How Cryptocurrency Works

Cryptocurrency is a decentralized and encrypted digital currency which is transferable between peers and a later confirmation in a public ledger through a process known as crypto-mining. Cryptocurrencies have become very popular in today’s digital age where consumers prefer to make payments at the comfort of their homes or offices using a personal computer or even a mobile device such as a tablet or a smartphone. In this article, we will take a clear perspective of how bitcoin and other cryptocurrencies work and have utility in the market. This guide’s goal is to coach beginners about digital currencies otherwise known as cryptocurrencies.

What you need to know as a user

Cryptocurrency is the equivalent of using a debit card or PayPal to make purchases online except for the fact that the numbers on your computer or smartphone screen represent digital currency in place of fiat currency like the Euro, Sterling pound or the US dollar. All you need to do as a prospective user is to set up a Coinbase account where you can save, buy or even use your cryptocurrency to make online purchases. You will not need to understand the fundamental principles behind cryptocurrency for you to use it. All you need to know is to understand the workings of the monetary system in the global economy such as how you use your credit or debit card to pay for products and services.

However, you will need to understand the concept behind digital currency so you can have a grasp of what cryptocurrency is all about. You will also need to understand blockchain technology and how it works in both the transaction and ledger technologies and most importantly the concept of cryptography. Cryptocurrency comes in the form of a digital currency with every process being secured by cryptography and the transactions are recorded using the blockchain technology.

How it works

All the bitcoin cryptocurrency transactions that have been confirmed from the beginning are stored in a public ledger using blockchain technology such as TBIS. The coin owner’s identity undergoes encryption, and the legitimacy of the records that are kept is ensured by the use of other techniques in cryptography such as what happens in the titanium bar. The ledger makes sure that that the corresponding amount in the form of digital wallet is corresponding to the spendable balance in an accurate manner. To ensure that the bitcoins used by the owner are the ones that are strictly used in the transaction, new transactions are thoroughly checked and recorded in the ledgers. This public ledger is known to the bitcoin cryptocurrency as the transaction blockchain.


A transaction in the world of digital currency is the fund’s transfer between two or more digital wallets which is submitted to a public ledger where it waits to be confirmed. Wallets utilize an electronic signature whenever a transaction is made between cryptocurrency wallets. The encrypted electronic signature which is also known as a cryptographic signature gives an algorithmic proof that the transaction has been made by the person or entity who owns that particular wallet. It takes a bit of time for the confirmation message to arrive with the bitcoin cryptocurrency taking ten minutes on average to have the transaction approved.

Cryptocurrency mining

In the most basic terms, cryptocurrency mining is the process by which transactions are confirmed and added to the public ledger. For the transaction to be added to the public ledger, the cryptocurrency miner will have to solve an extremely sophisticated problem of computation which resembles a mathematical puzzle. Mining is an open source endeavor which means that anybody can have the transaction confirmed. A block of transactions is added to the public ledger by the first cryptocurrency miner who solves the algorithm.


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