Cryptocurrencies operate on blockchain technology, a decentralized ledger system that records transactions across multiple computers. Each transaction is grouped into a block and added to a chain of previous transactions, ensuring security and transparency. Blockchain operates through cryptographic algorithms, making it resistant to tampering and fraud. Moreover, it allows for peer-to-peer transactions eliminate the need for intermediaries. This technology supports not just currencies like Bitcoin but also a variety of applications, including smart contracts and decentralized finance, revolutionizing traditional financial systems.