Cryptocurrency is quickly becoming a household term, but what are they and why are they being discussed with growing frequency? To grasp the concept, we can begin by examining the word itself.
Crypto refers to cryptography, a system of encoding information to secure the contents from outside tampering. Techniques have been implemented throughout history, dating back to Ancient Egypt and Greece. A popular example is from WWI, where troop orders were encrypted in what became known as trench codes and required field codebooks to decipher. The US Army employed Native American "code talkers" as seen in the movie Windtalkers. The methods used in the early 20th century were basic replacement means (A = 1, B = 2, etc.) with some mathematical formulas for securing more sensitive information. Today, we use digital algorithms and complex sequences to encrypt everything from a simple email to highly classified state secrets.
Currency refers to any means of exchanging goods and services. In America, the dollar is the standard currency. Coins, metal disks, shells, rocks, food, animals and other commodities have been used as currency throughout history. Even the value of someone's word can be considered a currency. Here are the commonly accepted rules for calling something a currency:
Therefore, cryptocurrencies are secured digital commodities used (a)to facilitate the transfer of goods and services, or (b)as a means to store value. How do they do this?
The blockchain technology that cryptocurrencies are built upon, uses a computational method that writes and rewrites a digital ledger where each transaction is stored immutably (unable to be changed). The activity of each block is public, but the contents can only be accessed using digital "keys." This technology is in developmental infancy, but a number of companies have introduced platforms to utilize and expand the functionality of digital assets.
In short, cryptocurrencies are revolutionizing how assets and data are transferred, all the while changing the long-held perception of money and value.
