How Does Cryptocurrency Work?

Cryptocurrency is an encrypted, decentralized digital currency transferred between peers and confirmed in a public ledger via a process known as mining.
Below, we take a simplified look at how cryptocurrencies like bitcoin work. First, let's review the basics and essentials of cryptocurrency, and then we will do an overview of the other properties that have made cryptocurrency what it is today.

The Cryptocurrency Basics
To understand how do cryptocurrency works, you'll need to learn a few basic concepts. Specifically:
Public Ledgers:
The public ledger is used as a record-keeping system that maintains participants' identities insecure and (pseudo-) anonymous form, their respective cryptocurrency balances, and a record book of all the genuine transactions executed between network participants
Transactions:
A cryptocurrency (or cryptocurrency or crypto for short) is a digital asset designed to work as a medium of exchange comprising individual coin ownership records are stored in a ledger existing in a form of the computerized database using strong cryptography to secure transaction records, to control
Mining:
Cryptocurrency Mining, Or Cryptomining, Is A Process In Which Transactions For Various Forms Of Cryptocurrency Are Verified And Added To The Blockchain Digital Ledger. Also Known As Cryptocoin Mining, The Creation Of Additional Coins, And To Verify The Transfer Of Coin Ownership. Altcoin Mining, Or Bitcoin Mining (For The Most Popular Form Of Cryptocurrency, Bitcoin), Cryptocurrency Mining Has Increased Both As A Topic And Activity As Cryptocurrency Usage Itself Has Grown Exponentially In The Last Few Years.
Cryptographic:
Cryptography Or Cryptology Is The Practice And Study of techniques for secure communication in the presence of third parties called adversaries.
Decentralized:
Decentralization or decentralization is the process by which the activities of an organization, particularly those regarding planning and decision making, are distributed or delegated away from a central, authoritative location or group.
Proof-of-work:
Proof of work (PoW) is a form of cryptographic zero-knowledge proof in which one party (the prover) proves to others (the verifiers) that Verifiers can subsequently confirm this expenditure with minimal effort on their part. A certain amount of computational effort has been expended for some purpose.
Cryptocurrency works similarly regarding value. In cryptocurrency, “coins” (which are nothing more than publicly agreed on records of ownership) are generated or produced by “miners.” 

Cryptocurrency works similarly regarding value. In cryptocurrency, “coins” (which are nothing more than publicly agreed on records of ownership) are generated or produced by “miners.” These miners are people who run programs on specialized hardware made specifically to solve proof-of-work puzzles. The work behind mining coins gives them value, while the scarcity of coins and demand for them causes their value to fluctuate.

👉 Learn more in our comprehensive article What is Cryptocurrency