What is a Cryptocurrency?
A cryptocurrency is a medium of exchange like normal currencies such as USD/EUR, but designed for the purpose of exchanging digital information through a process made possible by certain principles of cryptography. Cryptography is used to secure the transactions and to control the creation of new coins. The first cryptocurrency to be created was Bitcoin back in 2009. Today there are hundreds of other cryptocurrencies, often referred to as Altcoins.
In the simplest of forms, cryptocurrency is digital currency.
Cryptocurrencies can also be classified as Protocol Tokens or App Tokens.
- Protocols are sets of rules, while applications are computer programs built on top of protocols.
- There is one native protocol per blockchain. Non-native protocols can be built on top of programmable blockchains such as Ethereum.
- Protocol tokens are required by a protocol to function. Protocol tokens can be both native and non-native. All native tokens are protocol tokens.
- App tokens are not required by an application or protocol. Instead, App tokens are generally used by the application users to access the application’s services.