Cryptocurrency is a new way to make and receive payments that operates like traditional money but is decentralized, digital and encrypted. It’s not issued or regulated by a government agency, like the U.S. dollar, and there are many different types of crypto available.
Crypto transactions are recorded on a public, distributed and tamper-proof ledger called a blockchain. This open-source framework prevents coins from being duplicated and eliminates the need for a central authority like a bank to validate transactions. Bitcoin, created in 2009 by the pseudonymous software engineer Satoshi Nakamoto, is the most popular cryptocurrency with a market cap that has reached $1 trillion. Many other cryptocurrencies have since been developed, including Ethereum and Tezos.
The value of a cryptocurrency is determined by supply and demand. The supply is how many of the currency are available to buy at any given time, and the demand is how much people want to own it. The price of a cryptocurrency changes frequently, and these price movements are often volatile.
While a number of companies offer services that let you purchase and spend crypto, it’s important to keep in mind that cryptocurrencies don’t come with legal protections that you’ll get with a credit card or other traditional payment method. This means that you could lose money if something goes wrong with your transaction, and it’s not always easy to get your money back.
In addition, if you sell or exchange your cryptocurrency for cash, you’ll likely face taxes. The current tax code in the US requires you to report a gain on any sale or exchange of crypto that increases its value over time.
Many people hold crypto as an investment or a store of value, rather than a spending tool. The large fluctuations in the price of some cryptocurrencies can cause them to lose value over time. However, they may have a role to play in global commerce by providing an alternative to dysfunctional fiat currencies for savings and payments.
People can acquire and spend cryptocurrencies through online exchanges, apps or websites. You can also earn crypto through a process called mining, in which you use advanced computer hardware to solve complex math puzzles. If you’re interested in learning more about cryptocurrency, we recommend exploring the websites for each coin and reading independent articles before making any investments. You can also consider a cryptocurrency wallet that provides several layers of security to help protect your funds and identity.