What is Cryptocurrency?

Cryptocurrency (or “crypto”) refers to digital currencies in which transactions are safeguarded by cryptography. To put it simply, cryptocurrency is decentralized digital money that’s based on blockchain technology¹.

How Does Cryptocurrency Work?

Crypto uses a peer-to-peer encrypted system² for establishing a payment channel. Since a bank or payment provider is not involved, all transactions are recorded in a public ledger. Cryptos can be safely stored in wallets where private keys are maintained by custodians and hard to crack.

Cryptos aim to make payment systems borderless by ensuring a fast and cost-effective payment system. It’s easy to buy and sell these assets with many crypto exchanges cropping up. Historically, they had to be mined, and required high computing power. With the ease of availability of cryptos, they can now be used in real-life scenarios. From buying a car to purchasing movie tickets, cryptocurrencies have seen increased adoption over the years.

Thousands of such assets have been floated, and due to the decentralized nature of crypto, scammers are taking advantage of new opportunities for illicit activity³. U.S. regulators such as the SEC, CFTC, OCC, FDIC, Federal Reserve, and Treasury Department are monitoring the space and weighing in on crypto policy⁴.

Example

The most popular cryptocurrencies available in the market are Bitcoin and Ethereum. The former was created in 2009, and the latter in 2015. Merchants like Whole Foods, Starbucks, and Twitch, among others, now accept Bitcoin as a payment option⁵.

References

1. What is Cryptocurrency? Forbes Advisor.

2. What is cryptocurrency and how does it work? Kaspersky.

3. Scammers Stole $14 Billion in Crypto in 2021. Here’s How Investors Can Protect Their Coins. Time.

4. Which Regulators are Shaping U.S. Crypto Policy? Crypto Briefing.

5. 10 Major Companies That Accept Bitcoin. GoBankingRates.

Please note that this article is for informational purposes only. The example above is for illustrative purposes only. Actual crypto prices may vary depending on the market price at that particular time. Alpaca Crypto LLC does not recommend any specific cryptocurrencies.

Securities brokerage services are provided by Alpaca Securities LLC ("Alpaca Securities"), member FINRA/SIPC, a wholly-owned subsidiary of AlpacaDB, Inc. Technology and services are offered by AlpacaDB, Inc.

Cryptocurrency is highly speculative in nature, involves a high degree of risks, such as volatile market price swings, market manipulation, flash crashes, and cybersecurity risks. Cryptocurrency is not regulated or is lightly regulated in most countries. Cryptocurrency trading can lead to large, immediate and permanent loss of financial value. You should have appropriate knowledge and experience before engaging in cryptocurrency trading. For additional information please click here.

Cryptocurrency services are made available by Alpaca Crypto LLC ("Alpaca Crypto"), a FinCEN registered money services business (NMLS # 2160858), and a wholly-owned subsidiary of AlpacaDB, Inc. Alpaca Crypto is not a member of SIPC or FINRA. Cryptocurrencies are not stocks and your cryptocurrency investments are not protected by either FDIC or SIPC. Please see the Disclosure Library for more information.

This is not an offer, solicitation of an offer, or advice to buy or sell cryptocurrencies, or open a cryptocurrency account in any jurisdiction where Alpaca Crypto is not registered or licensed, as applicable.