Is cryptocurrency real money? The definition of money is something that is generally accepted as a medium of exchange, a measure or store of value, and a unit of account. By this definition, cryptocurrency is real money.

What is Cryptocurrency?
A cryptocurrency is a digital or virtual currency secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Most cryptocurrencies exist on decentralized networks using blockchain technology—a distributed ledger enforced by a disparate network of computers. “Crypto” refers to encryption algorithms and cryptographic techniques that safeguard these entries, such as elliptical curve encryption, public-private key pairs, and hashing functions.

Types of Cryptocurrency
Most of the time, when you hear about cryptocurrency types, you hear the coin’s name. However, coin names differ from coin types. Here are some of the types you’ll find with some of the names of tokens in that category:

Utility: XRP and ETH are two examples of utility tokens. They serve specific functions on their respective blockchains.

Transactional: Tokens designed to be used as a payment method. Bitcoin is the most well-known of these.5

Governance: These tokens represent voting or other rights on a blockchain, such as Uniswap.6

Platform: These tokens support applications built to use a blockchain, such as Solana.7

Security tokens: Tokens representing ownership of an asset, such as a stock that has been tokenized (value transferred to the blockchain). MS Token is an example of a securitized token. If you can find one of these for sale, you can gain partial ownership of the Millennium Sapphire.

What are the crypto coins?
Cryptocurrency is an emerging area with over 9,000 crypto projects as of March 2024. While some cryptos function as currencies, others are used to develop infrastructure. For instance, in the case of Ethereum or Solana, developers are building other cryptos on top of these platform currencies, which creates even more possibilities (and cryptos).

Bitcoin (BTC)
Ethereum (ETH)
Tether (USDT)
Binance Coin (BNB)
Solana (SOL)
U.S. Dollar Coin (USDC)
XRP (XRP)
Dogecoin (DOGE)
Toncoin (TON)
Cardano (ADA)

How Does Cryptocurrency Work?
Cryptocurrencies are various forms of digital money usually based on blockchain technology. Blockchain technology allows most cryptocurrencies to exist as “trustless” transactions. This means no centralized authority oversees the transactions on a cryptocurrency’s blockchain.

How to Buy and Invest in Cryptocurrency
If you want to use cryptocurrency to buy products and services, you must visit a cryptocurrency exchange. These are businesses that allow you to buy or sell cryptocurrencies from other users at the current market price, similar to a stock. After buying the coins, you will need to transfer them to a digital wallet or use a third-party service like Coinbase to store your coins.
If you only want to buy cryptocurrency as an investment, you may be able to do so through your brokerage. For example, Robinhood allows users to invest in Bitcoin and other cryptocurrencies, although you cannot withdraw them from the platform for purchases. In addition, several crypto ETFs provide exposure to the crypto asset class without requiring the investors to maintain their wallets. For instance, as of May 2024, investors may choose to hold Bitcoin futures ETF shares. The SEC has also approved the listing and trading of Ether spot shares.

Important terms in Cryptocurrency
Altcoin: Any cryptocurrency other than Bitcoin.
ASIC: ASIC is a powerful and expensive computing device used for mining cryptocurrency.
Buy the dip: An investing strategy involves buying an asset when its price has fallen to reap the benefits when its price rises again.
Blockchain: The underlying technology is used by nearly all cryptocurrencies. A blockchain is essentially a complete ledger of transactions held simultaneously by multiple nodes on a network.
Cold wallet: A physical storage device such as a flash drive, hard drive, or “solid-state” drive used to store cryptocurrency offline.

