Cryptocurrencies are digital currencies secured by cryptographic technology. Many of these cryptocurrencies are decentralized networks powered by blockchain, also commonly referred to as distributed ledger technology (DLT). Cryptocurrencies work as a peer-to-peer digital payment system, allowing people to make payments directly to each other without the need of intermediaries like banks or financial service providers. The blockchain secures these transactions and verifies the transfer of assets.
Cryptocurrencies are known for their portability and divisibility and can be stored in digital wallets, where you can manage your assets and make payments. Your wallet is secured by a private key, which is an encrypted alphanumeric code. Cryptocurrencies can be advantageous for cross-border payments, as transactions can be done almost instantly with internet connection at a fraction of the transaction cost associated with fiat wire transfers.
There are risks associated with cryptocurrencies, including cyberattack vulnerabilities and use in illegal activities. Additionally, cryptocurrencies can be volatile compared to traditional financial assets given the relative immaturity of the crypto market.
The earliest cryptocurrency is Bitcoin, created by the anonymous founder Satoshi Nakamoto in 2009 as an alternative form of currency to gold and fiat currencies. 12 years later, Bitcoin remains the most popular cryptocurrency among the universe of 40,000+ cryptocurrencies. Other popular cryptocurrencies include Ethereum, Litecoin, and Ripple.