The internet’s been buzzing about cryptocurrency for years. But while it’s steadily grown more popular, as news headlines follow the volatility of the market, many people are still unclear about what, exactly, cryptocurrency is — let alone how to buy and use it.

Here, we’ll go over all this, plus the kinds of programming languages that support popular cryptocurrencies if you’re interested in gaining the skills needed to work in this fast-evolving sector.

And if you want to learn even more about the technology underlying cryptocurrencies, our free Introduction to Blockchain and Crypto course — created in partnership with the Stacks Foundation — will walk you through how blockchains work and how they’re being used today.

Cryptocurrency explained

Cryptocurrency is a digital or virtual currency that can be used to purchase goods and services. It functions like traditional, government-issued currencies, like the U.S. dollar or the Japanese yen. But the way cryptocurrency is exchanged is different, because everything happens digitally.

Cryptocurrency transactions happen on a blockchain, which is essentially a digital ledger that records transactions between parties in a secure and verifiable way. And the data on the ledger are duplicated and distributed across all of the computers on the network.

It’s called a blockchain because data is organized in blocks that are chained together using pointers. When you buy, sell, or trade cryptocurrency, information about your transaction — like the date and time it occurred and the involved parties — is stored on the blockchain.

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What does “crypto” mean?

One feature of cryptocurrencies that makes them appealing is how secure and safe they are. “Crypto” is short for cryptography, which is a way of encoding data so it can be sent securely. With cryptocurrencies, each transaction is processed through an algorithm known as a hash. The algorithm then outputs a result. The result has the same length, no matter what data was inputted, but it looks nothing like what was originally entered.

Cryptography isn’t only used for cryptocurrencies. It’s used all the time to secure data being sent over the internet through virtual private networks (VPNs). Like with cryptocurrencies, you can’t read a transaction if you don’t have the cryptographic key or algorithm that processed the original data.

How does cryptocurrency work?

When you want to purchase something with cryptocurrency, or if you want to buy it using a government-issued currency like dollars, you access a blockchain. Information — like the amount of crypto you’re buying or spending, the identity of your wallet (which is where you store your crypto), and a timestamp — are put through a hash algorithm. The result is outputted on the blockchain, where users’ computers (referred to as nodes) verify the legitimacy of the transaction.

After the transaction is certified as authentic, the amount you spend, plus any fees, will be deducted from your crypto wallet. If you’re receiving cryptocurrency, your wallet’s balance will increase.

How can I buy cryptocurrency?

Before you can buy cryptocurrency, you’ll need a place to put it. This is where cryptocurrency wallets come in. You can get a cryptocurrency wallet for free online, or you can buy a hardware wallet, which is a physical device that stores your secret information and validates your transactions. You can also get a paper wallet that has your wallet info — either as a set of characters or a QR code — printed or written on it.

Once you get your wallet set up, you can go to an online exchange, like Binance or Gemini, and buy cryptocurrencies. After you make your purchase, the amount you bought gets deposited into your wallet and becomes available for you to use.

How do you trade cryptocurrency?

Trading cryptocurrency happens on an exchange, and the process is simple. You connect your wallet to the exchange, choose the currency you want, and make the purchase. The amount you pay is deducted from your wallet, along with any fees. You can trade many different kinds of cryptocurrency on the leading exchanges, diversifying your portfolio as you see fit.

Is cryptocurrency a good investment?

If you’re curious about cryptocurrencies, you’re probably also wondering if they’re a good investment. There isn’t a straightforward answer to this question, unfortunately.

Cryptocurrencies are extremely volatile — spiking and plummeting often. Investors who aren’t turned off by this see them as good investments because they can profit from quick value spikes. Others steer clear because of the lack of predictability. Your investment style and risk tolerance will determine whether they should be a part of your portfolio or strategy.

Let’s explore some of the most popular cryptocurrencies: Bitcoin, Ethereum, and Cardano.

Bitcoin

Bitcoin was the first cryptocurrency, and it’s based on the Bitcoin blockchain. Bitcoin is powered by its popularity. It was designed to handle seven transactions per second, making it far slower than other methods of electronic transactions. As a result, many people would rather buy, sell, or hold Bitcoin instead of using it for day-to-day transactions.

Ethereum

Ethereum’s coin, known as Eth, is the second-most popular cryptocurrency. The draw of Ethereum is its blockchain, which is used to create many other blockchain-based solutions, such as smart contracts and other cryptocurrencies.

Cardano

Cardano was invented to solve issues faced by Bitcoin and Ethereum, like how long it takes to facilitate a transaction and scalability. Cardano uses a proof-of-stake method to verify a transaction, which only involves a few select computers on the network — the owners of which have cryptocurrency locked up, or staked, in the system.

Bitcoin and Ethereum both use proof-of-work, which requires many computers — and computational power — to verify transactions. Cardano’s proof-of-stake system makes its transactions relatively fast and less energy-demanding, supporting the platform’s rise in popularity.

What is an ICO in cryptocurrency?

An ICO, or initial coin offering, is when a new coin is made available on the market. ICOs are often preceded by white papers that outline:

  • The problems the coin solves
  • How the platform or solution is different than those of other cryptocurrencies
  • The plan for how the coin will be developed in the years that follow
  • The number of coins that will be minted
  • The governance model of the coin
  • How people can get involved with the governance of the coin

The programming that goes into cryptocurrencies

Cryptocurrencies are created and managed on digital platforms. The platforms themselves, as well as the coins that live on them, are often created using common programming languages:

  • Ethereum is made up of multiple languages, including C++, Python, Ruby, and Go. Because there are so many solutions designed and deployed on the Ethereum blockchain, a variety of languages are used.
  • Bitcoin is mostly written in C++. One of the main reasons bitcoin uses C++ is that it was the original language the founder(s), Satoshi Nakamoto, used to create the platform.

Ready to start programming with the languages behind cryptocurrencies? Check out the courses below, as well as our blog post on the most common blockchain programming languages.

And if you want more details about how cryptocurrencies work and how blockchain is being used today, try our Introduction to Blockchain and Crypto course. Along with cryptocurrencies, you’ll also explore buzzy topics like NFTs, Web3, and the metaverse. Sign up now to learn more.

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