Cryptocurrencies are digital currencies secured by cryptographic technology. Many of these cryptocurrencies are decentralized networks powered by blockchain, also commonly referred to as distributed ledger technology (DLT). Cryptocurrencies work as a peer-to-peer digital payment system, allowing people to make payments directly to each other without the need of intermediaries like banks or financial service providers.
Cryptocurrencies are known for their portability and divisibility and can be stored in digital wallets, where you can manage your assets and make payments. Your wallet is secured by a private key, which is an encrypted alphanumeric code. Cryptocurrencies can be advantageous for cross-border payments, as transactions can be done almost instantly at a fraction of the transaction cost associated with fiat wire transfers.
Bitcoin is a decentralized cryptocurrency created in 2009 by a pseudonymous person (or group of people) named Satoshi Nakamoto. Unlike for fiat currencies, there is no government or central bank controlling and issuing Bitcoin.
Due to its scarcity, Bitcoin has been lent the name “digital gold.” You can use the Bitcoin blockchain to transact on a peer-to-peer network without going through traditional intermediaries such as banks. The Bitcoin network is run by thousands of computers distributed around the world. Because of the decentralized nature of Bitcoin’s blockchain, all transactions can be transparently viewed by either having a personal node or by using blockchain explorers that allow anyone to see transactions occurring live.
Ethereum is an open-source, blockchain-based, decentralized software platform used for its native cryptocurrency, ether (ETH). Created by Vitalk Buterin in 2013, Ethereum is known as the “world's programmable blockchain” secured by thousands of independent computers (also known as nodes). Ether (ETH), also commonly referred to as Ethereum, powers many of the transactions on the Ethereum network. ETH underpins the Ethereum financial ecosystem. Similar to Bitcoin (BTC), ETH can be sent peer-to-peer without any third-party service like a bank and is not controlled by a central authority. When you send ETH or use an Ethereum application, you'll pay a small fee in ETH to use the Ethereum network. This fee is an incentive for a miner to process and verify the transactions made on the network.
The blockchain, also known as distributed ledger technology (DLT), keeps a record of cryptographic transactions made in peer-to-peer networks. The data recorded is organized into blocks in chronological order and secured by cryptography. When a new block is created, it takes data from the previous block, creating a link – hence the term blockchain. In a blockchain, if any data in any block is altered, the entire blockchain from that point onwards is broken. The only way to 'fix' the tower is by correcting the data that was tampered with. In fact, blockchains are often measured in terms of 'height' which is the total number of blocks in the tower. So, the older the data is, the more secure it becomes. Generally, a block will be considered 'valid' once enough additional blocks are added to the chain in order to ensure security.