Сryptocurrency is a form of digital money that is designed to be secure and anonymous, it provides direct and extremely fast transactions. You have full control over your payments and balance, and that’s why you don’t need to rely on a central authority like banks or credit card companies to validate your transactions. Cryptocurrencies, often referred to as coins, are stored in digital ‘wallets’ that you use to manage your payments. Your wallet is protected by a private key — think of it like an extremely complex password — that only you know about. Every time you want to make a transaction, you must digitally sign it with your private key. That provides security of the transactions.

Cryptocurrencies were developed as an application on top a cryptographic invention known as blockchain, hence the name cryptocurrency. A block is a complex mathematical problem based on a cryptographic technology which computers aim to solve. Once the mathematical problem is solved, the block is ‘complete’. The important property of a block is that if you change any information inside of it — like transaction data — it becomes invalid, and if any data in any block is altered, the entire blockchain from that point onwards is broken. When a new block is created, it takes data from the previous block, creating a link — hence the term blockchain. The blockchain is used to store an immutable transaction ledger for the currency.

Since a decentralized network has no authority, a cryptocurrency needs some kind of mechanism to confirm transactions and prevent one ruling party from abusing it. People called miners are solving the mathematical problems of blocks, they take transactions, stamp them as legit and spread them in the network. After a transaction is confirmed by a miner, every node has to add it to its database. It has become part of the blockchain. For this job, the miners get rewarded with a token of the cryptocurrency, for example with Bitcoins.

There are now more than 1,000 cryptocurrencies now available on the Internet, but the first and the best known one is Bitcoin. Bitcoin (BTC) is the original cryptocurrency, it is the market leader due to its established reputation worldwide, its security and the huge community base powering it. The currency was developed by Satoshi Nakamoto in 2009, a mysterious figure who developed its blockchain. Retailers such as Overstock accept payments and Bitcoin, and Amazon allows consumers to purchase gift cards with the cryptocurrency. Currently, Bitcoin is the most valuable cryptocurrency and has a market capitalisation of around $230 billion as of December 2017.