The market of cryptocurrencies is fast and wild. Nearly every day new cryptocurrencies emerge, old die, early adopters get wealthy and investors lose money. Every cryptocurrency comes with a promise, mostly a big story to turn the world around. Few survive the ﬁrst months, and most are pumped and dumped by speculators and live on as zombie coins until the last bag holder loses hope ever to see a return on his investment.
But on the other hand, many currencies are now becoming standardized and would soon be accepted as legal tender in many countries.
If you take away all the noise around cryptocurrencies and reduce it to a simple deﬁnition, you ﬁnd it to be just limited entries in a database no one can change without fulﬁlling speciﬁc conditions. This may seem ordinary, but, believe it or not: this is exactly how you can deﬁne a currency.
Take the money on your bank account: What is it more than entries in a database that can only be changed under speciﬁc conditions? You can even take physical coins and notes: What are they else than limited entries in a public physical database that can only be changed if you match the condition than you physically own the coins and notes? Money is all about a veriﬁed entry in to some kind of database of accounts, balances, and transactions.
Let‘s have a look at the mechanism ruling the databases of cryptocurrencies. A cryptocurrency like Bitcoin consists of a of peers. Every peer has a record of the complete history of all transactions and thus of the balance of every account.
A transaction is a ﬁle that says, “Bob gives X Bitcoin to Alice“ and is signed by Bob‘s private key. It‘s basic public key cryptography, nothing special at all. After signed, a transaction is broadcasted in the network, sent from one peer to every other peer. This is basic p2p technology. Nothing special at all, again.