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| cryp:cryptocurrencies [2025/12/05 10:07] – created - external edit 127.0.0.1 | cryp:cryptocurrencies [2026/04/20 19:42] (current) – external edit 127.0.0.1 |
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| # Cryptocurrencies | This topic is part of [[gt:digital|Digital & media]] and [[gt:economy|Economy & finance]]. |
| | ====== Cryptocurrencies ====== |
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| ## What are cryptocurrencies? | ===== What are cryptocurrencies? ===== |
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| Cryptocurrencies are decentralized digital currencies that use advanced encryption to facilitate trustless online payments without the need for traditional financial institutions. Unlike state-authorised, bank-issued [fiat currencies](https://www.investopedia.com/terms/f/fiatmoney.asp) (e.g. the dollar or the euro), cryptocurrencies do not have a central issuing authority. Instead, cryptocurrencies are ‘decentralized’, meaning they are maintained by a network of independent nodes spread around the world. Ultimately, cryptocurrencies allow users to engage in direct, peer-to-peer transactions with the same (or greater) security one would expect from traditional online payment methods without having to go through large financial institutions or governments. | Cryptocurrencies are decentralized digital currencies that use advanced encryption to facilitate trustless online payments without the need for traditional financial institutions. Unlike state-authorised, bank-issued [fiat currencies](https://www.investopedia.com/terms/f/fiatmoney.asp) (e.g. the dollar or the euro), cryptocurrencies do not have a central issuing authority. Instead, cryptocurrencies are ‘decentralized’, meaning they are maintained by a network of independent nodes spread around the world. Ultimately, cryptocurrencies allow users to engage in direct, peer-to-peer transactions with the same (or greater) security one would expect from traditional online payment methods without having to go through large financial institutions or governments. |
| Bitcoin was described in its [official white paper](https://bitcoinwhitepaper.co/) as a “peer-to-peer electronic cash system”. Since then, thousands of cryptocurrencies have been created for an extremely broad range of purposes. Unfortunately, many of these projects are scams or failures; either they are unable to deliver a finished product or they never intended on producing one in the first place. | Bitcoin was described in its [official white paper](https://bitcoinwhitepaper.co/) as a “peer-to-peer electronic cash system”. Since then, thousands of cryptocurrencies have been created for an extremely broad range of purposes. Unfortunately, many of these projects are scams or failures; either they are unable to deliver a finished product or they never intended on producing one in the first place. |
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| ### How do cryptocurrencies work? | ==== How do cryptocurrencies work? ==== |
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| The fundamental technology behind cryptocurrencies is a network structure called a ‘[blockchain](/bloc/blockchain)’. Often described as a ‘distributed ledger’, the idea behind a blockchain is fairly straightforward: a publicly verifiable, tamper-proof record of all transactions on a network. Unlike traditional networks which are often hosted on centralized servers, blockchains are maintained by a decentralized network of ‘nodes’. Each [node](https://en.wikipedia.org/wiki/Node_\(networking\)) records its own copy of the network, and these nodes are in communication with one another to ensure that there is consensus between them. | The fundamental technology behind cryptocurrencies is a network structure called a ‘[blockchain](/bloc/blockchain)’. Often described as a ‘distributed ledger’, the idea behind a blockchain is fairly straightforward: a publicly verifiable, tamper-proof record of all transactions on a network. Unlike traditional networks which are often hosted on centralized servers, blockchains are maintained by a decentralized network of ‘nodes’. Each [node](https://en.wikipedia.org/wiki/Node_\(networking\)) records its own copy of the network, and these nodes are in communication with one another to ensure that there is consensus between them. |
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| ### Cryptocurrency mining | ==== Cryptocurrency mining ==== |
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| Cryptocurrencies are created through a process called ‘mining’. Bitcoin and many other coins utilize a system called [proof-of-work (PoW)](https://en.bitcoin.it/wiki/Proof_of_work) mining, in which ‘miners’ compete with one another in a race to solve an extremely difficult computational puzzle. The first miner to find the solution is given the right to add the next block to the chain and is rewarded with newly minted coins. | Cryptocurrencies are created through a process called ‘mining’. Bitcoin and many other coins utilize a system called [proof-of-work (PoW)](https://en.bitcoin.it/wiki/Proof_of_work) mining, in which ‘miners’ compete with one another in a race to solve an extremely difficult computational puzzle. The first miner to find the solution is given the right to add the next block to the chain and is rewarded with newly minted coins. |
