Cryptocurrencies represent a subset of alternative currencies or, specifically, of digital currencies.
They were designed for the purpose of exchanging digital information through a process made possible by certain principles of cryptography. Cryptography is used to secure the transactions and to control the creation of new coins.
In 2009 Bitcoin became the first decentralized cryptocurrency. It uses SHA-256, which is a set of cryptographic hash functions designed by the U.S National Security Agency.
In April 2011, Namecoin, the first altcoin, was created to form a decentralized DNS to make internet censorship more difficult.
Litecoin was released in October 2011, becoming the first successful cryptocurrency to use scrypt as its hash function rather than SHA-256.
Unlike centralized banking, where governments control the value of a currency, like dollars or euros, through the process of printing fiat money, authorities have no control over cryptocurrencies as they are completely decentralized.
Cryptocurrencies are legal in most countries, with Iceland and Vietnam being an exception – Iceland mainly due to their freeze on foreign exchange, they are not free from regulations and restrictions. China has banned financial institutions from handling bitcoins and Russia, while saying cryptocurrency is legal, has made it illegal to purchase goods with any currency other than Russian rubles.