12/20/21, 9:23 PM What is cryptocurrency?

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Learn Crypto Basics

What is cryptocurrency?

Bitcoin, Ethereum, and other crypto are revolutionizing how we invest, bank, and use money. Read

this beginner’s guide to learn more.

At its core, cryptocurrency is typically decentralized digital money designed to be

used over the internet. Bitcoin, which launched in 2008, was the first cryptocurrency,
and it remains by far the biggest, most influential, and best-known. In the decade
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The most popular cryptocurrencies, by market capitalization, are Bitcoin, Ethereum,

Bitcoin Cash and Litecoin. Other well-known cryptocurrencies include Tezos, EOS,
and ZCash. Some are similar to Bitcoin. Others are based on different technologies,
or have new features that allow them to do more than transfer value.
Crypto makes it possible to transfer value online without the need for a
middleman like a bank or payment processor, allowing value to transfer globally,
near-instantly, 24/7, for low fees.
Cryptocurrencies are usually not issued or controlled by any government or other
central authority. They’re managed by peer-to-peer networks of computers running
free, open-source software. Generally, anyone who wants to participate is able to.
If a bank or government isn’t involved, how is crypto secure? It’s secure because all
transactions are vetted by a technology called a blockchain.
A cryptocurrency blockchain is similar to a bank’s balance sheet or ledger. Each
currency has its own blockchain, which is an ongoing, constantly re-verified record
of every single transaction ever made using that currency.
Unlike a bank’s ledger, a crypto blockchain is distributed across participants of the
digital currency’s entire network
No company, country, or third party is in control of it; and anyone can participate. A
blockchain is a breakthrough technology only recently made possible through
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decades of computer science and mathematical innovations. Get started

Most importantly, cryptocurrencies allow individuals to take complete control

over their assets

Coinbase CEO Brian Armstrong's Vision for the Future of Cryptocurrency

Key concepts

Transferability

Crypto makes transactions with people on the other side of the planet as seamless as paying with
cash at your local grocery store.

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Privacy

When paying with cryptocurrency, you don’t need to provide unnecessary personal information to
the merchant. Which means your financial information is protected from being shared with third

parties like banks, payment services, advertisers, and credit-rating agencies. And because no

sensitive information needs to be sent over the internet, there is very little risk of your financial

information being compromised, or your identity being stolen.

Security

Almost all cryptocurrencies, including Bitcoin, Ethereum, Tezos, and Bitcoin Cash are secured using

technology called a blockchain, which is constantly checked and verified by a huge amount of

computing power.

Portability

Because your cryptocurrency holdings aren’t tied to a financial institution or government, they are

available to you no matter where you are in the world or what happens to any of the global finance

system’s major intermediaries.

Transparency

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Every transaction on the Bitcoin, Ethereum, Tezos, and Bitcoin Cash networks is published publicly,
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without exception. This means there's no room for manipulation of transactions, changing the

money supply, or adjusting the rules mid-game.

Irreversibility

Unlike a credit card payment, cryptocurrency payments can’t be reversed. For merchants, this

hugely reduces the likelihood of being defrauded. For customers, it has the potential to make

commerce cheaper by eliminating one of the major arguments credit card companies make for

their high processing fees.

Safety

The network powering Bitcoin has never been hacked. And the fundamental ideas behind

cryptocurrencies help make them safe: the systems are permissionless and the core software is
open-source, meaning countless computer scientists and cryptographers have been able to

examine all aspects of the networks and their security.

Why is cryptocurrency the future of finance?

Cryptocurrencies are the first alternative to the traditional banking system, and
have powerful advantages over previous payment methods and traditional classes of
assets. Think of them as Money 2.0. -- a new kind of cash that is native to the internet,
which gives it the potential to be the fastest, easiest, cheapest, safest, and most
universal way to exchange value that the world has ever seen.

Cryptocurrencies can be used to buy goods or services or held as part of an

investment strategy, but they can’t be manipulated by any central authority, simply
because there isn’t one. No matter what happens to a government, your
cryptocurrency will remain secure.

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Digital currencies provide equality of opportunity, regardless of where you were

born or where you live. As long as you have a smartphone or another internet-
connected device, you have the same crypto access as everyone else.

