Cryptocurrency is a digital or virtual form of currency that uses cryptography for security. It operates on a technology known as blockchain, which is a decentralized ledger maintained by a network of computers. Unlike traditional currencies issued by governments, cryptocurrencies are not controlled or regulated by any central authority.

The functioning of cryptocurrency involves a few key components:

1. Blockchain: Cryptocurrencies rely on blockchain technology to record all transactions. A blockchain is a public and transparent ledger that holds the transaction history of the currency. It ensures the security, integrity, and immutability of the transactions.

2. Cryptography: Cryptography is used to secure transactions and control the creation of new units. It involves encryption techniques to verify and authenticate transactions, ensuring confidentiality and integrity.

3. Mining: Certain cryptocurrencies, like Bitcoin, use a process called mining to create new units and validate transactions. Miners solve complex mathematical problems using powerful computers. Once a problem is solved, a new block is added to the blockchain, and miners are rewarded with new cryptocurrency units.

4. Peer-to-peer network: Cryptocurrency transactions occur directly between users without the need for intermediaries, such as banks or payment processors. The transactions are validated and verified by participants within the network, making it a decentralized system.

5. Digital Wallets: To store, send, and receive cryptocurrencies, users require a digital wallet. These wallets have unique public and private keys. Public keys are used to receive funds, while private keys are used to access and spend the holdings.

Cryptocurrencies can be used for various purposes, including online purchases, investment, and transferring value across borders. They offer advantages such as reduced transaction fees, faster transfers, increased privacy, and global accessibility. However, it's worth noting that the value of cryptocurrencies can be highly volatile, and they may not be accepted universally.