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Explainer: How do cryptocurrencies work?

July 9, 2014 -- Updated 1128 GMT (1928 HKT)
STORY HIGHLIGHTS
  • Over $1 million dollars are being traded in Bitcoin every day
  • Transaction history is encrypted into a chain of letters and numbers for each coin's identity
  • Fans of cryptocurrencies like the fact that no single person or institution has control

Editor's note: Future Finance is a new series showcasing future trends related to the global financial system. The show complements CNN's business coverage by examining everything from a cashless society to high-speed trading that employs the power of laser beams.

(CNN) -- Not so long ago the thought of reaching into your pocket for a digital currency might have seemed too far-fetched.

But cryptocurrencies are digital money -- and they're on the rise.

This method of payment, which cuts out the banks, is peer to peer and it's all done digitally.

While the most well-known is Bitcoin -- being the first of its kind in 2009 -- there are many others now, such as Litecoin and Feathercoin.

There's no denying that digital money is part of the future of finance. Most recent figures show there is more than $1.5 billion worth of Bitcoin in circulation.

Watch the explainer video to learn a few more facts about the world of cryptocurrencies.

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