A shared record
Every transaction is written to a public ledger called a blockchain. Thousands of computers hold a copy, so no single party controls it.
A plain-language guide
Cryptocurrencies, explained plainly
What a cryptocurrency is, how a blockchain keeps track of who owns what, and how the best-known coins differ. We explain. We don't sell, trade or advise.
What it is
Digital money without a central bank
A cryptocurrency is a form of digital money. Instead of a bank keeping the record of who owns what, the record is shared by a network of computers that check each other.
Secured by cryptography
You prove that coins are yours with a private key, a secret number only you should know. The maths makes forging that proof practically impossible.
Rules set by software
How new coins are created and how transactions are approved is written into the network's software, and changes need broad agreement among its users.
How it works
What happens when someone sends a coin
- 1
A transaction is signed
The sender's wallet uses their private key to sign a message: "send this amount to that address".
- 2
The network hears about it
The signed message is broadcast to computers on the network, called nodes.
- 3
It is checked
Nodes check the signature and that the sender really has the coins, so nothing can be spent twice.
- 4
It goes into a block
Valid transactions are bundled into a block. Depending on the network, miners or validators compete or take turns to add it.
- 5
The block joins the chain
Each block contains a fingerprint of the one before it. Changing an old block would break every block after it.
Proof of work
Computers called miners race to solve a costly puzzle. The winner adds the next block and earns new coins. Bitcoin works this way. It is very secure, but uses a lot of electricity.
Proof of stake
Validators lock up coins as a deposit and are chosen to add blocks. Cheating risks losing the deposit. Ethereum works this way, and it uses far less energy.
Try a blockchain
Change one block and watch the chain break
Each block's hash is a fingerprint of its contents, and each block stores the hash of the block before it. Edit the text in any block to see why history is hard to rewrite.
All blocks are linked correctly.
This demo uses a simplified hash. On a real network, repairing the chain means redoing the work for every later block faster than everyone else combined, which is what makes tampering impractical.
Examples
Five well-known cryptocurrencies, and how they differ
Bitcoin BTC
The first cryptocurrency, designed as digital money that needs no bank.
- Launched
- 2009
- Created by
- The pseudonymous Satoshi Nakamoto
- How blocks are added
- Proof of work (mining)
- Supply
- Capped at 21 million coins
New bitcoins are created as a reward for miners, and that reward halves roughly every four years. A new block is added about every ten minutes. Because the supply is limited, it is often compared to gold.
Ethereum ETH
A blockchain that runs programs, not only payments.
- Launched
- 2015
- Proposed by
- Vitalik Buterin
- How blocks are added
- Proof of stake (since 2022)
- Supply
- No fixed cap
Ethereum introduced smart contracts: programs stored on the blockchain that run automatically when their conditions are met. Many other tokens and applications are built on top of it. Its currency is called ether. Using the network costs a fee, known as gas.
Stablecoins USDT, USDC
Tokens designed to hold a steady value, usually one US dollar.
- Examples
- Tether (USDT, 2014), USD Coin (USDC, 2018)
- Issued by
- Companies, not a decentralised network
- How they hold value
- Backed by reserves held by the issuer
- Supply
- Grows and shrinks with demand
Stablecoins aim to avoid the large price swings of other cryptocurrencies. They rely on the issuing company holding enough reserves, so their stability depends on trusting that issuer. Some stablecoins have lost their peg in the past.
Solana SOL
A blockchain built for speed and low fees.
- Launched
- 2020
- Founded by
- Anatoly Yakovenko
- How blocks are added
- Proof of stake, with "proof of history"
- Supply
- No fixed cap
Solana also runs smart contracts, and it uses a built-in clock called proof of history to order transactions quickly. It can process many transactions per second at low cost. The network has had several outages, which shows the trade-offs between speed and resilience.
XRP XRP
A currency designed for fast international payments.
- Launched
- 2012
- Associated with
- The company Ripple
- How transactions are confirmed
- Agreement among validators, with no mining
- Supply
- 100 billion created at launch
XRP runs on the XRP Ledger, where a group of validators agree on transactions every few seconds. All coins were created at the start, so there is no mining. It is aimed at banks and payment providers moving money across borders.
Risks
What everyone should know first
Understanding a technology includes understanding where it goes wrong. These are the main risks, stated plainly.
- Prices swing sharplyCryptocurrencies can lose a large share of their value in a short time.
- Mistakes are permanentA transaction can't be reversed, and a lost private key means lost coins.
- Scams are commonPromises of guaranteed or fast returns are a warning sign. Nobody legitimate needs your private key.
- Rules differ by countryLegal protection is often weaker than for bank accounts, and regulation is still changing.
Glossary
The words you'll keep hearing
Blockchain
A shared record of transactions, stored as a chain of blocks on many computers at once.
Wallet
Software or a device that stores your keys and lets you send and receive coins. The coins themselves stay on the blockchain.
Private key
A secret number that proves you own your coins. Anyone who has it can spend them.
Mining
Using computing power to add new blocks on proof-of-work networks, in return for newly created coins.
Staking
Locking up coins to help approve transactions on proof-of-stake networks, in return for rewards.
Smart contract
A program stored on a blockchain that runs automatically when its conditions are met.
Gas fee
The fee paid to have a transaction processed, most often used about Ethereum.
Exchange
A service where people swap cryptocurrencies for each other or for ordinary money.
Contact
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