What is cryptocurrency — and how can I use it?

16 November 2018

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Cryptocurrencies like bitcoin, Litecoin and Peercoin are growing in popularity. Here’s how they work.

The value of bitcoin is reaching all-time highs in 2017, boosting interest in all cryptocurrencies — more than 700 out there at any given time. But just what is cryptocurrency, and how you can save, earn and spend it?

What is cryptocurrency?

Cryptocurrency is a digital currency for which encryption techniques are used to regulate its use and generate its release. Unlike fiat currency — like US dollars, euros and yen — cryptocurrency is not regulated or controlled by any bank, government or centralized financial authorities.

Instead, it relies on the power of the Internet to guarantee its value and confirm transactions. Users on a network verify every transaction, and those transactions then become a matter of public record. This prevents the same digital currency or coin from being spent twice by the same person.

How are cryptocurrency records kept?

That digital public ledger on which all transactions are recorded is called the blockchain. Data is stored across a network, so it’s not susceptible to exploitation by hackers or central failure.

Each record or series of records on the blockchain is known as a block. A block is sent to the network and added to the blockchain after it’s accepted by the network as a valid transfer. Once verified, the blocks cannot be changed.

What does it mean to mine cryptocurrency?

Cryptocurrencies are released to the world through a process called “mining.” For you to mine this currency, you must attempt to solve a computational puzzle known as a hash, which allows you to add the next block. These transactions are then recorded in the blockchain for all to see.

People around the world compete to be the first to solve a hash. Those “miners” who succeed in solving the hash receive a block reward — or an amount of the cryptocurrency they mined.

WHAT EQUIPMENT DO I NEED TO BEGIN MINING CRYPTOCURRENCY?

Unlike mining for gold, you’ll need a few more tools than a pan and a magnifying glass. Invest in these basics to get started:

• Mining hardware. You’ll need a ASIC chip for your computer designed specifically to mine cryptocurrency.
• Mining software. Look for free software with easy-to-follow instructions that explain how these programs work with your ASIC.
• Bitcoin wallet. If you complete a block, you’ll need to store your bitcoin in a wallet.

How can I buy and use cryptocurrency?

Cryptocurrency is a volatile market, with exchange rates that can wildly fluctuate by day, and sometimes by hour. Bitcoin is the better-known and most valuable cryptocurrency out there, but there are many others to explore, including litecoin, peercoin, dogecoin, monero and ripple.

When you buy or receive cryptocurrency, you are given a digital key to the address of that currency. You can use this key to access and validate or approve transactions.

You need a place to keep your key safe, which is where a cryptocurrency wallet comes in.

You have a variety of cryptocurrency wallets to choose from:

• Desktop wallets. Software like Cryptonator allows you to send and store cryptocurrency addresses and also connects to the network to track transactions.
• Online wallets. Cryptocurrency keys are stored online by exchange platforms like Coinbase or Circle and can be accessed from anywhere.
• Mobile wallets. Apps like Blockchain store and encrypt your bitcoin keys so that you can make payments using your mobile device.
• Paper wallets. Some websites offer paper wallet services, generating a piece of paper with two QR codes on it. One code is the public address at which you receive cryptocurrency, and the other is your private address you can use for spending.
• Hardware wallets. You can use a USB device created specifically to store bitcoin electronically and your private address keys.

