Introduction to Cryptocurrencies

Flashcards defining key terms and concepts related to cryptocurrencies, their characteristics, and how they differ from traditional fiat currencies.

Cryptocurrency (or “crypto”)

An umbrella term for a new kind of “digital money” that relies on a combination of technologies allowing it to exist outside the control of central authorities like governments and banks.

Digital

A characteristic of cryptocurrencies meaning they have no physical form, such as dollar bills or metal coins, but are instead lines of computer code.

Borderless

A quality of cryptocurrencies that allows them to be sent almost instantaneously anywhere in the world, regardless of geographic distance and country borders, via an internet-connected device.

Permissionless

A feature of cryptocurrencies where anyone can send and receive them without needing to register an account, fill out an application, or be approved by a bank.

Address

A computer-generated string of letters and numbers used in place of names and account numbers to send and receive cryptocurrencies.

Fiat currencies

Traditional currencies, such as the U.S. dollar, that are connected to and issued by a government or central bank.

Federal Reserve (“Fed”)

The central authority that issues and controls the U.S. dollar.

European Central Bank (ECB)

The central authority that issues and controls the euro.

Bank of Japan (BOJ)

The central authority that issues and controls the Japanese yen.

Decentralization

The defining feature of cryptocurrencies meaning they are not controlled by any central authority, bank, or government.

Finite (or fixed) total supply

Construct where there is a maximum number of units of a cryptocurrency that will ever be in circulation, creating scarcity.

Infinite total supply

A supply model for some cryptocurrencies where there is no maximum cap on the number of units that can be created.

Counterfeit-proof

A design feature of cryptocurrencies involving cryptography to securely record and store transactions to prevent fraud.

Cryptography

The study of techniques to keep information safe, coming from the words “hidden” (crypt) and “writing” (graphy).

Julius Caesar

A historical figure noted for using cryptography to communicate with his generals before the existence of computers.

Intermediary

A third party, such as a bank, that is usually required for transactions with fiat currencies but not for direct cryptocurrency transactions.

Emerging asset class

The financial categorization of cryptocurrency as its popularity grows in the financial world.