How Do Cryptocurrencies Work and Where Do People Lose Money?
In November 2022, FTX, a crypto platform valued at $32 billion, went bankrupt with a hole of around $8 billion in customer funds. We explain how a cryptocurrency works, which ones dominate today, which risks have cost the most money and what has happened to FTX's customers.
What is a blockchain?
Picture a ledger of payments copied onto thousands of computers around the world. Each page groups several payments together and is chained to the one before it.
To fake an old payment, you would have to redo that page and every page after it faster than the rest of the network. That is a blockchain. A cryptocurrency is the unit recorded on it.
Bitcoin and proof of work
In Bitcoin, the ones who decide which page gets added are the miners. These are computers competing to solve a calculation that uses a lot of electricity. This system is called proof of work.
The winner adds the page and collects a reward. Since 20 April 2024, that reward has been 3.125 bitcoins. Every 210,000 blocks, the reward is cut in half. The next cut is expected in 2028.
This is how it was designed in 2008 by whoever signed as Satoshi Nakamoto, with a cap of 21 million bitcoins. According to CoinGecko, more than 20 million are already in circulation, over 95%. But the last one will not be mined until around 2140.
This competition consumes a lot of energy. According to Cambridge's July 2026 estimate, it uses 138 terawatt-hours a year. According to Digiconomist, it uses 204, a level of consumption similar to Thailand's.
Ethereum and proof of stake
Ethereum has cut that consumption to almost zero. Since 15 September 2022, it has had no miners, only validators. These lock up their own coins as a deposit.
This is proof of stake. With this change, its electricity consumption fell by roughly 99.95%.
Which cryptocurrencies dominate the market
As of 30 September 2026, Bitcoin is worth about $83,300. It accounts for 58% of a $2.86 trillion market, according to CoinGecko. It is followed by Ethereum, at about $2,680, and Tether. According to CoinMarketCap, BNB, XRP, USDC, Solana, TRON, Zcash and Hyperliquid round out the top ten.
Tether and USDC are not designed to go up. They are stablecoins, built to always be worth one dollar. According to the Bank of Spain, in spring 2026 all stablecoins combined exceeded $320 billion. Between 98% and 99% are pegged to the dollar and only 0.2% to the euro. The Bank of Spain warns of systemic risks, such as contagion to the banking sector during a crisis of confidence.
The three risks that have cost the most money
The first is volatility. Bitcoin reached about $126,000 on 6 October 2025 and in 2026 lost more than half its value at one point. On 3 June 2026 alone, $1.86 billion in bets made with borrowed money were liquidated.
The second is believing that a stablecoin cannot fall. On 9 May 2022, the stablecoin UST began losing its peg to the dollar. Within a week it was worth 10 cents, and around $45 billion was wiped out. Its founder, Do Kwon, was sentenced in December 2025 to 15 years for fraud.
The third, and the least expected, is intermediaries. At FTX, customer money was diverted to Alameda Research, its sister company. Its founder, Sam Bankman-Fried, was sentenced in March 2024 to 25 years.
FTX customers are estimated to recover between 118% and 142% of what they claimed. But those claims were valued in dollars on the day of the bankruptcy, when cryptocurrencies were worth much less. Anyone who held bitcoins receives, in principle, their November 2022 value and loses all the gains since then. The blockchain did not fail: the company holding the coins did.
Three habits to protect yourself
None of these habits is investment advice. First, check the licence. Now that the transition period for the European MiCA regulation has ended, only authorised platforms can operate in Spain. Look up the platform's name on the CNMV website or in the register of ESMA, the European authority. If it does not appear in either, it is not supervised.
Second, only invest what you could afford to lose entirely. MiCA has no guarantee fund like the one that covers banks. If the platform goes bankrupt or the price falls by half, as it did in 2026, nobody will pay you back. Set that amount before you buy and never use borrowed money.
Third, check exactly which company signs your contract. ESMA warns that MiCA protection only covers the entity authorised in the EU, not its subsidiaries outside it. Look for the legal name and country in the terms of use before depositing any money.
Frequently asked questions
How many bitcoins will exist in total?
The cap is 21 million. More than 20 million are already in circulation, according to CoinGecko, but the last one will not be mined until around 2140.
Can a stablecoin lose its value?
Yes. In May 2022, the stablecoin UST lost its peg to the dollar and within a week was worth 10 cents.
Will FTX customers get their money back?
They are estimated to recover between 118% and 142% of what they claimed, but valued in dollars on the day of the bankruptcy. Anyone who held bitcoins loses the gains made after November 2022.
How do I know if a crypto platform is authorised in Spain?
Look up its name on the CNMV website or in the ESMA register. If it does not appear in either, it is not supervised.
Informative article written with the help of AI tools from the verified script of the video. The video is in Spanish.