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What Is Crypto? Defining Cryptocurrency and the Blockchain

What Is Crypto? Defining Cryptocurrency and the Blockchain
Date Published: 01/06/2022
Date Modified: 06/23/2022

Ever since the first Bitcoin block was mined in 2009, people have been using cryptocurrencies to securely conduct transactions online. Bitcoin, Ethereum, and Litecoin are some of the most well-known cryptocurrencies, but there are over 8,000 digital currencies in existence.

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What is crypto?

“Crypto” is short for cryptocurrency, but it can also refer to a crypto token or a crypto asset. Cryptocurrency is a virtual form of exchange that circulates independently of any centralized financial body, for example, a government or bank. Essentially, cryptocurrency is a digital currency that can be bought, sold, traded, and used almost exactly like any other currency would.

How does cryptocurrency work?

Cryptocurrencies are created using cryptographic methods and run on a distributed public ledger. Unlike a central bank, which controls a currency and its minting, cryptocurrency is based on a decentralized platform that authorizes transactions via a peer-to-peer network. This distributed ledger is known as a blockchain, a massive database on which crypto transactions are recorded, updated, and verified to ensure their legitimacy.

In a blockchain system, each new block contains the dates and details of the valid, recent transactions in chronological order. These blocks are then linked together, hence the name “blockchain.” A blockchain permanently records each of the transactions that have been conducted on it.

To begin a Bitcoin transaction, for example, the new transaction is sent to the Bitcoin peer-to-peer network, which validates the transaction through cryptographic equations. This validated transaction is then clustered together with other transactions into blocks, which become part of the blockchain. An average Bitcoin block contains between 1,000 to 3,000 transactions.

Crypto token vs. crypto coin

The terms crypto coin and crypto token are often used interchangeably. While they are very similar, there are some critical differences between the two.

Cryptocurrency coins operate on their own independent blockchains. For example, Bitcoin works via the Bitcoin blockchain, Ethereum on the Ethereum blockchain, etc. It acts as a form of currency exactly in the same way a physical currency would, and it can be “mined” or earned.

Cryptocurrency tokens, on the other hand, do not have their own blockchains and rely on other blockchains to function. Tokens include things like Tether and NFTs (non-fungible tokens), which are digital deeds or assets that are managed via smart contracts.

When a crypto coin is exchanged, a balance moves from one account to another; when a token is exchanged, a digital asset is traded.

Other terms

Just like any contemporary technology, crypto has its own terminology. Here are some of the most important terms:

  • NFT: A non-fungible token is a non-interchangeable, digital asset that can be held, traded, or sold. Some of the most well-known NFTs involve art, but the term can also include other intellectual property, such as fashion, along with digital real estate.
  • Decentralization: In crypto, decentralization means that control (decision-making) is removed from a centralized organization, for example, a national bank, and given to a distributed network.
  • Smart contract: A self-executing contract that is automatically run when certain conditions are met. Smart contracts were pioneered on, and are normally associated with, the Ethereum blockchain.
  • DAO: In a decentralized autonomous organization, decision-making isn’t made by a board but instead is governed by software-based rules and smart contracts on the blockchain.
  • Defi: Decentralized finance covers all peer-to-peer financial networks, such as blockchains. The Ethereum network is an example of a Defi system.
  • ICO: An initial coin offering is similar to an initial public offering of stock, which helps companies raise funds when they enter the stock market.
  • Mining: How new digital currency units are created. This is also known as β€œminting” and is the process by which miners solve complex equations that allow another block to be added to the blockchain.
  • Gas fees: These are the transaction fees paid to process and validate crypto transactions on Ethereum and similar blockchains. Such fees prevent hostile actors from flooding the network with meaningless transactions.

Current uses of crypto

The technology behind cryptocurrency is already being used in tangible ways. For example, blockchain technology is already in use in managing cross-border payments for non-governmental organizations (NGOs), logistics monitoring, governmental elections, non-fungible token marketplaces, and the VitaDAO longevity project.

Even large governmental organizations are exploring crypto. For example, the European Central Bank started the process of developing a fully digital Euro coin back in July 2021. However, a central bank digital currency (CBDC), unlike traditional crypto, is not decentralized.

Why does crypto matter for longevity?Β 

The potential of crypto goes far beyond speculating on the price of Bitcoin and into many other fields, including our own. Crypto experts have become interested in longevity, the science behind living healthier for longer.

In March 2020, Vitalik Buterin, founder of the Ethereum network, tweeted:

If we’re being more open-minded about accepting new weird ideas, can I suggest anti-aging research? Aging is a humanitarian disaster that kills as many people as WW2 every two years and even before killing debilitates people and burdens social systems and families. Let’s end it.

In July, Marc P. Bernegger, investment expert and member of the Swiss Blockchain Federation, spoke with Lifespan about crypto-powered biotechnology initiatives.

December 2021 saw the creation of NewLimit, an anti-aging company, by Coinbase founder Brian Armstrong and Stanford-educated bioengineer Blake Byers.

All of this indicates a positive sentiment in the capabilities of science to combat a once-insurmountable issue. A growing community of crypto enthusiasts is exploring ways to extend healthy life and slow or even reverse the biological effects of aging.

About the author
Maria Isabella

Maria Isabella

Maria is a writer and editor with a passion for technology, health, and lifelong learning. With over 6 years of experience in content creation for the fintech and wellness industries, and 10 years in the non-profit sector, as well as a Masters of Science in Development Management, she is passionate about combining tech and healthcare to make the world a better place.