Cryptocurrency
Cryptocurrency is a digital form of currency that operates without central financial institutions or oversight. The first cryptocurrency, Bitcoin, was introduced in 2009 by the pseudonymous Satoshi Nakamoto. Cryptocurrencies rely on cryptographic techniques for security and operate using a distributed ledger technology known as blockchain.
How Cryptocurrency Works
Bitcoin transactions are secured using public-key cryptography. Each user possesses a public key, accessible to all, and a private key known only to their computers. To send Bitcoin, a user provides their public key to the sender, who then uses their private key to sign the transaction. This transaction is broadcast across the Bitcoin network, and each transaction’s time and amount are recorded in a ledger file at every network node. The identities of the users remain largely anonymous, but the transfer of Bitcoins is publicly visible.
Transactions are grouped into blocks, which are added chronologically to the blockchain. Blocks are added to the chain using a complex mathematical process, making it difficult for any single user to compromise the blockchain.
Blockchain Technology and NFTs
The underlying blockchain technology has garnered considerable attention, even from critics of Bitcoin, due to its potential for creating trustworthy records without a central authority. Blockchain technology is also crucial to NFTs (non-fungible tokens), which often use cryptocurrency for transactions.
Cryptocurrency Mining
New Bitcoins are generated through a process called mining, where users run specialized programs on their computers to solve complex mathematical problems related to blocks of transactions. Solving these problems validates transactions and adds new blocks to the blockchain. The difficulty of these mathematical problems is adjusted to maintain a steady rate of block creation. The miners are rewarded with newly created Bitcoins.
This process requires significant computational power, especially as the number of Bitcoin miners increases. This has led to large-scale mining operations and substantial energy consumption.
Market Dynamics and Key Players
As of 2025, the market capitalization of cryptocurrencies reached approximately $3 trillion. Bitcoin and Ethereum make up a major portion of this value, with market capitalizations of approximately $1.9 trillion and $321 billion, respectively. While hundreds of cryptocurrencies exist, the top 20 coins represent the majority of the market.
Controversies and Criticisms
Cryptocurrencies face criticism from some economists who suggest they do not fulfill the traditional functions of money. Critics argue that cryptocurrencies are not a reliable medium of exchange, store of value, or unit of account. Experts counter that the technology is still in its early stages and not yet widely adopted.
The energy consumption associated with proof-of-work cryptocurrencies, such as Bitcoin, is another major concern. The energy-intensive nature of mining has spurred the development of large-scale operations, consequently raising environmental issues, and as of 2025, Bitcoin consumed roughly 0.5% of the world’s electricity. Proponents of Bitcoin suggest that the currency could accelerate the transition to renewable energy by providing a profitable use for sustainable sources during off-peak hours.
Regulatory Landscape
As of 2025, only two countries, El Salvador and the Central African Republic, accept Bitcoin as legal tender. Several countries, including China, have banned cryptocurrencies, citing concerns about the high energy usage of mining and fraud. Additionally, approximately 40 countries have restricted cryptocurrency trading activities, such as exchanges, and have barred banks from dealing in them.
Notable Scandals
The cryptocurrency market has experienced significant scandals, including the 2014 bankruptcy of Mt. Gox, a major Bitcoin exchange, following a theft of approximately 650,000 Bitcoins. A more recent incident occurred in 2025, when the Bybit exchange suffered a $1.4 billion Ethereum theft, with evidence pointing to North Korean hackers. In late 2022, Sam Bankman-Fried, founder of the cryptocurrency exchange FTX Trading Ltd., was arrested and convicted of fraud and conspiracy after the collapse of his companies, causing extensive losses for FTX and Alameda Research LLC customers.
