Cryptocurrency

What is cryptocurrency in simple words

Cryptocurrency is digital money that does not exist in the form of paper notes or coins. It is not controlled by banks or states, but is stored in the computers of network participants around the world. The main task of such money is to allow people to safely, quickly and directly transfer value to each other.

Unlike ordinary money, cryptocurrencies do not have a single issuing center. Their quantity is often strictly limited by program code. For example, no more than 21 million bitcoins can be issued. This makes cryptocurrencies resistant to the inflation that traditional states can create by printing new money.

Cryptocurrencies use cryptography to protect transactions. Hence the name — "crypto" (from the Greek κρυπτός — hidden, secret). Each transaction is signed with a digital signature that cannot be forged without knowing the secret key. About how the digital signature works, read the article Electronic signature.

The cryptocurrency market volume in 2025 exceeded 3 trillion dollars, and the number of crypto wallet users reached 600 million people worldwide. This makes cryptocurrencies one of the fastest growing financial instruments of our time.

In Russia, the possession, purchase, sale and mining of cryptocurrencies are legal. However, the use of cryptocurrency as a means of payment within the country is categorically prohibited — the ruble remains the only legal tender. About the risks and restrictions that exist in Russia, read the article Import substitution.

How cryptocurrency is arranged

The basis of any cryptocurrency is blockchain technology — a distributed database that stores information about all transactions. The blockchain works like an endless common "notebook" where each new record (block) is firmly linked to the previous one. This notebook cannot be forged or have a page torn out retroactively.

Main elements of cryptocurrency

• Decentralization: The network is maintained by thousands of independent computers (nodes) around the world, and not by one bank or state. This makes the system resistant to censorship and outages.
• Transparency and pseudo-anonymity: All transactions are recorded in a common ledger and are available for viewing. However, wallet owners do not disclose their real names — only digital addresses are used.
• Cryptographic protection: Transactions are signed with private keys, which guarantees their authenticity and the impossibility of forgery. Read more about cryptography in the article Encryption.

Main types of cryptocurrency

1. Coins

These are the base assets of independent blockchains. Each coin has its own network and is used to pay for transactions in that network.

• Bitcoin (BTC): The first and most famous cryptocurrency, created in 2009. Read more about bitcoin in the article Bitcoin.
• Ethereum (ETH): The second cryptocurrency by capitalization. A platform for creating smart contracts and decentralized applications.
• Litecoin (LTC): "Digital silver" — a faster analogue of bitcoin.

2. Altcoins

Any other cryptocurrencies created after bitcoin. These include Ethereum, Solana, Cardano, Polkadot and thousands of other projects. Altcoins often offer improved functions: higher speed, low fees or additional capabilities (for example, smart contracts).

3. Stablecoins

These are digital currencies whose exchange rate is pegged to real fiat money (usually the US dollar) to reduce volatility. The most popular stablecoins:

• Tether (USDT): The most popular stablecoin, pegged to the US dollar.
• USDC: The second most popular stablecoin from the company Circle.
• DAI: A decentralized stablecoin that is backed by cryptocurrency collateral.

4. Tokens

Digital assets created on top of existing blockchains (most often on Ethereum). Tokens can perform various functions:

• Utility tokens: Give access to platform services (for example, payment of fees).
• Security tokens: Represent digital shares or stakes in real assets.
• NFT (Non-Fungible Tokens): Unique tokens confirming the right of ownership to a digital or physical object.

About how tokens differ from coins, read the article Token.

How to buy and store cryptocurrency

Ways of purchase

• Cryptocurrency exchanges: The most popular way. Platforms like Binance, Bybit and OKX allow you to buy cryptocurrency for rubles or dollars.
• P2P platforms: Transactions between users directly. The exchange acts as a security guarantor.
• Online exchangers: Quick exchange of rubles or dollars for cryptocurrency. You can choose a reliable service through aggregators like BestChange.
• Offline exchangers: The ability to exchange cryptocurrency for cash at a company office.

Ways of storage

• Hot wallets: Storage on an exchange or in a mobile application. Convenient for active trading, but less secure.
• Cold wallets: Hardware devices (for example, Ledger or Trezor) for storing keys in offline mode. The safest way for large amounts.
• Paper wallets: Printed private keys. Reliable, but requires caution.

About how to secure your crypto assets, read the article CIPF.

How to make money on cryptocurrency

1. Long-term investing (HODL)

The simplest and most understandable way for beginners. You buy reliable cryptocurrencies (for example, Bitcoin or Ethereum) and hold them for months or years, expecting growth in value. The "buy and hold" strategy is especially effective on a growing (bull) market.

2. Active trading

Buying and selling cryptocurrencies over short periods to profit from exchange rate fluctuations. Requires a deep understanding of technical analysis, the ability to work with charts and high risk control. Trading is suitable only for experienced users.

3. Passive income (staking and farming)

You lock your cryptocurrencies to support the operation of blockchain networks and receive a reward for this. Many exchanges offer flexible and fixed deposits with a yield of 4% to 20% per annum. This is similar to a bank deposit, but with higher yields and risks.

4. Participation in new projects (AirDrop)

You can receive free tokens for activity on social networks, testing new decentralized applications or early registration on platforms. This is one of the safest ways to earn money, since you do not invest your own funds.

Read more about ways to earn money in the article Fintech.

Risks of cryptocurrency

Investments in cryptocurrencies are associated with high risks. The main threats:

• High volatility: Cryptocurrency exchange rates can change by tens of percent over several days. Sudden market crashes often lead to lightning-fast loss of investments.
• Lack of insurance: Unlike bank deposits, crypto assets are not protected by state insurance systems. If the funds are stolen, they cannot be returned.
• Fraud: The market is replete with financial pyramids, fake tokens and phishing schemes.
• Risk of human error: If you forget the wallet password or send coins to an incorrect address, it is technically impossible to restore access.

Read more about risks and ways of protection in the article Fraud.