Digital Currency (Cambridge (CIE) O Level Computer Science): Revision Note

Digital currency is one that only exists in digital form

Currency is stored in digital wallets or accounts; there is no physical banknotes or coins

It can be exchanged online to pay for goods and services or to transfer money internationally

Digital currency can be either centralised or decentralised

This can make digital currencies highly volatile; meaning their value can fluctuate rapidly in a short period of time

Digital currency investment can be risky due to the volatility

Cryptocurrency is a type of digital currency

All transactions made using cryptocurrency are publicly available and tracked using cryptography

Examples include

• Bitcoin

• Ethereum

A blockchain is a digital ledger that records every transaction made with a particular digital currency

Transactions are time-stamped and added to the blockchain in a permanent and unalterable way

A blockchain is a decentralised technology, meaning that it is not controlled by a single entity or authority

• Instead, every participant in the network has a copy of the ledger and can verify the transactions independently

The blockchain is made up of "blocks" of transactions that are linked together in a "chain" using  cryptographic algorithms

• This creates a secure and tamper-proof record of every transaction made with the digital currency

Each transaction in the blockchain must be verified by multiple participants in the network 

• This verification process ensures that the transaction is legitimate and prevents any fraudulent activity