Cryptocurrency (or Crypto Currency) is a form of digital or virtual currency which does not exist physically. It is designed to work as a medium of exchange between peers. The inventor Satoshi Nakamoto, while announcing the Bitcoin in 2008, called it “Peer-to-Peer Electronic Cash System”. It uses cryptography for security and is difficult to replicate/ counterfeit due to its embedded security feature. Since it is not governed by any government agency of any country, it is not regulated and does not come under the purview of any regulations and is decentralised. Decentralised control works through distributed ledger technology, called as blockchain, which serves as a public financial transaction database. This blockchain records all the transactions and make sure that it is not double spent and the transaction is valid.
Cryptocurrency mining or cryptomining is the process of validating the transaction and adding the same to the blockchain. One who is doing the transaction is called as miner. For every transaction, the miner is responsible for ensuring that the authenticity of information and updating the blockchain. The mining process involves competing with other miners in solving complicated mathematical problems that are associated with a block containing the transaction data. The first miner to solve the problem adds a block to the blockchain and gets a small transaction fee alongwith newly created coins.
Cryptocurrencies can be used to buy goods, make payments, invest and mine. However, legality of these currencies is questionable and varies from country to country. In India, dealing in cryptocurrecy is illegal whereas it is legal in Russia, but it cannot be used to purchase goods.
Since it is unregulated and is not governed under any rules of any country, several frauds and theft have happened, which nobody owns and there are losses. There have been reports of losses of the tune of several million dollars, but still people trade in them and are still using, finding it convenient over other digital cash systems.