How can cryptocurrencies be obtained?
You can buy cryptocurrencies through an exchange agent, a website, or a cryptocurrency ATM. Some people can acquire cryptocurrencies through a complex process called 'mining' for which advanced computing equipment is needed to solve very complicated mathematical problems.
Where and how are cryptocurrencies stored?
Cryptocurrencies are stored in a digital wallet, either online, on your computer, or on some other external physical medium. A digital wallet has an address, which is usually a long string of numbers and letters. If something happens to your wallet or your cryptocurrency funds, for example, if the online exchange platform you use ceases operations, if you send cryptocurrencies to the wrong person, lose the password to your digital wallet, get robbed, or have some issue with your digital wallet, you may find that there is no one available to help you recover your funds.
What are the differences between cryptocurrency and the U.S. dollar?
Since cryptocurrencies only exist online, there are important differences between cryptocurrencies and traditional currencies, such as the U.S. dollar.
Cryptocurrency accounts are not backed by a government. The cryptocurrencies held in accounts are not insured by a government as U.S. dollars deposited in a bank account insured by the FDIC are. If something happens to your account or your cryptocurrency funds, for example, the company providing the service for your virtual wallet ceases operations or suffers a cyber attack, the government has no obligation to intervene to help you recover your money.
The value of a cryptocurrency changes constantly. The value of a cryptocurrency can change rapidly, even every hour. And the amount of that fluctuation can be considerable. Its value depends on many factors, including supply and demand. Cryptocurrencies tend to be more volatile than traditional investments, such as bonds and stocks. An investment that is worth thousands of dollars today could be worth only a few hundred dollars tomorrow. And if the value drops, there is no guarantee that it will return.
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