blockchain. Miners use computational power to solve complex mathematical problems, earning new coins in return.
7. **Smart Contracts:** Self-executing contracts with the terms written into code, which automatically enforce and execute agreements. Ethereum popularized this concept.
8. **Volatility:** Cryptocurrencies are known for their price volatility. Prices can fluctuate widely in short periods due to market sentiment, regulatory news, and other factors.
9. **Regulation:** The regulatory environment for cryptocurrencies varies by country and is continually evolving. Some countries have embraced them, while others have imposed restrictions or bans.
10. **Security:** While blockchain technology itself is generally secure, cryptocurrencies can be vulnerable to hacking, fraud, and other risks