What Is Cryptocurrency?

Cryptocurrencies are inherently related to the blockchain. You can’t have one without the other. But before we get into cryptocurrencies, it’s important to know what a blockchain is: In simple terms, it is a digital ledger. It keeps track of value within the network and stores transactional data. But, there’s no way for us to access its services with cash in your pocket. Blockchains need their own native currency to communicate with the network.

That’s where crypto comes along. Just like there are different blockchain networks, there are different types of cryptocurrencies. In this article, Ledger Academy will explain the ins and outs of what cryptocurrency is, how it differs from fiat currencies, and its relationship with the blockchain.

What Is Cryptocurrency?

Put simply, cryptocurrency is a type of currency you use on blockchains. Similar to how we use tokens at a carnival, we need to use a different ‘type of money’ to access blockchain services. Here is where the concept of cryptocurrency fits in the blockchain ecosystem. These digital coins give us access to the blockchain world, and are called “cryptocurrency.”

Why Is It Called Cryptocurrency?

You might be wondering what could be the reason behind calling this digital money cryptocurrency. The biggest issue with creating a digital currency is the double spending problem. Without getting too technical, it’s hard to create a system that ensures you can’t spend the same funds twice. To eliminate this issue, digital money on the blockchain is secured by “Cryptography” techniques. That is why digital money is called “Cryptocurrency.”

How Does Cryptocurrency Work?

Firstly, like most currencies, cryptocurrencies are divisible. For example, 1 Bitcoin can be divided into small fractions called Satoshis in your Bitcoin wallet, just like a dollar splits into 100 cents. Each cryptocurrency works a little differently, but in essence, they are quite similar.

How Coins Come Into Existence: PoW vs PoS

Different blockchains use different consensus mechanisms which affect how the coins come into existence. For example, in a proof of work consensus, new coins are mined. This takes a lot of computational power which ensures that the means it’s pointless to try and cheat the system. This means the supply doesn’t increase too fast, which might devalue the coin. In a proof of stake consensus, the supply is usually issued at launch and then capped. This means that there will never be more than a specific number of coins.

Allocation: Who Receives The Coins and Can Control the System?

Apart from the miners or validators, there is usually an allocation model at the cryptocurrency’s launch. This will tell you exactly who gets a number of coins for doing what in the system and why. But watch out – not all cryptocurrencies are decentralized. Some cryptocurrencies allocate the majority of their coins to a foundation run by an unelected board of governors.

What Is Cryptocurrency For?

Cryptocurrency is the lifeblood of the entire blockchain ecosystem. It allows you to interact with the platforms and services of a blockchain network. Cryptocurrencies are not managed, governed, or controlled by any central authorities or institutions. Instead, they can power decentralized systems that operate autonomously.

Put together, all these features make blockchain very hard or almost impossible to alter or hack. That is what makes blockchain technology so powerful. Besides, it provides us with major revolutionary advantages for countless applications with the same core principle: fostering the decentralization of traditional systems to give power back to the people. And this is exactly what cryptocurrencies aim to do with the traditional financial system.

You might not be able to hold cryptocurrency in your hand or keep it in your pocket. But its value is as real as the notes in your wallet. In fact, you can have more control over your cryptocurrencies than you can with fiat currencies.

Cryptocurrency Trading

You can also trade cryptocurrency similar to trading stocks or commodities.

Paying For Services or Goods

Much like you can with fiat currencies, you can use cryptocurrencies as payment for goods and services. You can pay for anything with crypto, in the physical or digital world. There’s a famous example of Jeremy Strudivant, the man who paid 10,000 Bitcoin for 2 pizzas in 2010. While that may not have been the best choice for Jeremy at the time, there are now plenty of goods and services to spend your crypto on. From buying NFTs to donating to good causes, there are countless things you can buy with crypto today.

Participating in Web3 Communities Like DAOs

The blockchain is not just for moving around money. Using cryptocurrencies, you can also take part in community governance. Decentralized autonomous organizations (DAOs) use cryptocurrencies or tokens on a specific blockchain, to allow users to vote in a decentralized manner.

