Numbers man, numbers 

The word cryptocurrency is derived from the fact that the currency is secured by means of cryptography. What is cryptography? Modern cryptography is a system purely based on mathematics where randomness and probability prevent predictability and thus provide unparalleled security. Numbers are an objective, universal language that enable humans to quantify information. So universal that even computers and technology understand numbers. They can enable digital barriers to be constructed and are the basis of what has made cryptography such a secure system.

Cryptography has been around for thousands of years and allows for the protection of information with the use of symbols or math puzzles that require secret keys to decode. Cryptography can be irreversible in some instances meaning that you cannot decode a message. It can be a one-way street, which is why cryptography is ideal for securing and verifying the integrity of information. 

Applying these objective cryptographic concepts to a digital currency system allows for the global, trustless and secure exchange of value and information across a digital network of peers, without the need for a middleman.
Modern technological advancements have allowed these cryptographic techniques to move onto computers, permitting the construction of impenetrable digital barriers needed to protect your valuable assets on an internet riddled with prying eyes. So to recap, cryptocurrency is a system whereby value is exchanged, created and secured by means of cryptography or complex math puzzles used to build a digital fortress of protection on a network of computers, without a middleman. So why do we need this cryptocurrency stuff?

Sorry bankers, the gig is up. We have lived under the reigns of centralized authorities for as long as any of us have been alive. What puts these authorities in power? Currency. Where is this currency distributed and created? Banks. Why should one small group of individuals have the authority to control this currency? Why do not we, the people, play a part in how this currency is created and distributed? We are the ones that work so hard for it and slave over it day to day. Why do we have no say? Cryptocurrency takes all of these questions and concepts and flips them on their heads and asks one final, imperative question. Would you rather rely on a decentralized system of objective numbers that have been proven to work or a centralized system of subjective, greedy humans proven not to work?

Power to the people. Cryptocurrency empowers the individual. It allows for a trustless system of value exchange directly from one person to another without anyone telling either of you when, who and how much you can send or receive. Bitcoin, a “peer-to-peer electronic cash system” created by the anonymous individual/group Satoshi Nakamoto in 2008, is the best well-known example of a trustless cryptocurrency being successfully implemented on a large scale. It gives you freedom, security and peace of mind that you will not be taken advantage of nor tampered with in any way. In fact, taking these basic human rights from you is impossible with cryptocurrency due to the objective nature of numbers. Numbers cannot lie, cheat, steal nor deceive and are the very core of what makes cryptocurrency such a revolutionary concept.

A belief system of value. A currency system is nothing more than a large enough group of people who believe that some entity has value. If enough people believed that tulips had value, then they could exchange these tulips with other people who believed they also had value for goods, services or even another form of currency. However, some work had to be done to create and obtain these tulips as well as ensure that no tulip is traded by the same person twice or what is referred to as “double spending”. 

Cryptocurrency has managed to solve this   notorious double spend issue that any currency system faces, for the first time ever in a decentralized fashion. Decentralized due to the fact that the network, or blockchain, is maintained by thousands of people around the world solving math puzzles, thus verifying and recording transactions with their computers. The transactional history of cryptocurrency is where the blockchain comes in, however, that is a discussion for another article. Cryptocurrency is to the blockchain as money is to an accountant. The money comes from some source, is verified as legitimate and recorded. Keeping track of this transactional information in a decentralized manner and getting everyone to rach consensus upon the legitimacy of said transactions is how fraudulent activity is prevented. Stealing candy in a small closet (a bank) is much easier than in a room full of people all with their eyes on you (blockchain). The point being, fraud/double spending is next to impossible on the blockchain. Anyways, let’s get back to the tulips.

Tulip gardens, lots of them. Imagine millions of people around the world with their own tulip gardens. They need to put in work to grow these tulips thus giving them value. These tulips are then exchanged with others who believe they have value and distributed amongst more and more people until an economy develops (not much different than attributing value to pieces of paper with presidents on them). This is no different for cryptocurrency. A large enough group of people with a bunch of computers (tulip gardens) came together and started solving math puzzles (growing tulips) with their computers and exchanging the answers to these math puzzles (tulips) with one another and with those that believed their work (gardening) was worth something.  

