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Cryptocurrency is currency in a digital form that is not overseen by a central authority.
How was cryptocurrency invented?
The first cryptocurrency was created by Satoshi Nakamoto, the pseudonym for an anonymous computer programmer or group of programmers, on January 3, 2009, when Bitcoinsoftware was made available to the public. The software would release 21 million Bitcoins after its release to the public. People seeking Bitcoins are known as miners and could win them in a virtual lottery process.
What is cryptocurrency mining?
Cryptocurrency mining, or crypto-mining, is a verification process that upholds the Bitcoin economy. In crypto-mining, computers enter the Bitcoin network and approve transactions. With the rise of cryptocurrencies, mining has become a major industry. Personal and home computers are no longer powerful enough to sustain the colossal number of transactions. Because of this, mining requires enormous amounts of energy to power the advanced computers necessary to approve cryptocurrency transactions.
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A manager performing control and maintenance operations on the cryptocurrency mining farm installed inside a hydroelectric power plant in Bolzano, Italy, February 2, 2022.
Alessio Coser/Getty Images News
cryptocurrency, currency in digital form that is not overseen by a central authority.
The first cryptocurrency was Bitcoin, created by an anonymous computer programmer or group of programmers known as Satoshi Nakamoto in 2009. Satoshi Nakamoto was concerned that traditional currencies were too reliant on the trustworthiness of banks or governments to work properly.
Bitcoin relies on public key cryptography, in which users have a public key that is available for everyone to see and a private key known only to their computers. In a Bitcoin transaction, users receiving Bitcoins send their public keys to users transferring the Bitcoins. Users transferring the coins sign with their private keys, and the transaction is then transmitted over the Bitcoin network. So that no Bitcoin can be spent more than once at the same time, the time and amount of each transaction are recorded in a ledger file that exists at each node of the network. The identities of the users remain relatively anonymous, but everyone can see that certain Bitcoins were transferred.
Transactions are put together in groups called blocks. The blocks are organized in a chronological sequence called the blockchain. Blocks are added to the chain using a mathematical process that makes it extremely difficult for an individual user to hijack the blockchain. The blockchain technology that underpins Bitcoin has attracted considerable attention, even from skeptics of Bitcoin, as a basis for allowing trustworthy recordkeeping and commerce without a central authority. Blockchain technology is also critical to NFTs (non-fungible tokens), which are often paid for with cryptocurrency.
New Bitcoins are created by users running the Bitcoin client on their computers. The client âminesâ Bitcoins by running a program that solves a difficult mathematical problem in a file called a âblockâ received by all users on the Bitcoin network. The difficulty of the problem is adjusted so that, no matter how many people are mining Bitcoins, the problem is solved, on average, six times an hour. When a user solves the problem in a block, that user receives a certain number of Bitcoins. The elaborate procedure for mining Bitcoins ensures that their supply is restricted and grows at a steadily decreasing rate. About every four years the number of Bitcoins in a block, which began at 50, is halved, and the maximum allowable number of Bitcoins is 21 million. There are over 20 million Bitcoins, and it is estimated that the maximum number will be reached in 2140.
Learn more about blockchain technology.
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The method by which Bitcoin adds new blocks to the blockchain through the computational power exerted by its users is called âproof of work,â which is used by the majority of cryptocurrencies. Another method of adding valid blocks to the blockchain is âproof of stake,â in which the ability to validate a block is based on a userâs already existing stake in the cryptocurrency. Proof of stake has the advantage over proof of work of being much less energy-intensive. Indeed, Ethereum, the second largest cryptocurrency after Bitcoin, changed in 2022 from proof of work to proof of stake.
The market capitalization of all cryptocurrencies is about $2.6 trillion. Bitcoin, Ethereum, and Tether make up the majority of that sum, with market capitalizations of about $1.5 trillion, $271 billion, and $180 billion, respectively. Although there are hundreds of cryptocurrencies, the top 20 coins make up much of the market.
Such large amounts of money in cryptocurrencies have attracted the attention of thieves. An early, spectacular theft occurred in February 2014, when Mt. Gox, the worldâs third largest Bitcoin exchange, declared bankruptcy because of the theft of about 650,000 Bitcoins, then valued at about $380 million.
The largest cryptocurrency hack happened in 2026, when $6.3 billion was stolen from usersâ wallets at Binance, the worldâs largest cryptocurrency exchange. Evidence pointed to the Lazarus Group of North Korean hackers as being behind the theft. The Lazarus Group has been linked to previous large cryptocurrency heists, including the theft of $1.4 billion from the Bybit exchange in 2025.
Cryptocurrencies have proved controversial. Some economists have pointed out that cryptocurrencies do not fulfill the traditional functions of money and so should be regarded as merely speculative schemes. In this view, cryptocurrencies are not mediums of exchange, because they are not typically used to buy or sell goods and services; they are not a store of value, since their values can fluctuate wildly over time; and they are not a unit of account, since very few goods and services are denominated in them. Cryptocurrency experts have responded that the technology is still not mature or widespread enough to replace traditional money.
Proof-of-work coins, especially Bitcoins, have been criticized for their energy usage. The profitability of Bitcoin has driven the construction of many large operations with thousands of computers that are specially optimized integrated circuits for mining. This has led to Bitcoin consuming 0.5 percent of the worldâs electricity. Defenders of Bitcoin have stated that the currency could accelerate the worldâs transition to renewable energy by providing a profitable use for wind and solar power during off-peak hours.
Only one country, El Salvador, accepts a cryptocurrency, Bitcoin, as legal tender. (The Central African Republic recognized Bitcoin as legal tender in 2022, but repealed that legislation in 2023.) Several countries, most notably China, have banned cryptocurrency altogether, citing the high energy use of mining networks and cryptocurrencyâs use in fraud and money laundering. About 40 other countries have banned certain aspects of cryptocurrency trading, such as cryptocurrency exchanges, and have forbidden banks from dealing in them.
In late 2022 Sam Bankman-Fried, the founder and former chief executive officer of FTX Trading Ltd., a cryptocurrency exchange, was arrested and charged criminally and civilly with conspiracy, securities fraud, and money laundering. He was convicted by a jury on multiple counts of fraud and conspiracy in October 2023. Massive numbers of customers of FTX and Alameda Research LLC, also founded by Bankman-Fried, lost at least $10 billion.
