What is cryptocurrency? Everything you need to know before you buy

You've seen it in headlines. Your friend won't stop talking about it. Maybe you've even heard it's the future of money. But what is cryptocurrency, really? Let’s break it down.

Cryptocurrency meaning and definition

A cryptocurrency is a type of digital money that uses special computer techniques (called cryptography) to keep it safe. It's made to be used like regular money — for buying, selling, or sending to others. But unlike the money you get from a bank or government (known as fiat money), cryptocurrencies run on something called blockchain technology. This is a system that records every transaction across many computers, so it's decentralised (no single person or organisation controls it), and the records can’t be changed.

The first and most well-known cryptocurrency, Bitcoin, was introduced in 2009. Today, other major digital assets include Ethereum, Solana, and Cardano, each with unique features and use cases.

Why is cryptocurrency transforming finance?

Cryptocurrencies enable peer-to-peer transactions, eliminating the need for intermediaries such as banks or payment processors. This direct approach is reshaping global finance by making it faster, fairer, and more inclusive. Here's how crypto is paving the way for the next generation of money:

• Efficiency: cryptocurrencies let people send and receive money quickly, even across countries, with low fees. They work 24/7, unlike banks that close on weekends or holidays.
• Access: in places where banks are hard to reach, anyone with a smartphone and internet can use cryptocurrencies to potentially save, send, or receive money, opening up new opportunities.
• Innovation: some cryptocurrencies, like Ethereum, allow developers to build apps that don’t rely on a company or middleman. These include things like online lending platforms and NFT marketplaces.
• Ownership: unlike a bank account, no one else holds your funds — you manage them yourself using something called a private key.
• Transparency and trust: every transaction is recorded on a public system (the blockchain), which makes it very hard to change or fake. This helps build trust and reduce fraud. However, it's important to note that not all blockchains are public — there are completely private blockchains where transactions are hidden.

How does cryptocurrency work?

At its most basic level, cryptocurrency works through a combination of blockchain technology, cryptography, and a decentralised network. Here’s a simple breakdown to help beginners understand how this system operates:

1. The blockchain ledger

A blockchain is a type of digital ledger or record book, distributed across a network of computers (called nodes). Every transaction made with a cryptocurrency is grouped into a block. These blocks are then linked together in chronological order, forming a chain — hence the term blockchain.

Learn more about blockchain and how it works.

2. Decentralisation and peer-to-peer networks

Unlike traditional banking systems where a central authority verifies and records transactions, cryptocurrencies rely on a network of users to do this. Each participant has access to the same copy of the ledger and can contribute to validating new transactions. This model reduces the risk of fraud and centralised failure.

3. Proof of work and proof of stake

Transactions are secured by cryptography. Each transaction must be verified by the network before being added to the blockchain. This is done through consensus mechanisms like:

• Proof of work (PoW): used by Bitcoin, it requires powerful computers to solve complex problems
• Proof of stake (PoS): used by Ethereum and others, it allows users to validate transactions based on how much crypto they hold and are willing to lock up (or stake)

4. Wallets and keys

To send or receive cryptocurrency, you use a digital wallet. Each wallet has:

• A public key: like an email address — used to receive funds.
• A private key: like a password — used to authorise transactions. It’s essential to keep your private key secure.

5. Irreversibility and transparency

Once a transaction is confirmed and added to the blockchain, it can’t be changed or erased. This helps make crypto transactions clear and trustworthy.

Cryptocurrency works without needing banks or middlemen. Instead, it uses computer code, maths, and a global network of users to keep things running smoothly. This system can give people more control over their digital money.

At the heart of every cryptocurrency is the blockchain — a kind of digital record book that's shared and updated by computers all around the world. Here's how it works:

1. A transaction is initiated
2. The network validates it using consensus mechanisms (like PoW or PoS)
3. Once verified, it's added to a new block
4. The block is added to the blockchain

This helps improve transparency and immutability.

