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Cryptocurrency is a type of decentralized digital currency. Cryptocurrencies utilizeblockchainledgerstorecord and validate transactions. The first cryptocurrency wasbitcoin, which debutedin 2009, and nearly 900 cryptocurrencies have been created as of 2017, although very few have seen widespread adoption.

When cryptocurrency is used to pay for goods or services, eachtransaction is securely encrypted and recorded in a public ledger called a blockchain. The blockchain ensures acryptocurrencys integrity and eliminates the need for a central administrator, such as a treasury or acentral bank. Cryptocurrency users connect directly to each other in eer-to-peer transactions, with a degree of anonymity provided by the blockchain ledger. Acryptocurrency walletis used to store various kinds of cryptocurrency.

Bitcoin was the first cryptocurrency and it remains the most popular, with millions of users trading the 16 million bitcoins currently in electronic circulation. In its wake, many imitators appeared, andvirtually all of them replicated bitcoins approach while adding uniquetwists. Some of the first imitators, such as Namecoin and Litecoin, improved upon bitcoins security, although none of them have seenmainstream adoptionlike bitcoin, which as of 2017 is accepted at over 100,000 online retailers.

Other cryptocurrencies, like Nxt,resemble acomputing platform morethan a currency used for payment purposes. Where bitcoin simply registers ownership of coins, Nxts blockchain offers several transaction types, such asdata storage or commodities trading, and allows users tobuild apps that utilize the Nxt blockchain.

Ethereum is a cryptocurrency calledether to power a globally shared computer environment. Ethereum transactions are validated on a blockchain like other protocols, but these transactions dont simply confirm spent cryptocurrency; rather, whole computations are recorded in each block, and the price of performing the computation, whats called gas, is paid with ether. The processing power necessary for the computation is provided by users called miners who keep the ether as a reward.

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One way to understand the difference between bitcoin andethereum is to think of bitcoin as a currency enabled by a blockchain and ethereum as a blockchain enabled by currency. Whereas bitcoin exists to be spent, ethereums purpose is to provide a computing and business ecosystem. You cant spend ether on Amazon like you can with bitcoin, but you can use it to run an ethereum-based business or app without a middleman like J.P. Morgan or Apple.

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Cryptocurrency Definition | Bankrate.com