What Is Cryptocurrency: All You Need to know

It is no longer a secret what cryptocurrency is, how it was invented, what it is, and why it, is needed. We are all on the subject here because every day, we read something, learn, and try something new; many of us even buy and sell this same cryptocurrency, and someone even mines it and trades on exchanges. But I'm more than sure that each of us has a mom/dad, grandmother/grandfather, a dog/cat, a girlfriend (or a guy who likes it better), or a "moron" best friend who spoils all the photos that they don't know what it is. Although they probably heard the news from the zombie box on national channels that some kind of bitcoin is breaking all records,, a bright future is predicted.


If you try to tell any of them that cryptocurrency is a digital currency created with the help of cryptography, that it is decentralized and based on blockchain technology, and then also mention public and private keys,

Therefore, let's describe everything in simple language so that everyone already understands what a cryptocurrency is.

And the easiest way is to draw an analogy with what people are already familiar with. In this case, they will already roughly understand what is at stake, and will not feel rejected of the new and incomprehensible.

What is Cryptocurrency? Brief Introduction:

Cryptocurrency is a currency; it is money, it is like rubles and dollars, but the only difference is that this currency is electronic or virtual. Virtual cash cannot be touched or sniffed but can easily be exchanged for the usual paper wrappers. Therefore, having a bank card, we already have electronic money on it, but thanks to ATMs and friendly women cashiers, we can get this electronic money in our hands in the form of crisp banknotes. With cryptocurrency, everything is precisely the same - it is only a set of 1 and 0. Still, after a series of manipulations on our hands, we may have dollars, euros, rubles, or some kind of product or service.

Everything is evident with the currency; now let's deal with the first part of the word - "crypto." It's short for cryptography, and this is what Wikipedia tells us:

Cryptography is the science of confidentiality (the impossibility of reading information by outsiders), data integrity (the impossibility of imperceptibly changing information), authentication (verifying the authenticity of authorship or other properties of an object), as well as the impossibility of repudiating authorship.

Hence, the cryptocurrency is so named because it was developed with these requirements. It is protected and cannot be forged, i.e., you cannot be the owner of fake money. Although not, there are heroes who succeeded:

Cryptocurrencies are different, just like regular fiat money. In the real world, we know dollars, euros, rubles, hryvnias, yuan, kroons,, etc. Each such currency has its own value; that is, 1 dollar is not equal to 1 euro and vice versa. Similarly, in the world of cryptocurrencies, more than a thousand have already been created.

But the one who will be interested in what cryptocurrency is, most likely, will ask about one, about the most important - about bitcoin. And you, in turn, will hardly cite any altcoins as an example. Therefore, the first thing to say is how to pronounce the name of the coin correctly. And how many times have I been asked "What kind of bitcoin are you?" or "Do you already have Bitcoin?" - I do not even remember.

Where does cryptocurrency come from?

We figured out the definition, and even our grandmother already understands that her pension on the card is also electronic money, for which she buys milk in the store. But then the question arises: if the state pays the pension, which takes money for this in ... (and a long chain went, where did the candy wrappers come from), then where to get this cryptocurrency, and who is responsible for it?

The answer "Well, there like miners mine it and all that" is unlikely to help you understand the whole essence of what is happening, but it is very possible to draw an analogy with gold mining.

For beginner miners:

There are diggers, seekers, miners - you can call it whatever you like - who are mining gold. They use pickaxes to shred ore in mines or wash river sand. After the grains of this metal are found, it is sent for processing, and then we can find it in jewelry, ingots, or coins. Gold can either be bought for fiat money or then sold.

For cryptocurrency, everything is precisely the same: there are "miners" (albeit without picks and headlamps), they are usually called miners who use their computers to solve complex mathematical problems, and for the correct solution, they are awarded a certain amount of coins, which can then be spent on what something, or sell. If you are not such a miner, you can easily buy these coins using your grandmother's bank card, who has yet to spend all the money on milk. But solving mathematical problems every day becomes more difficult, and coins are given less and less, and the total number of these coins is limited. Everything is straight, as with gold, which is also not infinite.

Where to store cryptocurrency?

Where do you keep your fiat money? If something is wrong with a salary card, where you can then remove a part so that some small change is in your pocket, something in banks, and something under the pillow or in the safe at home. These are all classic schemes that are also relevant to cryptocurrencies.

