How Does Cryptocurrency Work and the 5 Main Benefits of Having It

Many people often ask us ‘how does cryptocurrency work’? Our answer is that cryptocurrency is a decentralized and encrypted digital currency that is transferred between peers after confirmations in public ledgers through the process of mining. All transactions of a cryptocurrency are stored on a public ledger. The details of the crypto investors are encrypted through various cryptographic techniques to ensure all records are transparent and legit. Cryptocurrency, therefore, offers a fast, secure and reliable solution to money transfer.

We’ve covered how does cryptocurrency work, so here are 5 main benefits of having digital currencies:

  1. Cheaper transactions

Since miners get their compensation from the network, cryptocurrency transactions are free. However, you need to use third parties e.g. exchanges for buying the bitcoin and wallets for storing them securely. These third-party services may charge some fees but overall, cryptocurrency transactions attend to be cheaper than fiat ones.

  1. Secure transactions

Credit card and identity theft is a major concern today. But if you transact with cryptocurrency, you do not share any personal details. You, therefore, safeguard yourself against losing money to identity thieves. Also, credit cards work by pulling the money from your account while cryptocurrencies work by pushing the money into the recipient’s wallet. This makes it possible for a user to only send what they want to pay without adding any personal information.

  1. Return on investment

Saving money in your bank may not attract any interest. Granted, there are some special accounts that come with a small annual return but this is nothing compared to the benefits you can reap by investing in Bitcoin. Back in 2017, Bitcoin appreciated by over 1300% in just one year. Investing in cryptocurrency is, therefore better than stashing money in the bank because you will grow your money.

  1. Global access

Over 2 billion people worldwide have reliable internet access and this number will keep growing. This makes cryptocurrencies the most reliable and efficient currency because anyone with access to the internet can use it. This changes the business landscape completely. You can now do business with anyone located anywhere on the globe. As long as they have internet, payments and purchases can be done securely via cryptocurrencies.

  1. Decentralized currency

Cryptocurrencies run on a global network of computers which jointly manage the blockchain technology. Cryptocurrencies are therefore not managed by any government or financial institution. This means that they are free from manipulation by banks and governments. Buying cryptocurrencies can, therefore, help you safeguard your money in case of another financial downturn like the one witnessed in 2008.

Cryptocurrency is referred to as digital currency because unlike fiat currencies, Cryptos are not defined by a tangible object. Cryptos are all digital coins, which are stored in digital wallets and transferred digitally on a peer-to-peer basis. A key advantage of cryptos is every transactional record will remain permanently stored on the blockchain which guarantees transparency. This is one major reason why cryptocurrencies will always be popular. Hopefully you can answer the question ‘how does cryptocurrency work?’ now thanks to this article.


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