Cryptocurrencies function within digital economies by serving as decentralized currencies that facilitate transactions without a central authority. They utilize blockchain technology to ensure secure and transparent transaction records. Users can buy, sell, and trade cryptocurrencies for goods and services, enabling a new economic model based on peer-to-peer exchange. Additionally, cryptocurrencies operate on protocol-based rules that govern their supply and distribution, such as mining or staking. This creates unique economic ecosystems where value is derived from both scarcity and utility within the digital domain, encompassing various sectors that embrace this innovation.