Crypto is many things — Lamborghini-driving Dogecoin millionaires, for instance — but it’s also, ostensibly, a method of transferring value online. That’s its most practical use, and it’s a big part of why people love to talk about it. Despite the frothy headlines, however, the crypto scene is complex and confusing, and understanding how it works takes time and dedication. It’s not for the casual observer, but there are some footholds for newcomers. For instance, a little knowledge of crypto can help you decipher memes and Discord chats, join a community that invests in “non-fungible tokens” or play a video game that awards players with cryptocurrency.
The most well-known cryptocurrencies are Bitcoin, Ethereum and Litecoin. But there are plenty of others, all with their own unique features. They are all based on a blockchain, a database that is constantly updated by computers all over the world. The computers are called miners, and they solve complicated puzzles to verify the accuracy of transactions on the blockchain. They are rewarded with newly created cryptocurrency in return for their work. Some of these coins can be sold for cash, but most are held in a digital wallet that can be accessed from any computer that has Internet access.
While traditional currencies are printed by governments and stored in banks, cryptocurrencies are produced by independent groups. They can be transferred over the Internet instantly and cheaply, and they are resistant to central authority control. This makes them useful for people in unstable countries or for those who wish to avoid the fees and taxes associated with credit cards and bank transfers.
Many of the most interesting applications for crypto are finance- or finance-adjacent, including remittances and Wall Street trading. Other projects, such as blockchain-powered social networks and self-governing “dAOs,” may eventually have broader reach. The technology’s ability to provide permanent, irrefutable records of ownership could make it attractive to marginalized communities that have suffered from property theft or evictions.
As crypto grows and changes, some of its critics argue that it is too volatile to be used for day-to-day transactions. It’s also been linked to fraud and money laundering. But proponents believe that the benefits of crypto will outweigh these risks in time. In addition to a decentralized financial system, crypto could allow creators to bypass platform gatekeepers like YouTube and Spotify and sell their work directly to fans (in the form of NFTs). It might even give us a new, more efficient way to vote. (This article contains affiliate links.)