This process of solving math puzzles with computers and creating cryptocurrency is termed mining. But why math puzzles? Because numbers are the language of computers and enable powerful digital barriers to be built. The complexity and difficulty of the math problems is how these digital barriers are created. Complex math problems that generate randomness prevent predictability due to the astronomically low probability of guessing what numbers will be generated from these complex math problems. The difficulty is automatically adjusted dependent upon the speed at which the math puzzles are solved by the miners. If these adjustable barriers did not exist, anyone could create cryptocurrency with ease at any rate and it would have no value or security. The value of cryptocurrencies come from; the work put in to solve these math problems; the rate at which units are created or total number of units in circulation; the competition between miners; the specific issues cryptocurrencies solve. Whoa, that was alot. Let's recap

Magic Internet Money. So, cryptocurrency is the result of a large enough group of people with computers coming together because of how corrupt our current central banking systems are and solving math problems with these computers to create a secure and decentralized system of value exchange. This cryptocurrency is then distributed and can be sent from me to you directly, without a middleman in a matter of hours, sometimes seconds. You owning and trading cryptocurrency contributes to its distribution. Everyone involved is the bank. Cryptocurrency is representative of digital value while the blockchain records the movement of this digital value all the while incentivizing individuals to participate in supporting the network. Yup, that is pretty much what cryptocurrency is. 

The beauty of cryptocurrency is that there is no corrupt central distributing  authority, no money printer. Cryptocurrencies have a hard cap and are therefore deflationary. No more than what is specified in the computer code in the beginning can be created and this is enforced by, you guessed it, numbers and math problems outside of anyone’s control. Anyone with the right computer resources can begin mining cryptocurrency and can get paid in cryptocurrency for doing so, thus, incentivizing people to participate in the network. 

No one can tell you that you cannot start mining and making money from solving math problems with your computer hardware in your own home. These miners all around the world are the equivalent to the bank of cryptocurrency. The major differences being that no one owns this bank, tells the users when & where they may spend their cryptocurrency, who they may send it to and how much they may send.  Nor does anyone control the creation and distribution of the currency in this bank. Objective numbers incapable of stealing, lying, cheating, or censoring do that for us, hence the trustless nature of cryptocurrency.

Below is a list of things that differentiate cryptocurrency from traditional fiat currency used on the internet:

Peer-to-peer. Cryptocurrency is transferred from peer-to-peer or directly from me to you, without a middleman.

Immutable. Once a transaction has been confirmed, it cannot be reversed. Central banks can and do reverse transactions.

Pseudo-anonymous. A user does not need to provide any identity information to use cryptocurrency. Although technically traceable, a user can have peace of mind that even though transactions are made public, the identity of the transaction is unknown.

Accountability. Every transaction is recorded permanently on the blockchain. This information cannot be messed with and thus provides a tamper-proof system. This tamper-proof network is applicable to many instances such as voting, company spending, contractual agreements etc.

Permissionless. Cryptocurrencies do not require any kind of permission to use them. No one can tell you how much you can send or receive or when you can use cryptocurrencies. It is a 24/7 global market. All that is required is an internet connection and a computer/smart device.

Secure. Cryptocurrency is secured by means of cryptography which has been around for millennia. It is impossible to break, at the moment, and is what contributes to you and only you truly owning your currency/data.

Quick, cheap & borderless. Sending and receiving cryptocurrency happens very quickly and cheaply relative to traditional systems. Sending $100,000 of bitcoin from the U.S. to China would take an hour or two and cost less than $10. Other cryptocurrencies are even faster and cheaper.

References
Alstyne, M. V. (2014). Why Bitcoin has value. Communications of the ACM,57(5), 30-32. doi:10.1145/2594288
Hayes, A. (2017). Cryptocurrency Value Formation: An Empirical Analysis Leading to a Cost of Production Model for Valuing Bitcoin. Telematics and Informatics,34(7), 1308-1321. doi:10.2139/ssrn.2648366
Narayanan, A., Bonneau, J., & Felten, E. (2016). Bitcoin and Cryptocurrency Technologies: A Comprehensive Introduction. Retrieved August 6, 2018, from https://books.google.com/books?id=LchFDAAAQBAJ&dq=cryptocurrency&lr=&source=gbs_navlinks_s
Nakamoto, S. (2008). Bitcoin: A peer-to-peer Electronic Cash System. 1-9. Retrieved from https://bitcoin.org/bitcoin.pdf. 

Vigna, P., & Casey, M. J. (2016). The age of cryptocurrency: How bitcoin and digital money are challenging the global economic order. New York: Picador.