Compare cryptocurrency marketplaces

Name	Deposit methods	Fiat Currencies	Supported Cryptocurrencies
Uphold Digital Money Platform (US)		Bank transfer Credit card Debit card Bank transfer (SEPA)	USD, GBP, AUD, EUR, INR, ARS, BRL, CAD, CNY. NZD, DKK, HKD, ILS, JPY, KES, CHF, MXN, NOK, PHP, PLN, SGD, SEK, AED	BTC, LTC, ETH, BCH, BAT, DASH, BTG, XRP, VOX	Refer a friend to earn US$20 — $10 for you and $10 for the person you refer. Buy, send and convert more than 35 currencies at the touch of a button.	Go to site View details	Compare
Binance Cryptocurrency Exchange		Cryptocurrency	–	BTC, XRP, USDT, ETH, NEB, XVG, TRX, NEBL, ETH, NEO, FUN, ETC, BCC, POE, DASH, ELF, & 80+ more	Trade an extensive range of reputable coins on this world-renowned exchange, popular for its high liquidity and multi-language support.	Go to site View details	Compare
eToro Cryptocurrency Trading		Bank transfer	USD	BTC, ETH, ETC, DASH, XRP, LTC, BCH, XLM, NEO, EOS, ADA	Copy the trades of leading cryptocurrency investors on this unique social investment platform.	Go to site View details	Compare
Abra Cryptocurrency App		Bank transfer (ACH) Cash Credit card Cryptocurrency Wire transfer	AUD, USD, GBP, EUR, JPY, SGD, HKD & 40+ more	BTC, BCH, ETH, XRP, ETC, LTC, XLM, ADA, BTG, TRX, REP, BAT, DASH, DGB, DOGE, GNT, LSK, XMR, XEM, NEO, OMG, QTUM, SNT, STRAT, TRX, XVG, VTC, ZEC, ZRX	Buy and hold 28+ cryptocurrencies and more than 50 different fiat currencies in this all-in-one wallet and exchange app.	Go to site View details	Compare
Cointree Cryptocurrency Exchange - Global		Cryptocurrency	-	BTC, ETH, BCH, EOS, MIOTA, ZRX, AE, AION, REP, DGD, ICX, IOST, OMG, PPT, SNT, TRX, & 23 more	Buy and trade 30+ cryptocurrencies with no deposit fees.	Go to site View details	Compare
Coinbase Digital Currency Exchange		Credit card Debit card	AUD, USD, EUR, GBP, CAD, CNY & 50+ more	BTC, BCH, ETH, LTC, ETC, ZRX, BAT	Get US$10 in free bitcoin when you buy US$100 or more of any crypto. T&Cs apply. Buy and sell major cryptocurrencies on one of the world's most renowned cryptocurrency exchanges.	Go to site View details	Compare
Coinmama Cryptocurrency Marketplace		Cash Credit card Debit card Bank transfer (SEPA)	USD, EUR	BTC, ETH, ETC, BCH, LTC, ADA, QTUM, XRP	Buy coins like Bitcoin, Ethereum, Ripple, Litecoin and Bitcoin Cash with credit card.	Go to site View details	Compare
VirWox Virtual Currency Exchange		Credit card Debit card OKPAY PayPal Skrill SOFORT	EUR, USD, CHF, GBP	BTC	Buy bitcoin through PayPal on one of the oldest virtual currency exchanges in the business.	Go to site View details	Compare
CEX.IO Cryptocurrency Exchange		Credit card Cryptocurrency Debit card Bank transfer (SEPA) SWIFT	USD, EUR, RUB, GBP	BTC, BTG, BCH, LTC, DASH, ETH, XRP, ZEC, XLM, GUSD	Disclaimer: Highly volatile investment product. Your capital is at risk. Use your USD, EUR or RUB to buy and sell cryptocurrency at competitive exchange rates and with high maximums for verified accounts.	Go to site View details	Compare
bitFlyer Cryptocurrency Exchange - US		Bank transfer Credit card Cryptocurrency Wire transfer	USD, EUR, JPY	BTC, ETH, BCH	With options to buy bitcoin and popular altcoins through credit card, wire transfer and more, BitfFyer offers users the choice of paying with cryptocurrency or USD, EUR and JPY.	View details	Compare
