what is cryptocurrency ?

During the last decade, digital currencies, or cryptocurrencies, have entered the digital world with the aim of facilitating the process of transferring money and eliminating intermediaries during financial transactions, and until today, they have been developing and changing at a very fast pace. The speed of growth and spread of cryptocurrencies around the world has been such that countless people have started using digital currencies. In this section, we will discuss cryptocurrencies, the difference between cryptocurrency and digital currency, and explain the various technologies used in cryptocurrencies.

• What is a cryptocurrency and what is its use?

• How does digital currency work, how important are these questions ?

Is it necessary to know the answer to these questions fully and focus on each and every detail ? Our usual opinion towards this is no. Because :

• Do you know exactly how the internet works? We don't know it either, but we are using it every moment.

• Do you know how data is processed in a computer? No, but we use them continuously

What is a cryptocurrency and what is its use?

In the previous contents, we got acquainted with the concepts of blockchain and money. Blockchain technology facilitated the transformation of centralized systems into distributed and decentralized ones, ensuring the immutability of information. Additionally, it introduced us to the concept and functionalities of cryptocurrency. But are these two concepts related to cryptocurrencies? Indeed, the preceding content forms the foundation for our subsequent discussion. Despite this, we can seamlessly transition to discussing cryptocurrencies.

We are all accustomed to the idea of digital and electronic currency, as they are integral to our daily transactions. Nowadays, banks primarily deliver their services through electronic means and the Internet. Therefore, The presence of electronic and digital money is not unusual. Many of us have bank accounts where our balances change through transactions like buying, selling, and transferring funds. The story gets more intriguing as they are not affiliated with any particular person or organization and transactions are not issued by an entity. How can cryptocurrencies be trustworthy without a central authority? Will they hold the same value as traditional money? And what sets cryptocurrencies apart from electronic money?

At first glance, cryptocurrencies and electronic money commonly used in banks may appear to have no differences. The experience of using them is essentially similar. There is no difference between the two. However, Upon closer examination of their functionality and information storage methods, it becomes evident that the two are fundamentally distinct from each other. Blockchain was a technology that helped store information in a decentralized and immutable way; If the stored information consists of financial transaction details within a system, then essentially, we've established a system where payment information and similar data are secured within a blockchain environment, which is not in the possession of a person or an institution. But this solely is not enough. Indeed, it is accurate that information stored in the blockchain remains entirely correct and immutable. If a person can impersonate someone else and receive money within this system, they can easily commit theft within this system. In banks, signatures and authentication are employed to address this issue. In cryptocurrencies, however, identity cannot be directly identified through cryptography. Instead, they devised a digital signature that is virtually impossible to forge. Each individual possesses their own unique signature in the digital sphere. If a person initiates a money transfer with their unique signature, then the transfer is undoubtedly legitimate and executed on behalf of that individual. This signature is both unique and impervious to forgery.

To gain a deeper understanding of the concept of cryptocurrency, it's essential to deconstruct the term itself. "Cryptocurrency" originates from merging the words "Cryptography" and "Currency." Hence, Cryptocurrency involves using cryptography to create unique signatures that secure the transfer of currency between people. Cryptography may seem a little vague to some people. But No worries, cryptography, at its core, is a branch of mathematics utilized by scientists to aid individuals in encrypting and safeguarding their information.

Cryptography enables us to create an unforgeable and unique digital signature, which we can use to sign all our transactions securely. In the cryptocurrency space, these signatures are known as public key and private key pairs. In fact, these two keys are our signature. We will discuss public and private keys in detail in the following chapters. Before delving into the distinctions between various types of cryptocurrencies, it's crucial to establish a clear definition of digital currency. A thorough comprehension of digital currencies lays a solid foundation for understanding cryptocurrencies and their significance in the financial landscape. Once we've explored the fundamentals of digital currencies, we can then examine key aspects of cryptocurrencies and the differences between them.