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Cryptocurrency Easy Explanation and How Does it Work?

Cryptocurrency Easy Explanation

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In Today’s world cryptocurrency is a popular topic to discuss about. But most of them don’t know what this is and how this works. So what is Cryptocurrency easy explanation?

A cryptocurrency is a virtual form of money or digital currency that uses cryptography for security. This article is about Cryptocurrency easy explanation. By the end of this article, we hope you’ll get a basic idea of how cryptocurrencies work.

Cryptocurrencies are decentralized which means they operate independently of a central bank or government authority or financial institution. Cryptocurrencies exist only in an electric form, unlike traditional physical currencies like coins or bank notes. They exist as entries in a digital ledger called the blockchain.

The most popular of cryptocurrencies is Bitcoin. There are also many others like it such as- Ethereum, Litecoin, Ripple, etc. Each cryptocurrency operates on a technology called blockchain, which is a decentralized and distributed digital ledger technology that records all transactions made with that currency.

Here is a step-by-step cryptocurrency easy explanation of how it works-

●     Encryption

●     Blockchain Technology

●     Decentralization

●     Mining and Verification

●     Digital Wallets

●     Peer-to-peer Transactions

●     Limited Supply


Mining is the process by which cryptocurrencies are created and they are issued by initial coin offerings (ICOs). After creating they are stored in digital wallets which can be considered as virtual bank accounts that hold the cryptocurrencies.

Blockchain Technology

Blockchain technology can be referred to as a foundation upon which cryptocurrency is built. A Blockchain is a transparent, decentralized ledger that records all transactions across a computer network. It is a public database that keeps secure and indefinite records of each transaction.

Each transaction is organized into a block, which is then serially added to the chain. Because of this, modifying or tampering with previous transactions is nearly impossible and thus makes the technology secure and trusted.


Decentralized means no central authority is involved with the process. Cryptocurrencies are not controlled by a central authority like a government bank or other financial institutions. Instead, they rely on a node-based decentralized computer network to keep the system’s integrity. Cryptocurrencies are also immune to censorship and interference thanks to their decentralization.

Mining and Verification

Mining is the process by which transactions get validated and then they are added to the blockchain. With the help of powerful computers, miners solve difficult mathematical problems, and the result is the creation of new cryptocurrency units. The network’s integrity and security are guaranteed by this procedure.

Digital Wallets

After creating a currency a wallet is needed to store and manage them. As cryptocurrencies are digital forms of money so storage is also called a digital wallet. These wallets can be programming based, for example, applications or PC projects, or equipment based, as actual gadgets. To securely transfer and access their cryptocurrencies, wallets provide users with unique cryptographic keys.

Peer-to-Peer Transactions

Cryptocurrencies offer direct peer-to-peer transactions without the need for intermediaries like banks. With a digital wallet, users can quickly send and receive cryptocurrencies to anyone, anywhere in the world. This also offers lower transaction fees compared to any other traditional financial system.

Limited Supply

Many cryptocurrencies have a limited supply where the term “limited supply” refers to the fact that there is a maximum number of units that can ever exist. For example, Bitcoin has a supply of 21 Millon which is a limited amount. This shortage can add to the worth of cryptographic forms of money, as demand increases while the supply remains fixed.


So, these are the basics of cryptocurrency easy explanation. It’s important to note that although cryptocurrencies provide advantages like security and decentralization, they also come with risks. There have been cases of hacking, scams, and regulatory challenges in the cryptocurrency world. Moreover, the value of cryptocurrencies can be highly volatile. For this reason, when dealing with cryptocurrencies, thorough research and caution is essential.

Hope that this article can answer your question of what is cryptocurrency easy explanation.

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