Cryptocurrency explained: What you need to know to get started

Cryptocurrency is changing the way people think about money. It’s not just a trend — it’s a new financial system that offers speed, freedom, privacy, and global access. Whether you're new to crypto or want a clearer picture, this guide will walk you through why it matters and how it works.

What makes cryptocurrency worth using?

Cryptocurrency isn’t just for tech experts anymore. Today, it's a practical choice for people and businesses looking for speed, savings, and security. From private payments to global transfers, crypto offers a modern alternative to the old-school banking system.

Here are some of the reasons why more people are starting to trust and use it:

Faster, cheaper, and more accessible

Cryptocurrencies are designed to be efficient and cost-effective, especially for international transfers. Traditional banks and payment platforms often charge high fees and take several days to complete cross-border transactions. In contrast, cryptocurrencies can move across borders in minutes—often with significantly lower fees.

They also don't rely on intermediaries like banks or clearing houses. This peer-to-peer model cuts out many costs associated with traditional finance, such as salaries, server upkeep, and office overheads—passing the savings directly to users.

Moreover, since crypto works online, anyone with an internet connection can access it. This is mostly valuable in areas where traditional banks are hard to reach or unreliable.

A safer way to send and store money

One of the strongest advantages of using cryptocurrency is its built-in security. Transactions are protected by advanced cryptographic techniques that make it extremely hard to tamper with or forge them. Plus, once a transaction is confirmed and added to the blockchain, it can’t be changed or reversed, offering strong protection against fraud and chargebacks.

The blockchain also ensures every transaction is verifiable and transparent, which boosts trust between users without needing a central authority like a bank.

Pseudonymous privacy

Crypto offers a unique level of privacy, often referred to as pseudo-anonymity. This means your transactions are visible on the blockchain, but your identity isn't automatically attached to them.

Instead of names, users are represented by wallet addresses—strings of characters like ‘0x1234abcd…’ or ‘bc1abc123….’ Unless you publicly claim or share that a wallet is yours, it’s nearly impossible for someone to know who’s behind it. You can use crypto without revealing personal details, which helps protect your privacy in the digital world.

Crypto is always on—anytime, anywhere

One of the most powerful features of cryptocurrency is that it's global and never sleeps. You can send, receive, or manage your funds 24/7, no matter where you are in the world.

There are no banking hours, no need to wait for approval from a third party, and no restrictions based on geography. Even though some countries may regulate crypto more strictly than others, the technology is borderless. As long as you have internet access and a wallet, you can use your funds however you choose.

How do cryptocurrency transactions work?

Cryptocurrency transactions involve transferring digital assets from one person to another through a blockchain network. Here's how the process works:

1. Start the transaction:

・When you want to send cryptocurrency, you use a wallet, a software or hardware tool that stores your private and public keys.

・The private key is used to sign the transaction and prove ownership of the funds, while the public key acts as your address to receive funds.

・You enter the recipient's public wallet address, specify the amount of cryptocurrency to send, and then initiate the transaction.

2. Broadcast to the network:

・Once signed, the transaction is broadcasted to the cryptocurrency network, spread to all participating nodes (computers connected to the network).

3. Verify with Miners or Validators:

・In a Proof of Work (PoW) system like Bitcoin, miners compete to solve complex mathematical problems to validate transactions and add them to the blockchain.

・In a Proof of Stake (PoS) system like Ethereum 2.0, validators are chosen based on the number of coins they hold and are willing to ’stake’ as collateral.

・These systems check that:

・You have enough funds.

・You used the correct key.

・You’re not trying to spend the same coins twice.

4. Add it to the Blockchain:

・Once approved, the transaction is grouped with others into a block.

・This block is added to the blockchain, a public ledger of all transactions made with that cryptocurrency.

・The blockchain is immutable, meaning it cannot be altered or deleted once a transaction is added.

5. Confirmation:

・Each block added to the blockchain represents a confirmation. The more confirmations a transaction has, the more secure it is considered.

・Typically, after a few confirmations, the transaction is considered irreversible.

6. Completion:

・The recipient's wallet detects the transaction on the blockchain and updates their balance accordingly. The transaction is now complete, and the cryptocurrency has successfully been transferred.

This entire process is decentralised, meaning it doesn't rely on any central authority, like a bank, but rather on a distributed computer network that collectively verifies and secures the transaction.

What is Blockchain?

A blockchain records and stores data without a central authority, like a bank or company. Instead of keeping all data in one place, blockchain spreads it across a network of computers. This is called decentralisation.

Here’s how it works:

・Information is stored in ‘blocks.’

・Each block links to the one before it—forming a ‘chain.’

・The data is locked in using cryptography, making it tamper-proof.

The idea was first introduced in 2008 by Satoshi Nakamoto, the creator of Bitcoin. Their goal was to solve the double-spend problem—how to create purely digital money that can’t be copied or spent twice. Blockchain made that possible.

At the heart of every cryptocurrency is a consensus mechanism—a rule system ensuring only valid data is added to the blockchain.

What is a Crypto Wallet?

A crypto wallet is a tool that lets you store, send, and receive cryptocurrency. While all wallets perform the same basic function—managing crypto—how they work and who controls the private keys can differ.

Crypto wallets are generally divided into two main categories:

・Hot vs. Cold (whether they are connected to the internet)

・Self-custodial vs. Custodial (who controls your private keys)

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Hot Wallets (Connected to the Internet)

Hot wallets are online and easy to use for everyday transactions, but they are more exposed to hacking risks.

Self-Custodial Hot Wallets

・You control your private keys.

・Requires careful handling of your recovery phrase and device security.

Examples:

・MetaMask

・Rabby Wallet

・Trust Wallet

・Phantom (for Solana)

Custodial Hot Wallets (Exchange Accounts)

・The exchange controls your private keys.

・Easier for beginners, but you rely on the exchange’s security.

Examples:

・Binance

・Coinbase

・Crypto.com

・OKX

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Cold Wallets (Offline Storage)

Cold wallets store your private keys offline, making them highly secure and ideal for long-term storage.

Self-Custodial Cold Wallets

・You fully control your private keys.

・Safer from online threats but requires secure physical storage.

Examples:

・Ledger Nano S Plus / Nano X

・Trezor Model One / Model T

・Keystone Wallet

・GridPlus Lattice1

Wallet Type Overview

Want to learn more about using cryptocurrency?

Learning how cryptocurrency works is the first step toward taking control of your financial freedom. If you’re curious to explore more—from beginner basics to advanced strategies—visit LearnCrypto.com for free, easy-to-understand guides.