How do cryptocurrencies work?

Cryptocurrencies are a digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of this security feature. A defining feature of a cryptocurrency, and arguably its biggest allure, is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation. Cryptocurrencies are created through a process known as mining. Miners are rewarded with crypto tokens for verifying and committing transactions to the blockchain public ledger. Incentives for miners help to ensure that new coins are introduced into circulation in a fair and decentralised manner. Crypto exchanges are platforms that allow users to buy, sell, or trade cryptocurrencies. These platforms typically require users to undergo know-your-customer (KYC) and anti-money laundering (AML) checks before they can transact. Cryptocurrencies can be used to purchase goods and services, or traded on crypto exchanges for profit. Due to their volatile nature, cryptocurrencies are often used as speculative investments. Cryptocurrencies are often described as digital Gold. Like Gold, Bitcoin and other cryptocurrencies have a finite supply. This makes them attractive to investors who believe that the cryptocurrency will appreciate in value over time. Cryptocurrencies are often compared to traditional fiat currencies, such as the US dollar or the Euro. However, there are several key differences between fiat currencies and cryptocurrencies. For one, cryptocurrencies are decentralized, while fiat currencies are regulated by central banks. Secondly, cryptocurrencies are often more volatile than fiat currencies, meaning that their prices can fluctuate more drastically. Investors who are considering investing in cryptocurrencies should do their research and consult with financial advisors to understand the risks involved.