1. What is a cryptocurrency? How does it work?
Cryptocurrency is digital money secured by cryptography and recorded on a decentralized ledger called a blockchain. Bitcoin—the first major crypto—launched in 2009 by the pseudonymous “Satoshi Nakamoto.” It runs on a peer-to-peer network without banks, and “miners” validate transactions via cryptographic challenges . Blockchains ensure transparency: transactions are public but users stay pseudonymous .
2. How many cryptocurrencies are there? Which ones matter?
There are thousands—CoinMarketCap tracks over 16.9 million digital assets. Bitcoin and Ether (Ethereum’s token) remain dominant. Other popular tokens include Tether (a stablecoin), Dogecoin, Cardano, and Solana .
3. Is cryptocurrency a good investment or asset class?
Crypto is highly volatile and risky but offers potential high returns. Recently, U.S. regulators approved spot-bitcoin ETFs and institutions are jumping in—Bitcoin even cleared $100k . Many experts suggest allocating a small portion only—like early-stage venture capital—as part of a broad, long-term investment strategy.
4. What are stablecoins, and why do they matter?
Stablecoins are pegged to assets like the USD for stability. The U.S. Senate just passed the GENIUS Act (June 18, 2025), requiring stablecoin issuers to hold liquid reserves and undergo audits—a major step toward mainstream adoption.
5. Is cryptocurrency legal and regulated?
Regulation varies globally: the EU has MiCA, the U.S. is moving with frameworks like GENIUS, while countries like China prohibit crypto. In India, crypto isn’t banned but faces strict taxation (e.g., 30% on gains) .
6. How is crypto taxed?
In the U.S., crypto is treated as property. Gains—short‑term or long‑term—are taxed accordingly. Transactions are taxable events, even if you trade coin-for-coin . Many investors misunderstand this—just ask Australian regulators who found one-third of retail crypto holders unaware of their tax obligations.
7. How do I buy and store crypto safely?
- Buy on reputable exchanges like Coinbase, Binance, or Kraken. Use strong passwords and enable two-factor authentication.
- Storage: Hot wallets are online and convenient; cold (hardware) wallets are more secure for long-term holding .
- Privacy: While ATM and P2P purchases can be somewhat anonymous, crypto transactions remain traceable on-chain—and legal compliance is essential.
8. Can crypto be hacked or used illegally?
While blockchains themselves are resilient, vulnerabilities often lie in wallets, smart contracts, or exchanges. Scams and theft led to over $10 billion in losses in 2024. Vigilance, due diligence, and secure setups are critical.
9. What are DeFi and smart contracts?
DeFi (“Decentralized Finance”) enables financial services—lending, trading, derivatives—without intermediaries, facilitated by smart contracts. These services offer new possibilities but can be prone to code defects and hacks . Smart contracts process instructions automatically on platforms like Ethereum .
10. What’s next for crypto?
- Regulation: Stablecoins are gaining standard frameworks (e.g., GENIUS Act, MiCA).
- Institutional adoption: Bitcoin ETFs and corporate integration bolster crypto’s legitimacy.
- Innovation: Continued growth in DeFi, NFTs, and central bank digital currencies (CBDCs like India’s e‑rupee pilots).
✅ Bottom Line
- Crypto offers a blend of risk and innovation.
- Treat it like high-risk venture capital—use only funds you can afford to lose.
- Stay informed: regulatory, tax, and security landscapes evolve rapidly.
- Prioritize safety, diversify, and approach with a long-term mindset.