Cryptocurrency is digital money that runs on a blockchain, a shared record kept by many computers instead of a bank. Owners control their coins with private keys held in a wallet, and the network checks every transaction. Bitcoin was the first cryptocurrency. Prices can rise or fall sharply, and payments usually cannot be reversed.
Cryptocurrency, or crypto, is a digital asset that you can send to anyone on the internet without a bank in the middle. A network of computers checks every payment and records it on a blockchain, and cryptography keeps that record secure. Bitcoin was the first cryptocurrency, and it is still the largest by total market value.
This guide explains how crypto works, the main types, what people use it for, how buying and storing it works, the rules and taxes, and the risks. Each section links to a more detailed guide in the Crypto basics section of the Academy. When you are ready, you can see crypto prices and payment options on Coinmama.
Where should you start?
If you are new to crypto, read these six guides in this order. Each one builds on the one before it.
- Bitcoin. What is Bitcoin? explains the first cryptocurrency and why it was created.
- Blockchain. What is blockchain? shows how the shared record behind crypto works.
- Ethereum. What is Ethereum? covers the blockchain that runs apps and smart contracts.
- Wallets. What is a crypto wallet? explains where your crypto is kept.
- Keys. Public keys vs private keys explains what gives you control of your coins.
- Buying. How to buy crypto walks you through a first purchase, step by step.
How does cryptocurrency work?
Cryptocurrency works through a blockchain, a shared record that many computers keep and check together. Owners control their coins with private keys, and the network only accepts payments signed with the right key.
The blockchain
A blockchain is a list of transactions grouped into blocks. Each block is linked to the one before it, so changing an old entry would mean redoing every later block. For Bitcoin, it is a shared public ledger that the whole network relies on (Bitcoin.org). Read more in what is blockchain?
Keys and addresses
Your wallet holds a private key: a secret number that signs your transactions and proves they come from you (Bitcoin.org). The wallet works out a public key from it, and your address from the public key. On Ethereum, for example, the address is made from a hash of the public key (ethereum.org). This only works one way: no one can work out your private key from your public key or address.
Share your address to receive crypto, but never share your private key or seed phrase. See public keys vs private keys.
Nodes and consensus
Computers that run a network’s software are called nodes. They keep a copy of the blockchain and check that each transaction follows the rules. To agree on which block comes next, the network uses a consensus mechanism. There are two main kinds:
- Proof of work. Miners compete to solve a hard puzzle, and the winner adds the next block. Bitcoin uses this system (Bitcoin.org). See proof of work and crypto mining.
- Proof of stake. Validators lock up coins as a deposit and take turns proposing and checking blocks. Ethereum switched to this system on 15 September 2022, in an upgrade called the Merge (ethereum.org). See proof of stake.
What are the main types of crypto?
Most cryptocurrencies fit into five groups: Bitcoin, smart-contract platforms, stablecoins, tokens and memecoins. Every coin other than Bitcoin is often called an altcoin.
| Type | What it is | Examples | Learn more |
|---|---|---|---|
| Bitcoin | The first cryptocurrency, built as digital money. No more than 21 million bitcoins will ever exist. | Bitcoin (BTC) | What is Bitcoin? |
| Smart-contract platforms | Blockchains that run programs called smart contracts, which power apps. Their coin pays network fees. | Ether (ETH), Solana (SOL), Cardano (ADA) | What is Ethereum? |
| Stablecoins | Tokens designed to keep a fixed value, usually one US dollar. | Tether (USDT), USD Coin (USDC) | What is a stablecoin? |
| Tokens | Assets created by a smart contract on an existing blockchain, such as Ethereum. | Chainlink (LINK), most stablecoins | What is a smart contract? |
| Memecoins | Coins inspired by internet jokes or memes. Their value rests mostly on community interest. | Dogecoin (DOGE) | What is Dogecoin? |
A smart contract is a program stored on a blockchain that follows “if this, then that” rules (ethereum.org). Stablecoins aim to avoid the price swings of other crypto (ethereum.org), but they carry their own risks. Dogecoin was created as a joke in 2013 (dogecoin.com).
How many cryptocurrencies are there? As of September 2026, the price tracker CoinGecko said it was tracking 21,667 of them. Most of the market’s value sits in a few large coins: Bitcoin alone made up more than half of the total value that CoinGecko tracked, and Bitcoin and Ether together about two-thirds (as of September 2026).
