What is cryptocurrency in simple words?

Can we call cryptocurrencies electronic money? On the one hand, yes, but this is not the same thing as Webmoney, PayPal or a bank account. Maybe a currency? Perhaps, but it has nothing to do with Central Banks and the rate does not depend on the country's economy.

Cryptocurrency is digital money created using cryptography (data encryption) technology. Unlike ordinary money, which exists only in the digital world, we will not find banknotes or ingots with the inscription “Bitcoin”.

Cryptocurrencies move without the participation of third parties. There are no privileges due to finances or social status.

Cryptocurrencies exist thanks to blockchain technology. This is a complex database algorithm. All transactions are interconnected and go through the chain. Chains form a list of requests, and those are organized into blocks. All blocks in the collection is the blockchain. In simple words, this is a large database that contains all transactions. Entries cannot be edited, but at the same time they are visible to every user. Only the address (hash) of the sender and recipient is visible, which guarantees complete anonymity.

Digital currency can only be stored on digital wallets. The transaction occurs as follows: the user creates it and gives the recipient a password from his key, which he can use.

The main features of the cryptocurrency:

• Lack of physical appearance.
• There are no commissions for transfers, but you need to pay to make transactions faster.
• Not tied to the global economy, not controlled by the central bank.
• Anonymous, unlike physical money.
• It is possible to independently mine the currency.

There is also a reverse side of the coin: many countries do not recognize cryptocurrency and are struggling with its use. You can often pay with bitcoins on the Internet, but offline establishments are in no hurry to switch to this payment option.