Source: Nasdaq.com
A cryptocurrency is a digital currency, that is to say it is a currency that does not exist in the form of coins or bills, but a currency that we find only on the internet. Unlike real currencies like the dollar, a cryptocurrency is not created or controlled by a central bank or a government. It works thanks to a technology called blockchain, which allows keeping a record of all transactions in a secure, transparent, and decentralized way.
Bitcoin is the first cryptocurrency and also the most well-known. But today, there are thousands of them, like Ethereum or even Litecoin. Each cryptocurrency has its own particularities, but all share the same base: a digital currency that circulates on a computer network that is global, and without central authority.
How does it work?
All cryptocurrencies rely on a network of computers that are connected to each other all around the world. So this network aims to send, receive, and record all transactions without going through any intermediaries. When a person sends one or several cryptocurrencies to another person, this information is transmitted to all the computers that are on the network. Then they check that the transaction is valid: for example, they check if the person who sends the money really owns it and has not already used it somewhere else. Once the transaction is validated, it is recorded on a block that is added to the blockchain.
Each person has a digital wallet, which is also called a Wallet, which contains the cryptocurrencies. This is protected by a private key (a secret code) that must never be lost or shared. This system allows each person to manage their own currencies independently without needing a bank account or a bank card. This gives control over one’s finances, but it requires a certain responsibility because there is no customer service in case of loss or error.
What are cryptocurrencies used for?
At the beginning, cryptocurrencies were used to send money quickly without needing to go through banks. Today, their use has greatly evolved. Some people will use cryptocurrencies to invest, and others use them to buy goods or services online in the different shops that accept them.
Cryptocurrencies are also widely used in what we call decentralized finance or DeFi. Thanks to this system, you can lend or borrow money, but also exchange currencies without going through banks or traditional platforms. It is a financial system accessible to all and open 24 hours a day. Furthermore, with the appearance of NFTs, cryptocurrencies have become a means of payment whether for works of art or online collectible items.
What are the pros and cons ?
| Pros of Cryptocurrencies | Cons of Cryptocurrencies |
| Fast and often cheaper transactions | High volatility: value can change very quickly |
| Accessible to anyone with a smartphone and internet connection | Possible use for illegal purposes (fraud, money laundering) |
| Independent from banks, governments, or institutions | Risk of losing money due to fraudulent or insecure projects |
| Useful in countries where banks are unreliable or hard to access | Lack of clear regulation in many countries |
| Can protect against inflation in some countries | Technology still poorly understood by the general public |