A few years ago, “crypto” mostly meant cryptography, but now it’s more closely associated with digital currencies like Bitcoin and the broader universe of technologies built on blockchains. Essentially, blockchains are distributed ledger systems that can power anything from cryptocurrencies to NFTs and decentralized finance (or DeFi) trading protocols.
The most well-known cryptocurrencies are Bitcoin, Ethereum, Bitcoin Cash and Litecoin, but there are thousands of others that vary by features or explore different ways to process transactions. For instance, some cryptocurrencies can be used to mine for new coins; this involves running computer equipment to solve complex math problems that verify and add transactions to the blockchain. Miners are rewarded with new cryptocurrency tokens for their efforts, which can then be traded or spent at participating online retailers.
Some people also use crypto to purchase goods and services, but doing so is complicated and often requires going through a cryptocurrency exchange. This can be done via an app or website, but some exchanges require verification of identity in order to prevent fraud and meet federal regulatory requirements. This can take days or even weeks.
There are also a growing number of brick-and-mortar stores and online retailers that accept cryptocurrency as payment, but it’s important to remember that many of these merchants are not legitimate. Never pay for something with cryptocurrency from a business or individual that you’ve not personally vetted, and be wary of anyone who tries to contact you unexpectedly asking for payment in crypto.
Besides being a store of value, a major benefit of crypto is that it’s portable and transparent. Because your digital currency holdings aren’t tied to a financial institution or government, they’re available no matter where you are in the world or what happens to any of the global finance system’s major intermediaries.
It’s also possible to send and receive cryptocurrency at almost any time, 24/7, for a low or zero fee. This is in stark contrast to the cost and time of transferring money internationally with a wire transfer, which can take more than a day.
While there is no guarantee that your investment in crypto will increase or decrease in value, it’s easy to see why so many people are drawn to this burgeoning industry. It’s also easy to understand why some are worried about the impact that crypto could have on traditional banking, financial institutions and the economy overall. But if you can see past the carnival barkers and convoluted jargon, there is a world of weird and wonderful projects waiting to be explored.