There are various ways to store your virtual cryptocurrency. Generally, cryptocurrencies are stored in e-wallets, like the eToro Bitcoin Wallet. You may have a wallet application on your smartphone, with which you can pay for purchases on the Internet, in shops, and in cafes (yes, some already accept cryptocurrency). Also, you can have a wallet program on your home laptop, where some of your coins, and different ones, will be stored. After all, just like under the pillow, you can put a couple of dollars and euros, and in such a multi-wallet, you can throw several different cryptocurrencies.

Multicurrency crypto wallets:

If you expect significant amounts of money, there are also crypto banks - these are services on the Internet with the function of "cold" storage. You transfer your coins to them, and they store them on servers disconnected from the network. Those. No one has access to them except for the employees of this bank, and even then, not all of them. And when you want to pick them up, just request to withdraw your coins. If you do not trust banks, that is, crypto safes, you can buy a unique device that looks like a USB flash drive, transfer your money to it, and then hide it in a safe place.

Cold storage of cryptocurrency:

As you can see, all the storage and preservation methods you use are also suitable for cryptocurrencies. Yes, at first glance, they are a little more complicated, but at the same time, they are more technologically advanced because the world does not stand still - everything is moving forward!

Is cryptocurrency taxable? 

Many laws have been introduced since cryptocurrency has become more popular. Depending on the amounts and when you withdraw any funds, it can be subject to cryptocurrency taxes. Contact an accountant with experience in this realm before making any significant transactions.

How do you pay with cryptocurrency?

To begin with, let's take a look at how settlements are now carried out in the usual ways - in cash and cards.

When buying milk in a cash store, you simply give it to the seller, and that's it - the payment has been made.

If you pay for purchases using a bank card, that is, make an electronic payment, then everything is more complicated. Although many do not even think about what actions occur in this case because everything works quickly and easily. Here's a rough diagram:

• The buyer makes a payment by card at the store.
• The store sends a request for this operation to its bank (for example, Alpha).
• Alpha sends a request to a payment system (for example, Visa).
• For this operation, visa gives the go-ahead to the buyer's bank card (for example, Omega).
• The money from Omega goes to the Alpha account.
• Alpha transfers cash to the store's performance.

With cryptocurrency, things are as follows. It uses direct money transfers from one person to another. There are no intermediaries and third parties like bank cards in this system.

Let's consider this scheme in a nutshell using an example. You already have a crypto wallet with cryptocurrency on it. The seller tells you his details (this will be a unique address) where the money should be transferred. You send the required amount from your wallet to this address, after which your transfer (transaction) appears on the seller's wallet, and you, in turn, receive the product or service.

As you can see, everything happens in much the same way. But, as with cards, we can only know part of the internal process of transferring funds to use cryptocurrencies. Therefore, it's not worth telling my grandmother about the fees for transferring and confirming transactions, about the mempool and blockchain, this will already be unnecessary information for an initial acquaintance with the new technology. Gradually, this information can be added to stories, but the main thing is with simple examples and using analogies to show that cryptocurrencies are about everything that already exists, only a little differently, since progress does not stand still, and, therefore, to be afraid it's not worth it.

Where is cryptocurrency accepted?

"What can I buy for cryptocurrency and in which stores do they accept it?" - such a question you will most likely also hear and answer as easily as shelling pears. If you are going to make payments on the Internet, then you can pay with cryptocurrency for almost everything:


If you want to go on vacation, no problem - buying a plane ticket and booking a hotel is as easy as using a bank card. The network is full of stories about people making almost round the world, paying with bitcoins. And more and more services offer tickets and hotels for cryptocurrency every day.

If you want to buy something from technology, it's easy - a new smartphone and home theater will be gladly sold to you for cryptocurrency.

You need to pay for products in an online store with home delivery - and this can already be done, provided that you live in a particular country.

With offline payments, things are a little worse so far. It only takes time to fully implement. But there are already restaurants and cafes that accept cryptocurrency, although not many. And a number of countries are already actively using cryptocurrency in everyday life, for example, the same Japan: the points where bitcoins are accepted can no longer be counted on the fingers of one hand; there are already hundreds and thousands of institutions where it has become possible. Well, the news that real estate and cars are sold for cryptocurrency, we see with enviable regularity.

Offline infrastructure is still in its infancy, but its development is progressing slowly. Cryptocurrencies are becoming more widespread every day. Therefore, the hour is close when they will become as commonplace as a plastic card.