Cryptocurrencies like Bitcoin, Ethereum, or Solana function very differently. They are digital assets that typically run on decentralized systems based on blockchain technology. Unlike fiat currencies, there is no central authority – no government, no bank – that issues or controls them.
The value of cryptocurrencies is determined by:
- Scarcity: Many cryptocurrencies have fixed maximum supplies (e.g., only 21 million Bitcoins will ever exist), creating a sense of digital scarcity, similar to precious metals.
- Supply and Demand: Prices rise and fall depending on how many people want to buy or use the currency.
- Technology: Blockchain ensures secure, transparent, and tamper-proof transactions.
- Use Cases: Cryptocurrencies can be used in digital financial systems (DeFi), for online payments, or in emerging digital ecosystems like the metaverse.
- User Trust: Value also depends on people’s belief in the technology, the network, and its long-term viability.
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