What Makes Cryptocurrency “Cryptocurrency”?

The Essential Aspects That Crypto Must Have
By 
Coin Cloud Team
, published on 
August 29, 2020
What Makes Cryptocurrency “Cryptocurrency”?

What is cryptocurrency? It seems like a pretty basic question, but when you get into the nitty-gritty details, it can actually be quite confusing. Most people are generally aware that cryptocurrency, a specific type of digital currency is, well, a currency that is digital.

But how come an internet meme of a dog can be deemed cryptocurrency? And let’s not forget all the cat coins out there! Is it really cryptocurrency? It seems so unprofessional. What makes a currency legit? Let’s look at a few general markers for something being cryptocurrency.

Cryptography

Cryptography is what puts the crypto in cryptocurrency. “Cryptography is a method of protecting information and communications through the use of codes,” according to WhatIs.com. In short, cryptography keeps virtual currency secure and irreplaceable.

Cryptocurrency is almost always mined on a blockchain, which is a digital ledger used for Bitcoin and other cryptocurrencies to track transactions and keep them secure. This is one of the most essential aspects of any cryptocurrency, and what sets crypto apart from other digital currencies. It regulates the currency, keeps it secure, and allows people to trust the transactions as true and verifiable.

Decentralization

  • Decentralization goes hand-in-hand with cryptography. Governments don’t control cryptocurrency, and they are not exempt from the codes used to protect it. While this isn’t necessarily what makes crypto “crypto,” it is something that is unavoidable when any virtual currency has cryptography. While cryptography is essential to keeping a cryptocurrency in circulation, decentralization is what makes said currency special.

Global Network

  • This ties closely into decentralization in the sense that cryptocurrency is meant to be accessible to anyone, anywhere, in a borderless fashion. This means that using the network that ties all devices together, cryptocurrency can be traded from person to person no matter where they are in the world. Not only this, but cryptocurrency can be acquired by anyone with the right resources, without having to trade … they could mine it instead.

Time is Money

  • Not all digital currencies have a limited amount available to be mined. For example, while Bitcoin has a cap of 21 million bitcoin (projected to be reached in the year 2140), Ethereum’s Ether coin has only a yearly limit … although its creator has proposed changing that. Regardless, this type of scarcity isn’t what makes crypto “crypto”.

Rather, it's the difficult process one must go through to ‘mine’ most cryptocurrency that helps give it value. It takes about 10 minutes to mine a single block on the Bitcoin blockchain (currently worth 6.25 BTC) and 72 terawatts of power. This time and power used to acquire the currency is a huge part of what makes it valuable, because not everyone has access to the machines that are capable of doing this.

  • All of these things are basic checkpoints of what defines cryptocurrency. As silly as they may seem, cryptocurrencies like Dogecoin, which is based off of a joke about a photo of a dog, do exist. Not only do they exist but they also check all of these boxes. So yeah, new crypto is always going to be created, no matter how silly or serious it is.

Disclaimer: The information and views supplied on the Coin Cloud blog are for educational and entertainment purposes only. We are not financial advisors, so please do your research and consult with a trusted financial specialist before investing your money.

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