How Does Cryptocurrency Work? A Beginner’s Guide

Cryptocurrency is a form of digital money that doesn’t rely on a central bank or financial institution to verify transactions.
Instead, it uses blockchain technology to create an unchangeable ledger that records trades and asset ownership.

Although the first cryptocurrency appeared in the 1990s, the crypto boom of the last decade has made it one of the most talked-about innovations in finance. From Bitcoin’s meteoric rise to the thousands of altcoins available today, digital currencies have become a part of mainstream investing.

However, as exciting as the opportunities may be, the crypto market is also volatile. That’s why understanding how cryptocurrency works — and how to navigate the risks — is essential before you start.

What Are the Advantages of Cryptocurrency?

One of crypto’s biggest appeals is privacy. Transactions are recorded on a public blockchain, but you don’t need to share personal details like you would with a bank. This reduces risks such as identity theft while proving transactions are valid.

Another advantage is its global nature. Cryptocurrencies operate across borders, so there’s no need to worry about exchange rates or withdrawal limits.

Types of Cryptocurrencies

Cryptocurrencies generally fall into two categories:

1. Coins: Digital money with their own blockchain (e.g., Bitcoin, Ethereum).
2. Tokens: Assets built on existing blockchains, often used to represent ownership or access within a project.

Bitcoin was the first cryptocurrency and remains the most widely traded. Ethereum is also popular, thanks to its ability to handle complex transactions. Other altcoins include Cardano, Solana, and XRP.

Ways to Invest in Crypto

People invest in crypto either short-term or long-term:

1. Short-term trading — Buy and sell quickly to take advantage of price swings.
2. Long-term investing — Hold for years, riding out volatility in hopes of massive gains.

For example, Bitcoin has grown by over 12,000% since its launch in 2009. Ethereum, launched in 2015, has gained even more.

What to Do Before You Invest

Before diving in, consider these key steps:

1. Define your goals — Are you looking for quick profits or long-term growth?
2. Analyze the market — Take time to understand trends, risks, and opportunities.
3. Manage your risk — Only invest what you can afford to lose.

Crypto can be rewarding, but its volatility makes careful planning essential.

Getting Started with Cryptocurrency

To begin, you’ll need to:

1. Open an account — Choose a broker or crypto exchange and verify your identity.
2. Buy crypto — Select the currency you want and decide how much to purchase.
3. Store your assets — Use a hot wallet (online, easier but riskier) or cold wallet (offline, safer but less convenient).

3 Cryptocurrencies to Watch

1. Bitcoin (BTC)
   Market Cap: $2,275,114,761,008
   Considered by many as the gold standard of cryptocurrency, Bitcoin runs on a blockchain and requires solving cryptographic puzzles, which keeps it a secure coin. The price of Bitcoin as of April 2025 is $82,413 USD.
2. Ethereum (ETH)
   Market Cap: $518,192,457,238
   This coin, considered an altcoin by some, is another popular option. Its developers aim to create a globally accessible, decentralized roster of financial products and applications that run without fraud or third-party interference.
3. Tether (USDT)
   Market Cap: $167,002,420,906
   Tether was the first stablecoin, a type of crypto tied to the value of the United States dollar. That backing can help level some of the dramatic fluctuations and make it easier to convert your holdings into dollars.

Where Pikka Comes In 🚀

Understanding crypto is one thing. Converting it to real money you can use every day in Nigeria is another. That’s where Pikka steps in.

With Pikka, you don’t have to worry about the hassle of finding buyers or dealing with liquidity issues on exchanges. You can:

• Instantly convert your crypto to Naira at competitive rates.
• Cash out securely to your Nigerian bank account — anytime, 24/7.
• Skip the stress of waiting days or facing hidden charges.

Whether you’re a short-term trader looking to lock in profits or a long-term investor ready to cash out gains, Pikka ensures your digital wealth is always liquid and within reach.

Cryptocurrency may be the future of money, but with Pikka, you can spend and enjoy that future today — in Naira, fast and secure.