To look at individual coins, see the Bitcoin price and payment options, see the Ethereum price and payment options or browse the coin pages. Not every coin is available on every service or in every country.
What can you do with crypto?
People use crypto to send money online, to hold it as an asset and to use apps built on blockchains. What you can do depends on the coin and on the services around it.
- Send money. You can send crypto to anyone who has a wallet address, in any country, without a bank in the middle. Each transfer pays a network fee, which depends on the blockchain and on how busy it is.
- Pay for things. Some merchants accept crypto as payment. Check the amount carefully before you pay, because the price in crypto can change while you wait.
- Hold it. Many people buy crypto and keep it for years, a habit known as HODLing. Prices can fall as well as rise, and past performance does not predict future results.
- Use apps. Smart-contract platforms such as Ethereum run apps for lending, trading and digital collectibles. Read about decentralized finance (DeFi) and NFTs.
- Hold a digital dollar. Stablecoins let people keep a dollar-like value on a blockchain and move it between apps and wallets.
How many people use crypto? Estimates vary a lot, depending on who is counted and how. The guide how many people use cryptocurrency compares the main figures and their sources.
How do people buy crypto?
Most people buy crypto through a crypto exchange or a broker, paying with regular money such as dollars or euros. Other routes are peer-to-peer marketplaces, Bitcoin ATMs and decentralized exchanges.
- Exchanges and brokers. An exchange matches buyers and sellers or quotes you a price, and a broker sells you crypto at a quoted price. Both usually check your identity first, under anti-money-laundering rules. See KYC and crypto.
- Peer-to-peer (P2P) marketplaces. You buy directly from another person, often by bank transfer. You rely on a stranger to send the crypto, so check how the marketplace handles disputes.
- Bitcoin ATMs. Machines that swap cash or card payments for crypto. Only scammers demand payment in crypto (FTC), so never use one because someone told you to. See the guide to Bitcoin ATMs.
- Decentralized exchanges (DEXs). Apps that swap one crypto for another straight from your wallet, so you need crypto and a wallet first. See what a decentralized exchange is.
Coinmama is a cryptocurrency exchange. You create an account, choose a coin, an amount and a payment method, enter your wallet address and confirm. You’ll be asked to verify your identity before you buy: see Get verified.
For every step in detail, including payment methods and costs, read how to buy crypto.
Where is crypto stored?
Crypto stays on the blockchain, and a wallet holds the keys that let you move it. The most important question is who holds those keys: a company, or you.
- Custodial. A company, such as an exchange, holds the keys for you. This is convenient, but you depend on that company. In the US, FDIC deposit insurance does not cover crypto assets, and it does not protect you if a crypto exchange, custodian or wallet provider fails (FDIC).
- Self-custody. You hold the keys yourself in your own wallet, backed up by a seed phrase: a list of words that can restore it. You are in full control and fully responsible. No one, not developers, miners, wallet providers or exchanges, can recover funds you permanently lose from a self-custodied wallet (Bitcoin.org).
Wallets are also hot or cold. A hot wallet is software connected to the internet, such as a phone or desktop wallet. A cold wallet, such as a hardware device, keeps your keys offline. Compare them in hot wallet vs cold wallet, and start with what a crypto wallet is.
On Coinmama, crypto is delivered to the wallet address you provide, so set up a wallet before you buy.
Is cryptocurrency legal, and who oversees it?
Owning Bitcoin has not been made illegal in most countries, but some countries restrict or ban its use (Bitcoin.org). The rules for other coins and for crypto services differ from country to country, and they change often.
European Union. The Markets in Crypto-Assets Regulation (MiCA) sets uniform EU rules for crypto-assets. It covers companies that issue crypto-assets and crypto-asset service providers, such as exchanges (ESMA). Its rules for stablecoin-type tokens have applied since 30 June 2024, and the rest since 30 December 2024 (ESMA, as of September 2026).
United States. The GENIUS Act, signed into law on 18 July 2025, set federal rules for payment stablecoins (US Government Publishing Office). A wider bill on how crypto markets are overseen, the Digital Asset Market Clarity Act, passed the House of Representatives but had not become law as of September 2026 (GovTrack). For tax purposes, the IRS treats crypto as property (see the tax section below).
