All You Need To Know About Cryptocurrency: How Cryptocurrencies Work And Their Benefits 


5 mins read August 29, 2023

Cryptocurrencies have existed for over a decade and have built many waves because of their potential. With each passing day, people are becoming more aware of cryptocurrencies and their use cases. They offer the benefits of traditional fiat currencies and much more, making them the interest of millions across the globe. Cryptocurrencies are slowly becoming a must to learn about as their revolutionary nature changes the world as we know it.

How do cryptocurrencies work?

Cryptocurrencies are digital currencies that cannot be touched or moved physically. Cryptocurrencies are typically decentralised, meaning the central bank, government, or other central authorities do not manage them. Instead, they are run by thousands of computer systems from ordinary individuals worldwide. Transactions involving cryptocurrencies are stored on a decentralised ledger called the blockchain

The information on this computer system is almost impossible to manipulate by a person or group of people, making cryptocurrencies very secure to use as they cannot be abused.

What are crypto wallet keys? Understanding Crypto Wallet keys (Public and Private Keys) 

You are issued a public and private key when you open a cryptocurrency wallet. Think of the public key as an account number. In order to receive funds or information, you would need to share your account details with others. The private key is similar to your password or ATM PIN, allowing you to access your account's funds. 

You are expected to keep the private key securely. It is structured to grant you access to the cryptocurrencies locked in your wallet. Anyone can access these cryptocurrencies as long as they have your private key. The public key is an alphanumeric string of numbers and words. It may also be a QR code shared with others to receive cryptocurrencies. The public key is an identifier used while recording each transaction.

What is cryptography, and how does it relate to cryptocurrencies?

To understand all about cryptocurrency, we must know the meaning of cryptography. Cryptography existed long before the digital era and generally involved hiding information or data to protect it from getting into the wrong hands. Assume you want to send a message to a friend through someone, but you want only your friend to understand it. You will need to find a coded way of sending the message or saying what you want so that only both of you understand it while it makes no sense to an outsider. This is the meaning of cryptography in the computer world, as it is a format to protect data.

Cryptography is a process used to hide or encrypt plain words or instructions. It also involves decoding and understanding data or information. The goal is to secure data and information from hackers through encryption. Data or information is encoded through mathematical theories and computation processes. Information can then be distributed across nodes of even unsecured networks.

You may be wondering how cryptography comes into place in securing your crypto funds. Cryptocurrencies are built around cryptography, ensuring their security and making them difficult to manipulate. Cryptography allows cryptocurrency to maintain its decentralised nature securely and ensures that only valid users or blocks are introduced on the blockchain network.

Benefits of Cryptocurrencies: Why are cryptocurrencies important?

Cryptocurrencies are revolutionary and are gradually changing the economic and financial ecosystem because of their numerous uses. Cryptocurrencies' benefits are enormous as they can be used to send funds from person to person, irrespective of their geographical location, at a faster and cheaper rate. You can also use cryptocurrencies to pay for products and services. Cryptocurrencies can also be used as a store of wealth to protect your funds from inflation which fiat currencies are subject to.

Cryptocurrencies can also be considered short-term or long-term investments. You can profit from crypto trading and investments in crypto projects like mining, staking, yield farming, and loaning. You may also borrow crypto loans and use them for your financial needs. You can even use cryptocurrencies as collateral when collecting these loans. Let's take a look at other standard benefits and uses of cryptocurrency below;

1. User Privacy: Because cryptocurrency transactions are anonymous, your wallet address can represent you without revealing personal information. Since you do not need to open an account with a financial institution to use cryptocurrency, you can keep your transactions private.

2. Accessibility: Anyone with a smartphone and an internet connection can use cryptocurrency. Cryptocurrency enables financial inclusion, particularly for the unbanked, by allowing them to access financial services without going through a centralised authority. People who do not use traditional banking services can easily use cryptocurrency to make online transactions or send money to loved ones.

3. Transaction fees: Compared to other financial services, transacting in cryptocurrency costs relatively low. Cross-border transactions, which are expensive with local financial services, are inexpensive with cryptocurrencies. 

4. Transaction speed: One of the many benefits of cryptocurrencies is their lightening speed transactions. Most transactions with traditional financial institutions are settled in one to seven working days, depending on the medium. Cryptocurrency transactions can be completed in seconds or minutes once the network confirms your transaction's block.

5. Security: Cryptocurrencies provide one of the safest and most secure ways to send and save funds. Someone cannot sign transactions or access your funds without access to your crypto wallet's private key. The network of distributed computers verifying transactions secures blockchain transactions. The network becomes more secure as computing power is added.

How to buy cryptocurrencies


Since the creation of Bitcoin, several cryptocurrencies have been created, many of which have also been successful in their own right. Different variations of cryptocurrencies have also been created, such as stablecoins and non-fungible tokens (NFTs), among several others. Cryptocurrencies are built to solve the limitations of fiat currencies and bring banking closer to the underbanked and unbanked.

Disclaimer: This article is meant to provide general guidance and understanding of cryptocurrency and the Blockchain network. It’s not an exhaustive list and should not be taken as financial advice. Yellow Card Academy is not responsible for your investment decisions.

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