The word cryptocurrency is itself a combination of the words cryptography and currency. As a result, it would be sensible to take a minor detour to understand these elements and see how they relate to cryptocurrency.  

At its most basic, cryptography is the use of methods that ensure security of data. Cryptography provides solutions to the problem of the wrong people trying to access your data. Currency on the other hand is a more common concept. It is a generally accepted form of “money” that has a value that can be exchanged for goods and services or other forms of currency. Taken together, cryptocurrency is a digital currency that can be used for online transactions. Its key features include security, anonymity and most importantly to some, being decentralised meaning no one entity is in charge of it. 

Traditional forms of currency are centralised and governed by a regulatory body, normally banks and central/reserve banks in tandem. These institutions are responsible for monitoring who has what and generally how they are using it and facilitating the movement of their currency. Also, they ensure no one is spending currency that they do not have. Furthermore, in the case of central/reserve banks, how much currency is available in the markets and who has access to currency in certain instances. By being decentralised a currency is more flexible. A key feature we’ve mentioned is that it is anonymous. Traditional banking establishments in most of the world require a legal identity being attached to currency stored with them. That is not the case with cryptocurrency. The benefits of having a centralised system is the ability to track transactions to make sure no one is spending money that they do not have and that the system is not being defrauded. Cryptocurrency achieves the same objective through a public ledger mechanism called the blockchain.  

The blockchain is a digital ledger that lists all transactions that have ever occurred and everyone has access to it. The blockchain works via peer to peer protocol. What this means is that everyone involved in cryptocurrency’s computer does an equal amount of work to record and verify what transaction occurred and when. It then records this information, making it unmodifiable and available to everyone. For example, Bob would like to conduct a transaction with Grace. A request is then broadcasted to the peer to peer network where the blockchain is located. It is here that the request is confirmed (validated being a more accurate description of the process). Once the transaction is verified it is added to a block and that block is added to the chain. 

Units of cryptocurrency are created through the process of what is termed mining. This does not involve the actual physical digging of earth fortunately. This process entails using a computing device to solve highly complicated math problems of which the reward is a part unit or whole unit of the cryptocurrency. Alternative ways of procuring cryptocurrency include simply purchasing them and storing them in your digital wallet. Examples of real life cryptocurrencies include Bitcoin, Ethereum and Ripple. These being the three largest by market cap whom at the time of writing had a combined market cap of over $200 billion dollars. 

As mentioned earlier, cryptocurrency provides a secure and totally anonymous way of conducting online transactions and keeping currency. The decentralised nature of it means no one body can manipulate access to it; a problem people in Africa face due to reasons ranging from corrupt officials to bad banking practices. Cryptocurrency provides a mechanism to securely store value and easily transfer it anywhere in the world without interference.