What is crypto?
Most of the time, when someone says “crypto,” they mean cryptocurrency. A cryptocurrency is a currency secured by cryptography (a field focused on secure data transfers). That’s rather confusing if you don’t understand how cryptography works, so let’s break it down!
The easiest way to understand a cryptocurrency is by thinking about it as a form of digital cash. You can use it to pay for things that you want to buy, like new clothes, a pizza, or even renting a vacation home. The idea is that it can be exchanged for goods, services, and experiences, just like cash. Cash has no intrinsic value—if stores stopped accepting paper bills/notes, they would quickly become worthless. Government-issued money represents value, and the same is true for cryptocurrency. Its value at any given time is dependent on people’s perceptions, the health of the overall economy, the trustworthiness of those who promote it, and many other factors.
Unlike government-issued money, which is also called fiat, cryptocurrency is transferred peer-to-peer without any intermediaries. There’s no bank, no payment provider, no organization deciding if your transaction is allowed. Traditionally, you pay your money to an organization, and that organization will forward your payment onto the party that you actually want to pay, or they’ll hold your money until you’re ready to spend it.
In the world of cryptocurrencies, you pay friends, family, businesses, etc. directly. But how do we prove that you paid? That’s where the blockchain comes in.