Cryptocurrency provides an exciting alternative to national currency as a decentralized alternative to fiat notes, but it’s no silver bullet.
For those who’ve heard the word a lot but are still not sure what it means, cryptocurrency is a digital asset used to make purchases. It operates using a computer network, often a blockchain, a shared ledger that acts as a mechanism to transfer value from one person to another and that records and stores information in chains of “blocks”—chronological groups rather than tables or folders like more traditional databases. This provides a digital way to move money using the internet, and operates as a decentralized mediator through “mining,” which ensures that both sides of the transaction are validated. When engaging in any exchange, we must ensure that the person who promises to pay does pay and the person who is owed payment receives it. It’s this process that keeps the transactions honest, and mining is the process of updating this ledger, which exists in many places at the same time, providing transparency. The miners are rewarded for authenticating the transactions, and this encourages virtuous behavior. There is an excellent, more detailed discussion of this process here.