Starting with a fundamental question: what is cryptocurrency? From there, this cryptocurrency beginner’s guide defines and explains how cryptocurrency works, and why it has become such a huge deal to the world. By the end of this article, you will have an idea of the basics and be ready to dive into the exciting world of digital money.
What is Cryptocurrency?
In its most simplified explanation, cryptocurrency is simply a form of digital cash. It is as good as cold cash, but you cannot touch it; you can buy things with it, invest in it, or send money anywhere literally to anyone. The best? It’s built on the blockchain, a super-safe way for tracking transactions without needing any bank or middleman.

Unlike money we happen to use every day, like dollars or euros, cryptocurrency doesn’t rely on banks or governments. It’s decentralized, meaning that it works on a network of computers, so-called nodes, which are distributed all over the world. Each and every time any transaction happens along the network, it’s checked for its accuracy and recorded. Therefore, in theory, it’s virtually impossible to counterfeit or manipulate any kind of transaction. Think of cryptocurrency as a new form of global money, available to anyone with access to the Internet, where you are your own bank.
So, how does cryptocurrency differ from regular money?
You might wonder how cryptocurrency differs from traditional money in your wallet. Here’s a rundown:
- Decentralized System: Your traditional money—the U.S. dollar, for example—is controlled centrally, whether by the government or your bank. Regarding cryptocurrency, there is no single company or organization behind it. The system is dispersed across thousands of computers; hence, no single entity possesses absolute control.
- Limited Supply: Most cryptocurrencies, including Bitcoin, provide a fixed cap on the amount that can exist. For example, 21 million Bitcoins will ever be mined. Some of these inbuilt reasons for scarcity relate many to Bitcoin as gold. On the other hand, governments can always print the quantities they want, thus leading to inflationary pressures.
- Safe and Private: Transacting through your bank means that the bank has all information regarding to whom you pay, how much, and when. The transactions in cryptocurrency have a little mask of privacy because they appear on a blockchain through your digital wallet address and not through personal information.
- Fast and affordable: Any time you have tried to send money to another country, you were often hit with an obscenely high fee or worse, you had to wait days before the money actually went through. You could send money with cryptocurrencies at incredibly high speeds and very inexpensively from anywhere around the globe. In many instances, you could move money in minutes with just a tiny transaction fee, depending on the type of cryptocurrency you happen to be using.
Why are people so hyped about cryptocurrency?
Cryptocurrency really is the game-changer in the world of finance due to a number of reasons:
- It’s Global and Accessible: Whether it is New York or Nairobi, all one needs to access and use cryptocurrency is an internet connection. This is a huge advantage in most developing countries where economies are unstable or people do not have very reliable access to traditional banks.
- Lower Fees, Faster Payments: As some of the other major complaints against them, traditional banks often make you wait and pay a lot to transfer money—especially internationally. Cryptocurrencies can negate these issues by facilitating much cheaper and quicker transactions.
- Financial Freedom: In the case of cryptocurrency, the money is yours, and you are in control of it. No bank to hold your money, no third-party verification of your transactions. This has meant a sense of financial freedom for many in countries that are often plagued by untrustworthy banking systems.
- Investment Potential: Many are getting themselves introduced to cryptocurrencies like Bitcoin and Ethereum since they have the possibility of appreciating in value. Early investors in Bitcoin saw huge returns as the price rose from a few cents to several thousand dollars.
Popular Cryptocurrencies You Should Know
There are literally thousands of cryptocurrencies out there, but here’s a few of the big names you’ll probably come across.

- Bitcoin (BTC): The first and most well-known cryptocurrency, Bitcoin was created in 2009 by an anonymous person, or group, under the pseudonym of Satoshi Nakamato. Bitcoin is often referred to as “digital gold” for being the first to solve the so-called double-spending problem of digital money with no central authority.
- Ethereum (ETH): Unlike Bitcoin, Ethereum wasn’t just created to be a digital currency. Its blockchain also has functionality to enable smart contracts, which are self-executing contracts that have the terms of the agreement written directly within lines of code. This makes Ethereum the backbone of so many decentralized apps and services, everything from financial systems to games and NFTs.
- Litecoin (LTC): Most would consider it to be the “silver” in comparison with Bitcoin’s “gold.” It was created in 2011 as a lighter, faster version of Bitcoin. It is also known for having quicker transaction times, making it more suitable for everyday transactions.
What Can You Do with Cryptocurrency?
Now that you know what cryptocurrency is, you would probably be wondering what you can actually do with it. Here are a few things:
- Buy Goods and Services: You can use cryptocurrency to buy everything from pizza to electronics, increasingly. Retailers from all walks of life have begun to accept Bitcoin and other digital currencies as means of payment.
- Investing or Trading: Others buy cryptocurrency for holding as an investment, hoping that it rises even further in the future. These people actively trade the substance on online exchanges, trying to make a quick buck off daily swings.
- Send Money Across the Border: Need to wire some cash to a friend or someone abroad? Cryptocurrency allows you to transfer money without a bank or remittance service.
- DeFi: DeFi, short for decentralized finance, is a system allowing people to lend, borrow, and earn interest from their digital cryptocurrency without having to deal with a bank or any more traditional form of financial institution.
The Future of Cryptocurrency
Cryptocurrency is still in its early days but is growing fast. It’s becoming more mainstream, too, as major companies like Tesla, PayPal, and even Visa start to get involved with cryptocurrency. Governments, too, are waking up to this phenomenon, with many countries contemplating the issue of digital currencies.
As cryptocurrency evolves, it is going to play a big role in the future of finances. Want to invest, spend, or just learn more? It is a great start to know the basics about cryptocurrency.