What The Heck is Cryptocurrency and How Does it Work?

What The Heck is Cryptocurrency and How Does it Work

For the longest time I kept asking people “what the heck is cryptocurrency and how does it work?” Thankfully I got a lot of helpful answers. Here’s an easy to understand explanation below!

A lot of buzz about crypto is happening all over the world. Be it Elon Musk, who has been hyping about cryptocurrency for quite some time now. Or be it different companies adopting blockchain and so on.

All of this definitely made a huge number of people curious about crypto – and anxious to understand more!

So the question that you might have (as I used to have) is: What the heck is a cryptocurrency, and how does it work?

Well… if the same goes for you as well, then in this post, I am going to talk about cryptocurrency in brief and the ways you can use it.

So here we go…

What is cryptocurrency?

Cryptocurrency or crypto is basically a digital payment system that is completely decentralized. It means that the payment system does not rely on a bank to verify transactions. Instead, it relies on a P2P or peer to peer system that enables anyone from anywhere to send and receive payments.

Cryptocurrency kills the need to carry a physical form of money carried around the world. Instead, crypto exists in a virtual form on an online database describing transactions.

When you transfer funds using cryptocurrency, the transaction gets recorded in a public ledger, also called, which can be viewed by anyone. Plus, you store cryptocurrency in digital wallets.

Cryptocurrency received its name because it uses encryption to verify transactions. All the transactions are encrypted using advanced technology, which is involved in storing and transmitting cryptocurrency data between wallets and public ledgers.

The first cryptocurrency was Bitcoin, which was founded in 2009. And it is the most popular cryptocurrency out there. You may have heard of this in passing over the years, especially when the market boomed, and everyone who owned Bitcoin suddenly found themselves with a cryptocurrency that was more valuable than they would have ever thought possible.

While the main purpose of cryptocurrency is to make an easier payment solution, people also trade crypto for profit.

Key Concepts Of Cryptocurrency


Cryptocurrencies are becoming increasingly popular and accessible worldwide, especially because cloud mining has made it possible for anyone to mine them without the need for specialized equipment. This has also been made more possible with the use of reliable cloud mining providers.

However, for someone who is looking to take the crypto mining process to an advanced level, it’s important to find the best mining motherboard that can handle continuous mining without the problem of possible system failure. Mining has also been made more possible with the use of reliable cloud mining providers.

With more businesses and individuals accepting crypto coins as payment, it is becoming easier for people to use them. People have many reasons for choosing to use cryptocurrencies. For some, it is a way to support businesses they believe in. Others find cryptocurrencies more convenient and secure than traditional payment methods. And for some people, it is simply a way to invest in exciting new technology.


Crypto makes a transaction with other users extremely easy. You can send funds to anyone anywhere in the world. Also, the transaction happens rapidly and at a lower transaction fee compared to what a bank would charge.


When you are paying with cryptocurrency, there is no need to provide your personal details to the merchant. This means your financial information is protected from being shared with third parties like banks, payment gateway, or the merchant. Since you are sharing zero financial information, it protects your identity from being stolen.


Almost all the cryptocurrencies like Bitcoin, Litecoin, Ethereum, Tezos, and others are using a secured technology called a blockchain. The blockchain gets constantly checked, and it is verifiable by a huge amount of computing power.


Your crypto funds are not tied to a financial institute or government. Instead, they are available to you anywhere in the world. There is no need to worry about currency exchange fees or anything. However, potential investors should be informed that profits made from the trading, holding or transactions are subject to crypto taxes, just as any other assets.


Every crypto transaction gets recorded on a blockchain, and it is published publicly. This makes crypto transactions transparent. And there is no room for manipulating the transactions and changing the money supply.


Unlike a credit card payment, crypto payments cannot be reversed. This is a great thing for anyone who is receiving funds. For instance, if you are providing services to your clients, then they cannot reverse back the transaction after some time. This is a common thing with credit card transactions or using online payment services like PayPal.

How does cryptocurrency work?

Bitcoin was the first and the most popular cryptocurrency out there. But there are thousands of other cryptocurrencies that also exist out there.

Different cryptocurrencies serve different purposes. For instance, cryptocurrencies like Litecoin Bitcoin Cash share Bitcoin’s characteristics. But they do explore new ways to process transactions.

Similarly, Ethereum, another hugely popular cryptocurrency, focuses on smart contracts. It can be used to run applications and create contracts.

Most cryptocurrencies run on a basic idea called the blockchain, which is key to understanding how cryptocurrency works.

To make it easy for you, here is a brief explanation:

  • In simple words, you can say that a blockchain is a list of transactions that can be viewed and verified by anyone. For instance, Bitcoin’s blockchain records every time someone sends or receives Bitcoin. The list of transactions is a fundamental thing for any crypto. Since it enables secure payments to be made between two people who don’t know each other and don’t have to rely on a third party like the bank.
  • Blockchain technology is also pretty unique. Since it has many uses beyond keeping cryptocurrencies funational. Blockchain is being used for medical research, improving the sharing of healthcare records, streamlining supply chains, increasing privacy on the internet, and so on.
  • The blockchain ledger is split across all the computers on the network, which are constantly verifying that the blockchain is accurate. As a result, there is no central vault, entity or database that can be hacked or manipulated. This is another reason why the cryptocurrency is extremely secure in nature.

Why Should One Invest In Cryptocurrency?

Ideal For Long Time Investments:

Cryptocurrency has been well known for giving good returns for a long time. This is what makes it one of the good investment options. The crypto market is extremely volatile, which can make the price of any crypto coin go up or down. As a result, making profits from crypto in a short span of time is not a cup of tea for everyone.

But if you hold a coin for a really long time, you are going to be in profit. But make sure to pick a good coin that has strong fundamentals for your investment.

Gives You Full Control Over Your Assets:

With crypto, you get full control over your assets. As crypto is based on a decentralized network, there is no involvement of a third party. As a result, the price of a coin cannot be manipulated. Instead, it completely depends on the market and how traders are trading a specific coin.

Deflationary Assets:

Most cryptocurrencies like Bitcoin have a limited supply, which makes such coins deflationary assets. This means that Bitcoin’s purchasing power would increase over a period of time. Hence holding it for a long time is definitely a good idea. But there are coins that have an unlimited number of supply. And such coins aren’t good for long-term investment.

So if you are looking ahead to investing in cryptocurrencies but not sure where to start, I would recommend you to check out The Money Mongers. It is one of the top resources to learn about crypto investments.

Final Words on Cryptocurrency

So that was all about what cryptocurrency is and how it works. I hope this has answered all your questions about crypto. But if you do have any other questions, feel free to drop a comment below.

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