In the previous step, we described a blockchain as a way for many computers to maintain a shared history without a central owner.
A cryptocurrency is a digital asset whose ownership is tracked by that shared history. It is not “stored in an app” or “held by a bank.” Instead, the network records who is currently allowed to spend what.
In a one-hour overview, crypto matters for one main reason: it provides a native unit of value that pays fees, rewards honest participation, and aligns incentives so a blockchain can operate without a central controller.
In One Minute
What to remember
- A cryptocurrency is a digital asset whose ownership is defined by blockchain history, not by a bank database.
- A “balance” is a derived result of past transactions, not a file sitting inside your wallet.
- A wallet mainly manages keys: keys authorize spending; they do not contain coins.
- Coins and tokens matter because they pay fees and fund security incentives.
- Different crypto assets exist, but the core system story is ownership + transfer + incentives.
If you remember only one thing: crypto is not a file you store. It is a set of permissions recorded in shared history.
The Core Definition
A cryptocurrency is a digital asset that can be transferred by publishing a signed transaction to a blockchain network.
The network accepts the transfer only if it follows shared rules and can be independently verified by nodes. There is no central authority that approves or reverses ownership changes.
In most systems, “having crypto” means that past transactions make you the currently authorized spender of some amount. That authorization is proven using cryptographic keys.
Coins, Tokens, and Stablecoins (Just Enough for Now)
Key facts
What You Actually Own
You do not own “coins inside a wallet.” You own the ability to authorize spending. That ability is represented by a private key (or a set of keys) that can produce valid signatures.
A blockchain does not know your name or identity. It only knows whether a valid signature proves that the holder of a key is allowed to move value associated with an address.
- Public address: Where others can send value.
- Private key: What authorizes spending.
- Wallet: A tool that manages keys and creates signed transactions.
If you control the private key for an address that holds 0.5 ETH, the network will accept a signed transaction moving that ETH. If you lose the key, no one can reset ownership — because there is no central owner.
How Ownership Moves
A simple transfer follows the same system-level flow across most blockchains.
- 1) A wallet creates a signed proposal: Your wallet constructs a transaction that says “transfer value from my control to another address,” then signs it. The signature binds authorization to the exact transaction data.
- 2) Nodes verify rules locally: Nodes check that the signature is valid and that the transaction is consistent with the history they currently accept.
- 3) Transactions are ordered into blocks: Block producers select and order transactions. Once a block becomes part of the accepted chain, the ownership change becomes part of shared history.
Why Blockchains Use a Native Asset
If a blockchain is a shared system with no owner, it needs a way to pay for scarce resources like bandwidth, storage, and blockspace. That is the role of fees.
It also needs a way to motivate honest participation in producing and validating blocks. That is the role of rewards and economic incentives.
In this sense, a cryptocurrency is not just “money.” It is part of the system’s operating mechanism: it prices demand and helps secure shared history.
Key facts
Two Risks Beginners Must Understand
This overview does not try to turn you into a trader. But two risks are fundamental to using crypto responsibly.
Key facts
The Mental Model
A cryptocurrency is an asset whose ownership is defined by shared history. Keys authorize spending. Transactions propose ownership changes. Blocks order those proposals. Fees and rewards fund the system so it can operate without a central controller.
If blockchain is shared history, cryptocurrency is the native unit of value that makes that history economically sustainable.
Where This Leads Next
So far, we have a system (blockchain) and a unit of value it tracks (cryptocurrency). The next missing piece is the object that actually records ownership changes: the transaction.