What is cryptocurrency?

Cryptocurrency is digital money that exists only on the internet and is secured by cryptography. Unlike a bank balance, no single company or government keeps the records. They are kept on a shared database called a blockchain, which thousands of computers around the world maintain together.

How it works

When you send a coin to someone, the transaction is broadcast to the network. Computers on the network check that you really own the coin and that you have not already spent it. Once enough of them agree, the transaction is added to a block, and the block is linked to the one before it. Changing an old record would mean redoing all the blocks after it, which is why the history is so hard to fake.

Coins and tokens

A coin, like Bitcoin or Ether, runs on its own blockchain. A token is built on top of another blockchain. Many tokens run on Ethereum and represent anything from a stablecoin pegged to the dollar to a share of an online game’s economy.

Why prices move so much

Crypto trades around the clock, in markets that are young and smaller than stock markets. News, regulation, big investors moving coins and plain sentiment can all push prices sharply in either direction within hours.

What to keep in mind

• You can lose money. Never invest more than you can afford to lose.
• If you hold your own coins, you are responsible for keeping your keys safe. Lose them and nobody can recover the coins for you.
• Scams are common. Be careful with anyone promising guaranteed returns.

Next, read what Bitcoin is and how market cap is used to compare coins.