Basics
What cryptocurrency is
Short answer
Cryptocurrency is digital money that runs on decentralized networks instead of banks or governments. Bitcoin lets you send and receive digital cash. Ethereum builds on this with smart contracts—programs that run automatically and let people create digital assets and applications accessible to anyone with an internet connection.
What cryptocurrency is
Cryptocurrency is digital money that operates on decentralized networks made up of thousands of independent computers called nodes. These nodes work together to process transactions and maintain a shared record called the blockchain.
Sources: bitcoin.org ethereum.org
Bitcoin was the first cryptocurrency. It lets you send and receive digital cash between wallets. Ethereum launched in July 2015 and expanded the concept by adding smart contracts—open-source programs that run automatically on the network.
Sources: ethereum.org bitcoin.org
How cryptocurrency transactions work
When you send cryptocurrency, the transaction is broadcast to the network. Computers called miners or validators verify and record it in the blockchain, which is a shared public ledger. Bitcoin transactions typically receive their first confirmation within 10 to 60 minutes.
Sources: bitcoin.org
Each cryptocurrency wallet has a secret piece of data called a private key. This key signs transactions and proves you authorized them. The signature prevents transactions from being altered after you send them.
Sources: bitcoin.org
Key advantages of cryptocurrency networks
Cryptocurrency networks offer three main advantages. They are censorship resistant because thousands of nodes record every transaction without discrimination. They provide enhanced security because apps run on the network itself rather than vulnerable cloud servers. They offer improved reliability because the network keeps running even if some nodes go offline.
Sources: ethereum.org
Ether and transaction fees
Ether (ETH) is the native cryptocurrency of Ethereum. When you use Ethereum, you pay small transaction fees in ETH called gas fees. These fees prevent spam and reward validators who process transactions.
Sources: ethereum.org
Validators secure the Ethereum network through staking—locking up their ETH to earn the right to process transactions. In return, they earn ETH rewards. This creates a self-sustaining economy powered by users rather than companies.
Sources: ethereum.org
How blockchain security works
The blockchain's integrity and order are protected by cryptography. To change a transaction, an attacker would need to recalculate every block that came after it. To take down a cryptocurrency app, attackers would need to take over the entire network, which is extremely difficult and costly.
Sources: bitcoin.org ethereum.org
Smart contracts and decentralized applications
Smart contracts are open-source programs that run automatically on blockchain networks. They let anyone create digital assets and decentralized applications (dapps) that run 24 hours a day, 7 days a week, globally. These apps cannot be restricted, censored or turned off.
Sources: ethereum.org
Official sources used on this page
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Questions
What is the difference between Bitcoin and Ethereum?
Bitcoin is digital cash for sending and receiving money. Ethereum launched in July 2015 and added smart contracts—programs that run automatically on the network. Smart contracts let people create digital assets and decentralized applications beyond simple payments.
Sources: ethereum.org bitcoin.org
How do I use cryptocurrency?
You need a cryptocurrency wallet, which generates addresses for receiving money. You can send cryptocurrency to anyone, anywhere in the world. With just a wallet and an internet connection, you can move money, trade, and own digital assets without registering with your name or waiting for bank approval.
Sources: bitcoin.org ethereum.org
What is mining or staking?
Mining is a distributed system that confirms pending transactions and protects network security. Staking is an alternative system where validators lock up their cryptocurrency as a security deposit to earn the right to process transactions. Ethereum switched from mining to staking in 2022, reducing energy use by 99 percent.
Sources: bitcoin.org ethereum.org
Why can't someone hack or alter a cryptocurrency transaction?
Transactions are signed with a private key, providing mathematical proof of authorization. The blockchain is protected by cryptography, and changing a transaction would require recalculating every block after it. To alter the blockchain, an attacker would need to control the majority of the network, which is practically impossible.
Sources: bitcoin.org ethereum.org