Glossary

Cryptocurrency

Plain-language definition Crypto glossary

Key takeaways

A cryptocurrency is a digital asset that uses cryptography and a blockchain to record ownership and transfer value, without depending on a bank or government to issue it or keep the books.
Ownership is recorded on a public ledger the whole network agrees on through a consensus mechanism, and you hold the private keys that authorise spending from your addresses.
Cryptocurrencies make it possible to send value over the internet directly, around the clock and across borders, with trade-offs of price volatility, self-custody responsibility, and an evolving regulatory landscape.

Definition

A cryptocurrency is a digital asset that uses cryptography and a blockchain to record ownership and transfer value, without depending on a bank or government to issue it or keep the books.

How it works

Ownership is represented by entries on a public ledger that the whole network agrees on through a consensus mechanism. You hold the private keys that authorise spending from your addresses, and transactions are verified by the network rather than by an intermediary. New units are typically issued through mining or staking according to fixed, transparent rules.

Why it matters

Cryptocurrencies make it possible to send value over the internet directly, around the clock, across borders, with the rules enforced by code. The trade-offs are price volatility, the personal responsibility of self-custody, and an evolving regulatory landscape.

Example

Bitcoin was the first cryptocurrency; thousands of others, collectively called altcoins, have followed with different designs and goals.

FAQ

Frequently asked questions

How is a cryptocurrency different from regular money?

Unlike traditional money issued and tracked by banks or governments, a cryptocurrency records ownership on a public blockchain that the whole network agrees on through a consensus mechanism. You hold the private keys that authorise spending, and transactions are verified by the network rather than an intermediary. This enables direct transfers but also places the responsibility of self-custody on the holder.

Where do new cryptocurrency coins come from?

New units are typically issued through mining or staking, according to fixed and transparent rules written into the protocol. This means issuance does not depend on a central authority deciding to print more. The exact method and rate vary by network.

What are the main risks of using cryptocurrency?

The main trade-offs are price volatility, the personal responsibility of self-custody, and an evolving regulatory landscape. Holding your own private keys means there is no intermediary to reverse a mistake or recover lost access. None of this is financial advice; it is a description of the practical considerations involved.