Cryptocurrencies - what is it?

1. Cryptocurrencies - what is it?

Opinions differ on whether cryptocurrencies actually pass as money. While things are clear for crypto enthusiasts and bitcoin fans, regulators and governments are usually critical.

Bitcoin (BTC) was the first cryptocurrency. It is a digital payment system. The monetary units cannot be touched like a euro coin or gold bars, they are not physical. However, this makes it easier to send them - like an SMS or an email. The difference to these means of communication is that bitcoins cannot be copied.

In a digitized world where people everywhere can communicate with each other and are connected through the Internet, Bitcoin represents the possibility of sending money across the globe.

Altcoins

Bitcoin is not only the mother of all cryptocurrencies, it is also one of the few whose issuer is not known. After Bitcoin came a number of alternatives Coins – the Altcoins.

What cryptocurrencies are there?

The list of cryptocurrencies is long - they differ according to the type of application, the so-called use cases. The best-known cryptocurrencies include Bitcoin (BTC), Ripple (XRP), Ethereum (ETH), Solana (SOL), Binance (BNB), Cardano (ADA). On January 7th, 2023, 22,222 coins are listed at Coinmarketcap.

Cryptocurrencies, digital currencies, crypto money or cryptocurrencies refer to purely digital payment systems. They are based on cryptography.

For a definition of cryptocurrencies, one can start by simply sticking to the word itself. They are currencies built on cryptographic tools. The best-known of these tools is the blockchain technology that runs the cryptocurrency Bitcoin.

By the way: When describing cryptocurrencies, a distinction is usually made between the currency itself and the technology or the company that is associated with the cryptocurrency. So there is something like this Company Ripple, which itself works with the cryptocurrency XRP. So we write: Ripple (XRP).

We refer to cryptocurrency units as tokens - they are placeholders on the underlying technology.

What is the difference between a token and a cryptocurrency?

A cryptocurrency is a digital means of payment secured by cryptography.

A token, on the other hand, exists on an outsourced blockchain (e.g. in Ethereum) and is not intended exclusively as a means of payment. Tokens can have various functions, such as representing real values ​​(company shares). Some tokens are securities and in Germany are usually regulated by the Federal Financial Supervisory Authority (BaFin). The big difference is that a token is a digital asset on someone else's blockchain, whereas a cryptocurrency owns its own blockchain.