A cryptocurrency is a digital asset designed to function as a medium of exchange using cryptography to secure transactions, control the creation of new units, and verify the transfer of assets.
It generally relies on a blockchain, a distributed, decentralized, and immutable ledger.
Key technical components:
Blockchain:
It is a distributed database where each block contains:
a list of validated transactions,
a timestamp,
the hash of the previous block (ensuring continuity),
a nonce used for mining (in Proof of Work systems).
Cryptography:
Hashing (SHA-256, Keccak, etc.): transforms any data into a unique fingerprint.
Asymmetric cryptography: each user has a private (secret) key and a public key. Digital signatures allow for transaction authentication.
Distributed consensus:
Ensures that the entire network agrees on the state of the blockchain:
Proof of Work (PoW): used by Bitcoin, requires intensive calculations.
Proof of Stake (PoS): used by Ethereum 2.0, based on the ownership of tokens.
Others: Delegated PoS, Proof of Authority, etc.
Nodes and P2P Network:
Each participant (or node) holds a copy of the blockchain and communicates with others via a peer-to-peer network.
Example: Bitcoin
Public, open-source blockchain
Consensus: Proof of Work (SHA-256)
Block every 10 minutes
Limited block size (1 MB base)
Decreasing reward: halving every ~4 years
Native currency: BTC
Smart contracts (for cryptos like Ethereum):
These are autonomous programs deployed on the blockchain, executed automatically according to defined conditions. They enable the creation of decentralized applications (DApps), tokens (ERC-20, etc.), DeFi, NFTs, etc.