In theory, cryptocurrency is a form of currency that plays the same function as fiat currency [→], meaning it is a medium of exchange for the purchase of goods and services.
However, unlike traditional currencies where supply and governance are handled by a central government, cryptocurrency supply is ingrained in technological infrastructure and non-central governance, with most of it enforced using multiple cryptographic techniques.
Cryptocurrencies that are mostly set up as an alternative to fiat currencies usually follow known market dynamics. Thus, exchange rates against other currencies are based on supply and demand, limiting supply to avoid overinflation, etc.
That being said, most coins at the moment have high valuations largely due to speculation.
There are also blockchain [↗] projects where the goal is not to introduce an alternative currency, but to use coins as a mechanism to govern the blockchain's true purpose, for example, penalizing or rewarding members by taking or giving them coins, thereby incentivizing project participants to act in line with the governing rules.
This is especially profound in cases where the coins used within the project are funded with real money contributed by the members.
A digital currency doesn't necessarily fall under the cryptocurrency spectrum; it could simply be a digital representation of a fiat currency.
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