What is cryptocurrency and how it works?

cryptocurrency digital currency

What is cryptocurrency digital currency?

Cryptocurrencies or “cryptos” are made up of digital bits known as digitized money. Cryptocurrencies only work in an electronic environment used to pay expenses. To perform transactions, users must rely on 3 factors: Internet, computer network and electronic means of the issuer (3rd party).

Electronic money does not exist as a physical substance but exists invisibly through the electronic environment. They are stored on: Internet, telephone, information and other electronic payment cards. This means that users cannot hold their money.

Besides, electronic money can be understood as a payment method through a secure signature (currency pen). Like paper money, electronic money is a tool used to transact and accumulate value. Cryptocurrencies can be converted into paper currency at the request of the owner.

Cryptocurrency digital money are divided into 3 types as follows:

  • Fiat Currency: An electronic currency recognized by the Government. They are stored in ATM cards, bank accounts, e-wallets, etc. Fiat money has the same value as cash.
  • Virtual money: Is electronic money issued and controlled by organizations and businesses. Virtual currency is not recognized by the Government. They only work in a virtual environment that serves certain purposes. For example: in-game coins, coins, tokens used to buy products or services on websites, e-commerce sites.
  • Cryptocurrency: This is a subset of virtual currencies (most notably bitcoin). Cryptocurrencies are based on digital platforms that are not regulated by the Government. The advantage of this cash flow is high security, no intermediaries, so it is safe.
Cryptocurrency digital currency
Cryptocurrency digital currency

History begin

Cryptocurrencies have emerged since the 90s when the era of information technology and digitization exploded. Cryptocurrencies originated from the novel idea of ​​commercialization. One of the famous founders at that time could be mentioned as: Flooz, Beenz, Digicash, etc. These companies almost all depended on the 3rd party transaction control and promotion system. And here it is. Common mistakes lead companies to “tragedy” and collapse.

It seemed impossible to develop, but cryptocurrencies were once again supported by investors with the appearance of E-Gold. This US-based business owns a monthly trading volume of up to billions of USD. Although it did not make the same mistake as its predecessor, E-Gold was attacked by hackers. Therefore, this company soon slipped and disappeared from the market.

It was not until 2008, that cryptocurrency officially built its own empire with the birth of Bitcoin. This company’s cryptocurrency is applied blockchain technology. This method does not depend on 3rd parties and has high security, overcoming all conditions of the previous generation. Since then, cryptocurrencies have grown steadily and become the most popular “financial craze” in the market.

Cryptocurrency digital currency
Cryptocurrency digital currency

Mode of Operation

Most cryptocurrencies operate on blockchain technology. This way of working will bring about safe and convenient transactions. Each coin is understood as a file stored in a digital “wallet”. Users can access their “wallet” with smartphones or other Internet-enabled devices. Archived files are operated from person to person thanks to blockchain.

Blockchain is a popular encryption technology that helps users complete transactions securely. When users transfer money, it is recorded by this system in a virtual public book. This is like adding small blocks to a chain. In it, each block is considered as a record of a transaction. Blocks when added to the chain make it more difficult to counterfeit the cryptocurrency digital currency.

Cryptocurrencies are not created by governments or financial institutions like the dollar or readily available like gold. They are developed based on math. Cryptocurrencies adopt a distributed network that allows the system to transact in a p2p (peer-to-peer) manner. This means that the transaction is executed peer-to-peer without protection by a third party. Mathematical equations are used to link the account to the actual amount spent by the owner.

When participating in cryptocurrency trading, you only need to log in with your email and an anonymous one. The electronic exchange does not require you to give your real name or register with a bank. You can generate units of cryptocurrency by the task of “mining” (hunting cryptocurrency with a computer device).

Outstanding Features

  • Widely used in countries around the world such as: European Union, Japan, Germany, Switzerland, … and famous companies such as: Apple, Microsoft, Dell, … Electronic money used for payment transactions and circulation as legal money.
  • Do not issue too much to avoid the risk of inflation.
  • High liquidity, easy to use, convenient and fast.
  • An intermediary peer-to-peer medium of exchange, operating in an electronic environment on an algorithmic basis.

Advantages and disadvantages of using cryptocurrencies


  • Transaction anytime, anywhere: allows users to receive and send quickly with unlimited amount.
  • Low Transaction Fees: Cryptocurrency digital money transactions usually have no fees or are extremely low.
  • Safe and secure: all transactions are done quickly and securely, not easily copied and contain sensitive customer information. In addition, limiting fraud and not depending on 3rd parties in the transaction process such as credit cards.
  • Development in the e-commerce industry: users tend to use cryptocurrencies to pay when shopping online. Therefore, in recent years, cryptocurrencies have become a development factor along with e-commerce sites.
  • Transparent information, easy tracking: due to the use of blockchain technology, all information related to cryptocurrencies is available on the blockchain. So you can verify and track cryptocurrencies easier and faster.


  • Difficult to predict: Since cryptocurrencies often fluctuate in value, increase/decrease frequently. This is very risky for crypto holders.
  • Some countries have not yet accepted the use of cryptocurrencies for the following 3 reasons:
  • Many people still have the habit of using their national currency.
  • Many businesses are concerned about the erratic rise/fall of cryptocurrencies.
  • Cryptocurrencies are still illegal in some countries.
  • Cryptocurrencies use mathematical equations, so some transactions often fail.
  • E-money will be lost if electronic devices have problems such as: hard drives are damaged, data is lost, data is infected with viruses, etc. At the same time, users cannot recover and find back the lost money.
  • Is an environment for hackers, criminals to launder money to perform illegal acts.
  • It is a fertile ground for hackers and money-laundering criminals to commit illegal acts.

Cryptocurrencies are the means to bring profits to investors. Hope the above article has helped you understand more about cryptocurrency digital currency. If you have any questions or concerns, please come to yantum.com to learn more about cryptocurrencies.

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