A cryptocurrency is a digital medium of exchange that uses encryption to secure the processes involved in generating units and conducting transactions.
Cryptocurrencies are a subset of digital currencies and, as such, have no physical representation. They may beused for online orin-person transactions with any vendors who accept them.In-person transactions using cryptocurrencies aretypically conductedthrough mobile paymentfrom a digital wallet.
There are hundreds of cryptocurrencies around the world. Among them, Bitcoin is the most prominent example — in fact, other cryptocurrencies are sometimes referred to as altcoins, as in alternatives to Bitcoin. The Bitcoinprotocol enables peer-to-peer (P2P) exchange in a decentralized system that, unlike conventional currencies,is not associated with any financial institution or government.
Bitcoin-to-Bitcoin transactions are conducted through anonymous, heavily encryptedhashcodes across a peer-to-peer network.Each users digital wallet maintains their Bitcoins. The wallet also stores all addresses the user sends and receives Bitcoins from, along with aprivate keyknown only to the user. The P2P network monitors and verifies Bitcoin transfers.
Other cryptocurrencies include Litecoin, primecoin, Namecoin and Feathercoin.
Paul Vigna provides a crash course on cryptocurrencies:
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What is cryptocurrency? – Definition from WhatIs.com