Cryptocurrencies are digital assets that have strong foundations in cryptography, designed with the intention of being a decentralized medium of exchange and store of value, among other uses.
Most cryptocurrencies are built using blockchain technology, with Bitcoin being the first of its kind, at least as far as what we consider cryptocurrencies to be today. Other technologies, like the IOTA project’s Directed Acyclic Graph (DAG), also exist.
Starting with Bitcoin, cryptocurrencies have been designed with democracy and transparency in mind, as several permissionless blockchains, in theory, grant equal power to every node on the network. Blockchains are also designed to resist tampering; any fraudulent financial would require an immense amount of computing power or resources to happen. Theoretically, it is possible to alter data on the ledger but Bitcoin has proven resistant to this. This security is another selling point of cryptocurrencies.
A few types of cryptocurrencies have come to form their own categories over the years. Some of these are security tokens, stablecoins and utility tokens.
Stablecoins, for example, are assets that are pegged to a fiat currency and aim to remain at the price of $1. The benefit of this is that investors can use the stablecoin to mitigate the effects of the market’s volatility. Utility tokens are tokens that are used to access products and services, and flow back into the platform’s ecosystem. Security tokens are tokens that, when invested in, holders can expect a profit from.
Blockchain technology is considered to be very early in its maturity and as such multiple pioneering upgrades and research are currently taking place.