Hang with us, we’re about to get pretty techy here. You store your cryptocurrency in something called a digital wallet—usually in an app or through the vendor where you purchase your coins. Your wallet gives you a private key—a unique code that you enter in order to digitally sign off on purchases. It’s mathematical proof that the exchange was legit.
With us so far? Okay, good. Because we’re about to get into the tech weeds even more.
Cryptocurrencies use something called blockchain technology. A blockchain is like a really long receipt that keeps growing with each exchange of crypto. It’s a public record of all of the transactions that have ever happened in a given cryptocurrency. Yes, it sounds like it’s straight out of The Matrix. Just think of it like a ledger that shows the history of that piece of currency.
Cryptocurrency is exchanged from person to person on the web without a middleman, like a bank or government. It’s like the wild, wild west of the digital world—but there’s no marshal to uphold the law.
Here’s what we mean: Have you ever hired a kid in your neighborhood to mow your lawn or watch your dog while you were out of town? Chances are, you paid them in cash. You didn’t need to go to the bank to make an official transaction. That’s what it’s like to exchange cryptocurrencies. They’re decentralized—which means no government or bank controls how they’re made, what their value is, or how they’re exchanged.
Think of it this way: Cryptocurrency is kind of like swapping out your money in a new country. A Benjamin can buy you a nice dinner in the States, but if you want to enjoy fine dining in Italy, you’ll need some euros. We value dollars and euros because we know we can purchase goods or services with them. The same goes for cryptocurrency. You exchange your money for crypto and use it just like real money (at places that accept it as a type of payment).
So, where the heck do we get the word cryptocurrency from, anyway? Glad you asked. It comes from the word cryptography meaning the art of writing or solving codes. Sounds like the setup of an Indiana Jones movie, right? Each coin of cryptocurrency is a unique line of code. And cryptocurrencies can’t be copied, which makes them easy to track and identify as they’re traded.
You’ve probably heard of people making (or losing!) hundreds of thousands of dollars by investing in cryptocurrency. It feels like a modern-day gold rush all of a sudden.
Cryptocurrency. It’s the hot buzzword of the investing world these days. But what is cryptocurrency really? Ever heard of Bitcoin, Dogecoin, Litecoin, XRP or Ethereum? Nope—they aren’t embarrassing rock band names from the ’90s. They’re actually types of cryptocurrency (aka digital money). And they’re trending everywhere you look.
But the million-dollar (crypto?) question here is, should you invest in cryptocurrency? Despite what every loudmouth on the internet yells at you from their digital soapbox, buying cryptocurrency isn’t a safe bet for your investing future. But we’ll get to that in a minute. Let’s unpack what in the world crypto is first.