1. Digital currencies are virtual and don’t have any physical form, right?

Yes, digital currencies, such as Bitcoin or Ethereum, only exist as records on the users’ hard drives.

The original cryptocurrency - Bitcoin - was launched in 2009, in an attempt to create a decentralized system of money, run not by governments or banks, but by its individual users. In order to achieve that goal, Bitcoin’s author Satoshi Nakamoto devised a new technology called “Blockchain”.

The Blockchain is a distributed public ledger of all transactions that have ever been sent with Bitcoin. In fact, Bitcoin itself is nothing more than just records on this ledger, by tracing the history of each single coin in the network since its creation and to the latest owner, any user can tell who owns Bitcoins, and how many.

All cryptocurrencies are built on the Blockchain. The Blockchains of different currencies usually vary: they may have different rules, transaction times, security algorithms and so on. But the basic principle stays the same and that is that nobody, in particular, is in charge of a cryptocurrency, and the currency itself is only manifested in records of transactions on a public digital ledger.

Although there are some rare examples of physical coins, they are not used as actual currency. Rather, they are souvenirs which can later be redeemed for the digital coins.