Crypto’s madcap, meme-crazed online culture can make it seem frivolous and shallow. But look past the carnival barkers and convoluted jargon, and you’ll find a bottomless well of weird, interesting and thought-provoking projects. From a blockchain that aims to replace the Internet to video games that reward players with virtual tokens, these projects draw on fields as diverse as computer science, engineering, philosophy, law, economics and energy policy.
At the same time, crypto is being used to solve real-world problems and empower individuals. People are using it to send remittances to family members abroad, settle Wall Street trades and even power data centers. But while crypto may be having a positive impact on the world, it’s also generating vast new fortunes at an unprecedented pace. From overnight Dogecoin millionaires to Lamborghini-driving Bitcoin bros, this digital gold rush is creating wealth at a rate never seen before.
While traditional currency comes in the form of paper bills and coins that you can hold, cryptocurrency is stored in a digital wallet. These wallets are not insured by the government or banks, and they can be hacked or fail. The value of cryptocurrencies can also fluctuate significantly from day to day. It’s important for consumers to consider how much risk they’re willing to take with their crypto holdings.
The most popular cryptocurrencies, such as Bitcoin and Ethereum, are decentralized networks that use “proof of work” to verify transactions. This system, which has been compared to a global guessing game, uses powerful computers that require lots of electricity to run. In fact, if Bitcoin were a country, it would rank 27th in terms of energy use and greenhouse gas emissions. Its high usage has generated backlash from people who see it as a frivolous use of energy in the midst of a climate emergency.
Many of the early adopters of crypto were criminals and people who wanted to avoid traditional financial systems. They were joined by libertarians and anti-establishment activists who saw the potential for a new, incorruptible monetary system. Today, these goals still inspire some projects, but others focus on more practical concerns such as e-commerce and secure messaging.
Some cryptocurrencies are stable, meaning that their value is pegged to existing currencies like the dollar. These coins are designed to eliminate the volatility that other cryptocurrencies experience, but they’re not all created equal. A less trustworthy stablecoin might fall below the value of the currency it’s supposed to track, and some have even lost their value entirely. Before you buy one, research carefully and ask for third-party verification. And remember that using crypto as a stand-in for cash can have unexpected tax consequences. So check with your accountant or tax advisor before making any purchases.