Cryptocurrency is a digital asset that uses cryptography to verify the validity of transactions and records data on a blockchain, without needing a bank or government as an intermediary.
It Started with Bitcoin
In 2008, a person or group using the name Satoshi Nakamoto published the paper "Bitcoin: A Peer-to-Peer Electronic Cash System," and the first Bitcoin block was created in January 2009. Since then, several thousand other coins have emerged.
How Does Blockchain Work?
Imagine a ledger that everyone holds an identical copy of.
- When someone transfers coins, the transaction is announced to the network.
- Network maintainers (Miners or Validators) bundle transactions into a block.
- The new block is attached to the previous block, forming a chain that is extremely difficult to alter retroactively.
- Everyone on the network can verify who sent what to whom and how much.
Transaction Verification Mechanisms
| Method | Used in | Principle |
|---|---|---|
| Proof of Work (PoW) | Bitcoin | Miners compete using computing power to solve a puzzle; high energy consumption |
| Proof of Stake (PoS) | Ethereum (since 2022), Solana and others | Validators stake coins as collateral; uses far less energy |
Why Does Crypto Have Value?
- Scarcity Bitcoin has a maximum supply of 21 million coins, and new issuance is cut in half roughly every 4 years (Halving). The most recent one occurred in April 2024.
- Utility Ethereum and other networks support smart contracts, decentralized finance (DeFi) apps and stablecoins.
- Acceptance The launch of Bitcoin ETFs in the US since 2024 has made it easier for institutional investors to gain access.
- Belief and demand Prices are driven mostly by market demand; unlike stocks, there are no cash flows backing them.
Why Are Prices So Volatile?
- The market is open 24 hours a day, 7 days a week with no breaks.
- There is high leverage in the derivatives market; when prices fall sharply, forced position closures (Liquidations) occur in succession.
- It is sensitive to global liquidity and interest rates. Read Interest Rates and Markets
- News about regulation, hacks and platform outages has a severe impact.
Read next: Major Cryptocurrencies You Should Know
For education only, not investment advice. Figures change over time, so check official sources before making decisions.