September 20, 2025, 2:19 pm | Read time: 7 minutes
Cryptocurrencies are a divisive topic. Opinions range from promises of freedom to fraud when it comes to the new digital money. The now seemingly vast crypto landscape is daunting to some, while for others, it’s pure promise. TECHBOOK provides an overview.
What exactly is a cryptocurrency? As the name suggests, it is a means of payment transferred from one party to another via blockchain in a cryptographic process. Such a digital transaction is initially nothing unusual. Every conventional currency is digitally transferred, for example, via credit cards. Yet, there are some differences.
Cryptocurrencies are not state-backed but private or accessible to everyone. Many of these currencies start as projects by companies, foundations, or developer teams and undergo a decentralization process. In the end, the creators of the currency often lose control over their product–and that’s entirely intentional! Decentralization is one of the top goals of crypto ideology.
Overview
What types of cryptocurrencies are there?
Initially, cryptography had nothing to do with currencies. When corresponding methods were invented in the 1970s, the goal was to exchange encrypted messages. In the 1990s, there was a precursor to cryptocurrencies: Ecash. Pioneers in the field were so-called cypherpunks (from the English “cypher,” meaning “digit, cipher”), mostly programmers who advocated for strict privacy and against state control out of idealistic motives.
The financial crisis in 2008 gave momentum to the cryptocurrency movement. Bitcoin was born in 2009 and has been the most important cryptocurrency since. A mysterious founder named Satoshi Nakamoto is considered the inventor. His identity remains unknown to this day.
Soon after, more cryptocurrencies emerged–there are now more than 20,000 different ones! The exact number is difficult to determine for several reasons. It depends on classification, and it grows daily. Cryptocurrencies can be systematized according to various criteria.
From a technical perspective, sorting by the respective consensus mechanism with which the blockchain operates is an option. There is Proof of Work (PoW), Proof of Stake (PoS), and several other methods. Another distinction is between coins, which have their own blockchain, and tokens, which run on a foreign blockchain.
The decisive feature is the purpose
However, the most common way is to distinguish cryptocurrencies by their main goals, features, or functions. Bitcoin, for example, is considered a store of value, making it more of an investment product and less of a means of payment. Although you can now pay with Bitcoin in many places worldwide, its significant value fluctuations do not make it an ideal currency. Stablecoins are better suited for this. These are cryptocurrencies like USDT or USDC, which are usually pegged 1:1 to the value of the U.S. dollar. A very popular category is meme coins like Dogecoin or Pepe. They often have few or no innovative technological concepts and no specific use. Instead, they thrive on the cult of well-known internet memes that serve as currency symbols.
There are dozens of other classifications, such as dividing into so-called crypto ecosystems, or into Layer1 and Layer2 blockchains, governance coins, smart contract platforms, DeFi tokens, game tokens, zero knowledge, privacy coins, wrapped tokens, and many more. You can get an overview on sites like Coinmarketcap or Coingecko.
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Where can you buy cryptocurrencies?
Cryptocurrencies are usually bought online on centralized crypto exchanges. This is the easiest way to enter the crypto system with euros or other currencies via credit card or bank transfer. Until recently, such transactions were still refused by some banks or savings banks. For many customers, this was reason enough to switch financial institutions. However, this behavior is becoming increasingly rare, as banks are now often invested in crypto themselves or even offer special crypto services.
Crypto exchanges that have received a BaFin license and adhere to high standards are considered particularly secure. Notable examples include the U.S. crypto exchange Coinbase, the Austrian crypto exchange Bitpanda, and the German crypto exchange Bison. Once the so-called KYC process is completed, where everyone officially registers, you can start. With the deposited euro balance, you can choose from long lists of cryptos.
In addition to buying on centralized crypto exchanges, there are other methods to acquire cryptocurrencies. In Germany alone, dozens of so-called Bitcoin ATMs have been set up where you can buy Bitcoins. They are usually found in major cities near electronics stores like Saturn or Media Markt.
Decentralized crypto exchanges and even some crypto wallets have so-called fiat on-ramps (from fiat money and the English “on-ramp”), which allow you to enter the crypto system online via international payment service providers like Moonpay or Kado with euros or other currencies.
What are the advantages and risks of cryptocurrencies?
Although the EU, with its MiCA regulation, has become the best-regulated region in the world regarding crypto, the majority of the population still seems unsure whether to invest or not. Despite sometimes strict prohibition policies, crypto adoption is many times higher in some countries outside Europe.
Not everyone in all countries has the luxury of owning a checking account that allows them to send money worldwide without hassle. While it takes a while for the transfer to arrive, for most people, that’s not a problem. It’s a different story in many so-called Third World countries.
Cryptocurrencies as an opportunity in developing countries
Often, only the wealthy segments of the population have a bank account. Additionally, money transfers from migrant workers in the U.S. or Europe to their home countries are commonplace. Banks have adapted to this and often charge exorbitant fees for money transfers.
Under these conditions, it is a tremendous advantage to be able to send personal income to family back home at any time, seven days a week, for the lowest fees. The blockchain makes it possible. “Banking the unbanked” is therefore one of the most well-known challenges of the crypto movement to the financial establishment.
Investment opportunity with pitfalls
In the global West, cryptocurrencies are primarily a topic of investment. The dynamics of the markets offer opportunities that no other investment product can provide. And this is precisely where the risks lie. Where things go up quickly, they can come down just as fast. The market’s volatility is immense. There are also so-called rug pulls, where malicious developers withdraw the value of their cryptocurrency, leaving investors with nothing. However, this is just one of many scams.
For a newcomer to the market, it is difficult to assess which project is legitimate and which is not. A total loss of investment is always possible. There are additional risks, such as potential bankruptcies of crypto service providers and even crypto exchanges. A market that can make millionaires overnight can, of course, also turn millionaires into paupers overnight. Diversification is essential to minimize risks. If you don’t want to deal with the details at all, the rule is: stay away from crypto. However, if you still don’t want to be deterred, always remember the most important rule: Don’t let anyone talk you into anything, but DYOR–do your own research.