How Crypto Works

A Beginner’s Guide to Cryptocurrency

Cryptocurrency is a digital form of token or “coins.” Basically, crypto is digital money. There’s nothing you can physically hold or touch, but it’s a valid form of payment. It was created back in 2009, but has recently become extremely popular and widely traded. There are more than 4,000 different cryptocurrencies and counting. Cryptocurrency can be used to purchase goods or pay for services, however it’s typically exchanged or used for investment purposes. Part of the appeal with cryptocurrency is that it eliminates the need for a central money authority or banks.

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How Crypto Works

Cryptocurrency works through a list of transactions shared by everyone, known as a blockchain or digital ledger. Digital signatures along the way keep the transactions safe by proving a record that allows other people to verify the transactions are real. Since it’s all digital, it’s important transactions are validated so the system can’t be cheated.

Cryptocurrency has become so popular that some people even use it to purchase real estate. You can buy anything with cryptocurrency, provided the seller is willing to accept it as a payment method. However it’s important to note, in some cases, cryptocurrencies cannot be converted to real currencies. It’s also incredibly volatile and the value fluctuates greatly.

Crypto Wallets

Some cryptocurrencies, such as Bitcoin, can be purchased with U.S. dollars, but others require you to pay with bitcoins or another form of cryptocurrency. If you want to buy crypto, you need what is known as a “wallet.” It’s a little different from what we would envision, as it doesn’t actually store your crypto, but instead stores keys. Your keys are what prove your ownership of your digital money. Keys within the wallet are what allow you to make transactions. Crypto wallets protect your privacy by keeping the passwords that give you access to your cryptocurrencies private, safe and accessible. They range from hardware wallets that look similar to a USB stick to mobile applications.

Crypto Mining

In simple terms, crypto mining is the process of verifying transactions and creating new cryptocurrency. In more complex terms, mining is where units of cryptocurrency, such as Bitcoin, are generated and secured via a very specific algorithmic process. Miners do this by using computer equipment that generates new blocks of transactions that are then added to the cryptocurrency blockchain or system of recording. Crypto miners usually have very sophisticated computer systems and a vast knowledge of the ins and outs of the cryptocurrency.