Cryptocurrency works by recording every payment on a shared ledger, the blockchain, that thousands of independent computers keep identical. You authorise a payment by signing it with a private key; the network checks the signature and your balance, groups valid payments into a block, and agrees on that block through proof of work or proof of stake.
What happens when you send cryptocurrency?
Take a simple example: Alice sends 0.01 BTC to Bob. The same five stages apply, with small differences, on almost every public blockchain.
- Create and sign. Alice's wallet builds a transaction that names the coins she controls, Bob's address, the amount and a fee. It signs the transaction with her private key. The signature proves she authorised the payment without revealing the key.
- Broadcast and check. The wallet sends the transaction to nodes on the network. Each node checks the signature and confirms the coins have not already been spent, then passes it on. Valid transactions wait in a queue called the mempool.
- Pick for a block. Block producers choose transactions from the mempool, usually the ones paying the highest fee for the space they use. When demand for block space rises, so do fees.
- Win the right to add the block. On Bitcoin, miners repeatedly hash the block header until the result falls below a difficulty target. The target adjusts every 2,016 blocks so that blocks arrive roughly every ten minutes on average.
- Wait for confirmations. Once the block is accepted, Bob's wallet shows the payment. Each later block built on top adds a confirmation and makes reversal harder, so services wait for several before treating a payment as final. Wealtii, for example, credits USDT deposits on BNB Smart Chain after 12 confirmations.
Where is cryptocurrency actually stored?
No coin file sits on your phone. Cryptocurrency exists only as records on the blockchain. Bitcoin tracks individual unspent transaction outputs, a bit like separate banknotes assigned to addresses; Ethereum keeps a running balance for each account. In both cases, the ledger says which address controls which value.
What a wallet holds is the private key for each address. The key is the only thing that can authorise spending, so whoever has it controls the coins, and if every copy is lost the coins stay on the ledger but can never be moved again. Our guide to what a crypto wallet does explains custodial and self-custody options.
How do proof of work and proof of stake keep the ledger honest?
A consensus mechanism decides who may add the next block and makes cheating more expensive than following the rules. The Bitcoin whitepaper's key point is that as long as honest participants control most of the computing power, an attacker cannot rewrite history faster than the honest chain grows. Proof of stake replaces computing power with capital at risk.
| Question | Proof of work | Proof of stake |
|---|---|---|
| Who adds blocks | Miners running specialised hardware | Validators who lock up the network’s coin as collateral |
| What an attacker needs | More than half of the network’s computing power | A large share of all staked coins, which can be destroyed (slashed) if used to cheat |
| Block rhythm | Bitcoin: about one block every 10 minutes; difficulty retargets every 2,016 blocks | Ethereum: one slot every 12 seconds |
| Main ongoing cost | Electricity and mining equipment | Capital locked up and the risk of slashing |
| Examples | Bitcoin, Litecoin, Dogecoin | Ethereum, Cardano, BNB Smart Chain (proof of staked authority) |
On Ethereum, a validator needs 32 ETH to activate and is chosen at random to propose blocks, while others vote (attest) on them. For a fuller comparison, read proof of work vs proof of stake.
What are transaction fees and why do they change?
Fees pay block producers to include your transaction, and they depend on how much block space the transaction uses and how busy the network is, not on the amount sent. On Bitcoin you bid a fee rate per unit of data. On Ethereum and other EVM networks such as BNB Smart Chain, the fee equals the gas a transaction uses multiplied by the gas price; on Ethereum that price is a protocol-set base fee, which is burned, plus an optional tip. A simple token transfer uses less gas than a complex smart-contract interaction, which is why swapping tokens costs more than sending them.
How are new coins created?
- Block rewards. Bitcoin miners receive newly created coins plus fees. The reward halves every 210,000 blocks; since April 2024 it has been 3.125 BTC. See how the Bitcoin halving works.
- Staking rewards. Proof-of-stake networks such as Ethereum issue new coins to validators who do their duties correctly.
- Issuer minting. Stablecoins and tokenized assets are created by an issuer, for example when Tether mints USDT against reserves, and destroyed when they are redeemed.
Can a cryptocurrency transaction be reversed?
Generally not. Once a transaction has enough confirmations there is no bank to call and no chargeback. The same token can also exist on several networks (USDT, for example, is available on Ethereum, Tron, BNB Smart Chain and others), and sending it on a network the recipient does not support can lose it. Before any transfer, copy and paste the address rather than typing it, check the network matches, and send a small test amount first for large payments.
How Wealtii uses these mechanics: when you buy a Wealtii fund, the purchase is executed on-chain on BNB Smart Chain through DEX aggregators at the best available quote, so network gas fees and market price impact apply. The tokens are held in a Gnosis Safe vault that requires three of three signatures to move funds, and anyone can check its balances on BscScan; our walkthrough on how to verify Wealtii's reserves on-chain shows how.
Frequently Asked Questions
How long does a crypto transaction take?
It depends on the network and the fee you pay. Bitcoin targets one block about every ten minutes and many services wait for several blocks before treating a payment as final; Ethereum adds a block every 12 seconds; BNB Smart Chain is faster still. During congestion, low-fee transactions can wait much longer.
Where is my cryptocurrency stored?
On the blockchain itself. Your wallet stores the private keys that let you move the coins recorded at your addresses, so anyone who obtains those keys controls the coins, and losing every copy of them means losing access for good.
Who controls a cryptocurrency network?
On a decentralized network such as Bitcoin, no single party is in charge: node operators choose which software rules to run, and miners or validators produce blocks under those rules. Tokens issued by a company, including most stablecoins, can also be minted, burned or frozen by that issuer.
Can crypto transactions be traced?
On public blockchains such as Bitcoin and Ethereum, every transaction and address balance is visible to anyone. Addresses are not labelled with names, but exchanges, on-ramp providers and analytics firms can often link addresses to real identities.
📚 Sources & References
- Nakamoto, S. — Bitcoin: A Peer-to-Peer Electronic Cash System (2008) (accessed 21 Oct 2026)
- Bitcoin Developer Guide — Block Chain (proof of work, difficulty retargeting) (accessed 21 Oct 2026)
- ethereum.org — Transactions (accessed 21 Oct 2026)
- ethereum.org — Gas and Fees (accessed 21 Oct 2026)
- ethereum.org — Proof-of-Stake (PoS) (accessed 21 Oct 2026)
Disclaimer: This content is for educational purposes only and does not constitute financial, tax, or legal advice. Digital assets are volatile and you can lose some or all of the money you invest. Past performance does not guarantee future results. Wealtii is not registered or licensed with any financial regulator; see our Regulatory Status page.
