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Cryptocurrency

Cryptocurrency is a digital asset. Two very well known examples are Bitcoin and Etherium.

Contrary to the name, cryptocurrency is more of a speculative asset than a currency. Most online shops do not accept cryptocurrency as a form of payment. One reason for this is the volatility of cryptocurrency.

Instead, people tend to use cryptocurrency as an investment. There is a finite amount of each cryptocurrency in the world. The way to create more is by mining. This involves computers running complex algorithms, usually on GPUs. After a certain amount of computational effort has been expended, a new digital coin is created.

If too many coins are being mined in a given period of time, the mining algorithm is made more difficult, which limits the rate of creation of new coins.

Contrast this to traditional currencies where a central bank can decide to print more, which can lead to high inflation. This is why cryptocurrencies are described as a digital equivalent of gold, as there is also a finite amount of gold in the world, and the rate of mining limits the quantity available. However, real gold has an intrinsic value as a material, so some would argue that it's a safer investment.

Most cryptocurrencies are not controlled by a central organisation, such as a central bank. Cryptocurrencies typically store transactions on a decentralised ledger called the blockchain, rather than in a centralised database.

You can purchase and sell cryptocurrency at an exchange, using traditional currency such as the US dollar.