What are cryptocurrencies and how do they work?

What are cryptocurrencies and how do they work?

What are cryptocurrencies and how do they work?

Do you know about cryptocurrencies? In our increasingly digitized world, terms like Bitcoin, Ethereum, and Stablecoins have become part of our everyday vocabulary. Yet, for many, the realm of cryptocurrency remains a mystery. As such, there's a continuing need for education on this innovative topic.

At TruBit Academy, we aim to start from the beginning, providing knowledge for anyone eager to dive into the digital age. So, let us explain what cryptocurrencies are, how they function, and share some intriguing facts with you.

What are cryptocurrencies? Cryptocurrencies are technologically encrypted, which prevents them from being hacked or stolen.
What are cryptocurrencies? Cryptocurrencies are technologically encrypted, which prevents them from being hacked or stolen.

What are Cryptocurrencies? Every Journey Has a Beginning

Cryptocurrencies are a new form of payment, a new way of thinking, and are now considered a new economic system. But beyond philosophical aspects or even matters of revolutionary thought, we want to provide you with an exact definition so you can grasp this concept.

A cryptocurrency is a digital asset that uses cryptographic techniques to ensure ownership, maintain the integrity of transactions, and monitor the generation of new units, thus avoiding the possibility of duplication. These coins have no physical existence and are stored in digital wallets.

It should also be noted that a cryptocurrency is inherently a digital payment system which, as we've mentioned, doesn't rely on banks for verification. This independence makes cryptocurrencies a system that anyone can use, particularly for sending and receiving payments.

In contrast to physical currency, which is transported and used in real-world transactions, cryptocurrency payments exist solely as digital records stored in an online database detailing specific transactions. When transferring funds using cryptocurrencies, these transactions are documented in a public record known as a "ledger."

Where does the word "cryptocurrency" originate? It comes from the combination of the word "crypto", referring to the cryptographic encryption used in transactions, and the word "currency". Hence, they're sometimes called 'crypto currencies'. From this name, we can deduce the advanced encryption required for storing and transferring data, indicating utmost security.

What Was the First Cryptocurrency?

When exploring the nature of cryptocurrencies, it's crucial to discuss the very first crypto. While many might instantly think of Bitcoin as the inaugural cryptocurrency, its origins actually trace back to the 1980s. To shed light on this, here's a brief timeline:

  • 1980s: In 1983, David Chaum developed the first monetary cryptographic system known as eCash. This can be considered the genesis of an idea that would be fully realized years later. It was a cryptographic and anonymous form of electronic money which eventually saw use as a micropayment system in the United States.
  • 1995: Drawing inspiration from eCash, a new system named DigiCash was developed. It can be viewed as the precursor to cryptocurrencies, as DigiCash employed encryption to store the data of individuals participating in various economic transactions.
  • 1998: Wei Dai, a computer engineer, introduced a concept called 'b-money'. This idea distinctly described a system for electronic cash with anonymity. In his work, Dai elaborated on the necessity of collective accounting to validate transactions, signaling the early inklings of crypto ideology and the pioneering steps toward Blockchain technology.
  • 2008: A decade post b-money, on November 1, 2008, an individual using the pseudonym 'Satoshi Nakamoto' unveiled the technical documentation of a digital currency he named 'Bitcoin'. This was the inaugural introduction of the Bitcoin concept, as this document presented a renewed perspective on electronic money.
  • 2009: On January 3, 2009, Bitcoin was officially launched with the unveiling of the 'Genesis' block, the inaugural block that yielded the first 50 BTC. This event marks the genesis of cryptocurrencies as we recognize them today.

How Do Cryptocurrencies Work?

We're already familiar with what cryptocurrencies are; now, let's delve into how they operate, explained in simpler terms for you. As highlighted in the previous paragraph, cryptocurrencies aren't overseen by any banking institution. Instead, their transactions are recorded on the "Blockchain," a shared ledger that acts as a control mechanism.

When considering the workings of cryptocurrencies, it's vital to understand that once a transaction is finalized using these digital currencies—whether buying or selling the asset—it's irreversible. This is because the blockchain is an immutable record that doesn't allow data deletion. To counteract a transaction, one would need to execute an opposing transaction.

I Have a Cryptocurrency. What Does This Mean?

It's important to clarify: if you possess a cryptocurrency, it doesn't mean you hold a tangible currency. So, what do you have? You possess a key that grants you control over the digital currency, allowing you to engage in transactions such as buying, selling, investing, multiplying, and other crypto-related activities like trading.

These keys, metaphorically speaking, are unique and bolstered with robust encryption security, making them virtually impossible to counterfeit or duplicate.

What Is The Value of A Cryptocurrency?

The phenomenon surrounding the valuation of cryptocurrencies is intriguing. As they aren't regulated by any financial institution, the value of cryptocurrencies is determined by the law of supply and demand. Consequently, the value of crypto adjusts every second based on the transactions recorded in the ledger or blockchain. However, there are other crucial factors influencing this:

  • Speculation and perception: Speculation is pivotal in cryptocurrency trading, implying that certain investment strategies can significantly sway their prices. Furthermore, the perception traders hold of an asset, along with the emotions driving their decisions, can also affect its value.
  • Government restrictions: Even though cryptocurrencies are decentralized, some governments have set limitations on their everyday usage, which can influence the value of these digital currencies. The restricted availability of specific cryptoassets, such as Bitcoin, also plays a role in determining their worth.
Cryptocurrency transactions are conducted within the Blockchain, or digital ledger.
Cryptocurrency transactions are conducted within the Blockchain, or digital ledger.

How Are Cryptocurrencies Stored?

As mentioned above, cryptocurrencies are essentially codes that a user possesses and can manage as they see fit. So, how are cryptocurrencies stored? Similar to traditional money (or even your credit cards), cryptocurrencies are kept in a cryptocurrency wallet.

Cryptocurrencies typically reside in encrypted wallets, which can either be physical devices or online applications, tailored to safeguard the private keys of your digital assets. Some exchange platforms provide integrated wallet services, making storage directly through the platform more convenient.

How to buy cryptocurrencies?

Cryptocurrencies can be purchased on the internet through secure sites, which are responsible for offering these currencies to people interested in acquiring them. But, being a financial product, it is necessary to have a reliable platform that can offer a premium service and guarantees.

There are several cryptocurrency exchanges that offer a complete service for all those people who want to enter the world of cryptocurrencies. But, if you are in Latin America, TruBit is the best option to buy and sell cryptocurrencies safely, since it offers legal payment platforms and the best customer service.


Welcome to the new era of the digital economy! Cryptocurrencies are digital currencies that allow users to have diversity in their portfolios. In addition, it allows users to have new ways of investing and accessing markets such as cryptocurrency trading, earning interest and even having ways of payment, since you can now access credit cards that are recharged with them.

This is just the first step that users must take to be part of this new era. Knowing what cryptocurrencies are is just the beginning, so we invite you in our cryptocurrency academy to learn more and more concepts.


Tu puerta de entrada al mundo cripto