What Is Cryptocurrency? – A Pocket-Sized Guide

Why should I care?

1. Pay a friend, buy a train ticket, or receive wages—without a bank in the middle. Cryptocurrency is money that moves on the open internet, 24 hours a day, anywhere on earth. “It turns cash into code you control yourself.”

2. The blockchain – a giant shared ledger

• One file, many copies Imagine a single spreadsheet copied to thousands of home and office computers.

• New lines only You can add a line (a payment) but never rub one out.

• Built-in alarm Each page carries a digital fingerprint of the page before it. Alter one number in an old line and every later fingerprint breaks—everyone spots the fraud, and the fake copy is dumped.

That self-checking file is the blockchain. Because no single company owns it, anyone may read or add payments, but no one can quietly alter the books.

3. Who’s allowed to write the next lines?

Two popular systems decide:

• Proof of Work (Bitcoin)
  Analogy: First computer to finish a hard sudoku gets to write the next block and earns new coins.
  Energy use: High—lots of electricity for the puzzle race.

• Proof of Stake (Ethereum, Cardano)
  Analogy: Players lock up some of their own coins as a security deposit; software picks one at random to write the next block.
  Energy use: Low—no big number-crunching, so far less power.

It turns cash into code you control yourself

4. Wallets – your digital keyring

A wallet is an app (or USB-style gadget) that holds two codes:

• Public address Like your bank sort code and account number. Share it to be paid.

• Private key Like your PIN—but impossible to reset if lost. It signs transactions.

Most wallets reveal a 12- or 24-word backup phrase. Copy it on paper; if your phone dies you can rebuild the wallet. If a thief gets the words, they get the money—simple as that.

5. Making a payment

1. Paste your friend’s address, enter £10, press Send.

2. Wallet signs the message with your private key.

3. Network computers see it in seconds.

4. A miner (Proof of Work) or staker (Proof of Stake) records it in the next block.

5. After one block on fast networks—or six on Bitcoin—the payment is locked in for good.

6. Everyday things people already do

• Fast transfers Move cash from London to Lagos in minutes, often for pennies.

• Digital gold Many hold Bitcoin as long-term savings.

• Programmable payments On Ethereum, smart contracts can drip interest, split a restaurant bill automatically, or issue concert tickets that cannot be forged.

• Stablecoins for business Tokens pegged to pounds or dollars let companies settle invoices without pricey international charges.

7. Four facts to keep you safe

• Prices swing wildly—never risk rent money.

• Send to a wrong address and it’s gone.

• Ignore any scheme promising “guaranteed” returns.

• Your keys, your responsibility; no helpline can restore lost coins.