Q

What are cryptocurrencies?

A

They are decentralized digital currencies that exist only online.

Cryptocurrencies may sound like money used by mummies and other lavishly buried corpses, but they are in fact something totally different: digital currencies that only exist online, have no physical form or intrinsic value, and aren’t regulated or controlled by a central bank or server. Cryptocurrency transactions happen only between individuals, and are thus referred to as “decentralized.” (The “crypto” actually refers to the fact that the transactions are made securely using impossibly tough-to-crack cryptography.)

You’ve undoubtedly heard of — or possibly knocked over an old lady in your rush to invest in — bitcoin, the most well-known cryptocurrency and the first one to take off. Created in 2009, bitcoin succeeded in creating a digital cash system that could transmit payment just as easily from one side of the earth to the other as it could from two people living next door to one another. There are now at least a thousand different cryptocurrencies circulating, but a couple of the more well known ones are ether and litecoin.

Cryptocurrencies rely on what’s called a blockchain, a publicly accessible electronic ledger that permanently, and immutably records every cryptocurrency transfer. Blockchains serve to keep folks honest, providing cryptocurrencies with both self-policing and accountability.

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