TCNJ

19 SPRING 2022 CRYPTICALLY SPEAKING Terms you need to know Asset Property owned by a person or company that carries value. Bitcoin The first cryptocurrency, which was launched in 2009. Blockchain A digital ledger (think: Excel spreadsheet). It's a network of computers that tracks cryptocur- rency transactions. Cryptocurrency Digital money. Key thing: it's not backed by the government. Cryptography Secure communication techniques that allow only the sender and intended recipient of a message to view its contents. Ledger Collection of financial accounts and its actions. Mining Using computers to solve com- plex equations, individuals help build the blockchain and are rewarded with new coins. Wallet Your personal account, where you can trade and spend crypto. 86% OF U.S. ADULTS have heard of cryptocurrency. — Pew Research Center TCNJ Magazine: Let's start with the basics. What exactly is cryptocurrency? Jeff Horowitz: Cryptocurrency is a digital asset designed to be a medium of exchange, like gold, with a variable price attached to it based on supply and demand. The difference is crypto- currencies aren't physical like gold; they are digital. TM: So when we hear the term Bitcoin, which was the first cryptocurrency, that's not a coin you can touch like a penny; it just exists in digital form? Dennis O'Connell: Correct. A crypto- currency, like Bitcoin, is digital money you can use on the internet. It is a new way of expressing value and owner- ship. And instead of a bank deter- mining that value and who owns it, it is done through a technology called blockchain. TM: OK, stop. What is a blockchain? JH: A blockchain is essentially a ledger that anyone can view. Instead of traditional banks that independently keep track of your balances, your cryptocurrency balances are recorded on the blockchain's ledger. DO: Blockchain technology is the infrastructure for cryptocurrency and is run by a large network of computers, with each computer holding an exact copy of the ledger. You can think of the ledger as an Excel spreadsheet, but when you think of where an Excel spreadsheet exists, you might say, "Oh, it's on my computer." You have a single location where it exists and nowhere else. In the blockchain, that ledger is distributed everywhere, among a network of computers. JH: For example, after you buy Bitcoin, the Bitcoin network will acknowledge your purchase on the ledger. The goal of the blockchain is to distribute these validated records and transactions among a community rather than one company or bank. Validation via consensus is a new way of thinking about how to record information. TM: And that validation via consensus, is that where the term "mining" comes in? The miners are the ones who are confirming transactions are legit? JH: Yes. Cryptocurrency networks need to make sure that nobody spends the same money twice; there is no bank or Visa or PayPal in the middle validating transactions and balances. "Mining " is the way the network confirms new transactions and adds them to the blockchain. It is performed using sophisticated hardware that solves an extremely complex computa- tional math problem. The key to crypto is there is no central authority. The community is the authority. And the community competes to solve the math problem to confirm the transaction. TM: Then once that transaction is validated, where does the crypto- currency go? JH: In a traditional bank transaction, you would go to your bank website to see that you have $10,000 in your savings account and then ask the bank to send $5,000 of that to a friend's bank account, leaving you with $5,000. Both banks in this scenario would keep independent records of balances. However, with crypto, your balances are reflected in a wallet address on a public blockchain. DO: Your wallet acts as your savings account and is identified by an address of random numbers and letters. You can then directly access the block- chain through a website, browser plugin, or mobile app to check your balance, withdraw, or send crypto to someone else.

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