Digital Currency

Think about the money in your head right now — probably notes and coins, something you can physically hold. Digital currency throws that idea out completely. It only exists as data: a number in a database, a balance in an app, a record on a ledger. There's no note to fold into your pocket and no coin to drop in a jar. It lives entirely inside digital wallets or accounts.

You use it the same way you'd use "real" money — paying for goods and services online, or sending money internationally — except every step of that transaction happens as a digital record being updated, not a physical object changing hands.

Centralised vs Decentralised — the key distinction

This is the single most important split in this whole topic, so let's slow down on it.

In a centralised system, one authority — a bank, a government, a company — has the power to create, approve, freeze or reverse transactions. They hold the master record. If that authority makes a mistake, or decides to act against you, you have limited recourse, because they control the system.

In a decentralised system, there is no single boss. Instead, control is spread across a whole network of users, all of whom hold a copy of the records and agree collectively on what's valid. This is the model most cryptocurrencies use, and it's the reason blockchain exists — you need some clever way for thousands of strangers, who don't trust each other, to agree on a shared set of facts without a referee.

Cryptocurrency

one type Bitcoin Ethereum

• Highly volatile
• Publicly tracked using cryptography