What is cryptocurrency?
Cryptocurrency is a type of digital currency that uses cryptography for security and counterfeit protection measures. Public and private keys are often used to transfer cryptocurrency between individuals.
As a counterculture movement often associated with cipher points, cryptocurrency is essentially a fiat currency. This means that users need to reach consensus on the value of the cryptocurrency and use it as a medium of exchange. However, since it is not tied to a specific country, its value is not controlled by a central bank. With Bitcoin, the leading working example of cryptocurrency, value is through supply and demand in the market, which means that it behaves similarly to precious metals like silver and gold.
Bitcoin's technical director Gavin Andresen told Forbes.com that the cryptocurrency is designed to create a 'decentralized people's currency' that will throw centralized banks off balance. Since Bitcoins must be encrypted with every transfer, every Bitcoin user has both public and private keys.
Cryptocurrency transactions are anonymous, undetectable, and have created a niche for illegal transactions like drug trafficking. Since the currency does not have a central repository, law enforcement agencies and payment service providers are not responsible for Bitcoin accounts. For followers of the cryptocurrency, this anonymity is a primary strength of the technology, despite the potential for illegal abuse, as it enables power to be shifted from institutions to individuals.