Cryptocurrency Investments

Since blockchains provide entire economies for users, there are several ways in which users can invest their cryptocurrencies in the hope of seeing some returns. For example, blockchains that use a proof of stake consensus allow users to stake a certain amount of cryptocurrency to help secure the network. In return, the user, named a validator, receives cryptocurrency rewards. This is just one example of a way you can invest in cryptocurrencies in a blockchain ecosystem.

Cryptocurrency investments are highly speculative and carry significant risks, making them unsuitable for all investors. They can be accessed through exchanges like Coinbase and Binance, or via investment products such as ETFs, but the safest way to invest is by purchasing and securing them directly via a Ledger signer using the all-in-one crypto app Ledger Wallet™. Investors may choose to buy and hold digital assets like Bitcoin and Ethereum, or actively trade them. Due to their volatile nature, these investments should be approached with caution.

Real-World Asset Tokenization (RWA)

Tokenization converts traditional financial assets like bonds, real estate, or commodities into blockchain tokens you can own and trade directly without intermediaries.. Platforms like BlackRock’s BUIDL hold $500M+ in tokenized securities, letting you earn government bond returns while maintaining self-custody. This is 2026’s dominant use case—institutions tokenize everything from real estate to private equity, creating yield opportunities previously exclusive to Wall Street.

AI-Blockchain Integration in Crypto

AI agents are autonomous software programs that manage crypto strategies, execute trades, and optimize yields without human intervention. They now autonomously manage $10B+ in crypto portfolios, executing complex DeFi strategies without human input. AI-governed DAOs optimize treasury management and predict market movements in real-time. 

Crypto Stablecoin Business Payments

Stablecoins are cryptocurrencies pegged to fiat currencies (usually dollars) that companies use for instant, low-cost international settlements. Companies use USDC/USDT to bypass the SWIFT system, settling international invoices in seconds for pennies. The FCA now regulates stablecoins as priority payment infrastructure. Today’s payments involve Fortune 500 companies moving millions on-chain daily, and this is the actual driver of crypto transaction volume.

Crypto Cross-Chain Interoperability

Interoperability protocols let you seamlessly move crypto assets and data between different blockchains like Ethereum, Solana, and Layer 2 networks. Bridges now process $50B daily between Ethereum, Solana, and Layer 2s. You can seamlessly move assets across chains for optimal yields, with interoperability protocols like LayerZero making blockchain borders invisible. 

Decentralized Physical Infrastructure (DePIN)

DePIN networks pay you cryptocurrency for providing real-world infrastructure services like wireless coverage, data storage, or GPU computing. In essence, you earn crypto by hosting real-world infrastructure. Helium’s 5G network pays you for providing wireless coverage, Filecoin rewards data storage, and Render compensates GPU rendering.

Advanced Staking (Liquid & Restaking)

Liquid staking lets you stake crypto while keeping it tradable; restaking uses the same staked assets to secure multiple protocols simultaneously for multiplied yields. Liquid staking lets you stake ETH while keeping it tradable (Lido holds $30B+ TVL). 

Restaking takes this further: Once your ETH is already staked (or you have a liquid staking token like stETH), you can “restake” it through protocols like EigenLayer. This reuses the same staked ETH to help secure additional projects or services (called Actively Validated Services) on top of Ethereum. In simple terms, your ETH works twice—first securing Ethereum, then helping other protocols—potentially multiplying your yields with extra rewards.These advanced strategies often deliver some of the highest returns in DeFi, but they also stack up risks: issues in one smart contract could affect multiple layers, so they’re best approached carefully, especially for newcomers.

Cryptocurrencies vs Fiat Currencies: What’s The Difference?

All of those use cases might seem familiar to you. So you may be wondering; what is the difference between cryptocurrency and the money in your bank account? Well, cryptocurrencies have a few major differences from the fiat currencies you already know.

Crypto allows for Decentralized Ecosystems

Fiat currencies are issued by governments that control their supply and circulation. Crypto, on the other hand, is not issued by the government. In fact, many blockchains are governed by holders of the coins themselves. Some blockchains have an unlimited supply of coins, while others have a capped supply. But no single entity can print more coins without reason like governments can with fiat currencies.

Crypto Is Purely Digital

While your fiat currencies exist in physical form, as bills or coins, crypto is purely digital. Your cryptocurrencies exist on the blockchain on an unhackable distributed Ledger, meaning you can’t actually hold a Bitcoin in your hand.

