How is cryptocurrency different from “normal” money?
These currencies are not created by a specific government or government-sanctioned organization. Traditional currencies are created by governments (or related organizations) for legitimacy, trade, competition, and many other reasons. Cryptocurrency tends to be created by private organizations instead, and its purposes tend to be less nation-oriented. A lot of cryptocurrency is created simply to make money. Some are created specifically to fight against traditional physical currencies.
National currencies are protected by banks and a variety of government controls that generally work to control inflation, prevent malicious practices, stamp out counterfeiting, adjust related interest rates, and many other important currency management decisions. Cryptocurrency doesn’t have this kind of support (not yet, anyway). It often depends entirely on miners and the encryption process for protection and control. This naturally comes with its own risks, and those risks can make people less willing to invest.
There’s no physical form to cryptocurrency. This is obvious, but think of the implications. While there are cards and similar vessels for digital wallets, there is no physical money to be stolen, transported, or lost down the couch cushions. There is also no physical way to track a cryptocurrency the way that other currencies can be tracked, and it tends to flow through less familiar international channels (as opposed to bank accounts).
Finally, cryptocurrency can be programmed. We already mentioned that some kinds of cryptocurrency are attempting to represent contracts or debt registries. That’s what people mean when they talk about cryptocurrency being programmable — it allows the currency to take on different roles. For instance, certain exchanges of currency can be programmed to happen automatically when conditions are met, without further user interaction.
Cryptocurrency and Bitcoin
This all sounds a lot like Bitcoin, right? You may even be wondering why we’re calling it “cryptocurrency” when it’s obvious we’re talking about Bitcoin.
It is true, Bitcoin was the first mainstream example of a cryptocurrency, and remains by far the most popular. Created in 2008 by Satoshi Nakamoto (a moniker used for anonymity), Bitcoin showed the world how a relatively stable cryptocurrency could be created. However, many others were quick to jump on board with their own encryption systems.
Today, there are more than a thousand different cryptocurrencies, typically named after the software used to create them. Some, like Bitcoin, are serious ventures into the world of finance, investment, and global currency. Others are more light-hearted or casual attempts. Notable example of non-Bitcoin options include Litecoin, Ripple, Dash, Nxt, Namecoin, Ethereum, BitShares, and yes, Dogecoin.