Crypto crisis: how digital currencies went from boom to collapse
Yuri Popovich had watched his neighbours’ houses burn down to the ground in Kyiv and he needed a safe place to put his money. So he did what millions of amateur investors have done in recent years: he turned to cryptocurrency.
“It was impossible and unsafe to store funds in the form of banknotes. There was a big risk of theft, we also had cases of looting. Therefore, I trusted a ‘stable and reliable’ cryptocurrency. Not for the purpose of speculating, but simply to save,” he says.
The digital asset that Popovich chose in April was terra, a “stablecoin” whose value was supposed to be pegged to the dollar.
It collapsed in May, sparking a rout in the cryptocurrency market whose victims include Popovich. He lost $10,000 (£8,200).
What is a cryptocurrency?
A cryptocurrency is a decentralised digital asset built on top of a blockchain. The first, and still the largest, cryptocurrency, is bitcoin, and its blockchain is secured by miners using a proof-of-work system. But other cryptocurrencies exist too. Ethereum is the second biggest, and is used as a platform for building other decentralised projects, such as stablecoins, NFTs and shitcoins.
What is a blockchain?
A blockchain is the decentralised ledger that tracks the ownership of a cryptocurrency or other digital asset. New transactions are added on to the end of the blockchain, and using cryptography contain a record of every previous transaction. There is no one “official” blockchain, but the network as a whole is kept consistent through a consensus algorithm like proof of work.
What is proof of work?
Proof of work is the consensus algorithm used to secure bitcoin, ethereum and many other large cryptocurrencies. It asks “miners”, who run the computer nodes that make up the physical
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