Cryptocurrency is a form of digital payment that exists without tangible bills or coins and is not issued by governments. It can be used to buy goods and services from some retailers. Consumers obtain cryptocurrency by purchasing it on trading platforms using fiat currency and government-issued money, and storing it in digital wallets. Cryptocurrencies have a high risk of loss due to fluctuations in value and lack of protections, so consumers should only invest what they can afford to lose. Consideration should also be given to investing in funds with cryptocurrency holdings rather than direct ownership.
Cryptocurrency is a form of digital payment that exists without tangible bills or coins and is not issued by governments. It can be used to buy goods and services from some retailers. Consumers obtain cryptocurrency by purchasing it on trading platforms using fiat currency and government-issued money, and storing it in digital wallets. Cryptocurrencies have a high risk of loss due to fluctuations in value and lack of protections, so consumers should only invest what they can afford to lose. Consideration should also be given to investing in funds with cryptocurrency holdings rather than direct ownership.
Cryptocurrency is a form of digital payment that exists without tangible bills or coins and is not issued by governments. It can be used to buy goods and services from some retailers. Consumers obtain cryptocurrency by purchasing it on trading platforms using fiat currency and government-issued money, and storing it in digital wallets. Cryptocurrencies have a high risk of loss due to fluctuations in value and lack of protections, so consumers should only invest what they can afford to lose. Consideration should also be given to investing in funds with cryptocurrency holdings rather than direct ownership.
Cryptocurrency is a form of digital payment that exists without tangible bills or coins and is not issued by governments. It can be used to buy goods and services from some retailers. Consumers obtain cryptocurrency by purchasing it on trading platforms using fiat currency and government-issued money, and storing it in digital wallets. Cryptocurrencies have a high risk of loss due to fluctuations in value and lack of protections, so consumers should only invest what they can afford to lose. Consideration should also be given to investing in funds with cryptocurrency holdings rather than direct ownership.
Cryptocurrency Nichole Huff and Kelly May, Family and Consumer Sciences
T he concept of cryptocurrency, or digital
currency, might sound a bit cryptic to many consumers. As cryptocurrencies become more widely used, consumers should still proceed with caution. Cryptocurrency—such as Bitcoin, Litecoin, Ether, or others—is a form of digital payment con- sumers can use to buy goods and services. It exists without tangible corresponding bills or coins, and it is not issued or backed by government agencies. At its core, cryptocurrency is essentially digital computer software. People or entities can transfer it online without the need for a bank or financial institution. The currency is stored within a digital wallet that consumers can maintain either online or offline using a hard drive or paper printout.
Obtaining Cryptocurrency You must use government-issued money (or fiat currency) to buy cryptocurrency, similar to how you would buy casino chips or arcade tokens. Originally, cryptocurrency was developed Cryptocurrency is a form of digital payment consumers to remove the intermediary in transactions and reduce the time it takes for transactions to occur. can use to buy goods and services. It exists without It is not issued or backed by the government or tangible corresponding bills or coins, and it is not issued central bank like the dollar; therefore, its value can fluctuate. Some choose to use cryptocurren- or backed by government agencies. cies because of the anonymity it provides con- sumers when making purchases. Others choose cryptocurrencies as a form of investment, hoping the value increases. It also is important to understand the fees Consumers who purchase cryptocurrency cre- associated with the purchasing platform you ate an account on a cryptocurrency trading plat- choose. Some platforms charge different fee rates form website or app. Many different options exist for digital checks as opposed to debit or credit (e.g., Coinbase, Gemini, Binance, Kraken, eToro), card purchases. Once the purchase is complete, which vary in services offered, fees, and costs of the cryptocurrency is stored in a digital wallet using the platform. Usually cryptocurrency is pur- that you must set up in advance. Research before chased with a bank transfer, credit card, or money choosing your wallet and select a reputable plat- transfer service. It may be beneficial to check with form that you understand. Common variations your bank first to make sure it allows transfers to include mobile, desktop, web, and hardware wal- the platform you are using. While most platforms lets. A “hot” wallet is connected to the internet, accept bank transfers, some banks do not allow which makes it more convenient but also more the transaction because of the unregulated nature susceptible to hacking. A “cold” wallet is an exter- of cryptocurrencies.
Cooperative Extension Service | Agriculture and Natural Resources | Family and Consumer Sciences | 4-H Youth Development | Community and Economic Development nal device designed for cryptocurrency storage. It offers more protection but is less convenient. Use cautious internet practices, such as strong passwords and secure networks, throughout the purchasing process to help prevent online theft.
