The word cryptocurrency is combination of two words; crypto and currency. Crypto is derived from cryptography which is the science of encrypting data. And currency is a mutually trusted asset that is used as medium of exchange for goods.
Therefore, cryptocurrency is a digital currency which is cryptographically secured in the world of internet and used to trade (buy and sell) online. Its transactions are recorded on a digital ledger called Blockchain. The blockchain with the help of cryptography records all the transactions in such a way that no cheating can take place.
One of the most prior purpose of cryptocurrency is to keep financial system decentralized so that no single person or party has control, rather public should collectively control the system. This way banks and trusted intermediary parties are strictly discouraged.
According to Jan Lansky, a cryptocurrency is a system that meets six conditions:
1. The system does not require a central authority, distributed achieve consensus on its state.
2. The system keeps an overview of cryptocurrency units and their ownership.
3. The system defines if new cryptocurrency units can be created. If new cryptocurrency units can be created, the system defines the how to create new units, and how to determine the ownership of these new units.
4. Ownership of cryptocurrency units can be proved exclusively cryptographically.
5. The owner of a unit of cryptocurrency can transfer this unit. For this transfer to be successful, the current owner must prove the ownership.
6. If two different instructions for changing the ownership of the same cryptographic units are entered at the same time, the system performs at most one of them.
Also read about Blockchain