SatoshiTango Cryptocurrency Exchange		Bank transfer Cash Cryptocurrency Bank transfer (SEPA)	ARS, USD, EUR	BTC, LTC, XRP, ETH, BCH	SatoshiTango is an Argentina-based marketplace that allows you to easily buy, sell or trade Bitcoins.	Go to site View details	Compare
CoinSwitch Cryptocurrency Exchange		Credit card Cryptocurrency	USD	BTC, BCH, MIOTA, XVG, NEO, ADA, XRP, TRX, ONT, ZIL, GAS, LTC, ZRX, QTUM, ETH, ETC, VET, ICX & 300+ more	CoinSwitch allows you to compare and convert over 250 cryptocurrencies across all exchanges.	Go to site View details	Compare
Changelly Crypto-to-Crypto Exchange		Credit card Debit card	USD, EUR	BTC, BCH, ETH, XMR, ZEC, DASH, XRP, ETC, LTC, DOGE, XLM,1ST, ADX, AMP, ANT, BAT, & 75+ more	Access competitive crypto-to-crypto exchange rates for more than 35 cryptocurrencies on this global exchange.	Go to site View details	Compare
xCoins P2P Bitcoin Lending		Bank transfer Credit card Debit card eCheck PayPal	USD	BTC	Buy bitcoin instantly with credit card, PayPal or bank account on this peer-to-peer lending platform.	View details	Compare
Huobi Cryptocurrency Exchange		Cryptocurrency	-	BTC, ETH, HT, LTC, PAI, BCH, XRP, DASH, IOST, EOS, TRX, ETC, OCN, ONT, ELF, ABT, CMT, ELA, & 78+ more	Huobi is a digital currency exchange that allows its users to trade more than 190 cryptocurrency pairs.	View details	Compare
Coinbase Pro		Bank transfer (ACH) Bank transfer (SEPA) Wire transfer	USD, EUR, GBP	BTC, BCH, ETH, LTC, ETC, ZRX, BAT	Formerly known as GDAX, Coinbase Pro is a US-based exchange which offers fiat currency payment options, including wire transfer, ACH bank transfer and SEPA.	View details	Compare
Kraken Cryptocurrency Exchange		Electronic Funds Transfer Bank transfer (SEPA) Wire transfer	USD, EUR, GBP, JPY, CAD	BTC, BCH, ETH, ADA, QTUM, ETC, XMR, DASH, LTC, XRP, XLM, REP, MLN, ZEC, USDT, GNO, EOS, BSV	Disclaimer: Highly volatile investment product. Your capital is at risk. Exchange multiple cryptocurrencies through a range of payment methods, including Electronic Funds Transfer, SEPA or wire transfer.	View details	Compare
Bitstamp Cryptocurrency Exchange		Credit card Cryptocurrency Debit card Bank transfer (SEPA) Wire transfer	USD, EUR	BTC, BCH, LTC, ETH, XRP	A global cryptocurrency exchange that facilitates crypto to fiat transactions, where you can use EUR or USD to buy bitcoin and popular altcoins.	View details	Compare
Bittrex Digital Currency Exchange		Cryptocurrency Wire transfer	USD	BTC, ETH, BOXX, XVG, SC, XRP, DOGE, STRAT, XMR, ADA, OMG, ETC, BCC, XLM, DGB, UKG, & 128+ more	Buy from one of the largest cryptocurrency exchanges with a selection of over 190+ cryptocurrencies and 3 USD pairings.	View details	Compare
Gemini Cryptocurrency Exchange		Cryptocurrency Electronic Funds Transfer Wire transfer	USD	BTC, ETH, LTC, ZEC,GUSD	Trade bitcoin and Ethereum at a US-based exchange where payments can be made in USD.	View details	Compare
Exmo Cryptocurrency Exchange		Credit card Cryptocurrency Debit card Payeer Perfect Money Bank transfer (SEPA) Wire transfer	USD, EUR, RUB, PLN, UAH	BTC, BCH, ETH, ETC, XRP, KICK, DASH, WAVES, ZEC, XMR, LTC, DOGE, USDT, ADA, INK	A UK-based cryptocurrency platform that provides buyers with a wide variety of payment options.	View details	Compare
YoBit Cryptocurrency Exchange		AdvCash Cryptocurrency Payeer Perfect Money	USD, RUB	BTC, BTG, DASH, ETH, LTC, DOGE, WAVES, LSK, BCC, TRX, ABYSS, PAC, ZEC, XVG, EOS, ETC, & 404+ more	Pay in USD, RUB or trade crypto to crypto at this Russian-based cryptocurrency exchange with hundreds of coins listed.	View details	Compare
