Cryptocurrency
Also called: crypto · digital currency · crypto asset
Definition
A cryptocurrency is a digital asset that is issued and transferred on a blockchain, secured by cryptography instead of a bank or central authority.
How cryptocurrency works
Ownership of a cryptocurrency is recorded on a public blockchain. What you actually hold is a private key, a secret number that lets you sign transactions moving coins from your address. Whoever controls the key controls the coins, which is why exchanges and wallets put so much effort into key security.
The word covers very different assets. Bitcoin is designed as scarce digital money with a fixed 21 million supply. Ether pays for computation on Ethereum. Stablecoins such as USDT and USDC aim to track the US dollar. Thousands of other tokens represent projects, governance rights or simply internet culture, as with memecoins.
Prices are set by trading on exchanges around the clock, every day of the year. That means crypto can move sharply at night or over a weekend, and price swings of 5 to 10 percent in a day are common for many coins. How crypto is taxed and regulated depends on your country, so rules that apply to a friend abroad may not apply to you.
Example
Suppose you deposit 500 USDT on an exchange and buy ETH at 2,500 USDT per coin. You receive 0.2 ETH, minus a small trading fee. If ETH later trades at 2,750 USDT, your 0.2 ETH is worth 550 USDT, a 10 percent gain before fees. If it falls to 2,250 USDT, the same holding is worth 450 USDT. The number of coins you own stays at 0.2 ETH; only their price in dollars changes.
Common mistakes
- Treating all cryptocurrencies as interchangeable when a stablecoin, Bitcoin and a new memecoin carry completely different risks.
- Sharing a seed phrase or private key with someone who claims to be support staff.
- Buying a coin because its unit price looks cheap, without checking its total supply and market capitalization.
Learn and practise
FAQ
Is cryptocurrency real money?
Some countries treat certain cryptocurrencies as legal property or payment methods, while others restrict them. In practice, crypto has value because people are willing to trade it, and it can be exchanged for local currency on exchanges.
What was the first cryptocurrency?
Bitcoin, launched in January 2009 by the pseudonymous Satoshi Nakamoto, was the first widely used cryptocurrency.
Do I need to buy a whole coin?
No. Most cryptocurrencies are divisible. You can buy 0.001 BTC or 10 USDT worth of a coin on most exchanges.