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How Cryptocurrencies Work: Transactions and Governance
Cryptocurrency combines a digital asset with rules for recording and transferring it. To understand a project, distinguish the network, its asset, your wallet and any company that provides access to it. They have different responsibilities.
Transactions and wallets
A wallet uses keys to authorise transactions. Bitcoin transactions are recorded on a public ledger; addresses are not a guarantee of anonymity. The Bitcoin network checks transactions against shared rules, while mining helps establish their order. See the Bitcoin documentation for the underlying design.
An exchange account is a separate service. Its displayed balance and withdrawal process depend on the provider. For that distinction, read our guide to custodial and non-custodial wallets.
How networks reach agreement
Different networks use different consensus mechanisms. Ethereum uses proof of stake: validators commit ETH, check blocks and help the network reach agreement. Certain dishonest actions can lead to penalties against their stake. Ethereum’s proof-of-stake documentation explains this process. Mining is therefore not a universal explanation for how every cryptocurrency operates.
Who changes the rules?
Bitcoin developers can propose software changes, but adoption depends on network participants. A software proposal does not automatically change the rules everyone follows. Governance arrangements differ between projects; assess who can propose, approve and implement a change rather than assuming every token has Bitcoin’s structure.
Questions worth asking about a project include:
- Where are proposed changes documented?
- Who maintains the software and can release an upgrade?
- Can a token issuer or administrator change contract settings?
- Does a governance vote cover the whole network or only one application?
Using a network through a service
Protocol rules do not describe a provider’s payment methods, verification requirements or charges. Read those terms separately. For J2TX, consult the KYC guide, fees page and trading instructions before relying on an old article’s description of the service.
Understanding these layers makes it easier to identify which documentation answers a question: network documentation for transaction rules, wallet documentation for key management, and provider terms for account access and charges.
