Cryptocurrencies are digital coins that use a system of cryptography to verify transactions and control supply. Unlike fiat currencies, which are backed by central banks, cryptocurrencies are decentralized and run on consensus. People who mine cryptocurrencies use high-powered computers to solve complex mathematical problems to create new coins. There are only 21 million bitcoins in existence.
The process of transferring cryptocurrency from one person to another involves the creation of a digital wallet. These wallets generate private and public keys that act as a type of bank account number or address. A private key serves as proof of ownership, while a public key is used to identify a recipient. These transactions are made manually, and they may also be automated or programmable. They typically take about 10 minutes to complete, depending on how long it takes to add a block to the blockchain.
Blockchain technology is the underlying technology of cryptocurrencies. Blockchains are a chain of digital records, which allow for complete transparency and security. The blockchain is the database for the transactions on the network, and each new transaction constitutes a new block in the chain of all previous transactions. Because the blockchain is distributed, no central authority controls the information contained within.
Cryptocurrencies have generated some controversy. Some critics say that they are a form of Ponzi scheme, and others say that they are used to fund criminal activities. Cryptocurrencies are not yet widely used, but they have been the subject of speculation for several years.
