A cryptocurrency is a digital currency designed for use over the internet. As it only exists in digital form, there is no physical coin or bill associated with cryptocurrency. People use cryptocurrency for quick online payments or hold them as an investment in the hope that the value will increase.
The value of a cryptocurrency depends on many factors, including supply and demand. This value can fluctuate significantly even in a short period of time. There are hundreds of different cryptocurrencies in circulation, each with a different value. The most popular cryptocurrencies, by market value, are Bitcoin, Ether, and Tether.
Cryptocurrencies don’t rely on central banks or third parties to verify transactions and create new units of currency. Instead, they use cryptography to confirm transactions on a publicly decentralized network known as a blockchain, which enables direct peer-to-peer payments for low fees.
To purchase cryptocurrencies, you need what is known as a digital wallet where you keep your cryptocurrencies. Your wallet can be stored online, on your computer, or on an external storage device, similar to a USB drive.
Generally, you create an account on an exchange platform such as Coinbase. You can then transfer real money to buy cryptocurrencies such as Bitcoin or Ether.
Some people additionally earn cryptocurrency through a complex process called mining, which requires advanced computer power to solve highly complicated mathematical puzzles.
Cryptocurrencies can be converted back into regular currencies like dollars or euros relatively easily and then transferred back to a bank account. You simply use an exchange platform to trade them for a regular currency or another cryptocurrency.