Cryptocurrency – What is cryptocurrency and how does it work?

Cryptocurrency has taken the world by storm in 2017 and shows no signs of slowing down, but what exactly is cryptocurrency? A cryptocurrency (or crypto) is a form of payment that can circulate without the need for a central monetary authority such as a government or bank. Learn more about cryptocurrency with this brief introduction to cryptocurrencies, how they work, and what you need to know before investing in them. (Learn more about cryptocurrency on our Complete Beginner’s Guide to Cryptocurrency Investing.)

Introduction to cryptocurrency


Cryptocurrencies are a form of payment that can be exchanged without going through a centralized monetary authority such as a bank or government. In its simplest terms, cryptocurrencies are limited entries in databases no one can change without fulfilling specific conditions. Cryptography (the science of secure communication) provides a secure way to create these databases. Each entry has an identifier, created using public-key cryptography, making transactions traceable but keeping them anonymous.

Bitcoin basics

A cryptocurrency (or crypto) is a form of payment that can circulate without the need for a central monetary authority such as a government or bank. Digital currency, in general, has been gaining popularity over recent years, but bitcoin has really taken off due to its faster processing time, increased privacy, and reduced risk of fraud. So what exactly are cryptocurrencies? How do they function? And how do you get started buying them? Read on to find out more.

What are altcoins?

Altcoin or alternative coin is an umbrella term used to describe any cryptocurrency that isn’t Bitcoin. Altcoins are a combination of Bitcoin and other cryptocurrencies that were created to address shortcomings in Bitcoin’s protocol. Cryptocurrencies like Namecoin, Peercoin, Litecoin, Primecoin, Dogecoin, and Auroracoin are considered altcoins as they aren’t bitcoin but all use blockchain technology to provide global payment systems without a centralized authority. So how do altcoins work? How do you buy altcoins? Learn about what is cryptocurrency and how does it work with our helpful guide!

How do altcoins work?

Alternative coins to bitcoin are collectively known as altcoins. Altcoins have emerged in recent years to expand upon bitcoin’s functionality and adaptability. Some of these alternative digital currencies include Litecoin, Ripple, Namecoin, Dogecoin, Dash, IOTA, and many more. If you’re not sure what altcoins are, don’t worry! This guide will give you a brief introduction to how altcoins work. So, let’s get started: How do altcoins work?

Different types of altcoins

Altcoins (alternative coins) are cryptocurrencies that branch off from Bitcoin because they are using a different algorithm to mine coins or they have some significant difference in how they operate. For example, Litecoin (LTC) uses a different algorithm than Bitcoin, which makes mining Litecoins with standard hardware difficult.

Crptocurrency mining

One of its major differences is faster transactions; instead of taking 10 minutes for one confirmation, as Bitcoin does, Litecoin only takes 2.5 minutes for one confirmation. This means that merchants don’t need to wait as long before they can use their LTC as payment. Some other types of altcoins include Namecoin (NMC), Peercoin (PPC), Primecoin (XPM), Dogecoin (DOGE), and MasterCoin (MSC).
They can be divided into two categories, currencies and platforms.


Currencies try to compete directly with fiat currencies, often because their developers want widespread adoption by consumers.


Platforms use blockchain as a way to transfer units of value (i.e., tokens or coins) between people who have a stake in that platform’s success. The tokens are created based on some algorithm, which determines how much they’re worth.

Is cryptocurrency an investment opportunity?

We’ve seen sharp rises and equally sharp falls in cryptocurrencies such as Bitcoin, Ethereum, Litecoin, and Ripple. No wonder we’re all wondering whether cryptocurrencies are worth investing in. But what exactly are cryptocurrencies (or cryptos)? And do they deserve to be part of your investment portfolio? Let’s take a closer look at what cryptocurrency is—and how you can invest in it.

Cryptocurrency is a digital asset designed to work as a medium of exchange using cryptography to secure transactions, control the creation of additional units, and verify transfers. There have been hundreds of initial coin offerings (ICOs) in recent years that you might want to consider adding some crypto exposure to your investments, but first, let’s understand how bitcoin works.

Who controls cryptocurrency prices?

Crptocurrency prices

Understanding how cryptocurrencies are valued can be a little tricky at first. Unlike other currencies, their values aren’t determined by governments or banks, but rather by a network of buyers and sellers. On any given day, you might see bitcoin going for $7,000 or $700 on different exchanges around the world. Why such different prices? That has to do with supply and demand. But what if you could control those variables—maybe even predict them before they happen? Now that would be something! Here’s how it works

How Cryptocurrencies Work

Cryptocurrencies run on blockchains… no need for middlemen There are few things in our economy more exciting than blockchain technology. It was conceived (in theory) in 2008 as part of an idea to create a decentralized digital currency called Bitcoin, but since then its applications have spread into almost every imaginable industry.

Are cryptocurrencies legal in my country?

The legal status of cryptocurrencies varies substantially from country to country. While some countries have explicitly allowed their use and trade, others have banned or restricted it. Likewise, various government agencies, departments, and courts have classified bitcoins differently. China Central Bank banned banks from using bitcoins as a form of payment in December 2013. In Russia, though cryptocurrencies are legal, it is illegal to actually purchase goods with any currency other than Russian rubles.

Investing in cryptocurrency

invest cryptocurrency

If you’re looking to invest in cryptocurrencies, then you’ve come to the right place. Cryptocurrencies are an emerging form of digital payment that uses cryptography—the science of making and breaking codes—to secure transactions (and make counterfeiting money impossible). The most famous type of cryptocurrency is Bitcoin, which was invented by Satoshi Nakamoto in 2008. Since then, other cryptocurrencies have been created such as Ethereum, Ripple, Dash, and Litecoin. So what exactly are they? Where do they come from? And how can I use them? Let’s take a closer look.

Common Cryptocurrency Questions Answered

Cryptocurrencies are all over the news, with Bitcoin leading headlines around most of 2017. As you likely know, a single Bitcoin has jumped in value from less than $1,000 to more than $15,000 in just a year. Cryptocurrencies are quickly becoming an exciting new asset class for investors around the world. But what are cryptocurrencies exactly? How do they work? And how can we profit from them?

Let’s break down some of these common questions and concerns related to cryptocurrencies What is cryptocurrency? Cryptocurrency refers to a type of digital currency that uses cryptography (hence crypto) to maintain security while making transactions. The most popular form of currency on today’s market is Bitcoins, but there are dozens of other forms as well including Ethereum, Litecoin, Dash, and Dogecoin. Unlike normal fiat currencies like USD or EUR that governments control, cryptocurrencies exist entirely online – no physical coins or bills exist anywhere in our universe!

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