Cryptocurrency is a digital or virtual currency that uses cryptography to secure its transactions and to control the creation of new units. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control. Bitcoin, the first and most well-known cryptocurrency, was created in 2009.
Cryptocurrencies are often traded on decentralized exchanges and can also be used to purchase goods and services. Bitcoin, for example, is accepted by over 100,000 merchants worldwide.
What is Bitcoin?
Bitcoin is a cryptocurrency and a payment system, first proposed by an anonymous person or group of people under the name Satoshi Nakamoto in 2008. Bitcoin is often referred to as a "digital asset" or "digital currency."
Bitcoin is created through a process called "mining." Miners are rewarded with Bitcoin for verifying and committing transactions to the blockchain. Bitcoin can be transferred directly from person to person, without a bank or other intermediary.
What is Ethereum?
Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of fraud or third party interference. Ethereum was proposed in 2013 by Vitalik Buterin and launched in 2015.
Ethereum is unique in that it allows for the creation of decentralized applications (dapps), which are applications that run on a blockchain and require no middleman. Ethereum also allows for the creation of "smart contracts," which are contracts that execute automatically when certain conditions are met.
What is a Blockchain?
A blockchain is a digital ledger of all cryptocurrency transactions. It is constantly growing as "completed" blocks are added to it with a new set of recordings. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. Bitcoin nodes use the block chain to differentiate legitimate Bitcoin transactions from attempts to re-spend coins that have already been spent elsewhere.
What is Mining?
Mining is how new Bitcoin and Ethereum are created. Miners are rewarded with Bitcoin and Ethereum for verifying and committing transactions to the blockchain. Ethereum miners are rewarded based on their share of work done, rather than their share of the total number of blocks mined.
What is a Decentralized Exchange?
A decentralized exchange is an exchange that does not rely on a third party to hold users' funds. Instead, decentralized exchanges allow users to trade directly with one another. Decentralized exchanges are often built on blockchain technology.
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