Author: Akshay Published Date: 29 June 2025
. Cryptocurrency 101: Digital Coins Secured by Code
You’ve probably heard of Bitcoin—the granddaddy of cryptocurrencies that launched the modern crypto world in 2009. But what exactly is a cryptocurrency?
- It’s a digital asset or virtual currency with no physical form.
- It uses cryptography—complex encryption—to secure transactions and ownership.
- It’s decentralised, running on peer-to-peer networks—not governed by banks or governments.
In short, Cryptocurrency lets you send value over the internet, with no middlemen involved.
2. Blockchain: The Immutable Ledger
At the heart of crypto is blockchain, a transparent, tamper-proof ledger shared across millions of computers (nodes) worldwide.
- Every new set of transactions gets grouped in a block, which links to the previous block—hence, a “chain”.
- Before adding a block, nodes validate transactions using consensus mechanisms like Proof-of-Work or Proof-of-Stake rules.
- Once added, a block can’t be altered, ensuring transaction transparency and security.
This makes it the digital equivalent of a notarised, forever ledger—only it doesn’t belong to any one person.
3. Mining & Staking: Earning Crypto
Mining (Proof-of-Work): Think of it like a digital puzzle race:
- Miners use powerful computers to solve cryptographic problems.
- The first to solve it earns the right to add the next block, earning cryptocurrency as a reward.
- Bitcoin still uses PoW, though it’s energy-intensive, comparable to national grids.
Staking (Proof-of-Stake): A greener alternative:
- Instead of solving puzzles, validators lock up crypto (their stake) as collateral.
- If they are honest, they earn rewards. If not, they risk losing their stake.
- Ethereum, the second-largest crypto, successfully transitioned to PoS in 2022.
4. Wallets: Holding Your Crypto Safely
Owning crypto doesn’t mean holding it like cash. You own units recorded on the blockchain that only your wallet keys can access.
- Hot wallets are online, convenient for trades, but susceptible to hacks.
- Cold wallets are offline—more secure, ideal for long-term holding.
Losing your wallet keys is like losing your bank account password—no one else can recover your assets.
5. Different Types of Cryptocurrency
- Bitcoin (BTC): A digital store of value—often called “digital gold.”
- Ethereum (ETH): Enables smart contracts and decentralised apps (DeFi, NFTs).
- Altcoins: Thousands of alternatives like Litecoin, Ripple, Cardano, each targeting different use cases.
- Stablecoins: Pegged to fiat like USDT/USDC; used for trading or as inflation hedges.
6. Smart Contracts: Digital Agreements
On platforms like Ethereum, you can write smart contracts—self-executing code that runs when conditions are met .
Think vending machines: deposit ETH, and the contract automatically delivers digital assets—no intermediaries, no delays.
7. Key Advantages & Considerations
Pros:
- Fast, global, and peer-to-peer: Send value anywhere, anytime—without banks or SWIFT systems.
- Transparency: Every transaction is permanently recorded on the blockchain, yet personal identities stay pseudonymous.
- Decentralisation: No single point of failure or authority.
Cons:
- Volatility: Prices can soar—or crash—in minutes.
- Regulatory risk: Rules vary by country and can change suddenly.
- Security risks: Hacks, lost private keys, and tricky smart contract bugs—one misplaced line of code can cost millions.
- Environmental concerns: PoW is energy-hungry, though PoS is greener.
8. How to Buy, Trade, or Invest
- Choose a reputable exchange (Coinbase, Binance, Kraken).
- Verify your identity—KYC is required.
- Fund your account with fiat or crypto.
- Buy crypto (BTC, ETH, stablecoins).
- Store securely in hot or cold wallets.