What is cryptocurrency, and how does it operate?

Executive Summary

Cryptocurrency adoption has doubled since 2021. Ethereum, Dogecoin and Bitcoin are the most popular, but Solana is gaining traction. The industry is projected to reach one billion users by the end of 2025. Security concerns persist among 40% of cryptocurrency owners, highlighting the need for better regulation and user protection.

Introduction and Background

Cryptocurrency is a decentralized digital currency that uses blockchain technology for secure online transactions without intermediaries. Encryption secures data transfer and storage between public ledgers and digital wallets.

Cryptocurrency wallets include:

• Hot wallets: Online storage, easily accessible but with high-security risks.
• Cold wallets: Offline storage on external drives, more secure but with potential loss of access if the keycode is lost.

Data and Analysis

Cryptocurrency Trading

Contract for Difference (CFD) accounts allow speculation on cryptocurrency values. These leveraged products can amplify both gains and losses, with prices quoted in traditional currencies. Cryptocurrencies are traded in lots to standardize trade sizes due to volatility. Leverage enables exposure to large quantities of cryptocurrency without a large upfront investment, but it also increases the risk of significant losses. Margin is the initial investment required for a leveraged position. A pip measures one-digit price movements. Staking cryptocurrency involves locking tokens to a blockchain network for incentives, such as a portion of the staked tokens.

Types of crypto staking:

– Active crypto staking: Locking tokens for active participation, validating transactions and creating new blocks to earn token rewards.

– Passive crypto staking: Locking tokens for network security and efficiency, yielding lower token rewards.

Specialized types of crypto staking:

– Delegated staking: Stakers delegate their staking power to a validator node, sharing rewards.

– Pool staking: Coin holders compete more effectively for staking rewards.

– Exchange staking: Users stake holdings directly on an exchange, which handles the staking process and distributes rewards.

How to Trade Cryptocurrency - A Step-by-Step Guide:

1. Open and Fund a Trading Account: Choose a reputable broker and deposit funds.
2. Choose a Cryptocurrency to Trade: Select from major coins like Bitcoin (BTC) or Ethereum (ETH) or smaller market-cap coins.
3. Analyze the Market: Use fundamental, technical and sentimental analysis.
4. Decide on Direction and Open a Trade: Open a trade based on market analysis.
5. Manage Risks: Set stop-loss and take-profit orders.
6. Monitor and Exit the Position: Regularly monitor the market and close your position manually or automatically

Examples of crypto-brokers in Kenya: AvaTrade, Coinbase, Kraken, Binance, eToro, Local-Bitcoins, BitPesa, Exness.

Crypto-Piracy

Crypto-jacking involves using someone's device to mine cryptocurrency without their consent, potentially causing crashes, slowdowns or battery depletion.

Key Findings

How Cryptocurrencies Are Created

Bitcoin mining involves adding new blocks to the network by solving complex problems, which requires significant energy. Miners are rewarded with new cryptocurrency. Other cryptocurrencies have simpler creation methods. Anyone can mine Bitcoin, but powerful ASIC computers increase the chances of earning rewards.

Top 10 Cryptocurrencies as of April 1, 2025: Bitcoin (BTC), Ethereum (ETH), Tether (USDT), XRP (XRP), Binance Coin (BNB), Solana (SOL), U.S. Dollar Coin (USDC), Dogecoin (DOGE), Cardano (ADA), TRON (TRX).

Recommendations

If you notice your device running slower than usual, draining its battery quickly, or crashing, your device may have been hacked. Try the following:

• Close sites or apps that slow down your device or drain your battery.
• Use antivirus software, set software and applications to update automatically and never install any program or application you don't trust.
• Don't click on any link without knowing where it leads and be careful when visiting unknown websites.
• Consider installing a browser extension or ad blocker that can help you defend against crypto hacking. But first, do some research. Read reviews and consult reliable sources before installing any tool available online. Some websites may prevent you from using their site if you have a software blocker installed.

References

Ashford, K. (2023, February 16). What is cryptocurrency? Forbes Advisor.  https://www.forbes.com/advisor/investing/cryptocurrency/what-is-cryptocurrency/

Beck, R. H. (2025, April 1). Top 10 cryptocurrencies of April 1, 2025 . Forbes Advisor.  https://www.forbes.com/advisor/investing/cryptocurrency/top-10-cryptocurrencies/

Britannica money . (2025, April 1).  https://www.britannica.com/money/what-is-crypto-staking

Lo que hay que saber sobre las criptomonedas . (2018, October 29). Consumer Advice.  https://consumer.ftc.gov/node/77130

Rosen, A. (2024, November 22). Bitcoin mining: What it is and how it works . NerdWallet.  https://www.nerdwallet.com/article/investing/bitcoin-mining

Vardai, Z. (2024, April 29). Crypto on track to hit 1B users by end of 2025 — Analyst. Cointelegraph . https://cointelegraph.com/news/crypto-on-track-1-billion-users-end-2025-analyst

What is Cryptocurrency and How Does it Work? (2018, December 8). /.  https://www.kaspersky.com/resource-center/definitions/what-is-cryptocurrency

What is cryptocurrency trading and how does it work? (n.d.). IG.  https://www.ig.com/en/cryptocurrency-trading/what-is-cryptocurrency-trading-how-does-it-work