Cryptocurrencies create unique opportunities for expanding people’s economic

freedom around the world. Digital currencies’ essential borderlessness facilitates
free trade, even in countries with tight government controls over citizens’ finances.
In places where inflation is a key problem, cryptocurrencies can provide an
alternative to dysfunctional fiat currencies for savings and payments.
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As part of a broader investment strategy, crypto can be approached inGet

a wide
startedvariety

of ways. One approach is to buy and hold something like bitcoin, which has gone
from virtually worthless in 2008 to thousands of dollars a coin today. Another
would be a more active strategy, buying and selling cryptocurrencies that
experience volatility.
One option for crypto-curious investors looking to minimize risk is USD Coin, which
is pegged 1:1 to the value of the U.S. dollar. It offers the benefits of crypto, including
the ability to transfer money internationally quickly and cheaply, with the stability of
a traditional currency. Coinbase customers that hold USDC earn rewards, making it
an appealing alternative to a traditional savings account.

Digital currencies provide equality of opportunity, regardless of where you were

born or where you live.

Why invest in cryptocurrency?

Online exchanges like Coinbase have made buying and selling cryptocurrencies easy,
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secure, and rewarding.

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It only takes a few minutes to create a secure account, and you can buy
cryptocurrency using your debit card or bank account.
You can buy as little (or as much) crypto as you want, since you can buy fractional
coins. For example, you can buy $25.00 worth of bitcoin.
Many digital currencies, including USD Coin and Tezos, offer holders rewards just for
having them.
On Coinbase, you can earn 1% APY on— that’s much higher than most traditional
savings accounts.
You can also earn up to 5% APY when you stake Tezos on Coinbase. Learn more about
Tezos staking rewards.
Unlike stocks or bonds, you can easily transfer your cryptocurrency to anyone else or
use it to pay for goods and services.
Millions of people hold bitcoin and other digital currencies as part of their
investment portfolios.

What is a stablecoin?

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USD Coin is an example of a cryptocurrency called stablecoins. You can think of these
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as crypto dollars—they’re designed to minimize volatility and maximize
utility. Stablecoins offer some of the best attributes of cryptocurrency (seamless
global transactions, security, and privacy) with the valuation stability of fiat
currencies.

Stablecoins do this by pegging their value to an external factor, typically a fiat

currency like the U.S. dollar or a commodity like gold.
As a result, their valuations are less likely to shift dramatically from day to day. That
stability can increase their utility for everyday use as money, because both buyers
and merchants can be confident that the value of their transaction will remain
relatively consistent over a longer timeframe.
They can also work as a safe and stable way to save money, like a traditional savings
account.

Key question

What is the future of cryptocurrency?

Experts often talk about the ways crypto can provide solutions to the shortcomings of our current

financial system. High fees, identity theft, and extreme economic inequality are an unfortunate

part of our current financial system and they’re also things cryptocurrencies have the potential to
address. The technology that powers digital currencies also has wide-ranging potential beyond the

financial industry, from revolutionizing supply chains to building the new, decentralized internet.

How does cryptocurrency work?

Bitcoin is the first and most well-known, but there are thousands of types of
cryptocurrencies. Many, like Litecoin and Bitcoin Cash, share Bitcoin’s core
characteristics but explore new ways to process transactions. Others offer a wider

range of features. Ethereum, for example, can be used to run applications and create
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contracts. All four, however, are based on an idea called the blockchain,Get

which is key
started

to understanding how cryptocurrency works.

At its most basic, a blockchain is a list of transactions that anyone can view and
verify. The Bitcoin blockchain, for example, is a record of every time someone
sends or receives bitcoin. This list of transactions is fundamental for most
cryptocurrencies because it enables secure payments to be made between people
who don’t know each other without having to go through a third-party verifier like a
bank.
Blockchain technology is also exciting because it has many uses beyond
cryptocurrency. Blockchains are being used to explore medical research, improve
the sharing of healthcare records, streamline supply chains, increase privacy on
the internet, and so much more.
The principles behind both bitcoin and the Bitcoin blockchain first appeared online
in a white-paper published in late 2007 by a person or group going by the name
Satoshi Nakamoto.
The blockchain ledger is split across all the computers on the network, which are
constantly verifying that the blockchain is accurate.This means there is no central
vault, entity, or database that can be hacked, stolen, or manipulated.

Key concept

Cryptocurrencies use a technology called public-private key cryptography to transfer coin

ownership on a secure and distributed ledger. A private key is an ultra secure password that never

needs to be shared with anyone, with which you can send value on the network. An associated

public key can be freely and safely shared with others to receive value on the network. From the

public key, it is impossible for anyone to guess your private key.

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What is cryptocurrency mining?

Most cryptocurrencies are ‘mined’ via a decentralized (also known as peer-to-peer)

network of computers. But mining doesn’t just generate more bitcoin or Ethereum -
it’s also the mechanism that updates and secures the network by constantly verifying
the public blockchain ledger and adding new transactions.

