If you’re completely lost by all the talk about blockchain, Bitcoin, and other digital assets, you may have wondered: what is cryptocurrency?
It seems like crypto has taken the world by storm. At its highest point, a single Bitcoin was worth a little over $60,000, and the digital coin even became an official legal tender in the Central American country of El Salvador.
If you don’t know what crypto is, all this can seem really confusing. That’s why it’s important to take a step back and learn all the basics about crypto — so you have a foundational knowledge of the industry. We’ll give you all the answers you need for the question: what is cryptocurrency?
CRYPTO GLOSSARY – 5 KEY TERMS YOU NEED TO KNOW ABOUT CRYPTOCURRENCY
CRYPTOCURRENCY
Cryptocurrency is digital currency that runs on blockchain technology and is not dependent on a central authority to manage it.
BLOCKCHAIN
Blockchain technology is a distributed ledger system that securely records cryptocurrency transactions using cryptography. Transactions are recorded across a global network of computers.
DECENTRALIZATION
The concept of decentralization determines how cryptocurrency networks are governed. There is no central authority making decisions; instead, power is spread out equally among all the nodes on the network.
CRYPTO EXCHANGES
Crypto exchanges are platforms where people can buy, sell, and trade different cryptocurrencies. There are two types: centralized, where transactions are managed by a central company, and decentralized, where people can trade directly with one another without any third party.
FIAT CURRENCY
Fiat currency, or hard money, refers to traditional forms of currency like the Euro or U.S. dollar.
Check out our full glossary for more terms you need to know about cryptocurrency!
WHAT IS CRYPTOCURRENCY? 7 FAQS ABOUT CRYPTO
HOW MANY CRYPTOCURRENCIES ARE THERE?
There are currently estimated to be around 12,000 different cryptocurrencies. This is because anyone is free to make their own coin or token, so new ones are constantly being created.
However, only a fraction of these are viable digital currencies. Many of the others are known as “memecoins,” or coins created around jokes and internet culture.
WHAT’S THE DIFFERENCE BETWEEN CRYPTO COINS AND TOKENS?
You might think “coins” and “tokens” refer to the same thing, but they don’t. Cryptocurrency coins are any crypto projects that have their own blockchain network. Tokens, on the other hand, are used for projects that are created on top of an existing blockchain network.
For example, Ether is the cryptocurrency coin of the Ethereum network. But MANA is the token used for a project called Decentraland, which was built on the Ethereum blockchain.
WHAT CAN YOU DO WITH CRYPTO?
You can do many of the same things with crypto as you can with fiat currency:
- Investing
- Accessing crypto financial services such as loans and debit cards
- Lending out your crypto
- Staking your crypto on the blockchain to earn rewards
- Gifting crypto
- Spending crypto
While it’s true cryptocurrency isn’t widely accepted for making everyday purchases, there are several ways you can spend your digital asset at mainstream retailers, and some even take it directly.
DO YOU PAY TAXES ON CRYPTO?
Yes, you pay taxes on crypto whenever you sell or exchange it or receive it as income, whether through mining it or receiving it as payment.
IS CRYPTOCURRENCY SAFE?
Despite its reputation as being used by criminals, cryptocurrency is definitely safe. You can avoid getting hacked if you take simple online safety measures like having antivirus software and avoiding clicking on strange links.
WHERE DOES CRYPTO GET ITS VALUE?
It’s true that there is no tangible asset behind crypto that gives it value. But technically, this was also the case for many other means of exchange throughout history. Instead, people place value on a cryptocurrency if it demonstrates utility and they believe in the mission behind it.
Some cryptos, like Bitcoin, also have a finite supply, which gives it more value as demand increases.
IS CRYPTO A GOOD INVESTMENT?
If you’re asking, “What is cryptocurrency?” you’re probably also wondering if it’s worth investing in. While it’s true cryptocurrency is notoriously volatile, it can definitely make a good investment, depending on your goals.
If you’re looking for a long-term investment, a crypto with a good growth history might be a good choice. If you’re interested in something more short-term, it’s still possible to see some investment gains, but it will require close attention to the market, where the prices of crypto can fluctuate by the hour. And just like any investment, only invest what you’re prepared to lose.
