What is Cryptocurrency And How Does It work

Cryptocurrencies are digital currencies whose transactions and management do not rely on or can be verified by banks or any other central body.

It is an electronic currency that can be exchanged between any two parties, no matter their locations. Crytocurrencies are decentralized digital or virtual currencies.

They are built on blockchain technology in order to facilitate and record their transactions and secured by cryptography.

To understand crypto, you must be familiar with the following three terms: decentralization, Blockchain, and cryptography.

So let me explain them one-by-one.


Decentralization in this sense is when decision-taking and control are transferred from a centralized entity that is an individual or organization to distributed networks. It is possible for a transaction to be decentralized if it runs from collective networks of participants using a majority rule.

Cryptocurrency being decentralized facilitates its transactions and minimizes the taxes that could have been imposed on them by the government or any other body if they were centralized.


A blockchain is a distributed database that is shared for the recording of transactions in business networks. it is a form of distributed ledger technology that records transactions or other data in a chronological order. It is a string of digital blocks that are chained together using cryptography. A Blockchain is called an immuted ledger because it can never be altered, destroyed, or deleted.

The first block in the blockchain, also known as the genesis block, contains information on the time interval between blocks, the complexity of tasks that need to be solved in order to create new blocks, and a reference to all previous blocks.

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The most important elements in each block are its hash and its cryptographic signature. A cryptographic hash is an input from a message that has been processed with an algorithm that generates output by changing some of the input’s bits.

To learn more about Blockchain Technology, You can check out our guide on that by visiting this page.


Cryptography is the study of secure communication between two bodies that send and receive information, preventing disclosure of such communication to a third party. In the cryptocurrency space, digital assets can be transacted and verified without the need for a trusted third-party.

These transactions are recorded on public ledgers and stored in digital wallets.

How does cryptocurreny work?

Cryptocurrency is generated or run on a public immutable ledger known as a blockchain, and data is encrypted. The creation of a unit of cryptocurrency is done through a process called mining.


Mining is the process of solving complicated mathematical puzzles to generate new coins and validate transactions.

Blockchain mining involves a network of computers at different locations that validate blockchain transactions. Anybody venturing into mining must be grounded in blockchain technology and must be able to provide the hardware requirements.

Minig can be done in different ways; we have solo mining, individual mining, and pool minig. To learn more about mining, you can check out this page.

Buying, Storing, and Selling of Cryptocurrency.

Buying crypto:

Depending on your preferences and budget, you can buy crypto from exchanges, brokers, and individual owners.

An exchange is a platform where buyers and sellers meet for trading. Examples are Binance, Coinbase, etc.

You can buy any crypto asset with fiat currency on any exchange, transfer from one exchange to another, trade one crypto asset against another, and even withdraw your crypto into fiat.

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The price of cryptocurrency across different exchanges must be the same, though sometimes it varies. Such variation is considered abnormal and is usually normalized by crypto arbitrage traders.

Apart from buying crypto from an exchange (broker), you can buy directly from a user. This process is known as peer-to-peer transaction, and unless done with friends very close to you, it is a very risky endeavor as you can be scammed in the process and there is no way to track and confront the scammer.

Storing Crypto:

Cryptocurreny is stored in a digital wallet. This wallet can be hot or cold. A hot wallet is one that is connected to networks and stored online,

A cold wallet is a wallet that is not connected to networks or stored online. It is a form of hardware wallet where crypto is stored offline to reduce the chance of scammers hacking into it. Although the cold wallet is a very safe way of storing our crypto assets, users must be aware of how they keep the hard wallet to prevent misplacement or rust.

Selling crypto:

Just like when buying crypto assets, crypto can be sold in a variety of ways, including through exchanges and peer-to-peer methods. On exchanges, you can sell your coin to another coin or fiat currency and withdraw it directly into your bank.

Also, you can negotiate with friends and sell your crypto for fiat directly to them.

Investing in Crypto:

When you hear about investing in crypto, it means buying and holding one or more cryptocurrencies for a long period of time so that they appreciate in value. Another alternative name for this is HODLing.

HODLing does not require much knowledge about technical or fundamental analysis. HODLing can last months or even years, depending on the bughet of the investors.

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Types of cryptocurrency.

There are thousands of cryptocurrencies available today, but in this article, we will look at the top 5 types of cryptocurrencies.

1) Bitcoin (BTC)

Bitcoin remains the best known type and the world’s first cryptocurrency. It has its own blockchain where transactions can be verified.

2) Binanace coin (BNB)

As of today, Binance remains the largest cryptocurrency exchange. Users who pay in BNB will have their transaction fees reduced as a result of this exchange.It can be used to exchange other cryptocurrencies like bitcoin, ethereum, etc.

BNB was created in 2017 and used the Ethereum blockchain before it became a native currency.

3) Ethereum (ETH).

ETH is the second most popular digital currency after bitcoin. It operates on a decentralized computer network or digital ledger called “blockchain,” where all transactions are recorded and verified. The individual unit of ethereum is called ether.

Ethereum has two aims: it is either a medium of exchange or a store of value.

4) Solona (SOL)

Solona is one of the most well-known cryptocurrency coins among the thousands that exist today.The unit of it is sol, and the platform is called solona.

The main purpose of solona is to improve blockchain scalability by using the combination of proof of stake and proof of history.

Tether (USDT)

Tether is a cryptocurrency that is hosted between the Bitcoin and Ethereum blockchains. It is a stable coin because its price or value does not change frequently. USDT is the world’s third biggest cryptocurrency by market value.


As always, the information on this page is based on our experience and the research we have done. You can refer to our disclaimer page to know how you should treat information on this website.


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