What Is Cryptocurrency, And How Does It Work? Crypto For Beginners 2022

We believe that the world is ready for revolutionary ideas that will change the course of history—and the concept of cryptocurrencies is undoubtedly one of them. But what are cryptocurrencies, and how do they work? Read on to find out all you need to know as a beginner in 2022, simply explained.

July 4, 2023
Swaps team

What is cryptocurrency?

You’ve probably already heard this term before, but if you’re like most of us, you’re not entirely sure what lies behind this popular buzzword—trust us, way more than just Bitcoin.

Generally speaking, a cryptocurrency is a digital-only token with, or without a use case. Cryptocurrencies are issued using a blockchain (how they are issued exactly is another topic), which is basically a securely encrypted online data storage viewable by anyone. Their values are calculated based on various factors—the most important are available supply (how many tokens exist) and demand (funds invested). Thus, there are generally accepted metrics to determine their precise statuses, such as market capitalization, total supply, and trading volume.

How do cryptocurrencies work?

Crypto tokens have various purposes; some were even created without any initial use case, like Dogecoin, or Shiba Inu. But how do they work? Simply put, almost all cryptocurrencies operate based on a blockchain, where all related transactions—actions that happen with the cryptocurrency—are stored. These could be sending, receiving the token, or exchanging it, but transactions from entire applications built around a token are also included. The precise mechanism of the above is not necessary to understand, all you have to know is that anything crypto-related comes down to transactions on a blockchain.

Generally speaking, a cryptocurrency is a digital-only token with, or without a use case.

How many types of crypto are there?

For one, we distinguish Bitcoin (BTC) from altcoins, which is a common term for cryptocurrencies other than Bitcoin. Pretty straightforward, right? The additional types of crypto are categorized based on why they were created.

Let’s start the list with ‘store of value’ cryptocurrencies, like Bitcoin (BTC), or Litecoin (LTC), designed only to keep and increase their price over time.

Next up are ‘utility tokens, which are cryptocurrencies that serve some purpose within their ecosystem—Binance Coin (BNB) is a great example.

Moving on to ‘Decentralized Finance (DeFi)’ tokens—Polkadot (DOT), or Cardano (ADA)—that allow their holders to earn interest from their holdings.

Finally, ‘Non-Fungible Tokens (NFTs)’ are one-of-a-kind cryptos associated with digital art that can’t be copied, or duplicated.

How can a beginner invest in cryptocurrencies?

Now that you’re aware of the basics, the next step can be investing in your preferred cryptocurrencies. Before thinking that it’s a slow and highly technical process, we have to introduce you to Swaps. Here, we believe that the way our world’s centralized systems work needs to be changed, and with new technologies, control must be put back in the hands of individuals. To ease this transition, we imagined, and created an interface where buying cryptocurrencies is blazingly fast and supremely easy—all it takes is a few clicks. We invite you to join the movement, try Swaps, and change how the world operates; for the better.

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