1. What are Cryptocurrencies?
Cryptocurrencies are digital forms of money that exist exclusively online and are not controlled by central institutions like banks or governments. They are based on blockchain technology, which enables secure, transparent, and decentralized digital transactions.
The term "crypto" comes from Greek and means "hidden" or "secret." It refers to cryptography – an encryption technique that ensures the security and trustworthiness of cryptocurrencies. All transactions are thus tamper-proof and permanently stored on the blockchain.
The most well-known cryptocurrency is Bitcoin, which launched in 2009 as the first digital currency. Since then, thousands of other cryptocurrencies have emerged – with very different use cases, qualities, and risks. According to Statista, around 9,300 different cryptocurrencies existed by the end of 2025; however, a large portion of them have little relevance, liquidity, or substance.
Cryptocurrencies allow users to send, receive, and store money without intermediaries like banks or payment service providers. This independence makes them attractive for global transfers and – in the case of Bitcoin – as a long-term store of value.
Furthermore, cryptocurrencies offer a new form of digital sovereignty. While traditional currencies are controlled by central banks, individuals can manage their own money. This creates new opportunities, especially in countries with unstable currencies or limited access to banking.
2. How do Cryptocurrencies work?
At the heart of every cryptocurrency is the blockchain – a decentralized database that stores all transactions in blocks and links them chronologically.
2.1 Blockchain as a Digital Ledger
The blockchain can be imagined as a public, digital ledger stored on many computers worldwide. This decentralization ensures that no single entity – such as a bank – has control. Every transaction is stored transparently and securely.
Each block contains a collection of transactions. Once a block is full, it is linked to the previous block with a cryptographic signature. This creates an immutable chain of blocks (the "chain"). Anyone attempting to tamper with a block would simultaneously have to alter all subsequent blocks on virtually all computers worldwide – which is nearly impossible.
2.2 Security through Cryptography
Cryptocurrencies use encryption to protect each transaction with a digital signature. Only those who possess the private key can spend Bitcoin or other coins. Private keys are the central security feature: unique, strictly confidential, and proof that only the rightful owner has authorized a transaction.
Therefore, the basic rule is: „Not your keys, not your coins.“ Whoever controls the keys controls the money.
2.3 Consensus Mechanisms: Mining and Proof of Stake
For transactions to become valid, they must be confirmed by the network. The two most well-known methods are:
- Proof of Work (Mining): Miners solve computationally intensive tasks, thereby securing the network. Whoever finds a new block is rewarded in the respective cryptocurrency. This process is energy-intensive, but it makes manipulation extremely expensive and thus unattractive. Bitcoin uses Proof of Work.
- Proof of Stake: Here, "validators" confirm transactions by depositing ("staking") coins. The process is less energy-intensive but tends to lead to a greater concentration among large coin holders.
In addition, other mechanisms exist, such as Delegated Proof of Stake (DPoS) or Proof of Authority (PoA), each striking different compromises between security, scalability, and decentralization.
2.4 Advantages of Digital Transactions
Thanks to blockchain, transactions are possible regardless of borders or opening hours – often within minutes. This is particularly relevant for people in countries with unstable currencies, high inflation, or limited access to banking. There, cryptocurrencies open up avenues for financial inclusion that were previously expensive or impossible.
3. What is a Wallet?
A wallet is a digital wallet that allows you to receive, store, and send cryptocurrencies. Technically, a wallet does not store the coins themselves, but rather the private keys that enable access to your balance on the blockchain.
3.1 Types of Wallets
- Hardware Wallets (Cold Storage): Physical devices that store private keys offline. Very secure and ideal for larger amounts and long-term saving, as they are shielded from online attacks.
- Software Wallets: Apps on smartphones or computers – practical for everyday use, but more susceptible to malware and phishing.
- Custodial Solutions (Custodial Wallets): Here, a regulated provider professionally manages the keys for you. Advantage: no risk of losing your own key. It is important that the provider is regulated and relies on secure custody (e.g., cold storage, insurance).
3.2 Security and Management
If you lose your private keys (in self-custody), you lose access to your coins. Therefore: create secure backups, never store your seed phrase digitally in plain text, and never share it with anyone. Be cautious of phishing, fake apps, and disreputable websites. Where possible, use two-factor authentication and keep software up to date.
4. What can cryptocurrencies be used for?
- Store of Value: Bitcoin, in particular, is seen by many as "digital gold" and a hedge against currency devaluation due to its fixed cap of 21 million units.
- Means of Payment: More and more merchants accept Bitcoin; fast, low-cost payments are possible via the Lightning Network.
- Cross-border transfers: Often faster and cheaper than traditional bank transfers.
- Financial Inclusion: People without bank accounts can participate in global payment transactions.
- Other Applications: Some blockchains also feature smart contracts, decentralized finance (DeFi) services, or tokenization. These areas offer opportunities but come with additional technical and regulatory risks.
5. How are new cryptocurrencies created?
There are various ways new cryptocurrencies are created:
5.1 Mining
Many cryptocurrencies – including Bitcoin – are created through mining. Miners confirm transactions and are rewarded with new coins. This process secures the network and introduces new units into circulation. For Bitcoin, the reward decreases approximately every four years due to the "halving" – most recently in 2024 – which keeps the supply predictably scarce.
5.2 Token Creation
On blockchains like Ethereum, developers can create their own tokens, for example, for projects, rights, or digital assets. The quality and legitimacy of such tokens vary greatly – particular caution is advised here.
