How Does Cryptocurrency Work? A Beginner's Guide

Explore the world of cryptocurrency and how you can start buying, selling, and trading it. Learn about blockchain technology and how it tracks your digital assets.

Cryptocurrency is digital money that doesn’t require a bank or financial institution to verify transactions and can be used for purchases or as an investment. Transactions are then verified and recorded on a blockchain, an unchangeable ledger that tracks and records assets and trades.   

If you’re interested in learning more about cryptocurrency, this guide explains how it works and what you need to know before investing in these financial assets.

What is cryptocurrency?

Cryptocurrency, or crypto, is a digital payment platform that eliminates the need to carry physical money. It exists only in digital form, and although people mainly use it for online transactions, you can make some physical purchases. Unlike traditional money printed only by the government, several companies sell cryptocurrency. 

Cryptocurrencies are fungible, meaning the value remains the same when bought, sold, or traded. Cryptocurrency isn’t the same as non-fungible tokens (NFTs) with variable values. For example, one dollar in crypto will always be one dollar, whereas the value of one NFT dollar depends on the digital asset it’s attached to.

Although government regulations are absent from the cryptocurrency market, they are taxable assets. You’ll need to file any profit or loss with the Internal Revenue Service.

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