Crypto Is Permissionless

Fiat money varies from place to place. While you may have to change your Dollars to Euros at the European border, you don’t have to do that with crypto. Crypto can cross borders without friction.  Furthermore, you don’t have to provide the blockchain with any personal data to own or use cryptocurrencies. That means every nation can use them, no matter the geoblocking issues or sanctions citizens of certain countries may have to deal with.

Using Cryptocurrencies Removes the Need for Middlemen

Using fiat currencies relies on middlemen, such as banks or payment services. These are using real people or a central entity’s computer to verify transactions. Trusting centralized entities with your funds can be risky. For example, what if the bank goes bankrupt? Or worse, what if the person who is meant to validate your request for a loan just doesn’t like the look of you? Using cryptocurrencies allows for peer-to-peer transactions, meaning users on the network can transact with each other and the system provides security.

Crypto Transactions Are Recorded Forever

To explain, crypto transactions are irreversible. Once you make a transaction,  the blockchain records it immutably and forever. There is no going back. That means if you accidentally send funds to the wrong address, there’s no customer support to help you. That’s why good crypto security practices are so important.

Crypto and Blockchain – What’s the Difference?

While cryptocurrency is like digital money, blockchain is the network on which the money transactions operate. Blockchain technology is a generic technical concept – like “the Internet” and there are several different blockchains all built on this technology. Then, each of them supports a different cryptocurrency.

Cryptocurrency Mining

Cryptocurrency mining is the process of verifying transactions and adding them to the blockchain ledger. Miners use powerful computers to solve complex mathematical puzzles, which secures the network and validates each transaction. 

The first miner to solve the puzzle receives a reward of newly minted cryptocurrency units. This competitive process requires substantial computing power and energy consumption, making it increasingly specialized as networks grow more secure.

Crypto Mining Process

The crypto mining process follows several sequential steps. 

First, miners collect pending transactions from the network and verify their validity. Next, they bundle these transactions into a candidate block and compete to solve a cryptographic puzzle by finding a specific hash value. 

This requires specialized software and hardware, including ASIC machines or high-performance GPUs. 

Once a miner discovers the correct solution, they broadcast the new block to the network for validation. The mining process is intentionally energy-intensive, requiring significant computational power to maintain network security. 

The reward for successfully mining a block consists of newly created cryptocurrency units plus transaction fees, which incentivizes miners to continue securing the network and processing transactions. This system creates a self-sustaining ecosystem where computational work directly translates to network security and miner compensation.

What Is The Future of Cryptocurrency?

Crypto/web3 has evolved from niche speculation into foundational financial infrastructure. AI-blockchain integration now powers intelligent DAOs that automate compliance and optimize trading strategies in real-time. 

Cross-chain interoperability has become seamless—assets flow between Ethereum, Solana, and emerging Layer 2s without friction, enabling true multi-chain DeFi ecosystems. The stablecoin revolution, driven by the GENIUS Act and MiCA regulation, provides regulatory clarity while preserving censorship-resistant properties when stored correctly.

Cryptocurrency has also cleared its most important milestone: institutional validation with data to prove it. BlackRock’s tokenized Treasury fund BUIDL holds $2.9 billion in January 2026—100x growth in 22 months—while total tokenized real-world assets hit $21.4 billion across Treasuries, securities, and funds. JPMorgan is launching crypto trading for institutional clients, Morgan Stanley brings it to E*Trade by mid-2026, and State Street reports majority of institutions believe in blockchain’s long-term value. The global crypto market stands at $3.1 trillion, with Bitcoin alone representing $1.8 trillion.

Tokenized Treasuries grew from under $1 billion in early 2024 to over $10 billion by January 2026, proving that traditional finance can operate on blockchain rails with regulatory clarity from frameworks like GENIUS Act and MiCA. Even the Richmond Fed published research positioning properly regulated stablecoins as viable alternatives to CBDCs.

Hence, secure digital ownership lets you be your own bank in this new system. While challenges like scalability and user experience persist, the trajectory is clear—crypto is becoming the backend of global finance, internet culture, creator economy and more – and a secure signer is the key to unlock this experience and navigate web3 on your terms.