Cryptocurrency is derived from two words. Crypto is from Greek and means “hidden” or “secret.” Currency is from Middle English and means, “in circulation.” The crypto part refers to cryptography, which in this application means keeping the money private and secure and for verification purposes.
So, on an elemental level, cryptocurrency means secure or private money. But there’s more to know.
Cryptocurrency, also known as virtual currency or digital currency, is an alternative form of payment. Instead of paying with cash, a credit card, debit card or check, you can pay with a cryptocurrency, as long as the entity you’re paying accepts such as payment.
For those of us over a certain age, we may recall when not all stores honored all the main credit cards when they were still being introduced to the world. But over time, paying with credit cards became just as common as cash, and even surpassed it many industries.
A key here is that cryptocurrency is digital. So you don’t use it like cash. It’s transferred electronically, more like credit cards.
However, here is where it differs from cash or credit cards: The basis of cryptocurrency technology is that it allows you to send its value directly to others without going through a third party, such as a bank.
In other words, cryptocurrencies are like automated accounting systems that record transactions. More specifically, the transactions themselves are bundled into blocks of data on a decentralized computer network. This is where cryptography comes into play. Computers in the network resolve transactions via mathematical calculations and all the computers on the network verify accuracy. Nothing can be changed without every other entity knowing and quickly rendering as invalid any tampered transactions.
This is the basis of the blockchain, which is often discussed along with cryptocurrencies, even though they are separate technologies since blockchain can be used to verify all other transactions, not just related to money.
It’s worth restating that part of the appeal of this technology is its security.
Furthermore, it’s private. This means you don’t have to use your social security or credit score as collateral and allows you to be reasonably pseudonymous.
Summing up, cryptocurrency is a new form of payment that makes transactions private and secure and does not require banks. The security is provided by blockchain technology, which is a network of computers working together to verify security via mathematics, which no centralized authority controls.