Cryptocurrencies, or virtual currencies, are digital means of exchange created and used by private individuals or groups. Because most cryptocurrencies aren’t regulated by national governments, they’re considered alternative currencies – mediums of financial exchange that exist outside the bounds of state monetary policy.
Bitcoin is the preeminent cryptocurrency and first to be used widely. However, hundreds of cryptocurrencies exist, and more spring into being every month.
What Is Cryptocurrency?
Cryptocurrencies use cryptographic protocols, or extremely complex code systems that encrypt sensitive data transfers, to secure their units of exchange.
Cryptocurrency developers build these protocols on advanced mathematics and computer engineering principles that render them virtually impossible to break, and thus to duplicate or counterfeit the protected currencies. These protocols also mask the identities of cryptocurrency users, making transactions and fund flows difficult to attribute to specific individuals or groups. This article from Benzinga Money has more on the basic principles of cryptography.