How do cryptocurrencies work?

10. November 2025

Although cryptocurrencies (such as Bitcoin) have been around since 2008, the hype surrounding virtual money has only reached the mainstream this year. The main reason: the extreme rise in value and the associated media interest. Everyone is reporting on it, regardless of whether ORF, Kronen Newspaper or Standard. More and more people are therefore asking themselves the following question: How do cryptocurrencies work?

In this article, we explain the technology behind cryptocurrencies and discuss whether it is still worth getting into the crypto business.

How do cryptocurrencies work?

Before you can understand cryptocurrencies, you first have to look at a conventional currency, e.g. the euro. Money goes from one person to another in physical form - in printed bills or coins.

In contrast, there are cryptocurrencies. These only exist virtually and not in the real world. They are stored in a so-called "wallet".

Each wallet has two "codes". One code is the public address. This can be used to have bitcoins sent to you or to send bitcoins to another address. The second code is the wallet password. You must keep this safe, as you can only access the wallet with this password.

Why is Bitcoin so secure and how do transactions work?

For the following example, we assume that Max to Otto would like to send 5 Bitcoins. We explain what happens during the transaction.

1. Max clicks on "Send Bitcoins" in his wallet. He then enters the address of Otto and the amount to send (5 BTC).
2. The blockchain checks whether Max has 5 BTC at all. The blockchain is (simply explained) an open table that every Bitcoin miner can have on their computer. All Bitcoin transactions ever made (since the very first BTC transaction) are stored in the table.
3. Only when there is sufficient confirmation from mining computers that Max has 5 BTC, the transaction is released.
4. A new transaction is entered into the blockchain: Max has at Otto 5 BTC sent.
5. Gradually, the transaction is confirmed by all Bitcoin miners. After a certain time Otto now has access to the Bitcoins in his wallet.

We recommend this video to anyone who needs an even more detailed explanation of Bitcoin. It also summarizes the role of miners once again.

You too can Become a Miner. Today, however, it is no longer profitable for private individuals, as large companies have entire server farms working just for Bitcoin.

Is the crypto business still worthwhile?

We believe that cryptocurrencies are still in their infancy. Based on the global population, less than 10% of all people know Bitcoin.

However, as the population increasingly loses trust in banks and financial institutions, interest is steadily increasing. More and more people want to be part of the crypto revolution.

Thanks to blockchain, you are not tied to any central place. Today, there are many Bitcoin miners around the world (tens of thousands). Therefore, turning off all mining computers at once or changing the blockchain is impossible (or extremely unlikely).

These and many other factors will therefore ensure that cryptocurrencies will continue to play a major role in the future. However, as Bitcoin already has a very high price, you should also find out about alternative currencies. The best-known alternatives include Ethereum, Ripple and IOTA.

We have in this This article explains whether you can still earn money with bitcoins and other currencies.

You can find a table of all currencies at coinmarketcap.com, for example!

If you still have a question about "How do cryptocurrencies work?", we recommend reading the other articles in our Crypto Blog and a look at the official Wikipedia entry to the Bitcoin.