Everywhere else. Countries take very different approaches, and some states or regions add their own rules. This overview is general information, not legal advice. Check the official guidance where you live. To see where Coinmama is not available, read restricted countries and states.
What are the risks of cryptocurrency?
The main risks are sharp price swings, scams, lost keys and the lack of the protections that bank accounts have. Only use money you can afford to lose.
- Volatility. The value of a cryptocurrency can change rapidly, even by the hour, and crypto tends to be more volatile than stocks and bonds (FTC). See what volatility is.
- Scams. In 2025, the FBI’s Internet Crime Complaint Center (IC3) received 181,565 complaints involving cryptocurrency, with $11.366 billion in reported losses (as of September 2026). Learn the warning signs in how to protect yourself from fraud and phishing attacks.
- Lost keys and mistakes. If you lose your private keys or your seed phrase, or send crypto to the wrong address, your coins can be gone for good. Crypto payments typically cannot be reversed (FTC). See what happens if you lose your private keys.
- No deposit insurance. Crypto held in accounts is not insured by a government the way US dollars in an FDIC-insured bank account are (FTC). In the UK, the Financial Conduct Authority says it is highly unlikely that crypto investors are covered by the Financial Services Compensation Scheme, and that you should be prepared to lose all your money (FCA).
- Changing rules. New laws or tax rules can change which coins and services you can use, and what they cost.
How is crypto taxed?
In many countries, selling, swapping or spending crypto can create a taxable gain. The rules depend on the country where you pay tax.
In the US, the IRS treats digital assets as property, not currency (IRS, as of September 2026). In the UK, you may need to pay Capital Gains Tax when you sell crypto, swap it for another crypto, use it to pay for things or give it away, unless it is a gift to your spouse, civil partner or a charity (HMRC, as of September 2026).
Keep a record of every purchase and sale. Read crypto taxes before you buy, then the country guides on crypto tax in the US and crypto tax in the UK. For your own situation, ask a tax professional.
What else should you read in Crypto basics?
These guides go deeper into the ideas in this article. Together with this guide, they make up the Crypto basics section of the Academy.
- What gives crypto value: what backs cryptocurrency? and what market cap means.
- Prices and market mood: understanding market swings, the crypto fear and greed index and how to read cryptocurrency pairs.
- Market terms: what a bear market is and what HODLing means.
- Money basics: what fiat money is and what inflation is.
- Who uses crypto: how many people use cryptocurrency?
- Other ways in: can you buy blockchain stock?
Frequently asked questions
Sources
- Bitcoin.org: How does Bitcoin work? (checked September 2026)
- Bitcoin.org: Frequently asked questions (checked September 2026)
- Bitcoin.org: Some things you need to know (checked September 2026)
- Satoshi Nakamoto Institute: Bitcoin P2P e-cash paper (email of 31 October 2008) (checked September 2026)
- Satoshi Nakamoto Institute: Bitcoin v0.1 released (email of 8 January 2009) (checked September 2026)
- ethereum.org: Ethereum accounts (checked September 2026)
- ethereum.org: The Merge (checked September 2026)
- ethereum.org: Introduction to smart contracts (checked September 2026)
- ethereum.org: Stablecoins (checked September 2026)
- Dogecoin project: History of Dogecoin (checked September 2026)
- CoinGecko: Cryptocurrency prices by market cap (checked September 2026)
- CoinMarketCap: Cryptocurrency prices, charts and market capitalizations (checked September 2026)
- ESMA: Markets in Crypto-Assets Regulation (MiCA) (checked September 2026)
- ESMA: MiCA Article 149, entry into force and application (checked September 2026)
- US Government Publishing Office: Public Law 119-27, the GENIUS Act (18 July 2025) (checked September 2026)
- GovTrack: H.R. 3633, Digital Asset Market Clarity Act (checked September 2026)
- FDIC: What the public needs to know about FDIC deposit insurance and crypto companies (28 July 2022) (checked September 2026)
- US Federal Trade Commission: What to know about cryptocurrency and scams (checked September 2026)
- FBI Internet Crime Complaint Center: 2025 IC3 Annual Report (checked September 2026)
- Financial Conduct Authority (InvestSmart): Crypto basics (checked September 2026)
- IRS: Digital assets (checked September 2026)
- HM Revenue and Customs: Check if you need to pay tax when you sell cryptoassets (checked September 2026)