KuCoin Cryptocurrency Exchange		Cryptocurrency	-	BTC, BCH, XMR, DAG, ETH, XRP, EOS, LTC, ADA, TRX, NEO, ONT, STEEM, BTM, BCD, ZINC, VET, OLT, USDT, BSV, & 133+ more	Browse a variety of coin offerings in one of the largest multi-cryptocurrency exchanges and pay in cryptocurrency.	Go to site View details	Compare
HADAX (Huobi Autonomous Digital Asset eXchange)		Cryptocurrency	-	BTC, ETH, 18T, BUT, LXT, CDC, UUU, AAC, CNN, UIP, UC, GSC, IIC, MEX, EGCC, SHE	Owned by the team behind Huobi.pro, HADAX lets users vote for cryptocurrencies it should list.	View details	Compare
Mercatox Cryptocurrency Exchange		Cryptocurrency Payeer Perfect Money Yandex Money	USD, EUR, RUB	BTC, ETH, DCN, BCH, NIO, TRX, DASH, COB, DOGE, PRIX, DSR, XCPO, LTC, XRB, VERI, LOC, & 84+ more	Supporting over 100 coins, you can exchange a variety of cryptocurrency pairs on this peer-to-peer platform.	View details	Compare
CryptoBridge Cryptocurrency Exchange		Cryptocurrency	-	BTC, BCH, RVN, LTC, ALQO, LCC, ECA, SMART, POLIS, BCO, COLX, IC, XP, BWK, HTML, QBIC, & over 44+ more	Offering over 80 cryptocurrency pairings, CryptoBridge is a decentralised exchange that supports the trading of popular altcoins.	View details	Compare
Bleutrade Cryptocurrency Exchange		Cryptocurrency	-	BTC, BTG, DASH, ZET, XVP, XPM, WDC, VTC, VRC, UNO, TROLL, START, SLR, SLG, RDD, & 32+ more	Trade an array of cryptocurrencies through this globally accessible exchange based in Brazil.	View details	Compare
BitQuick P2P Bitcoin Marketplace		Cash Western Union	USD	BTC	Buy and sell bitcoin fast through a cash deposit at your local bank branch or credit union, or via a money transfer service.	View details	Compare
Cryptonit Cryptocurrency Exchange		Advance Cash Wire transfer	EUR, USD	BTC, ETH, ETC, ZEC	Cryptonit is a secure platform for trading fiat currency for bitcoin, Litecoin, Peercoin and other cryptocurrencies which can be delivered to your digital wallet of choice.	View details	Compare
Paxful P2P Cryptocurrency Marketplace		Cash Credit card Cryptocurrency Debit card Flexepin iDEAL Neosurf Neteller PayPal Perfect Money SWIFT Western Union	AUD, USD, EUR, GBP, CAD, CNY & 50+ more	BTC	Connect with bitcoin buyers and sellers through this peer-to-peer marketplace that accepts cash, credit and more than 300 other payment methods.	Go to site View details	Compare
Livecoin Cryptocurrency Exchange		Cryptocurrency Payeer Perfect Money Qiwi	USD, EUR, RUB	BTC, BCH, ETH, LSK, LTC, XMR, XEM, DASH, BCC, CLOAK, EMC, NEO, TIME, SHIFT, STRAT, & 146+ more	Trade at an exchange that has an extensive offering over 160 coins and numerous fiat and altcoin currency pairs.	View details	Compare
Altcoin.io Decentralised Exchange		Cryptocurrency	-	*Note that while the platform is under development, it is expected to support BTC, ETH, REP, ANT, BAT, EOS, SALT, CVC, DNT, SNT & 20+ more	Launching in 2018, Altcoin.io is a decentralised peer-to-peer cryptocurrency exchange powered by atomic swaps. Sign up now for early access.	View details	Compare
ShapeShift Cryptocurrency Exchange		Cryptocurrency	-	BTC, BCH, BTG, ETH, ETC, FUN, 1ST, ANT, BAT, BNT, BLK, CVC, CLAM, DASH, DCR, DGB, DNT, GAME & 29+ more	Quickly swap between more than 40 cryptocurrency assets or use your credit card to instantly buy bitcoin.	View details	Compare