Technically, anyone with a computer and an internet connection can become a

miner. But before you get excited, it’s worth noting that mining is not always
profitable. Depending on which cryptocurrency you’re mining, how fast your
computer is, and the cost of electricity in your area, you may end up spending more
on mining than you earn back in cryptocurrency.
As a result, most crypto mining these days is done by companies that specialize in it,
or by large groups of individuals who all contribute their computing power.
How does the network encourage miners to participate in maintaining the
blockchain? Again, taking Bitcoin as an example, the network holds a lottery in
which all the mining rigs around the world race to become the first to solve a math
problem, which also verifies and updates the blockchain with new transactions.

Each winner is awarded new bitcoin, which can then make its way into the broader
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marketplace.
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Key question

Where do cryptocurrencies get their value?

The economic value of cryptocurrency, like all goods and services, comes from supply and demand.
Supply refers to how much is available—like how many bitcoin are available to buy at any moment

in time. Demand refers to people’s desire to own it—as in how many people want to buy bitcoin and
how strongly they want it. The value of a cryptocurrency will always be a balance of both factors.
There are also other types of value. For example, there’s the value you get from using a

cryptocurrency. Many people enjoy spending or gifting crypto, meaning that it gives them a sense
of pride to support an exciting new financial system. Similarly, some people like to shop with

bitcoin because they like its low fees and want to encourage businesses to accept it.

How to buy bitcoin and other cryptocurrency

The easiest way to acquire cryptocurrency is to purchase on an online exchange like
Coinbase.

On Coinbase, you can buy major cryptocurrencies like

Bitcoin (BTC), Litecoin (LTC), Ethereum (ETH), Bitcoin Cash (BCH), Ethereum Classic
(ETC). Or you can explore emerging coins like Stellar Lumens or EOS. For some
cryptocurrencies Coinbase offers opportunities to earn some for free.)
One good approach is to ask yourself what you’re hoping to do with crypto and
choose the currency that will help you achieve your goals. For example, if you want
to buy a laptop with crypto, bitcoin might be a good option because it is the most
widely accepted cryptocurrency. On the other hand, if you want to play a digital
card game, then Ethereum is a popular choice.
Keep in mind that you do not need to buy a whole coin. On Coinbase, you can buy
portions of coins in increments as little as 2 dollars, euros, pounds, or your local

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currency. Get started

How do you store cryptocurrency?

Storing crypto is similar to storing cash, which means you need to protect it from
theft and loss. There are many ways to store crypto both online and off, but the
simplest solution is via a trusted, secure exchange like Coinbase.

Coinbase customers can securely store, send, receive, and convert crypto by

signing into their account on a computer, tablet, or phone.
Want to transfer money from your wallet to a bank account? The Coinbase app
makes it as easy as transferring funds from one bank to another. (Much like
conventional bank transfers or ATM withdrawals, exchanges like Coinbase set a daily
limit, and it might take from a few days to a week for the transaction to be
completed.

What can you do with cryptocurrency?

There’s a wide range of things you can do with cryptocurrency, and the list grows with
time. Here are a few ways to get started, from participating in everyday activities to
exploring new technological frontiers:

Shop: Over 8,000 global merchants accept cryptocurrency via Coinbase Commerce.

Donate to causes: There are benefits to donating and accepting crypto, and many
nonprofit organizations accept bitcoin donations.
Gift it: Cryptocurrency makes a great gift for friends and family who are interested
in learning about new technology.
Tip someone: Authors, musicians, and other online content creators sometimes
leave Bitcoin addresses or QR codes at the end of their articles. If you like their
work, you can give a little crypto as a way of saying thanks.

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Explore unique new combinations of money and technology: Orchid is a VPN, which
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helps protect you when you’re online, and a digital currency at the same time.
Basically it’s broken down into two parts, the Orchid VPN app and the OXT
cryptocurrency, and it all runs on the Ethereum network. Intrigued? Read more here.
Travel the world: Because cryptocurrency isn’t tied to a specific country, traveling
with crypto can cut down on money exchange fees. There’s already a small but
thriving community of self-titled “crypto nomads” who primarily, or in some cases
exclusively, spend crypto when they travel.
Buy property in a virtual gaming world: Decentraland, which also runs on the
Ethereum blockchain, is the first virtual world entirely owned by its users. Users can
buy and sell land, avatar clothing, and all kinds of other stuff while partying in
virtual nightclubs or mingling in virtual art galleries.
Explore decentralized finance, or DeFi: A wide variety of new players are aiming to
recreate the entire global financial system, from mutual-fund-like investments to
loan-lending mechanisms and way beyond, without any central authorities.

Buy Bitcoin in just a few minutes

Start with as little as $25 and pay with your bank account or debit card.

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