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What Is Cryptocurrency And How Does It Work?
Cryptocurrency is decentralized digital money that is based on blockchain technology and secured by cryptography. To understand cryptocurrency, one needs to first understand three terminologies – blockchain, decentralization, and cryptography.

What Is Cryptocurrency And How Does It Work?

Definition and meaning of cryptocurrency

Cryptocurrency are digital or virtual currencies that use cryptography to secure transactions and exist digitally or virtually. As opposed to a central authority that issues and regulates cryptocurrencies, cryptocurrencies use a decentralized system that records transactions and issues new units.

What is cryptocurrency?

Cryptocurrency is a digital alternative to traditional banking, allowing users to make and receive payments through peer-to-peer networks. Unlike physical cash which needs to be exchanged in the real world, cryptocurrency exists solely as entries in an online database. Transactions are documented on a public ledger and stored in digital wallets for security.

In order to store and transmit cryptocurrency data between wallets and public ledgers advanced coding is used. The fact that it uses encryption to confirm transactions gave cryptocurrency its name.

Most of the interest in cryptocurrencies is due to trading for profit with speculators often driving prices sky-high. Bitcoin was the first cryptocurrency established in 2009 and is the most widely known.

How does cryptocurrency work?

Blockchain is a distributed public ledger in which all transactions are recorded updated and held by currency holders.

A cryptocurrency is created by mining which involves using computer power to solve complex mathematical problems. Users can also buy the currency from brokers then store and spend it via cryptographic wallets.

You don’t own anything tangible when you own cryptocurrency. You own a key that can be used to transfer records from one person to another without the aid of a third party.

The financial applications of cryptocurrencies and blockchain technology are constantly evolving, and more are anticipated in the future, despite Bitcoin being accessible since 2009. The technology might be used to trade bonds, equities, and other financial assets in the future.

Examples of cryptocurrencies

There are a huge number of cryptocurrencies. Some of the most well-known are in the list below:


The initial cryptocurrency, Bitcoin, is still the most widely used. It was developed by Satoshi Nakamoto widely believed to be a pseudonym for an unknown individual or group.

The Ethereum currency

Ether (ETH), a cryptocurrency designed solely for Ethereum, overtook Bitcoin as the second-most popular cryptocurrency in 2015.

Bitcoin (Litecoin)

It is similar to Bitcoin but has developed faster payments and processes to allow for more transactions than Bitcoin.

The Ripple

As a distributed ledger system Ripple tracks different kinds of transactions, not just cryptocurrency. The company behind it has worked with banks and other financial institutions.

In order to distinguish them from Bitcoin, non-Bitcoin cryptocurrencies are collectively referred to as “altcoins.”

Cryptocurrency – How to buy?

There are typically three steps involved in buying cryptocurrency safely. These are:

1: Platform selection is the first step

Choosing the right platform is the first step. A regular broker or a Bitcoin exchange is generally your two options:

There are also traditional brokers who offer ways to buy and sell cryptocurrency as well as stocks, bonds and ETFs. These brokers typically provide less crypto services while charging reduced trading fees.

Cryptocurrency exchanges offer a variety of cryptocurrencies, wallet storage, interest-bearing accounts, and more. Many exchanges charge asset-based fees.

Compare platforms based on the cryptocurrencies they offer the fees they charge, the security features storage options and the educational resources they offer.

2: Adding funds to your account is the next step

After selecting a platform, you must fund your account in order to begin trading. The majority of crypto exchanges allow users to purchase cryptocurrencies using fiat (government-issued) currencies such as the US Dollar, the British Pound, or the Euro. Yet it differs from one platform to another.

Some exchanges do not allow crypto purchases with credit cards as they are considered risky. Also, some credit card providers forbid cryptocurrency transactions. Because cryptocurrencies are very volatile, it’s not advisable to risk going into debt or paying high credit card transaction fees for certain assets.

In addition to debit and credit cards, some platforms accept ACH transfers and wire transfers. Deposit and withdrawal times vary per platform as well as the time it takes for deposits to clear.

It is important to consider fees. They include trading costs as well as transaction fees for deposits and withdrawals. Fees may vary by platform and payment method.

3: Placing an order is the third step

You can use your broker or exchange from web or mobile interfaces to place an order. To purchase cryptocurrencies, select “buy” then select the order type to enter the number of cryptocurrencies you wish to purchase and confirm your transaction. The same process applies to selling cryptocurrencies.

In addition to investing in cryptocurrencies, there are also other ways to do so. For instance, consumers can buy sell or hold cryptocurrencies through payment systems like PayPal, Cash App, and Venmo.

With Bitcoin trusts, retail investors can get exposure to crypto through a regular brokerage account.

How to buy Blockchain stocks and ETFs?

Via blockchain businesses that are experts in the technology underlying cryptocurrencies, you can indirectly participate in the cryptocurrency market. You can also invest in the stock or exchange-traded funds (ETFs) of businesses that utilize blockchain technology.

The most suitable choice for you will depend on your investment objectives and risk tolerance.

Cryptocurrency – How to store?

The best way to protect cryptocurrency from hacks and theft is to store it safely once you have purchased it. Crypto wallets are physical devices or online software that store private keys securely for your cryptocurrencies. Wallet services may be provided by exchanges or brokers, making it simple for you to store money on the platform directly. Not all brokers or exchanges nevertheless will inevitably provide wallet services.

The terms “hot wallet” and “cold wallet” are used to describe different wallet providers.

“Hot wallets” or cryptographic wallets use internet software to protect your private keys.

To secure your private keys cold wallets (also known as hardware wallets) rely on offline electronic devices.

In general cold wallets charge fees while hot wallets do not.

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