What do you need to know about cryptocurrency history?
Here are a few important milestones you need to know about cryptocurrency.
BITCOIN WHITE PAPER PUBLISHED – OCTOBER 31, 2008
Satoshi Nakamoto, the creator behind Bitcoin, published the official white paper on the digital currency. Titled “Bitcoin: A Peer-to-Peer Electronic Cash System,” it answered the question “What is cryptocurrency?” and detailed everything about how the Bitcoin system would work.
FIRST BITCOIN PURCHASE – MAY 22, 2010
The first purchase with Bitcoin was made by Laszlo Hanyecz when he traded 10,000 BTC for two Papa John’s pizzas. Just three years later, Bitcoin’s value would grow exponentially, meaning those pizzas would have been worth a little over $11 million by 2013. This purchase has become memorialized as Bitcoin Pizza Day.
BITCOIN MARKET CAP REACHES MILESTONE – MARCH 30, 2013
Nearly five years after its initial launch, Bitcoin’s market capitalization officially surpassed $1 billion. It has remained the crypto with the highest market cap ever since, and it is also the crypto with the most institutional adoption.
INFLUENTIAL FIGURES IN CRYPTOCURRENCY
SATOSHI NAKAMOTO – CREATOR OF BITCOIN
Satoshi Nakamoto is the anonymous creator of Bitcoin. To this day, no one is sure of his identity or whether he’s an individual or group. As the inventor of the first successful cryptocurrency, Nakamoto’s ideas have influenced every other crypto that has followed Bitcoin’s footsteps. This is why his name is one of the top things you need to know about cryptocurrency.
VITALIK BUTERIN – CREATOR OF ETHEREUM
Buterin published the Ethereum whitepaper in 2013 when he was only 19 years old after learning about Bitcoin only a couple of years before. A year later, the Ethereum network was officially launched, differentiating itself from Bitcoin through smart contract technology and decentralized applications (dApps).
CHANGPENG ZHAO – CEO OF BINANCE
Zhao is the founder and CEO of the crypto exchange Binance, the largest crypto exchange in the world in terms of trading volume. According to Bloomberg, he is the 11th richest person in the world with a net worth of $96 billion.
Zhao worked for various crypto companies before launching Binance in 2017. Binance has gone on to launch its own blockchain, the Binance Smart Chain, a decentralized exchange, and a Binance Coin (BNB), which is the fourth largest crypto by market cap.
TOP CRYPTO EXCHANGES
With data from Coinmarketcap.com
BINANCE
Trading volume: $18,049,739,681
Availability: Worldwide, except: Ontario, China, Malaysia, Japan, U.K., Thailand, Serbia, Bosnia, Iran, Myanmar.
It’s important to note that Binance has a separate exchange for U.S. residents: Binance.US. In addition, Binance’s rules of operation vary from country to country to comply with regulatory authorities.
COINBASE
Trading volume: $3,422,801,956
Availability: U.S., Canada, U.K., Australia, Singapore, and 36 European countries.
FTX
Trading volume: $1,904,411,594
Availability: Worldwide, except U.S., Cuba, Crimea and Sevastopol, Iran, Afghanistan, Syria, North Korea, Antigua, Barbuda, Ontario, and Japan.
FTX’s rules of operation vary for countries and jurisdictions such as Hong Kong, Thailand, Malaysia, India, and Canada.
KRAKEN
Trading volume: $859,768,051
Availability: Worldwide, except Cuba, Iran, Japan, North Korea.
Kraken’s rules of operations vary from country to country to comply with regulatory authorities.