Mining, Blockchains, and More
Cryptocurrencies also can be obtained through a process called mining. Mining cre- ates “blocks” of data by clumping chronological transactions together and creating a public record or ledger, also called a “blockchain.” Mining is a complex process that is not for beginning or novel cryptocurrency users. Experienced min- ers are awarded cryptocurrency for their work in the creation of blockchains. They essentially solve cryptographic equations through the use of computer technology that verifies the legitimacy of past transactions, similar to an audit. As more cryptocurrency is mined, the value of the currency fluctuates. Cryptocurrencies gain value based on user demand, supply, and utility. Cryptocurrencies have a high risk of loss because they are Some cryptocurrencies are capped. For example, only 21 million Bitcoins can be in existence. not backed by the government and their value fluctuates As the cryptocurrency is mined, the potential significantly over time. scarcity has an effect on the value of the currency. Less available currency can drive up the value as demand increases. Some cryptocurrencies, such as Dogecoin, are not capped and fluctuate based on popularity and interest in the market. cryptocurrency through theft or fraud, or if the company you buy from goes bankrupt, for ex- Investment Risks ample, the government will not intervene or help replace your lost money. of Cryptocurrencies Some consumers purchase cryptocurrencies Avoiding Cryptocurrency Scams as a form of investment with the hopes that its While cryptocurrency transactions are value will increase over time. Cryptocurren- anonymous, transaction data is public informa- cies have a high risk of loss because they are not tion that is posted to a public ledger or blockchain backed by the government and their value fluctu- that can be accessed by anyone. A user’s personal ates significantly over time. If you are considering identifying information is not displayed; rather a purchasing cryptocurrency as an investment, be public key or “node” is. This includes an identify- sure to thoroughly research the currency before ing number linked to your digital wallet, similar purchasing. Use caution and only invest what you to a username. The transaction is confidential, can afford to lose. Alternately, consider investing but not entirely anonymous. You also may be at in mutual funds or exchange-traded funds that risk of theft or hacking and should take proper have holdings in cryptocurrency-related inter- measures to ensure your information is secure ests, such as the companies that host the trading in your digital wallet. Beware of false websites platforms or other associated fields. that masquerade as trading platforms or wallet It is important to reiterate that cryptocurren- services. Always double-check that web addresses cies are not government-insured or supported are accurate and legitimate before clicking links by the Federal Reserve. This means that if your or visiting URLs. cryptocurrency drops in value, if you lose your
2 While cryptocurrency can be used to purchase Consider investing in mutual funds or exchange-traded goods and services, depending on the retailer or seller, some purchases are nonrefundable. Always funds that have holdings in cryptocurrency-related review the seller’s refund policies before using interests, such as the companies that host the trading cryptocurrency to pay for a transaction. Because some purchases made with cryptocurrency are not platforms or other associated fields. refundable, it is a preferred method for scammers. Scammers will receive payment for items or services that may be bogus. It is important to thoroughly vet cryptocurrency and companies that sell or accept your digital wallet. Because cryptocurrencies are it before purchasing. Malware also is a concern, not regulated or insured, you will lose your cryp- either for hackers accessing your digital wallet or tocurrency (and therefore the money you spent for scammers “cryptojacking” your computer or on it) if you lose access to your digital wallet. smartphone’s processor to aid their mining activities As cryptocurrencies can be unpredictable, without your knowledge or benefit. only purchase what you can afford to potentially The rapid value fluctuations of cryptocurrency lose. While there are many speculations about the pose another risk. Fluctuations in value make stability, growth, and future of cryptocurrency, cryptocurrency ripe for scammers who create the true future is unknown. fake trading platforms, sell counterfeit currencies, or produce cryptocurrency versions of classic Morgann Kidwell, M.S., is a contributing author of this publication. scams such as Ponzi schemes and “pump and dump” scams. A Ponzi scheme is a type of fraud in which funds from new investors pay “profits” References to earlier investors, when in reality there may be no real investment. In a pump and dump scam, AARP. (2020). Cryptocurrency fraud. Retrieved the seller promotes the investment until a large from https://www.aarp.org/money/scams- number of people buy, then the promoter sells at fraud/info-2019/cryptocurrency.html. a profit and everyone else loses out. Federal Trade Commission. (2021). What to know Also be wary of online message boards or about cryptocurrency and scams. Retrieved other online sources that offer cryptocurrency in- from https://www.consumer.ftc.gov/articles/ vestment tips or secrets. In reality, they could lead what-know-about-cryptocurrency-and-scams. people to phony investment websites. To learn Hougan, M., Lawant, D. (2021). Cryptoassets: The more about using cryptocurrency and avoiding guide to bitcoin, blockchain, and cryptocurrency scams, visit the Federal Trade Commission’s web- for investment professionals. Retrieved from site at https://www.consumer.ftc.gov/articles/ https://www.cfainstitute.org/en/research/ what-know-about-cryptocurrency-and-scams. foundation/2021/cryptoassets. National Credit Union Administration. (2020). Being a Smart Crypto Consumer The rise of bitcoin: Understanding the ins and outs of the cryptocurrency. Retrieved from It is important to do your homework before https://www.ncua.gov/newsroom/ncua- purchasing cryptocurrency. Taking the time to re- report/2017/rise-bitcoin-understanding-ins- search will help you avoid situations in which you and-outs-cryptocurrency. may be vulnerable to scams or fraud. Safeguard- Royal, J., & Voigt, K. (2021). What is Cryptocur- ing your passwords also is crucial in protecting rency? Here’s what you should know. Retrieved yourself from fraud. If you choose to purchase from https://www.nerdwallet.com/article/ cryptocurrency, be sure to have backup access to investing/cryptocurrency-7-things-to-know.
The Crypto Code Unlocking The Power of Virtual Assets Harnessing The Potential of Cryptocurrencies For Financial Freedom (Fletcher, Charles) (Z-Library)
