What Is Cryptocurrency? Bitcoin, Ethereum, and Blockchain Basics

Cryptocurrency is a form of digital money that exists only electronically and is secured using cryptography rather than being issued or controlled by a central bank or government. Unlike a bank transfer, which relies on a bank as a trusted middleman to verify and record a transaction, cryptocurrency transactions are verified and recorded by a distributed network of computers, removing the need for a single central authority.

Blockchain is the underlying technology that makes this possible — a continuously growing, shared digital record (a "ledger") of every transaction ever made, distributed across thousands of computers worldwide rather than stored in one central place. Each new batch of transactions ("block") is cryptographically linked to the one before it, forming a chain that's extremely difficult to alter retroactively, since doing so would require changing every subsequent block across a majority of the network simultaneously.

Bitcoin, launched in 2009, was the first cryptocurrency and remains the largest by total market value. It was designed primarily as a form of digital money with a fixed maximum supply (21 million coins), making it resistant to the kind of unlimited creation that can happen with traditional government-issued currency, which is part of why Bitcoin is often compared to gold as a potential store of value.

Ethereum, launched in 2015, extended the blockchain concept beyond simple currency by introducing "smart contracts" — self-executing pieces of code that run on the blockchain and can automate agreements without a middleman. This made Ethereum's blockchain a platform other developers could build on, leading to a much broader ecosystem of applications beyond just sending and receiving money, which is a key reason Bitcoin and Ethereum are often treated as fundamentally different types of crypto assets rather than direct competitors.