What is cryptocurrency?
Digital money that works without a central bank: how it is created, stored and transferred, and what makes it different from a bank balance.
A cryptocurrency is a digital asset that people can hold and send to each other over the internet without a bank, payment company or government keeping the records. Instead, the records are kept by a network of computers that follow the same open rules.
How it works
Every cryptocurrency runs on a blockchain — a shared ledger of all transactions. Thousands of independent computers (nodes) keep a copy of this ledger and check every new transaction against the rules. Nobody can quietly change a past entry, because all other copies would disagree.
To own cryptocurrency you need a wallet. A wallet does not store coins inside it; it stores the private key that proves you control an address on the blockchain. Whoever has the key can move the funds.
How new coins appear
Each network has its own issuance rules written into its software:
- In proof of work networks such as Bitcoin, miners spend computing power to add new blocks and receive new coins as a reward.
- In proof of stake networks such as Ethereum, validators lock up coins as a deposit and receive rewards for confirming blocks honestly.
- Some tokens are created all at once when a project starts, or are issued by a company (for example, stablecoins backed by reserves).
Coins and tokens
A coin is the native asset of its own blockchain (BTC on Bitcoin, ETH on Ethereum). A token is created by a smart contract on top of an existing blockchain — for example, USDT exists as a token on several networks, including TRON and Ethereum.
What makes it different from a bank balance
- No central operator. Transactions are confirmed by the network, not by a bank.
- Final transfers. A confirmed transaction cannot be cancelled. A payment to a wrong address is usually lost.
- Self-custody is possible. You can hold the keys yourself — and then you alone are responsible for them.
- Open to everyone. Anyone with an internet connection can create a wallet.
- Volatile prices. Most cryptocurrencies can rise or fall sharply within hours.
University materials are for education only and are not investment, legal or tax advice.