#CEXvsDEX101 A cryptocurrency is a type of digital money that differs from traditional (fiat) money in several fundamental characteristics. Broadly speaking, it is a virtual currency that uses cryptography to secure and verify transactions, as well as to control the creation of new units.

Here are its main characteristics and how it works:

1. It is Digital and Virtual:

* Cryptocurrencies do not exist physically (there are no crypto bills or coins). They only exist as digital records in a distributed database.

2. It Uses Cryptography:

* The "crypto" in cryptocurrency refers to cryptography. This advanced technology is used to protect transactions, verify ownership of funds, and control the creation of new units. This makes it extremely secure and prevents counterfeiting or double spending.

3. Decentralization:

* This is the most distinctive feature. Unlike traditional currencies that are issued and controlled by central banks and governments, cryptocurrencies are decentralized. This means that there is no central authority that issues, regulates, or supervises them. Their control is distributed among the users of the network.

* This decentralization is achieved through blockchain technology, which is a public and distributed ledger where all transactions are recorded in a transparent and immutable manner.

4. Based on Blockchain:

* As mentioned earlier, most cryptocurrencies (like Bitcoin and Ethereum) operate on a blockchain. Each transaction is a "block" that is added to a previous "chain" of blocks, creating a permanent and tamper-proof record.

5. Peer-to-Peer (P2P) System:

* Cryptocurrency transactions are conducted directly between users (peer-to-peer) without the need for intermediaries like banks or payment processors. This can result in faster transactions and lower costs.

6. Limited Supply