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What is Cryptocurrency? And How Does Cryptocurrency Works? (2023)



What Is Cryptocurrency?

Are you interested to know about What Is Cryptocurrency? And How Does Cryptocurrency Work?

In the past few decades, the growth of crypto and other digital assets has skyrocketed to a considerably large extent. With more people investing in cryptocurrencies, it has become one of the biggest digital assets to invest in.

Investors and common people are constantly trying to understand what cryptocurrency is, as it is a wide concept, and understanding it can result in greater advantages.

If you have newly entered or thinking to enter into the field of investment and have no idea what crypto actually is but wants to know more about it and why you should prefer it, you need to keep on reading further.

In this article, we will let you know a lot of facts about cryptocurrency that you probably might or might not know.

We ensure that it will be super fun and addictive for you to know about cryptocurrency.

Though people were initially skeptical about investing in the new currency system when crypto first came into the market, it has with its qualities managed to gain the trust of the investors and has become a digital asset that is alone competing with the traditional currencies and methods and is increasingly becoming popular.

Now you must be wondering what is in cryptocurrency that is making it so popular among the people. So not waiting any further, let’s keep on going!

What is Cryptocurrency?

What is Cryptocurrency?

Cryptocurrency or just simply called crypto is a digital asset or a digital currency, it works as a medium to be invested in. It can also be used to send money from one place to another.

You can withdraw them in cash as well. They are not operated or maintained by any financial institution, bank or government, or any central authority.

What caused Cryptocurrency to be so popular?

Safety and security is definitely a factor that attracted huge popularity towards cryptocurrency. But more than its security, the point that attracted most of the masses was its investment possibility.

Cryptocurrency gives people the opportunity to take better advantage of investment options that they failed to take from the traditional banking methods. Some of the investment benefits that  cryptocurrency offers are

  • It simply gives you access to a huge range of opportunities. The Crypto market is a place where you can simply invest without having to stress much.
  • You can have direct control over your investments while staying at home. You don’t have to go out, regularly visit banks and go through all those tiring processes to track down information about your investments.
  • Also, you won’t have to pay excessive fees for the work. Thus avoiding the extra charged fees is another benefit for word people who opt for cryptocurrency investment.

For some such reasons, the decentralized payment option which people were skeptical about back in the year 2009, within less than a decade has managed to gain their trust.

How does it work?

How Does Cryptocurrency Works

Though you might have a bit of knowledge about Cryptocurrency that has been stated above the working of Cryptocurrency is still a mystery to some. So, the next thing we would be exploring is how Cryptocurrency works.

This will help you have a piece of detailed knowledge about everything related to crypto. So, to begin with, Cryptocurrencies do not work under the supervision of the central regulating authorities or the government.

To make it simple to understand, crypto works beyond the banking system with the help of different types of coins like Bitcoin and others.

1. Generated through Mining

The concerned digital asset, Cryptocurrency, the decentralized payment method is generated using a process named mining.

The process as a whole is a complex setup. The miners are needed to decode certain puzzles of mathematic operations over highly equipped special computers to gain bitcoins in return.

Ideally, it should take 10 minutes per person to mine a bitcoin, but in the real world, the entire process takes approximately a span of 30 days.

2. Selling, purchasing, and storing

Living in today’s world, people and investors have the chance to buy and sell Cryptocurrencies from and to various sources like brokers, individual currency owners, and central exchanges.

There are certain platforms or exchanges, for instance, Coinbase is the easiest source to sell as well as buy Cryptocurrencies.

Once you have purchased the digital asset, Cryptocurrency, it needs to be stored somewhere and that is the function of a digital wallet. You can opt for either hot digital wallets or cold digital wallets. Hot wallets as already described in the article above.

Though it has a lot of advantages it is very vulnerable and thus it is open to fraud and chances of theft. However cold wallet is better for this but it’s tough to make transactions with it due to its limited time availability.