BigONE Cryptocurrency Exchange		Cryptocurrency	-	BTC, ETH, EOS, USDT, ADX, AE, AIT, ATN, ATT, BAT, BCDN, BIG, BTO, CANDY, CDT, CHAT, AT, CPS & over 60+ more	A crypto-to-crypto exchange listing over 100 pairings and low trading fees.	View details	Compare
Poloniex Digital Asset Exchange		Cryptocurrency	-	BTC, ETH, XRP, DOGE, XLM, ETC, STRAT, LTC, SC, DGB, BCH, LSK, XMR, LOOM, BAT & 50 more	Trade various coins through a global crypto to crypto exchange based in the US.	View details	Compare
IDEX Cryptocurrency Exchange		Cryptocurrency	-	EOS, RFR, CS, AUC, BEE, BANCA, CNN, EOSDAC, FSN, NBAI, TRAC, VET, XBP & 60+ more	A decentralised cryptocurrency exchange where you can trade over 250 ERC20 tokens.	View details	Compare
Stellarport Exchange		Cryptocurrency	-	XLM, BTC, BCH, USDT, OMG, ZRX, KIN, MOBI & more	Stellarport taps into the Stellar Decentralised Exchange to provide buyers and sellers with access to XLM and various other cryptocurrencies.	View details	Compare
DDEX Cryptocurrency Exchange		Cryptocurrency	-	EOS, XYO, NPXS, HOT, CNN, ZRX, KIN, NCT, BAX, ZCO, NBAI, POLY, POE, TFD, REN, LBA, & 25+ more	View details	Compare
Gate.io Cryptocurrency Exchange		Cryptocurrency	-	BCH, EOS, TRX, ONT, ETH, BTC, BTM, AE, OCN, ADA, IHT, XRP, ETC, NAS, LTC, & over 117+ more	View details	Compare
Orderbook Exchange & ICO Platform		Cryptocurrency Wire transfer	USD	TAAS, GNO, ANT, 1ST, HKN, BBT, WRC, AMM, OROC, CHSB, GLBX, BENJA	Orderbook is a decentralised cryptocurrency exchange and ICO platform where users can trade Ethereum-based ICO tokens.	View details	Compare
Bitit Cryptocurrency Marketplace		Cashlib Credit card Debit card Neosurf	USD, EUR, GBP, JPY, CNY, KRW, AUD, CAD, DKK, NOK, SEK, TRY, HKD, SGD	BTC, ETH, XRP, DASH, LTC, BCH, ETC, OMG, ZRX, CVC, BNT	Buy cryptocurrency with cash or credit card and get express delivery in as little as 10 minutes.	View details	Compare
EtherDelta Cryptocurrency Exchange		Cryptocurrency	-	VERI, EOS, KIN, PLR, PPP, SXDT, POLY, ASTRO, OMG, EDT, NAS, ZIL, GMT, MAN, REAL, PAY, VEE, MYST, & 30+ more	View details	Compare
CoinBene Cryptocurrency Exchange		Cryptocurrency	-	ETH, BTC, EOS, XRP, LTC, GOT, SRCOIN, ABYSS, CONI, ORME, PAL, VME, ZIPT, CTXC, PCH ,CNN, & 53 more	View details	Compare Why should I use cryptocurrency? You already use debit cards and credit cards — two tools that “digitize” your dollars, pounds or euros. But there are a few advantages to using cryptocurrency over your standard government-issued currency. Low transaction fees. Because miners are simply rewarded cryptocurrency from the network itself, there are typically little to no fees for core transactions. Ownership. With your digital key, access to your currency is yours alone. Unlike money you store at a bank, your use of your cryptocurrency cannot be frozen or limited by any entity. Identity protection. Paying with credit or debit cards requires submitting sensitive banking information that could be stolen or compromised. Cryptocurrency can be sent directly to a recipient without any information other than total amount you want to send. Accessibility. Billions of people can access the Internet, but not everyone has access to banks or money exchange systems. Cryptocurrency requires no bank or line of credit to make or receive payments electronically. Risk-free