Cryptocurrencies: a gentle introduction

Lately and since some few months, medias have been talking a lot about cryptocurrencies, referring to some concepts which are not very clear. The purpose of this post is to define in general terms some notions you might want to be familiar with.
The first word that we often hear is "Blockchain." Let's introduce this concept.

What is "Blockchain" ?

The blockchain is the backbone of cryptocurrency technology. It's neither more nor less than a database shared among the network in which transactions are saved: a "block" is composed of multiples transactions records and mathematically linked with each other (the "chain" in blockchain word.) Cryptography is used to secure those records, which is why cryptocurrency is involved in the process. In the traditional system of fiat currencies (US dollars, Euro, Yen, etc.), a centrale authority plays the role of referee, ensuring compliance with regulations and money supply among other things.
With the blockchain, we can say that authority is decentralized. For instance, in the Bitcoin network, everybody can run what is called a "full node". The users (nodes) hold the entire history of records, acting to validate transactions and secure this vast "ledger", another term to designate the blockchain. The blocks are processed, resulting in the confirmation of the transactions. When that transaction is "confirmed", it's registered as long as the network living and it cannot be removed except in a certain case: someone who would like to take advantage of the system to remove or add transactions would have to control at least fifty one percent of the network. This case is known as a risk in the blockchain and it's called the "51% attack".

To sum up, a blockchain is a decentralized database secured by:

cryptography, we also speak about a cryptographic protocol.
a large network composed of nodes, which operates on that protocol.

Another thing to consider is that there exists three types of blockchains:

Publics blockchains, like Bitcoin, which uses cryptocurrency to secure network.
Permissioned blockchains which cannot be run and shared by everybody.
Private blockchains which are controlled by individuals who know each others and where a cryptocurrency isn't necessary.

Cryptocurrencies, tokens, miners?

A token is another word for cryptocurrency. "Digital asset" is also a used naming. But where do those entities come from ?
To simplify, we can say that there is two main kinds of technologies to issue tokens from a blockchain:

Proof Of Work: PoW
Proof Of Stake: PoS

The word proof emphasize the fact that there is work to do to get paid.

Proof of Work

In the PoW system, the users are involved in the process of tokens emission by mining them. Computation power of nodes is used to validate blocks of transactions and those "miners" are retributed with tokens at a certain rate. Mining is not a self-evident concept. At the end of post, i give some references if you are interested for some more explanations. What we can say is that there exists multiple algorithms used in the differents blockchains that have been created since the first block issued by the Bitcoin network, on 3rd January 2009.
Bitcoin uses SHA256 algorithm, while Litecoin and Dogecoin, two populars coins, use SCrypt. There are many others like Cryptonight, X11, X13, X15, NeoScrypt just to name a few.
The disadvantage of mining is that the power consumption increases more and more as miners are required to solved "hashes", results of computations and indicators of the difficulty to issuing new tokens. To overcome this difficulty, pools of mining have been created: miners gather their computing power and share the blocks rewards.

Proof of Stake

In the PoS system, no need for computation power. There are several systems of PoS, but the general term is to leave a certain amount of tokens on a wallet which is "open" to stake. After some time, the user is rewarded. It is to say that the power consumption is ridiculous compared to PoW consensus. Blackcoin is a notable PoS token. Reddcoin is another one which implement PoSV, Proof of Stack Velocity. In their wiki, you can find a useful explanation about PoS. We can also speak about Cardano, a platform which implements a PoS algorithm, Ouroboros. As you can see, there are many ways to "mint" those coins. "Minting" is the consecrated term, similarly to "mining" in PoW.

An the others...

These two categories do not exclude each other. In fact, there are "hybrids" coins which implement PoW and PoS at the same time. It's the case with Peercoin which was introduced in August 2012.

Some others begining with PoW and continuing their way with PoS. The famous Ethereum platform planned to pass his token, the ether, in PoS at a date not very clearly determined.

And of course, Steemit.com. The FAQ tells us: "Steem is 'minted' daily and distributed to content producers according to the votes they get." So, Proof of Work, or Proof of Stake ?

Blockchain is the begining of the secure digital assets and some say that it is a new age, the "fifth evolution" of computing. And so, it has started a new world, giving a direction to look. At first, we had black and white television. Now, we have 4K and even 8K... All that to say, the digital assets world don't stop with blockchain, and we can already see new technologies coming. For instance, iota is a cryptocurrency based not on a blockchain, but on the "tangle" and dedicated to IoT.