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| <caption> | <caption> |
| Bitcoin purchase on Coinbase. | _Bitcoin purchase on Coinbase._ |
| </caption> | </caption> |
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| ## What are the benefits of cryptocurrencies? | ===== What are the benefits of cryptocurrencies? ===== |
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| - **Disruptive to the global financial system:** cryptocurrencies by their very nature take power away from traditional financial institutions and give it to the people. By allowing users to engage in direct, peer-to-peer transactions, cryptocurrencies eliminate unnecessary middlemen in financial transactions. Additionally, cryptocurrencies will never be subject to the whims of bank executives or politicians. In fact, Bitcoin was largely inspired by the failures of the global financial system in the 2008 recession. Some cryptocurrency enthusiasts believe that widespread cryptocurrency adoption will be a key part in doing away with banks and government-controlled money altogether. | - **Disruptive to the global financial system:** cryptocurrencies by their very nature take power away from traditional financial institutions and give it to the people. By allowing users to engage in direct, peer-to-peer transactions, cryptocurrencies eliminate unnecessary middlemen in financial transactions. Additionally, cryptocurrencies will never be subject to the whims of bank executives or politicians. In fact, Bitcoin was largely inspired by the failures of the global financial system in the 2008 recession. Some cryptocurrency enthusiasts believe that widespread cryptocurrency adoption will be a key part in doing away with banks and government-controlled money altogether. |
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| ### ... and the problems? | ==== ... and the problems? ==== |
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| In spite of the above benefits, cryptocurrencies are also not without their problems. Two such problems were described above: the exorbitant energy consumption of PoW mining and the wealth-centralization of PoS mining. | In spite of the above benefits, cryptocurrencies are also not without their problems. Two such problems were described above: the exorbitant energy consumption of PoW mining and the wealth-centralization of PoS mining. |
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| ## What can I do? | ===== What can I do? ===== |
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| Although cryptocurrencies and their underlying technologies can seem complicated, actually buying and using cryptocurrencies is fairly straightforward. | Although cryptocurrencies and their underlying technologies can seem complicated, actually buying and using cryptocurrencies is fairly straightforward. |
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| <caption> | <caption> |
| Hardware wallets. | _Hardware wallets._ |
| </caption> | </caption> |
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| ## Further resources | ===== Forum ===== |
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| | This topic belongs to the section [[gt:digital|Digital & media]]. You can ask questions or add information on the corresponding [Forum section](https://forum.growingthecommons.org/t/digital). |
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| | It is also in the section [[gt:economy|Economy & finance]] (Forum: [Economy & finance](https://forum.growingthecommons.org/t/economy)). |
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| | ===== Further resources ===== |
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| | - [Coin Central](https://coincentral.com/) - news and analyis |
| | - [Bitcoin Foundation](https://www.bitcoinfoundation.org/) |
| | - [Faircoin](https://fair-coin.org/) - based on 'proof of stake' rather than proof of work |
| | - [Bitcoin: a peer-to-peer electronic cash system](https://bitcoin.org/bitcoin.pdf) - 2009 paper that started it all |
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| | ===== Related topics ===== |
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| | - [Blockchain](bloc:blockchain) |
| | - [Local currencies](lcur:local_currencies) |
| | - [Collaborative finance](cofi:collaborative_finance) |
| | - [Credit commons](crco:credit_commons) |
| | - [Mutual credit](mucr:mutual_credit) |
| | - [Credit unions](crun:credit_unions) |
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| ## Specialist(s) | ===== Specialist curators of this topic ===== |
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