Cryptocurrency is decentralized digital money used on the internet. Unlike national currencies issued by governments, cryptocurrencies operate through a distributed ledger called blockchain. Bitcoin, the first cryptocurrency, was introduced in 2008 and ushered in a new era of peer‑to‑peer electronic cash. Since then, thousands of coins – including Ethereum, Tether, Solana and Cardano – have been created.
The market has expanded dramatically; there are now more than 16,000 cryptocurrencies in existence. Their values vary widely. Bitcoin, the largest by market capitalization, was worth nearly US$900 billion in early 2022, while Ethereum’s market cap was under US$500 billion. Estimates placed the total crypto market around US$3 trillion at that time. This proliferation of digital tokens means investors must research each project’s purpose and technology before committing money.
What makes cryptocurrencies unique is their ability to let people transfer value online without a central counterparty. Transactions are recorded on a public ledger and settled within minutes, day or night. Enthusiasts argue that crypto offers privacy, security and irreversible transactions that traditional money cannot match. Yet the volatility of digital assets is striking: for example, the price of Bitcoin surged from about US$30 000 in mid‑2021 to nearly US$70 000 later that year, only to fall back to around US$35 000 in early 2022.
This volatility means cryptocurrencies can be thought of both as a medium of exchange and as a speculative investment. They may serve as a store of value, a unit of account and a medium of exchange, but they also present the possibility of significant gains or losses. A retiree seeking stable income might avoid such fluctuations, while a younger investor could view crypto as a high‑risk, high‑reward component of a diversified portfolio. Digital tokens also lack intrinsic value – they are worth only what people are willing to pay for them.
Because no central authority guarantees repayment or manages supply, crypto prices are driven by supply and demand. Some see this decentralization as a benefit – offering freedom from government interference – while others worry about scams, hacks and the environmental impact of mining. As Investopedia notes, cryptocurrencies are secured by cryptography, which makes them extremely difficult to counterfeit, but their price volatility, high energy consumption and occasional use in illicit activities are significant downsides.