What Is a Cryptocurrency?

A cryptocurrency like bitcoin is a virtual currency traded peer-to-peer on a blockchain, independent of centralized authorities like banks and governments. Cryptocurrencies are entirely virtual, so they are not backed by physical commodities and have no intrinsic value.

How Do Cryptocurrencies Work?

Primarily, cryptocurrencies rely on blockchain technology to complete a transaction via an intricate P2P network. Once a transfer request is entered into the network, it is validated by the network and added to a pool of other transactions to create a block of data for the ledger, which is then entered into the existing blockchain. Once the block is successfully added to the chain, the transaction is approved and completed.