How is 'cryptocurrency' best described?

Cryptocurrency is best described as a digital currency that utilizes cryptography for the security and verification of transactions. This characteristic of employing cryptographic techniques is crucial, as it ensures that transactions are secure, verifiable, and difficult to counterfeit. Unlike traditional currencies, which are issued and regulated by a central authority, cryptocurrencies are typically decentralized and operate on blockchain technology. This decentralization provides an extra layer of security and transparency.

The other descriptions do not accurately capture the essence of cryptocurrency. A physical currency implies tangible notes or coins, which cryptocurrency does not possess, as it exists only in digital form. Describing cryptocurrency as a system for exchanging goods without currency does not reflect its function as a currency itself, since cryptocurrencies are used primarily as a medium of exchange. Lastly, associating cryptocurrency with traditional banking operations overlooks the fundamental differences in structure and governance between cryptocurrencies and established banking systems.