How Cryptocurrency Works? Basics of Cryptocurrency

How does crypto work? Before knowing that let us know what is cryptocurrency. Well, it's just another currency but in digital format.
How does crypto work? Before knowing that let us know what is cryptocurrency. Well, it's just another currency but in digital format. 

It is not made of any material, paper, and which can't be touched, seen, or felt. Interesting? 

Yes, it is. The digital currency system was introduced by the innovation of blockchain technology. Blockchain is technology or a process to transfer digital currency from one person to another. 

How Cryptocurrency Works

It's simply like we transfer money from one bank account to another.

But the main difference is that crypto is a digital asset, people can create digital wallets to transfer these digital assets from one to another. These are managed by multiple networks like Coinbase, Binance, etc. 

In short, this is the way how crypto works.

What is Cryptocurrency?

Cryptocurrency is a digital asset which has value in terms of world recognized currencies like US dollar, Euro etc. It can be transferred between virtual wallet through blockchain technology. Virtual wallets are owned by human like us. 

There are more than 17,000 cryptocurrencies in the world so far.
For example, Bitcoin is a cryptocurrency where 1 Bitcoin is qual to $44000. This is not a metal coin, it's just named as Bitcoin. Among all other cryptos Bitcoin is mostly valued and popular. A person or a group named "Satoshi Nakamoto" founded Bitcoin.

Anyways, I hope you now understand what is cryptocurrency. At least you have an idea about crypto now. Moving forward to the segment where we will know how crypto works? You will get to know the basic process of cryptocurrency exchanges.

Why Cryptocurrency is invented?

Cryptocurrency is invented to provide a safe and secure transaction between two parties where none of them will be tracked. Neither the currency is vulnerable nor the person's wallet. 

The whole process is done by a strong network where no one knows who is sending currency to whom. For safety and security of currency exchange, this cryptocurrency has been introduced and it's proving that.

In this world, 180 currencies are recognized as legal and registered. Instead of having so many about why this cryptocurrency came into the field.

To understand this, you need to understand money exchange between countries. Let's say you are transferring US dollar to India. But the Indian currency is INR. Thus it needs to be converted from USD to INR at a specific rate. This conversion sometimes takes extra charges.

On top of that we are very familiar with hacking these days. Lot of ATM booths, Banks, multiple VIP accounts has been hacked and lots of money has been taken away by the hackers.

Though we have lot of security measures still this is happening. Recent Covid has taught us how digital payment can be comfortable and safe. In third world countries people are now using VISA cards for purchasing things. Which means digital payments are getting popular and people are getting more prone to hacking.

Lot of us share our bank details publicly without understanding the effects. This is how many people got frauded by criminals. Now cryptocurrency has been invented with a secured currency transfer system which is Blockchain. It's just a address to address transfer. No one knows how and when the balance is getting transferred.

For example, I have virtual crypto wallet and I have given you my address. Without me and you no one knows how much we have exchanged. Even no one track these address to find the person behind this account. That's the fun thing about blockchain technology and that is how crypto works.

This is why Cryptocurrency has been introduced.

How Does Crypto Work?

Cryptocurrency is a wallet to wallet transfer based currency. An individual can open an account in any of the website like Coinbase, Binance or blockchain to transfer crypto.

Different currencies will have different wallet address. Like If you want to transfer/receive Bitcoin then you need to have a Bitcoin wallet address while the address will be different for Shiba Inu, Tether or Ethereum. This is very simple to create addresses which requires just 2-3 clicks.

The important part is you need to make sure that you are transferring to the right address.

Once you transfer the currency to any address it can't be revert back or can't be stopped. Once you click the send button it's gone. No one is there to control and if you write the address wrong you can't complain to anyone.

PROS & CONS Of Cryptocurrency

So, here are few Pros and Cons for cryptocurrency transfer process. You might get an clear idea about how crypto works.


  • Faster transfer
  • Almost charge free.
  • Anytime, any amount you can transfer
  • Wallet to Wallet not person to person. So no one can track you.
  • Secured because transfer happens with lot of algorithm solving backend.
  • No one can track the transfer channel. No chance of hacking.


  • Once the currency has been sent can't be revert.
  • If you send it to wrong address this is gone.
  • No chance of complaining to anyone if you do the mistake.
  • Addresses are random alphanumeric characters which is a bit risky.

Still there are some cons I think mostly you can resolve by being careful. These are not flaws. It's just bit complicated to make it safe and that's how crypto works.

Though cryptocurrency concept has been introduced keeping in mind that it should be secure and fast.
People and investor started thinking that Bitcoin as a cryptocurrency will replace the place of GOLD. 

If you have little knowledge on general currency, and country reserve then you know how gold reserve matters in terms of the currency of a country. If Bitcoin can replace that, it will be a new economy throughout the world.

Thanks a lot for reading so far. Hopefully, you got an idea about what is a cryptocurrency and how crypto works. Give it a share if you think you have learned something. Thanks again. Stay connected with Datacrap. Please give a like to our Inforevz Facebook page.

Comment below if you need any clarification regarding the topic. Our team will get back to you.

Hi, This is Anisha Roy From India. Doing SEO and digital marketing is my passion. I am a professional blogger and digital marketer since 2015.

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