5.3 New Projects and Forks
Startups launch new coins through Initial Coin Offerings (ICOs) or similar formats. Additionally, new cryptocurrencies emerge through "forks" when a community splits (e.g., Bitcoin Cash). Many of these projects are highly speculative and do not survive in the long term.
6. Regulation: What MiCA changes from July 2026
For a long time, the crypto market in Europe was hardly uniformly regulated. That has changed with MiCA (Markets in Crypto-Assets) – the EU-wide regulation for crypto-assets.
- Deadline July 1, 2026: With the end of the transition period, crypto service providers will generally need MiCA authorization to offer their services in the EU.
- Unified Framework: MiCA establishes harmonized rules for trading platforms, custodians, and stablecoin issuers for the first time – increasing transparency, investor protection, and oversight.
- Competent Authorities: In Germany, BaFin supervises, and in Austria, the FMA. Providers without a valid license are no longer permitted to serve EU customers.
- For investors, this means: Ensure that your provider is MiCA-licensed and regulated. This will become a crucial selection criterion from July 2026.
Additionally, tax reporting obligations apply: With DAC8 the EU further expands the automatic exchange of information on crypto assets. For users, meticulous documentation of purchases and sales will become even more important.
7. The Market in 2026: Bitcoin as the Benchmark
By 2026, the crypto market will be significantly more mature than just a few years prior. The top cryptocurrencies combined will reach a market capitalization in the trillions – with Bitcoin as the dominant and by far most liquid asset.
A key driver is the institutional adoption: In the USA, spot Bitcoin ETFs from major providers like BlackRock and Fidelity have attracted tens of billions of dollars. This makes Bitcoin more accessible for pension funds, insurers, and traditional investors – and underscores its unique role compared to the rest of the market.
However, it's also true that the market remains volatile and heavily influenced by macroeconomic factors (interest rates, liquidity, geopolitical situation). Short-term corrections are part of the game.
8. The Most Well-Known Cryptocurrency: Bitcoin
Bitcoin is the world's first and most well-known cryptocurrency. Since 2009, it has established itself as "digital gold" and forms the backbone of the entire industry. With a fixed total supply of 21 million units, Bitcoin is scarce and predictable – a key difference from fiat currencies, which can be increased at will.
The network uses Proof-of-Work mining for transaction confirmation and is considered the most secure and decentralized blockchain network. Bitcoin is the most liquid and most traded digital asset and has inspired countless other cryptocurrencies – but remains the benchmark for them in terms of technology and robustness.
Many people view Bitcoin as a hedge against inflation: If traditional currencies lose purchasing power, its fixed supply offers a protective mechanism. Technologically, Bitcoin continues to evolve – for example, through the Lightning Network, enabling fast and affordable everyday payments.
A common counter-argument is the energy consumption of mining. However, current data shows a clear trend towards renewable sources – over half of mining electricity now comes from clean energy, and mining, as a flexible consumer, can even stabilize the power grid.
9. Risks and Challenges
While cryptocurrencies offer opportunities, they also come with risks:
- Volatility: Significant price fluctuations are normal. Only invest money you can afford to lose.
- Security Risks: Loss of private keys or fraud can lead to total loss.
- Project Credibility: Besides Bitcoin, there are thousands of coins with questionable substance, high fraud risk, and pump-and-dump schemes.
- Regulation: Rules are evolving (see MiCA). This provides more protection but also requires adaptation.
- Technical Complexity: Incorrect operation can lead to losses – educate yourself before investing.
However, the market is increasingly maturing, and regulation like MiCA makes it more transparent and secure.
10. Conclusion: What You Should Know About Cryptocurrencies
Cryptocurrencies are digital money based on blockchain – secure, decentralized, and independent of central institutions. A wallet allows you to manage the keys and thus control your funds.
Bitcoin forms the foundation of the industry and plays a special role as “digital gold.” The rest of the market is large but highly heterogeneous – quality and risks vary enormously. In 2026, two developments will primarily shape the landscape: increasing institutional adoption (including via Bitcoin ETFs) and EU-wide regulation through MiCA, whose transition period ends on July 1, 2026.
Those who thoroughly inform themselves, rely on regulated providers, and act cautiously can leverage the opportunities of this technology. Education and understanding remain key.
FAQ
What is a cryptocurrency, simply explained?
A cryptocurrency is digital money. It only exists online, is based on the blockchain, and can be transferred between people without a central bank.
How does a cryptocurrency work?
Cryptocurrencies use the blockchain – a type of digital ledger. Transactions are stored there in a decentralized manner and secured by cryptography.
What does 'crypto' mean?
'Crypto' comes from the Greek word for 'hidden' or 'secret' and refers to the encryption technology (cryptography) behind the system.
What changes with MiCA in 2026?
With the end of the MiCA transition period on July 1, 2026, crypto providers in the EU will require authorization. Investors should ensure that their provider is MiCA-licensed.
How many cryptocurrencies are there?
By the end of 2025, there were approximately 9,300 cryptocurrencies – most of which had little relevance. Bitcoin is by far the largest and best known.
Is Bitcoin the same as cryptocurrency?
No. Bitcoin is the first and best-known cryptocurrency, but it is only one of many. However, due to its scarcity, security, and decentralization, it holds a special position.
Marketing communication from FIOR Digital GmbH (21bitcoin). Investments in Bitcoin are associated with risks and opportunities. Past performance is not an indicator of future developments.
