In short, what is a cryptocurrency?

A cryptocurrency (or cybercurrency) is a digital currency. Cryptography is the science of encrypting information. Digital currencies are based on this principle. All holder and movement data is stored in encrypted form. And not on a single server, but on several thousand servers simultaneously. Each transaction is therefore recorded decentrally within the network. It is therefore almost impossible to falsify transactions. This system is called 'blockchain'.

Supporters of cryptocurrencies see them as an alternative to traditional finance. After all, digital money no longer needs banks, because the owners become their own financial institution. There is no central body that controls the flow of money and coins. Buyers always maintain control, but they are also responsible for the security of their assets.

When did cryptocurrencies originate and who invented them?

In the early 1990s, a group of programmers and cryptographers discussed via email how to protect privacy in the digital world. Referring to the term 'cyberpunk', they gave themselves the name 'cypherpunks'. Briton Adam Back is one of the most important members of this group. He is responsible for developing the 'proof of work' method that forms the basis of cryptocurrencies. In simple terms, the sending computer uses it to prove that it needed a certain computing power for the outgoing message. The "proof of work" method should help prevent spam.

Satoshi Nakamoto, also an active member of the Cypherpunks movement, is the anonymous inventor of the Bitcoin system. Note that this name is a pseudonym, since the true identity of this man remains secret. Based on the "proof-of-work" method, it is suspected that Adam Back is hiding behind this pseudonym. Others are convinced that this is not a single person, but a group.

On November 1, 2008, Satoshi Nakamoto presented the idea of a cryptocurrency to 'The Cryptoctography Mailing List'. He called it 'Bitcoin'. The first Bitcoin transaction took place just two months later, on January 12, 2009. Since 2011, the inventor has increasingly withdrawn from the company, leaving it to others to develop his idea. Those interested in the detailed history of Bitcoin can find more information in this interactive timeline.

What cybercurrencies exist today?

There are more than 3,000 cryptocurrencies in existence today. However, only about 100 of them achieve a daily trading volume of over 1,000 USD. Bitcoin is the best known and largest cryptocurrency, but Ether, Ripple and Litecoin also claim a place in this new world. Bizarre currencies, such as cryptokits, are also gaining popularity. The idea is to create the most original virtual cats possible and sell them for profit.  

How does Bitcoin work from a technical point of view?

The most important technical basis of cryptocurrencies is the blockchain. This 'chain' is based on three concepts. The first is the public ledger. All network participants can freely view each transaction within the blockchain. Invalid transactions are quickly rejected thanks to this principle of multiple control. For example, if someone wants to transfer more Bitcoins than they have, the transaction will fail.

To prevent this cash book from being manipulated, the second concept decentralizes it. The information is not stored on a single computer, but rather on an entire network of devices. Anyone can store a copy of the public ledger. This complete copy of the blockchain is called a 'full node'.