Cryptocurrency is an encrypted, decentralized digital currency transferred between peers and confirmed in an exceedingly public ledger via a process referred to as mining.

Below, we take a simplified look at how cryptocurrencies like bitcoin work.


To understand how cryptocurrency works, you’ll have to learn some basic concepts. Specifically:-

  1. Public Ledgers: All confirmed transactions from the beginning of a cryptocurrency’s creation are stored in a very public ledger. The identities of the coin owners are encrypted, and also the system uses other cryptographic techniques to confirm the legitimacy of record keeping. The ledger ensures that corresponding “digital wallets” can calculate an accurate spendable balance. Also, new transactions are checked to confirm that every transaction uses only coins currently owned by the spender. Bitcoin calls this public ledger a “transaction blockchain.”
  • Transactions: A transfer of funds between two digital wallets is named a transaction. That transaction gets submitted to a public ledger and awaits confirmation. Wallets use an encrypted electronic signature when a transaction is formed. The signature is an encrypted piece of knowledge called a cryptographic signature and it provides proof that the transaction came from the owner of the wallet. The confirmation process takes a touch of your time (ten minutes for bitcoin) while “miners” mine. Mining confirms the transactions and adds them to the general public ledger.
  • Mining: Mining is the process of confirming transactions and adding them to a public ledger. to feature a transaction to the ledger, the “miner” must solve an increasingly-complex computational problem (like a mathematical puzzle). Mining is an open source in order that anyone can confirm the transaction. the primary “miner” to resolve the puzzle adds a “block” of transactions to the ledger. The way within which transactions, blocks, and therefore the public blockchain ledger work together to make sure that nobody can easily add or change a block at will. Once a block is added to the ledger, all correlating transactions are permanent, and that they add an attiny low transaction fee to the miner’s wallet (along with newly created coins). The mining process is what gives value to the coins and is thought of as a proof-of-work system.


Understanding the concepts OF HOW cryptocurrency works is a challenge. One explanation works for some people, and a different explanation works for others. We all learn in different ways.

How does blockchain work?

The blockchain is sort of a decentralized bank ledger, in both cases, the ledger could be a record of transactions and balances. When a cryptocurrency transaction is formed, that transaction is distributed intent on all users hosting a replica of the blockchain. Specific sorts of users called miners then attempt to solve a cryptographic puzzle (using software) which lets them add a “block” of transactions to the ledger. Whoever solves the puzzle first gets some “newly mined” coins as an award (they also get transaction fees paid by people who created the transactions). Sometimes miners pool computing power and share the new coins. The algorithm relies on consensus. If the bulk of users trying to resolve the puzzle all submit the identical transaction data, then it confirms that the transactions are correct. Further, the safety of the blockchain relies on cryptography. Each block is connected to the info within the last block via one-way cryptographic codes called hashes which are designed to create tampering with the blockchain. Offering new coins as rewards, the problem of cracking the cryptographic puzzles, and also the amount of effort it might take to add incorrect data to the blockchain by faking consensus or tampering with the blockchain, helps to make sure against bad actors.


While some cryptocurrencies, including bitcoin, are available for purchase with U.S. dollars, others require that you pay with bitcoin or another cryptocurrency.

To buy cryptocurrencies, you’ll need a “wallet,” an online app that can hold your currency. Generally, you create an account on an exchange, and then you can transfer real money to buy cryptocurrencies such as Bitcoin or EthereumCoinbase is one popular cryptocurrency trading exchange where you can create both a wallet and buy and sell bitcoin and other cryptocurrencies.