Examples of major cryptocurrencies

• Bitcoin (BTC): the original crypto, viewed as digital gold
• Ethereum (ETH): powers decentralised apps and smart contracts
• Solana (SOL): known for high-speed, low-cost transactions
• Cardano (ADA): emphasises sustainability and academic research

What is cryptocurrency mining?

Mining is how new crypto coins are created and how transactions are validated on networks like Bitcoin. It involves solving complex algorithms, rewarding users with newly minted coins.

Ethereum, however, has transitioned to PoS, allowing users to stake their crypto to secure the network rather than mining.

Discover Bitcoin mining and how it works.

What is a stablecoin?

As cryptocurrencies became more popular, people started looking for a type of digital money that didn’t constantly change in value. That’s where stablecoins come in.

Stablecoins are special types of cryptocurrencies designed to stay stable in price. They do this by tying their value to something steady, like the US dollar.

Examples include:

• USDC (USD Coin)
• USDT (Tether)

They are used for digital payments, remittances, and hedging against market volatility.

What are the risks of investing in cryptocurrency?

While cryptocurrencies offer many benefits, it’s important to understand the potential downsides before investing. The landscape of crypto can change quickly, so it's essential to be fully aware of the risks.

• Price volatility: cryptocurrency prices can change rapidly and unpredictably, often due to market speculation and sentiment. It’s possible for the value of your assets to drop significantly in a short period.
• Regulatory uncertainty: governments are still developing their approach to cryptocurrency. New regulations could affect the value and use of certain cryptoassets.
• Security risks: while blockchain technology is secure, your crypto can be vulnerable to theft or loss if your private key is compromised or if you use an unsecure platform. Always use a trusted service to manage your crypto.
• Scams and fraud: the decentralised nature of crypto can make it a target for scams, fraud, and phishing schemes. Always do your research and be cautious.

How to buy cryptocurrency with Revolut

Getting started with crypto on Revolut is quick and easy. To start buying cryptocurrencies like Bitcoin, just follow these steps:

1. Download Revolut for iOS or Android, then sign up
2. Go to Crypto on your home screen and tap Get started
3. Read and accept our risk warnings and T&Cs
4. Go to Crypto, then Trade
5. Select your preferred cryptocurrency, then tap Buy
6. Enter the amount you want to trade
7. Review and confirm your order

Check out our Help Centre for more info on how to buy and sell crypto.

Revolut simplifies crypto investing with clear pricing, real-time charts, and in-app storage. You don’t need to manage external wallets or exchanges — everything you need is right in the app.

How do you store cryptocurrency?

Crypto is stored in wallets, which safeguard your private keys. There are two types:

• Hot wallets: online and easy to access, but potentially more vulnerable
• Cold wallets: offline, which can increase security

We offer integrated wallet management. Learn more about crypto wallets.

What can you buy with cryptocurrency?

While adoption is still growing, you can already use crypto to:

• Shop online with merchants accepting digital currencies
• Pay for subscriptions, travel, and luxury items
• Donate to charitable causes
• Explore new financial ecosystems, like DeFi and NFTs

The future of cryptocurrency

Crypto is a technology reshaping the financial world. From borderless payments to decentralised ecosystems, it holds the potential to increase access, efficiency, and freedom.

Ready to get started? Explore crypto with Revolut. For further reading, check out our crypto trust and safety guide.

The information provided is accurate as of 23 July 2025.

Not all cryptoassets carry the same risks. Before investing, read our cryptoasset specific risk summaries to make sure you understand the different risks associated with different types of cryptoassets.

Information is provided by Revolut Ltd (Registration No. 08804411, UK). However, Revolut Ltd is not liable for any claims, offerings, or services described herein. The representations made and opinions expressed in this content do not necessarily reflect the views of Revolut Ltd or any of its subsidiary companies registered and licensed to provide Revolut products in local jurisdictions. For more information about Revolut and its current product offerings in your country, please visit https://www.revolut.com/.

Your cryptocurrency trades are subject to fees.