What Is Cryptocurrency? How It Works and Main Types

A cryptocurrency is a digital asset recorded in the shared ledger of a computer network instead of in the books of a bank or a government. The crypto part of the name refers to cryptography: ownership and transfers are proven with cryptographic signatures. The Financial Stability Board, which coordinates financial regulators internationally, describes a crypto-asset as a type of private sector digital asset that depends primarily on cryptography and distributed ledger or similar technology.

Bitcoin was the first working example. On 31 October 2008, a person or group using the name Satoshi Nakamoto sent a paper on a peer-to-peer electronic cash system to a cryptography mailing list, and the network began running in January 2009. The bitcoin.org FAQ says only 21 million bitcoins will ever be created.

Cryptocurrency is the everyday word. Laws and international bodies tend to say crypto asset, because many tokens on these networks are not used as money at all: they can stand for access rights, claims on other assets or votes inside an application.

A transfer moves in three steps. The sender signs it with a private key. Computers on the network check that the signature is valid and that the balance covers the amount. The checked transaction is then written into a new block, and blocks link into a chain. Bitcoin.org calls this chain a shared public ledger that the entire network relies on.

Who does the checking depends on the network. On Bitcoin, miners spend computing power to add blocks and receive newly issued coins plus fees. Ethereum also started with mining but switched to proof of stake on 15 September 2022; ethereum.org says validators now lock up ETH as collateral to confirm transactions.

A wallet does not hold the coins themselves. They stay on the ledger, and, as the bitcoin.org FAQ explains, the wallet application manages the private keys that can move them. Someone who runs their own wallet and loses the key or recovery phrase has no authority to turn to. Transfers are also final: bitcoin.org says a confirmed payment can only be refunded by the person who received it.

Because the same technology serves different goals, crypto assets do not form one uniform group. There is no single official classification, and one asset can fit more than one group. In everyday use a coin runs on its own blockchain, while a token is issued on an existing network, although the line is not always sharp. The main groups below match the Layer 1 and 2, Stablecoin, DeFi and Meme filters of the Lzzo.com crypto list:

• Bitcoin: the first cryptocurrency, built to move value without an intermediary.
• Layer 1 and Layer 2 network assets: Ethereum is one example. Its main network launched on 30 July 2015, runs programs called smart contracts and uses ETH to pay transaction fees.
• Stablecoins: tokens that aim to track a currency, usually the US dollar. The aim is a design target, not a promise.
• DeFi tokens: tokens of applications that offer lending, swaps and similar services without a traditional intermediary.
• Meme tokens: tokens built around jokes and community attention rather than a product. Their risks are high.
• Real-world asset (RWA) tokens: tokens that aim to represent an outside asset such as a share or gold.

Crypto assets trade on many platforms around the world rather than on one central exchange. A price is the level at which a buyer and a seller agree on a given platform, so the same asset can show slightly different prices from one venue to another. On many platforms, prices are quoted against a stablecoin and read in dollars.

Most crypto assets lack a widely accepted valuation anchor such as a company's earnings, so prices react strongly to expectations and attention. The Bitcoin Fear and Greed Index tries to sum up that market mood in a single number. The bitcoin.org FAQ explains part of the volatility through the relatively small size of the market: modest events, trades or business activities can move the price significantly.

The price of one unit says little about size. For size, look at market capitalization, the circulating supply multiplied by the price, which the market capitalization guide explains.

Legal terms differ by country. Türkiye's legislation uses crypto asset rather than cryptocurrency. Law No. 7518, published in the Official Gazette on 2 July 2024 (issue 32590), added this definition to the Capital Markets Law: intangible assets that can be created and stored electronically using distributed ledger or similar technology, are distributed over digital networks and can represent value or rights.

Under the same law, crypto asset service providers must obtain permission from the Capital Markets Board of Türkiye to be established and to start operating; they are supervised, and unauthorised activity carries criminal penalties.

Earlier, a regulation of the Central Bank of the Republic of Türkiye, published in the Official Gazette on 16 April 2021 and in force from 30 April 2021, banned the direct or indirect use of crypto assets in payments. Its definition states that crypto assets are not fiat money, scriptural money, electronic money, payment instruments, securities or other capital market instruments. This section summarises the texts as published in the Official Gazette, and tax is covered in the separate crypto tax guide.

Bitcoin.org calls Bitcoin a volatile asset. The same risks apply to other crypto assets, often more strongly:

• Volatility: sharp falls and rises can happen within short periods; bitcoin.org says no one is in a position to predict the future of Bitcoin.
• Finality: a transfer sent to a wrong address or to a scammer cannot be reversed by the network.
• Custody: a lost key or recovery phrase can lock you out permanently, and anyone who obtains it can move the assets.
• Liquidity: small and new tokens may find few buyers, and even a small order can move their price a long way.
• Regulation: rules vary by country and change over time.

The crypto prices page lists assets in US dollars with the last update time on each row, and it can be filtered by groups such as Layer 1 and 2, Stablecoin, DeFi and Meme. Each asset page shows the price, the 24-hour change and the observation time; where no data exists, the page shows a dash instead of an invented value.

The comparison page puts assets side by side, the market map gives an overview, and the data methodology page explains how values are calculated. Check the observation time beside any value: the price may have moved since the page loaded.