Cryptocurrency is a medium of exchange. The main difference is that cryptocurrency is virtual or digital, meaning it has no physical coin or bill that owners can possess. A common and attractive characteristic of cryptocurrencies is their decentralized nature. Typical currencies are issued from a central bank, cryptocurrencies cut out the middlemen as a peer-to-peer system. This decentralization is touted as one its principal benefits, as it might increase transaction speed and let users avoid fees charged by banks and other more traditional financial institutions. The most known and widely used cryptocurrency is Bitcoin.
Bitcoin uses blockchain technology to maintain information on how much Bitcoin is owned and who owns it. Rather than possessing physical currency, or even a digital file that’s representative of the currency, individuals have a claim to a piece of information contained in the blockchain ledger. So when a Bitcoin transaction is made, the currency is transferred between parties as a block of information that gets added to the historical chain of transaction data. This “ledger” is a public file—anyone can download a copy of it. Individual’s identities are encrypted, however, and this feature of the technology is among the many reasons it is so highly touted. Click here to learn more.