TOP CRYPTOCURRENCIES BY MARKET CAP PROJECTED FOR 2022
Average 52-week price data from Coinmarketcap.com
BITCOIN (BTC)
Average 52 week low: $28,893.62
Average 52 week high: $68,789.63
Market cap projection: $2.7 trillion by 2023 (as of 2020, according to Bitcoinist.com)
ETHER (ETH)
Average 52 week low: $1,560.37
Average 52 week high: $4,891.70
Market cap projection: $2 trillion by 2023 – 2025 (as of September 2021, according to CoinBazaar.com)
TETHER (USDT)
Average 52 week low: $0.9974
Average 52 week high: $1.03
Market cap projection: $300 billion to $400 billion by 2024 (as of April 2021, according to Fxleaders.com)
BNB (BNB)
Average 52 week low: $213.52
Average 52 week high: $690.93
Market cap projection: $1,076 price per coin by 2030 (as of March 2022, according to Capital.com)
USD COIN (USDC)
Average 52 week low: $0.9874
Average 52 week high: $2.35
Market cap projection: $1.27 price per coin by 2025
(as of March 2022, according to Tradingbeasts.com)
CRYPTOCURRENCIES TO WATCH IN 2022
Price data from Coinmarketcap.com
SOLANA (SOL)
Current price in March 2022: $89.71
Top exchanges for buying and trading: Binance, OKX, Mandala Exchange, Bitget, FTX, and Coinbase
Why: What is cryptocurrency, and what makes it unique on the Solana blockchain? Solana was built to speed up transaction times and lower transaction fees. It’s already in the top ten cryptocurrencies by market cap, but it has the potential to grow even bigger as more people and investors support the project.
AVALANCHE (AVAX)
Current price in March 2022: $85.89
Top exchanges for buying and trading: Binance, OKX, Mandala Exchange, Hotcoin Global, Bitget, and Coinbase
Why: In 2021, Avalanche formed a partnership with Deloitte to use their blockchain technology to help streamline FEMA’s processes. Relationships with mainstream organizations like this show that Avalanche has a lot of growth potential.
TERRA (LUNA)
Current price in March 2022: $88.25
Top exchanges for buying and trading: Binance, OKX, Mandala Exchange, Bitget, and FTX.
Why: Terra is a stablecoin project that uses an algorithm and smart contract technology to control the price of its coins. After its partnership with the Korean-based Chai payment platform and widespread growth in its user base, it’s worth watching to see how Terra grows this year.
CARDANO (ADA)
Current price in March 2022: $0.8536
Top exchanges for buying and trading: Binance, OKX, Mandala Exchange, Hotcoin Global, and Bitget
Why: Cardano was the first proof-of-stake blockchain to become successful. This type of system is more environmentally friendly compared to Bitcoin and Ethereum, making Cardano a potential competitor to these networks. Many predict ADA will grow in the future as it continues to build out its network, so it’s worth keeping an eye on to see how the platform develops.
CHAINLINK (LINK)
Current price in March 2022: $15.03
Top exchanges for buying and trading: Binance, OKX, Mandala Exchange, Hotcoin Global, and Currency.com.
Why: Chainlink is an oracle service that collects all the data used by smart contracts. It has partnered with organizations like FedEx, FlightStats, and the Associated Press to help them verify data. It’s worth watching to see which organizations it partners with in the future and how that affects its growth.
CRYPTO RESOURCES
NEW TO CRYPTO?
Check out these eBooks to help you get started and answer the question, “What is cryptocurrency?” more in-depth:
Crypto quickstart guide: learn crypto with Jenn
Crypto income secrets: 3 ways to earn a monthly crypto income
Investor’s guide to crypto research: how to decide which cryptocurrencies to buy
ALREADY TRADING CRYPTO?
Check out some of our recent articles for experienced crypto-traders
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CHECK OUT OUR DOCUSERIES!
Head to UncensoredCrypto.com to watch our Uncensored Crypto docuseries! This series covers everything you need to know about cryptocurrency, whether you’re a newbie or an experienced trader.
PREFER HANDS-ON LEARNING?
Check out these crypto training webinars for traders of all levels:
About the Author
Michael Hearne
About Decentral Publishing
Decentral Publishing is dedicated to producing content through our blog, eBooks, and docu-series to help our readers deepen their knowledge of cryptocurrency and related topics. Do you have a fresh perspective or any other topics worth discussing? Keep the conversation going with us online at: Facebook, Twitter, Instagram, and LinkedIn.
