Cryptocurrencies, like Bitcoin, Ether, and Solana, are digital assets that run on decentralized peer-to-peer networks called blockchains. Some of these assets, like Bitcoin, are designed primarily to serve as a currency while others have a broader purpose—but all of them can be bought and sold and so can technically be considered cryptocurrencies.
Cryptocurrencies are split into two variants: “coins,” which represent the native coin of a blockchain (like ETH on Ethereum), and “tokens” that are created by the protocols that run on top of blockchains, like Uniswap’s UNI.
Coins are used to pay for transaction fees, and some function as digital analogs for cash. Tokens often confer rights on their holders, such as the ability to vote on aspects of a decentralized finance protocol—the latter, known as governance tokens, are also used for speculation.
Some cryptocurrencies, known as stablecoins, maintain parity with the values of other assets, like the U.S. dollar, gold, or a cryptocurrency from another blockchain, such as an Ethereum token that represents Bitcoin. Tether, which is pegged to the price of the U.S. dollar, is the largest stablecoin.
Cryptocurrencies are held in virtual and user-controlled wallets, like MetaMask or Trust Wallet, or in hardware wallets, like Ledger—or on exchanges. These exchanges can be centralized, like Coinbase and Binance, or decentralized such as the non-custodial exchanges Uniswap and Curve.
Each cryptocurrency is subject to its own “tokenomics”—monetary policies that dictate under which conditions new tokens are created, and to whom they’re distributed. Bitcoin, for instance, has a fixed supply of 21 million, most of which has already been given out. Compound’s COMP token, by contrast, is issued to anyone who has used its decentralized lending markets.
Cryptocurrency’s most popular use case remains speculation, which remains true even among those that profess other utilities, such as governance rights. After all, cryptocurrencies are just numbers entered into a ledger that some people, with varying degrees of confidence, believe are worth trading for conventional money.
The largest cryptocurrency by far is also the oldest: Bitcoin, which was created in 2008. At the peak of the 2021 bull market, Bitcoin’s price soared above $68,000 and its market cap topped $1.27 trillion, while the entire crypto market cap eclipsed $3 trillion. In May of 2023, the price of Bitcoin was closer to $30,000.
Go deeper:
An introduction to crypto—Linda Xie, a crypto investor and former Coinbase project manager
CoinMarketCap—A price aggregation site that lists all major cryptocurrencies and exchanges
See also:
What are blockchains?
What are crypto wallets?
Crypto investing 101
Try it:
MetaMask—crypto wallet
Coinbase—a popular exchange for buying cryptocurrencies
Etherscan—an Ethereum blockchain explorer that details the activities of all Ethereum wallets