3. Decentralization

Decentralization is a transformative concept that redistributes power and control away from a central authority, fostering a more democratic and resilient system. In various contexts, such as finance, technology, and governance, decentralization ensures that decision-making and operations are dispersed across a network, reducing reliance on a single point of failure.

In the realm of cryptocurrencies, decentralization is a fundamental principle, where blockchain technology facilitates peer-to-peer transactions without the need for intermediaries. This distributed approach enhances security, transparency, and trust, providing individuals with greater autonomy over their assets. Decentralization is not merely a technological shift but a philosophy reshaping how we perceive and organize systems.

4. Investments and other transactions

One of the greatest and biggest advantages of Cryptocurrency is that it’s easy to transfer from one digital wallet to another digital wallet, the owner of which can be anywhere in the world just by using a handy smartphone.

Once you have a smartphone and a crypto wallet you can use them in exchange to :

  • Buy goods and services.
  • Trade
  • Exchange in turn of cash

Why should one choose cryptocurrency over traditional currency?

Suppose you and your friend went to a restaurant to have your favorite meal.

Your friend paid the bill for the food in cash and now you will pay your share in the amount to your friend who got you the food by sending him the money online directly to his account.

Now there definitely could be technical glitches interrupting your smooth process of sending money. Some problems that could arise like :

  • The financial institution might be facing some technical issues or your system might not be working at the moment and that’s thus preventing you from sending the money to your friend immediately.
  • It could be so that your friend’s account has been hacked or is suffering from some sort of denial of service attack or has identified some fraud or theft.
  • In certain cases, it can also be a fact that if you are sending a large amount to a friend the transfer limit may exceed and thus you cannot send all of the money at once

Then who is the one responsible for your problems? It’s definitely a financial institution!

And that is why it called for a new solution that is CRYPTOCURRENCY.

Transactions between two people have been made super easy with the invention of cryptocurrency apps like Bitcoin, Unocoin, etc. It is as simple as that, it just verifies whether you actually want to make the transition if you do, the money is transferred after a short verification process and also gets credited to the receiver’s account. The process is so simple that it can be done in just minutes.

Cryptocurrency has turned all the disadvantages of the banking sector into its advantage.

First, it has no minimum or maximum limit to what extent you can make your payments.

Second, there is no risk of your account getting hacked and thus no point of failure.

Third, they are introducing new cryptocurrencies every day and thus people are looking forward to such a wide range of options.

3 exclusive tips to keep in mind before investing in cryptocurrencies

What Is Cryptocurrency

1. Research

You need to have proper knowledge about the platform you are investing in. You should not blindly trust others. Rather you should do the research yourself. You can read reviews of experienced individuals before investing a penny.

2. Think of a storage wallet

The storing of Crypto after buying them is very essential. So, first, you need to decide on the digital wallet you will stock them in. Each has its separate kind of advantages and needs. So do your research and check what suffices your needs, aspirations, and security requirements, go for it.

3. Diverse your investment

Every successful investor has some exclusive tips. One of the greatest tips for being a professional is diversification. Diversity is the key to universal success. Try to split your investment into different digital currency options available in the market. There are hundreds of options to choose from. So, have proper knowledge before you take a step.

How do I store my purchased or received cryptocurrency?

Now that once you have purchased or received the cryptocurrencies, you need to ensure that it is kept somewhere safe from the risks of hackers and thieves. Since cryptocurrencies are digital assets, so they need to be stored in digital wallets.

In a broader sense, there are two types of wallets that you can choose from

1. Cold storage crypto wallet

This is an offline storage crypto wallet. It does not require you to have a direct connection to the Internet. However, in this, there are some restrictions which you will have to face.

For instance, there is only a certain period of availability within which period only you will have access to it. However, due to its short period of accessibility criteria, it is a safe place where you can store your digital asset.

There are fewer chances of having online risks than that in hot storage crypto wallets.