dApp: Short for decentralized application, a dApp is an app that isn’t controlled by a central authority. A dApp is distributed on a blockchain, allowing users to send and receive data directly without an intermediary.
DeFi: Short for decentralized finance. Finance is traditionally centralized because it relies on trusted intermediaries. DeFi, on the other hand, requires no intermediaries. Participants can send and receive assets directly. In theory, this makes transactions faster and cheaper.
DAO: An acronym that stands for a decentralized autonomous organization. A DAO is a group of people who work together toward a shared goal and abide by rules written into the project’s self-executing computer code. Bitcoin (the project, not the currency) is the earliest example of a DAO.
Distributed ledger: In traditional finance, an organization such as a bank holds a ledger of all its customers’ transactions. Distributed ledges use nodes, or independent computers, to record, share, and synchronize transactions on the electronic ledger. A blockchain is a type of distributed ledger.
Encryption: The process of making digital information into a form that prevents unauthorized access. If you use a password to access a website, the site should be encrypted so that it is of no use to hackers if stolen.

Fiat currency: Traditional currencies are backed by the full faith and credit of a nation-state. The U.S. dollar, the euro, or the British pound are fiat currencies.
Fork: The process by which the community that runs an individual cryptocurrency makes a change to the blockchain’s governing protocols. The change marks a major departure—a fork, if you will—from the previous iteration of the blockchain. Soft forks typically involve a change in the software protocol, but one that is backward-compatible. Hard forks are significant enough to require all nodes to upgrade to the latest version.

Gas: Transactions on the Ethereum network carry a fee. For every transaction, users must pay an amount of the native Ethereum currency, Ether (ETH). This fee is referred to as gas. Gas is used to reward Ethereum validators for the energy they use clearing transactions. Gas also serves as a deterrent against malicious use of the blockchain.
Graphics card: Verifying transactions on a blockchain via proof of work involves solving cryptographic puzzles. Solving these puzzles may require significant computing power, which in turn may consume substantial amounts of power. High-end graphics cards used in PC gaming have the processing power needed to validate transactions.
Hash: A hash is the result of a piece of data being put through a special hashing algorithm. It compresses data into a nearly unique alphanumeric string of text. This is important in cryptocurrency because a blockchain is an immutable record of transactions, and hashing can uncover attempts to illegitimately alter or change data.

Hot wallet: A form of online storage for cryptocurrencies, provided either by an exchange or a third party. Since storage is online and accessed with passwords, hot wallets are typically a target for hackers. However, hot wallet operators can help users regain access to their assets if they lose their access codes.
ICO: An acronym that stands for initial coin offering. An ICO is the cryptocurrency equivalent of an initial public offering (IPO). It offers investors the opportunity to back a new crypto project.
Jager: The smallest denomination of Binance Coin (BNB).
Know Your Customer (KYC): Although not required, many crypto exchanges carry out certain identity checks on their customers under KYC rules.
Market capitalization: Also written as market cap, this is the total market value of a cryptocurrency. At the time of writing, all cryptocurrencies had a combined market cap of slightly less than $1 trillion.
Mining: Crypto mining is the process of verifying transactions via a proof of work consensus mechanism. Mining involves using computer hardware to solve a hash with trillions of possible combinations. The more computing power you have, the more guesses you can make within each given window of time, and the greater your chances of earning newly minted crypto.

Meme coin: An altcoin based on a meme, a kind of inside joke in the form of an image repeatedly altered and shared online. Dogecoin is an example of a meme coin.
Node: A computer or device connected to other computers or devices that all hold a copy of a blockchain. Each node supports the broader network by sharing information and validating transactions.
NFT: An acronym that stands for a non-fungible token, a digital collectible that uses the same underlying technology as cryptocurrencies.
Orphan block: A block that has been solved but not accepted by the network and isn’t added to the blockchain. Sometimes these blocks are referred to as “stale blocks.”
Smart contract: A program that executes itself on a blockchain when certain conditions are met, without the need for human intervention or an intermediary. Once completed, the contract cannot be changed or undone.
Seed: A random series of 12 to 24 words generated by your crypto wallet and used to gain access to it.
Zero confirmation: A transaction that has yet to be confirmed on the blockchain, and therefore, isn’t part of the blockchain yet.