[Blockchain A to Z] Entering the World of Cryptocurrency ①

◆ Lesson 1: What Is Cryptocurrency?

Cryptocurrency is a form of digital asset used on the internet that allows people to transact directly with one another without the involvement of a central bank or financial institution.

Unlike traditional money that is printed in mints, or gold that is physically mined from the earth, cryptocurrencies are created through complex computational processes carried out by computers. This process is called “mining.”

◇ How Cryptocurrency Is Created – Three Representative Methods

(1) Proof of Work (PoW)

Proof of Work is the oldest and most widely used consensus mechanism in blockchain networks. Participants, often called miners, use computers to solve highly complex mathematical problems. The first computer to find the correct answer earns the right to create a new block and receives newly issued coins as a reward.

This process requires enormous computing power and consumes a significant amount of energy. Bitcoin (BTC) is the most famous example of a cryptocurrency that uses PoW.

(2) Proof of Stake (PoS)

Proof of Stake selects block creators based not on computational power, but on how many coins they hold and how long they have held them — in other words, their “stake.” Because it does not require constant heavy computation, PoS is considered more energy-efficient and environmentally friendly. Ethereum (ETH), for example, completed its transition to a PoS-based structure in 2022.

(3) Delegated Proof of Stake (DPoS)

Delegated Proof of Stake builds on PoS by introducing a voting system. Participants vote to elect a small group of representatives who take on the role of validating transactions and creating blocks. These representatives receive rewards and may share them with those who voted for them.

DPoS offers much higher throughput and efficiency, but it also raises concerns about centralization, since only a limited number of nodes are responsible for maintaining the network. Steem and EOS are notable examples of DPoS-based platforms.

◇ The Idea of Cryptocurrency and How Blockchain Works

Blockchain can be thought of as a shared ledger system where everyone records and monitors the same information at the same time. A simple game analogy makes this easier to understand.

Imagine five people playing a card game together. The game has a special rule: after each round, everyone writes down exactly who won how many points and what happened in that round. If someone tries to cheat later and change the record, it will immediately be exposed because everyone else’s notebook will show the truth.

This is essentially how blockchain works.

- Core Principle 1: Everyone Holds the Same Ledger (Distributed Ledger)

In a blockchain system, no single individual or institution monopolizes the transaction history. Instead, many participants hold identical copies of the ledger. To successfully tamper with the data, an attacker would need to alter the majority of these copies simultaneously — something that is practically impossible on a large, decentralized network.

- Core Principle 2: Verification Before Recording (Proof of Work)

On blockchain networks, data is not simply written to the ledger. Before a transaction is accepted, it must go through a verification process. In PoW-based systems, this verification step is called Proof of Work, where participants perform computations to prove that the information being recorded is valid.

- So, What Is Blockchain?

Blockchain is more than just a new way to store data. It is a system that structurally encodes “trust” in the digital age.

All transaction records are written simultaneously, participants monitor one another, and the system verifies itself without relying on external authorities. As a result, blockchain makes it possible to build a transparent and secure transaction environment without a central institution.

◆ Lesson 2: Why Is Bitcoin Special?


Bitcoin was first introduced to the world in 2009 by an unknown individual or group using the name “Satoshi Nakamoto.” At the time, trust in banks and governments was rapidly deteriorating in the wake of the global financial crisis. Satoshi set out to create a form of money that could operate without central control — a system where people could trade directly with one another without needing a trusted third party.

The result was Bitcoin.

◇ Bitcoin Mining as a Race of Computation – Proof of Work

Bitcoin mining can be compared to a massive number-guessing game. Imagine someone says, “I’m thinking of a number between 1 and 2²². If you guess the correct number, I’ll give you a reward.” Computers then begin trying different combinations at high speed until one of them finds the correct answer. The first machine to succeed earns newly created Bitcoin.

This is the essence of Proof of Work: the participant that performs the most effective computation wins the right to create the next block and receive the reward. As competition intensifies, miners need more powerful hardware to stay competitive.

- Why Individual Mining Has Become Difficult

Bitcoin’s mining difficulty is programmed to increase over time. As a result, the amount of computation required keeps rising, and it has become nearly impossible for an average home computer to mine Bitcoin profitably.

Today, mining is typically carried out in specialized facilities — often called mining farms — filled with hundreds or thousands of high-performance machines. While this raises valid concerns about energy consumption, it is also a critical component of the network’s security model.

◇ Bitcoin: Money or Digital Asset?


One of the oldest debates surrounding Bitcoin is whether it should be considered true “money” or simply a novel kind of asset.

A popular analogy compares Bitcoin to the platypus. The platypus is a mammal, yet it lays eggs, has a duck-like bill, lives in water, and even produces venom. It doesn’t fit neatly into conventional animal classification.

Bitcoin is similarly difficult to categorize. It is called a “cryptocurrency,” but it is not easy to use like traditional cash in everyday life. Instead of being kept in a physical wallet or spent at a supermarket, Bitcoin exists entirely in digital form, and its price fluctuates in real time.

In practice, Bitcoin behaves much more like a digital asset than a conventional currency. It is traded on exchanges, held for investment, and in some countries, it is taxed as a form of property.

- So, What Exactly Is Bitcoin?

Strictly speaking, Bitcoin does not function like traditional legal tender. It is more accurate to describe it as a new kind of digital store of value.

It operates outside the control of central banks and enables direct peer-to-peer transactions using blockchain technology. This structure is fundamentally different from existing monetary systems.

Like the platypus, Bitcoin does not fit neatly into any existing category of asset or currency. Yet it is undeniably real, and it is actively reshaping the global financial system.