Cryptocurrency From A To Z – What Is Cryptocurrency and How it Works


Perhaps, you won’t find a person who hasn’t heard about cryptocurrencies, blockchains, and mining at all. At the same time, only a small percent of people really understands what does it all mean and how it works. Nexter launches the edition of articles that explains in the simplest way all you wanted to know about virtual currencies. 

Today we’re going to answer what cryptocurrencies are and how it works; also we’ll explain what blockchain, mining, and wallets are.


How does it work?

  • Cryptocurrencies are a type of alternative and virtual currencies.
  • Cryptocurrencies are decentralized. It means neither government nor single entity control them.
  • Cryptocurrencies are peer-to-peer (P2P), that allows users to buy or sell goods and services directly to each other.
  • A coin is protected from forgery as its encrypted information impossible to copy.

What’s a Blockchain?

  • The blockchain is a chain of blocks of transaction records.
  • The blockchain is cryptographically secured public ledger that allows to record and store financial transactions.
  • It helps to recognize the attempts of re-spending money.

What’s mining?

There are three primary ways of obtaining cryptocurrencies:

buying them on an exchange
accepting them for goods and services
mining new ones.

  • Mining is a process of adding transaction records to the Blockchain.
  • Everyone can do mining. All you need is a computer equipment of the required capacity and special software.


  • Cryptocurrency can’t be stored in traditional bank accounts, so you need to use special software and hardware cryptocurrency wallets.
  • Every such wallet is secured with a unique cryptographic key, that allows accessing the savings information.
  • There are so-called Cold Wallets – the storage without network access and Hot Wallets – that are placed somewhere on the Internet as part of an online service.

Stay with Nexter to find out more about cryptocurrencies.

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