2. Hot storage crypto wallet

A hot store crypto wallet is exactly the opposite of cold storage crypto wallet. It is used for the online storing of your cryptocurrencies and thus it needs to be connected to your Internet.

Cold storage has some restrictions which have been turned into benefits in the case of hot storage crypto wallets and that is the reason why people often choose the hot storage crypto wallet.

There is no limit on the time of accessibility and you can get access to it at any point in time.

Benefits of Investing in Crypto Currency

Benefits of investing in Crypto Currency

There are certain benefits that you will get access to once you invest in cryptocurrencies or once you think of investing in cryptocurrencies. We have stated below four such benefits of investing.

1. Cost-effective transaction fees

One of the biggest reasons why people prefer cryptocurrency is because they can send money anywhere around the globe. When using cryptocurrency, the transaction fees that have to be paid by the user are often reduced to almost a negligible or no amount.

Wondering how it is done?

It’s possible because cryptocurrency eliminates the need for a third party like PayPal or Visa Help. With the elimination of these third-party verification requirements, the need to pay extra charges for these is removed.

2. Easy transaction and privacy maintenance

As you know that cryptocurrency transaction charges are very low, and it is very easy to use. It also maintains your privacy better than any other. With some simple steps, you can send or even receive cryptocurrencies from anywhere across the world.

They value your privacy. You won’t even have to register yourself at cryptocurrency exchange mediums as you do at financial institutions, it does not require any kind of specific information about you and in these ways, your privacy is maintained.

3. Smooth exchange procedure

The process of sending money from one place to another is very fast when you’re using cryptocurrency. Compared to traditional techniques of transfer, crypto transfers are completed within minutes with some simple verification procedures.

You won’t have to go through an extensive long process to complete your procedure. You would only need your private and public keys and you’re done.

4. 24/7 availability

Since it is a digital currency market, they are available 365 days and 24/7. It is not possible with the traditional currency markets. In the traditional currency markets, they have a limited period of accessibility and availability whereas crypto markets are available for the whole day.

Investors can invest in crypto according to their time preferences and choices. There is no binding that they have to decide where and what to invest within a specified period of time, they can take their time and decide how and in which cryptocurrency they want to invest due to its availability factor.

Now you know why you should definitely opt for cryptocurrency over your traditional options.

5. Global Accessibility

Global accessibility stands as a hallmark of cryptocurrency, transcending geographical boundaries and fostering financial inclusion. Unlike traditional banking systems that may exclude large population segments, cryptocurrencies provide an open door to the global economy. With a simple Internet connection, individuals worldwide can participate in financial transactions, investments, and economic activities without reliance on traditional banking infrastructures.

This accessibility empowers the unbanked and underbanked, offering a means to engage in economic opportunities, savings, and investments. Cryptocurrencies break down barriers, democratizing access to financial services and contributing to a more inclusive global financial landscape.

6. Potential for High Returns

The allure of cryptocurrency lies in its potential for high returns, a tantalizing prospect that has captured the attention of investors globally. The volatile nature of the cryptocurrency market, characterized by rapid price fluctuations, creates opportunities for substantial returns on investment.

Numerous success stories abound of early adopters witnessing exponential growth in their portfolios. While the risks are inherent, the potential rewards are equally enticing, attracting seasoned investors and newcomers seeking to capitalize on market trends. The dynamic and speculative nature of the cryptocurrency market positions it as a unique avenue for those willing to navigate the volatility in pursuit of potentially significant financial gains.



Investment has always been a risky decision. If you are a newbie, it is definitely not expected from you to have all these experiences and thus you might not understand where to invest.

So, when you’re thinking to invest notwithstanding the fact of how trustworthy and reliable the option is, you should always consider all the facts and conditions before deciding on anything.

Even though cryptocurrency is a reliable option, for investors it is best preferred that they go through proper research before trusting it with their eyes closed.

Here we will discuss What Is Cryptocurrency? And How Does Cryptocurrency Works?

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