What is cryptocurrency and how does it work 2023

Cryptocurrency, sometimes called crypto-currency or crypto, is a form of currency that exists digitally or virtually and uses cryptography to secure transactions.

Cryptocurrencies have no central issue or regulatory authority, instead using a decentralized system to record transactions and issue new units.

What is cryptocurrency:

What is cryptocurrency
What is cryptocurrency

Cryptocurrency is a digital payment system that does not rely on banks to verify transactions. It is a peer-to-peer system that enables you to send and receive payments anywhere. Instead of carrying and exchanging money in the real world, cryptocurrency payments exist purely as a digital entry in an online database describing certain transactions. When you transfer cryptocurrency funds, transactions are recorded in a public ledger. Cryptocurrencies are stored in digital wallets.

Cryptocurrency got its name because it uses encryption to verify transactions. This means that advanced coding involves the storage and transmission of cryptocurrency data between wallets and public ledgers. The purpose of encryption is to provide security and safety.

The first cryptocurrency was Bitcoin, which was founded in 2009 and is still widely known today. Most of the interest in cryptocurrency is to trade for profit, sometimes speculators skyrocket prices.

How does cryptocurrency work:

What is cryptocurrency
What is cryptocurrency

Cryptocurrencies run on a distributed public ledger called a blockchain, which records all transactions updated and held by currency holders.

Units of cryptocurrency are created through a process called mining, which uses computer power to solve complex mathematical problems that makeup coins. Users can buy coins from brokers, then store and spend them using cryptographic wallets.

If you own cryptocurrencies, you do not own anything real. Ownership is a key that allows you to transfer a unit of record or measure from one person to another without any trusted third party.

Although Bitcoin has been around since 2009, applications of cryptocurrency and blockchain technology are emerging financially and are expected to be used more in the future.

Transactions with bonds, stocks, and other financial assets can eventually be traded using technology.

Cryptocurrency example :

What is cryptocurrency
What is cryptocurrency

There are thousands of cryptocurrencies. Some of the most familiar include:-


Founded in 2009, Bitcoin was the first cryptocurrency and is still the most traded currency. The coin was developed by Satoshi Nakamoto – it is widely believed to be a pseudonym for an individual or group whose exact identity is still unknown.

Ethereum :

Developed in 2015, Ethereum is a blockchain platform with its own cryptocurrency, called Ether (ETH) or Ethereum. It is the second most popular cryptocurrency after Bitcoin.


This currency is similar to Bitcoin but has moved faster for new innovations to allow more transactions with faster payments and processing.

Ripple :

Ripple is a distributed laser system that was established in 2012 Ripple can be used to track a variety of transactions, not just cryptocurrencies. Behind this, the organization has worked with various banks and financial institutions.

Non-bitcoins are collectively known as “altcoins” to distinguish cryptocurrencies from the original.

How to buy cryptocurrency :

What is cryptocurrency
What is cryptocurrency

You may be wondering how to buy cryptocurrency safely. Usually involves three steps. These are:

Step 1: Select a platform

The first step is to decide which platform to use. In general, you can choose between a traditional broker or a dedicated cryptocurrency exchange:

  • Traditional brokers: These are online brokers who offer to buy and sell cryptocurrencies as well as other financial assets such as stocks, bonds, and ETFs. These platforms offer low trading costs but low crypto features.
  • Cryptocurrency exchange: There are many cryptocurrency exchanges to choose from, each offering different cryptocurrencies, wallet storage, interest-bearing account options, and more. Many exchanges charge asset-based fees.

When comparing different platforms, consider what cryptocurrencies are on offer, what fees they charge, their security features, storage and withdrawal options, and any educational resources.

Step 2: Financing your account

Once you have chosen your platform, the next step is to deposit money into your account so that you can start trading. Most crypto exchanges allow users to buy crypto using their debit or credit cards using fiat (i.e. government-issued) currencies such as US dollars, British pounds or euros – although this varies by platform.

Crypto purchases with credit cards are considered risky and some exchanges do not support them. Some credit card companies do not allow crypto transactions. This is because cryptocurrencies are highly volatile, and it is not advisable to risk borrowing for certain assets – or paying potentially high credit card transaction fees.

Some platforms will also accept ACH transfers and cable transfers. The recognized payment method per platform and the time taken for deposit or withdrawal are different. Similarly, the time it takes to clear a deposit varies according to the method of payment.

An important factor to consider is the fee. These include potential deposit and withdrawal transaction fees and trading fees. Fees will vary according to the method of payment and the platform, which is something to be researched at the beginning.

Step 3: Place an order

You can place an order through your broker or exchange’s web or mobile platform. If you plan to buy cryptocurrency, you can do this by selecting “Buy”, choosing the type of order, entering the amount of cryptocurrency you want to buy and confirming the order. The same process applies to “sell” orders.

There are other ways to invest in crypto :

These include payment services such as PayPal, Cash App and Venmore, which allow users to buy, sell or hold cryptocurrencies. In addition, there are the following investment vehicles:

  • Bitcoin Trust: You can buy shares of Bitcoin Trust with a regular brokerage account. These vehicles give retail investors exposure to crypto through the stock market.
  • Bitcoin Mutual Funds: There are Bitcoin ETFs and Bitcoin Mutual Funds to choose from.
  • Blockchain stocks or ETFs: You can also indirectly invest in crypto through blockchain companies that specialize in the technology behind crypto and crypto transactions. Alternatively, you can buy stock or ETFs from companies that use blockchain technology.

The best option for you will depend on your investment goals and risk appetite.


What is cryptocurrency?

A digital or virtual currency that uses cryptography for security and operates independently of a central authority.

How can I buy cryptocurrency?

Through online exchanges or platforms that facilitate cryptocurrency trading.

Is it safe to invest in cryptocurrency?

Investing in cryptocurrencies carries risk, so research thoroughly and consider your risk tolerance before investing.

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