What are cryptocurrencies?
Cryptocurrencies are digital currencies based on a decentralized accounting system. This accounting system is referred to as a blockchain, which stores transactions that are encrypted by means of cryptography, hence the name cryptocurrency.
Each transaction creates a block in the blockchain. Based on the previously created blocks, the transaction is verified. By mining, new coins can be created.
Here, miners provide computing capacity for the crypto network and are rewarded with coins. Unlike currencies like the euro or the dollar, they only exist digitally. Nevertheless, they perform some functions of money, which is why they are often compared to the well-known government currencies.
However, some experts doubt that this form of digital currency is actually money, and it usually receives comparatively low recognition as a means of payment.
In 2009, the rise of cryptocurrencies began, with the pioneer Bitcoin. To date, Bitcoin is the most important representative of its kind. The technology on which the Bitcoin is based, however, goes back 10 years, to the year 1998.
Bitcoin has experienced an extreme price increase since its inception and is often surrounded by high levels of hype in the media. Because of their anonymity, Bitcoin and its supporters regularly come under fire for supporting crime, however, these supporters point to a comparatively high security standard.
What other currencies are there?
In addition to Bitcoin, there are currently more than 1,000 digital currencies based on a blockchain. The most important examples are Dash Coin, Litecoin and the IOTA.