What are cryptocurrencies?

Cryptocurrencies are digital currencies with some crucial differences. Their primary purpose—as a type of digital asset used to store value—nevertheless is the same: they work as a medium of exchange. 

Cryptocurrency systems are generally decentralised and are maintained by a distributed network of computers (nodes), which—located all around the world—make up what is known as a peer-to-peer (P2P) network. Different P2P networks enable different degrees of decentralization. As a result some cryptocurrencies are more decentralised than others—where the level of decentralisation basically depends on the structure and nodes distribution of the network. 

Decentralisation means that cryptocurrencies cannot be controlled by a single entity and thus do not and cannot rely on the type of central authority wielded governments or banks. When it comes to cryptocurrencies in their purest form, any financial transactions taking place occurs directly between users (P2P) without the need for intermediaries, or trusted third parties.

Unlike centralised economic systems, the issuance and management of cryptocurrency units are determined by the network architecture of a given cryptocurrency based on its programmed algorithms and cryptographic proofs. The predefined set of rules that define how a cryptocurrency system operates is generally referred to as the consensus protocol. 

All transactions taking place within a given cryptocurrency network are verified through the communication of network nodes. Transactions that are accepted and confirmed by the network are permanently recorded in a public distributed ledger, know as the blockchain. The blockchain is one of the core components and underlying technology of any cryptocurrency system—and yes: each cryptocurrency has with its own unique blockchain.