for sellers. Payments using cryptocurrency can’t be reversed, which means merchants don’t have to worry about stopped payments. The blockchain makes it difficult for you to be defrauded. Are there drawbacks to using cryptocurrency? Aside from the difficulty of understanding the concept of cryptocurrency itself, there are a few drawbacks to using it: General awareness. More people and businesses are starting to accept cryptocurrency, but it’s a small number compared to those accepting debit and credit cards. Volatility. Cryptocurrency exchange rates can vary greatly. Which means the amount you pay or receive one day could be wildly different the next. The market should eventually settle down, but it’s hard to predict where the rates will be. Newness. Even popular bitcoin is new and growing. It could take time before the various cryptocurrencies reach their potential. Similarly, some may fall by the wayside, while others come to dominate the market. What’s the most popular cryptocurrency? Among the burgeoning 700 cryptocurrencies in use at a time are the heavy hitters of the market. These popular ones are those you’ll be able to spend more easily. Bitcoin. The original cryptocurrency, bitcoin is also the most valuable. Its good reputation and large user base have cemented it as the leader for now. It’s entering the mainstream and can even be spent at retailers like Amazon and Victoria’s Secret. Blackcoin. A proof-of stake verification system requires users to stake coins from their own wallet for the right to verify a Blackcoin block. If the block isn’t verified, the coins are spent. This makes for a quicker mining process that consumes less power. Dash. This cryptocurrency prioritizes anonymity by using “Masternodes” to complete multiple transactions at once. There is no public ledger, which makes it harder for others to observe your savings and transactions. Litecoin. Started by a former Google employee, litecoin caught on quickly and is accepted by more retailers than some other cryptocurrency. Litecoin plans on releasing a total 84 million coins — far more than bitcoin’s 21 million. Dogecoin. This cryptocurrency created the hash algorithm Scrypt, which was supposed to prevent large companies from monopolizing its mining. That didn’t work, but it still has a large following. Peercoin. Its hybrid proof-of-stake/proof-of-work system sets this cryptocurrency apart. There’s also no hard limit on the possible number of coins minted, though it’s designed to eventually attain a 1% inflation rate. TERMS YOU MAY ENCOUNTER WITH CRYPTOCURRENCIES 51% attack. An attack on the blockchain, whereby a group of miners controls more than half of a network’s computing power and can refuse to verify transactions and pay users. It hasn’t happened, but it’s a possibility discussed in the market. Block. Each record or series of records on the blockchain. Block reward. An amount of bitcoin given to the person who adds a new block to the blockchain. Blockchain. A digital public ledger on which the entire history of a cryptocurrency is recorded. Proof of stake. A system that replaces the concept of “mining” with a consensus algorithm, whereby miners put up a stake of their currency to verify a block of transactions. Proof of work. A hash that is so difficult, it could only have been solved through significant work or power.