Cryptocurrency is digital money that no bank or state controls. Here is how it works, and how it began.
Cryptocurrencies are digital assets recorded on a blockchain. Unlike ordinary money, there is no central bank or bank that issues them or keeps the books.
The rules for how many units exist, and how they are transferred, are written into the code. Anyone can check that the rules are followed.
Ownership of cryptocurrency is controlled with cryptographic keys. Whoever holds the private key can move the funds.
The keys are stored in a digital wallet, either with a crypto exchange or by the user. If you lose the key without a backup, the funds are usually gone for good.
The idea of digital money is older than the blockchain. In the 1990s, David Chaum created DigiCash, which offered private payments but depended on a single company.
Later came proposals such as b-money and Bit Gold, and Hashcash, a method for proving that a computer has done some work. Behind many of the ideas were the cypherpunks, a movement that believed cryptography could protect privacy and freedom.
In 2008, in the middle of the financial crisis, the anonymous Satoshi Nakamoto published the description of Bitcoin. The solution combined earlier ideas with a blockchain that no single party controls.
For the first time it was possible to send digital money directly between two parties, without it being copied or spent twice. That was the start of the entire crypto market.