Frequently Asked Questions

Cryptocurrency is a high-volatility asset class. Historical returns have been outsized but so have the drawdowns. Whether it is right for any individual depends on their risk tolerance, time horizon, and existing portfolio. The general principle is to never invest more than you can afford to lose entirely.

Open an account on a regulated exchange, complete identity verification, deposit funds (bank transfer is usually cheapest), and place an order. For meaningful holdings, withdraw to a self-custody wallet rather than leaving funds on the exchange. Our step-by-step guide to buying Bitcoin covers the process in detail.

Bitcoin is purpose-built to be money — a scarce, decentralized store of value. Ethereum is a general-purpose smart-contract platform that hosts thousands of applications including DeFi, NFTs, and stablecoins. Both are major cryptocurrencies but solve different problems.

Reputable, regulated exchanges with proof-of-reserves attestations are reasonable counterparties for short-term holdings. For meaningful long-term holdings, self-custody (especially with a hardware wallet) is dramatically safer. The history of crypto includes many exchange failures that wiped out user funds.

A hardware wallet is a small physical device that stores cryptocurrency private keys offline. If you hold more than a few hundred dollars in crypto for any length of time, a hardware wallet is the single biggest security upgrade you can make. See our hardware wallet guide.

A seed phrase is 12 or 24 words that back up your entire wallet. Anyone with these words has full control of your crypto. Anyone without them cannot recover your funds if your device is lost or broken. Writing it down on paper or stamping it into metal — and never digitizing it — is the standard backup practice.

In most jurisdictions, yes. Selling crypto, trading one crypto for another, and spending crypto are typically taxable disposals. Receiving crypto as income (from work, staking, mining, airdrops) is typically taxable as ordinary income. Our tax guide covers the principles.

Decentralized Finance — financial services built on smart contracts that operate without traditional intermediaries. Includes decentralized exchanges, lending protocols, and yield products. Powerful but with real risks (smart contract bugs, oracle failures, regulatory uncertainty). Our DeFi guide explains it in detail.

A stablecoin is designed to maintain a 1:1 peg with another asset, almost always the US dollar. Regular cryptocurrencies like Bitcoin and Ethereum have prices set by markets and can be highly volatile. Stablecoins are widely used as the unit of account in crypto trading and as a way to hold dollar-denominated value on-chain.

Bitcoin is the original and largest cryptocurrency, often considered a category of its own. 'Altcoin' refers to any other cryptocurrency. The term has become less meaningful as Ethereum has emerged as a clearly distinct major asset and as the diversity of cryptocurrencies has increased.

No. Numerous studies, including from blockchain analytics firms and government agencies, find that illicit activity represents a small percentage of total cryptocurrency transaction volume — typically estimated at 1% or less. The bulk of activity is legitimate trading, payments, and DeFi usage.

Governments can and do regulate cryptocurrency, including through outright bans in some jurisdictions. However, the decentralized nature of major networks makes them difficult to shut down completely. Most major economies have moved toward regulation rather than prohibition.

Gas fees are the charges paid to use a smart-contract blockchain like Ethereum. They vary based on network demand. Layer 2 networks like Arbitrum and Base have dramatically reduced typical fees from dollars to cents.

Mining is the process by which Proof of Work blockchains like Bitcoin add new blocks of transactions and issue new coins. Miners compete to solve cryptographic puzzles; the winner gets to propose the next block and earns the block reward. Read more in our mining explainer.

Staking is the Proof of Stake equivalent of mining — locking up cryptocurrency to help secure the network in exchange for rewards. Ethereum, Solana, Cardano, and many other major chains use staking. Yields vary by network and conditions.

A custodial wallet (like an exchange account) is operated by a third party that holds your private keys. A non-custodial wallet (also called self-custody) gives you control of the keys directly. Self-custody is more secure against third-party failures but requires you to manage backups carefully.

You need their wallet address (a long string of letters and numbers specific to the cryptocurrency). In your wallet app, paste the address, enter the amount, confirm the network fee, and broadcast the transaction. For first transactions to a new address, send a small test amount first.

An attack on a Proof of Work blockchain in which a single party controls a majority of mining power, allowing them to potentially reverse transactions or prevent new ones. Theoretically possible but enormously expensive on large networks like Bitcoin.

Bitcoin Cash is a 2017 fork of Bitcoin that increased the block size limit. It is a separate cryptocurrency with its own network, much smaller than Bitcoin by every meaningful measure.

Bitcoin transactions are typically confirmed in 10-60 minutes depending on fee level. Ethereum transactions confirm in seconds to minutes. Layer 2 networks like Base or Arbitrum confirm in seconds. Lightning Network and similar payment layers can confirm Bitcoin transactions instantly.