Crypto FAQ: What is cryptocurrency?

• Alt. Phrasing: What is a digital currency?; What is a virtual currency?

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• Defn: cryptocurrency
  [portmanteau: noun "crypto(graphy)" + noun "currency"]
  Cryptocurrency is a decentralized form of digital currency (a.k.a. virtual currency) that uses strong cryptography techniques (e.g., blockchains with cryptographic harsh functions) and distributed peer-to-peer networks to securely regulate currency generation and fund transfers independent of central banks.
  

In addition to the Monetary Properties of traditonal currencies (see FAQ: What is a currency?), cryptocurrencies also have the following Transactional Properties and Disruptive Properties:

Transactional Properties of Cryptocurrency

Since cryptocurrencies are implemented using rigorous and secure protocols, they also support the following transactional properties:

• fast and global — second generation cryptocurrency transactions can be quickly propagated and confirmed by the network internationally within a couple minutes. Third generation cryptocurrencies, which are currently being rolled out, will soon reduce this propagation time to seconds.
• secure — cryptocurrency funds are strongly encrypted at rest, and in transit, using a proven secure public key cryptography system. Only the owner of the private key for a cryptocurrency wallet, which has a unique internet address, can send cryptocurrency.
• irreversible — after a cryptocurrency transaction is confirmed, it cannot be undone.
• permissionless — cryptocurrency software is typically free and open source; anyone with an Internet connection can download and use it without requesting permission.
• anonymous — most first and second generation cryptocurrency transactions are pseudonymous, where crypto coins are sent and received to lengthy random character addresses. However, since sender/receiver addresses and IP addresses can be encrypted on the blockchain (e.g., Monero cryptocurrecy), future cryptocurrency transactions can potentially become fully anonymous.

Disruptive Properties of Cryptocurrency

Given their synergistic monetary and transactional properties, cryptocurrencies have the potential to disrupt traditional financial and legal services:

• more stable than traditional fiat currencies — since the circulating and maximum supplies of cryptocurrency coins are mathematically defined, as opposed to being whimsically manipulated by Central Bankers, cryptocurrencies can potentially displace world reserve currencies as safe havens during times of financial uncertainty.
• more efficient financial funds transfer than traditional banks — since cryptocurrency protocols are potentially both cheaper and faster than traditional financial funds transfer mechanisms (bank wire transfers, automated clearing houses, credit cards), they have the potential to strongly displace the latter.
• "smarter" contracts than traditional financial contracts — since many second and third generation cryptocurrency blockchains have been extended with customizable programmable logic for financial transactions ("smart contracts"), smart contracts have the potential to displace many kinds of common financial contracts (e.g., POs, invoices, escrows) in the near future.

Compare: currency, fiat currency
Contrast: Distributed Ledger Technology (DLT), blockchain