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Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our investing reporters and editors focus on the points consumers care about most — how to get started, the best brokers, types of investment accounts, how to choose investments and more — so you can feel confident when investing your money. Investing disclosure: The investment information provided in this table is for informational and general educational purposes only and should not be construed as investment or financial advice. Bankrate does not offer advisory or brokerage services, nor does it provide individualized recommendations or personalized investment advice. Investment decisions should be based on an evaluation of your own personal financial situation, needs, risk tolerance and investment objectives. Investing involves risk including the potential loss of principal. Bankrate logo Editorial integrity
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Types of cryptocurrency
Token type Best used for/purpose Example of this type Equity tokens Represent equity in the underlying asset, usually the stock of an actual company or equity in a property. Terms are recorded on the blockchain. Very similar to owning traditional stocks, with the main difference being registration on a blockchain versus a database or paper certificate as is the case with traditional stock. Voting rights are also issued with these tokens through the blockchain. Tesla and PayPal are just two examples of companies that can be bought as regular shares and as tokenized stocks through the blockchain. Utility tokens Utility tokens are used to raise funds for new cryptocurrency projects. Utility tokens usually serve a specific purpose for their developer, often to raise capital but can also provide access to products or services. Not considered ownership of an asset like an equity token. Basic Attention Token (BAT) is used for payments in publishing systems. Golem (GNT) offers a way for users to rent computing power systems. Intrinsic tokens Also called “native” or “built-in” tokens, these tokens are digital forms of currency and have intrinsic value only insofar as the market values them. They do not represent anything, but simply exist as currency. Bitcoin (BTC) and Ethereum (ETH) are two of the most well-known intrinsic tokens. Asset-backed tokens Asset-backed tokens are the digital equivalent of IOUs. These tokens are backed by an underlying asset, something physical like gold, paper money, art or gemstones. Users can claim the underlying asset from a specific issuer by sending the token to the issuer. Any real, physical asset can be tokenized into an asset-backed token. Often, commodities like gold, crude oil and soybeans are used. Crypto market rise and fall – fast facts
Following the 2008 recession, an individual or group by the name of Satoshi Nakamoto created a white paper to address central bank control of money and the control governments had over citizens’ money. In 2009, Bitcoin was created, launching cryptocurrency from academic concept to real-world currency contender. Bitcoin was intended to eliminate the control, oversight and fees associated with cash transactions. The legitimacy provided by third-party institutions like banks was supposed to be replaced by cryptographic networks online. On Jan. 3, 2009, the first blockchain was launched with the first “block” called the genesis block. The first actual transaction with Bitcoin took place on May 22, 2010 when a Florida man negotiated to have two Papa John’s pizzas worth $25 delivered in exchange for 10,000 Bitcoin. This established the first actual value of Bitcoin, at 4 bitcoins per penny. Fans have since dubbed this day “Bitcoin Pizza Day.” In February 2011, Bitcoin’s price passed the $1 threshold. Not quite 11 years later, Bitcoin hit an all-time high of $68,789 in November 2021. Since Bitcoin’s inception, over 19,000 different cryptocurrencies have been created. Bitcoin is the most valuable coin in circulation, with Ethereum and Tether in second and third place. The value of all existing cryptocurrency is around $919 billion, with around $389 billion of that being Bitcoin (as of July 7, 2022), according to CoinMarketCap.com. The global online payments market was $6.75 trillion in 2021, according to Research and Markets. As of July 7, 2022, the size of the Bitcoin blockchain is approximately 415 gigabytes, about double the size from just three years ago. Crypto user stats and demographics
About 59.1 million Americans owned some form of cryptocurrency in 2021. Vietnam is currently ranked at the top of ChainAnalysis’s global crypto adoption index, followed by India and Pakistan, to round out the top three. Many high adopters are developing markets, such as Ukraine, Kenya and Nigeria, according to ChainAnalysis. In the United States, high-income earners are disproportionately represented, with those making $100,000 or more annually comprising 25 percent of crypto owners but only 15 percent of the general public. About 70 percent of cryptocurrency owners are also men, but represent only 48 percent of the general population, according to a report by Morning Consult. Women comprise 30 percent of crypto owners but 52 percent of the general population. Hispanics are over-represented among crypto owners. About 16 percent of the U.S. population identifies as Hispanic, but 24 percent of cryptocurrency owners identify as the same, says Morning Consult. Crypto users are also overwhelmingly millennial. Morning Consult reports that 57 percent of all cryptocurrency owners in the U.S. are millennials, despite representing 30 percent of the overall population. Gen Z represents 13 percent of crypto owners but 11 percent of the population, and Gen X holds 20 percent of cryptocurrency while representing 27 percent of the population, says Morning Consult. Crypto s impact on the environment – the stats
Although cryptocurrencies have created a new, alternative method of payment and opened up doors for millions all over the world, the production of cryptocurrency has been mired in controversy because of the energy required to produce it. Bitcoin and other cryptocurrencies are “mined” on decentralized computer networks that act much like a large ledger. This ledger tracks each transaction of cryptocurrency, and computers throughout the network verify and process each transaction through a blockchain database. Think of it like a long receipt that records every transaction in a cryptocurrency. As transactions are processed and verified, . Mining is the process of adding another entry onto the receipt, or another block to the chain. This process requires high-powered and sophisticated computers – and a lot of electricity. Citing the Cambridge Bitcoin Electricity Consumption Index, Columbia University says that Bitcoin alone used an estimated 150 terawatt-hours of electricity annualized as of May 2022 – more than Argentina, with 45 million people. Bitcoin mining consumes so much electricity that it accounts for 0.40 percent of the entire world’s electricity consumption as of July 2022, according to the Cambridge index. Mining for Bitcoin alone is estimated to create between 22 – 22.9 million metric tons of carbon dioxide emissions per year, comparable to those created by Sri Lanka, according to the Economic Times. If Bitcoin were a country, it would be in the top 30 energy users worldwide, according to Digiconomist. One Bitcoin transaction’s carbon footprint is equivalent to more than 975,000 Visa transactions, according to Digiconomist. Bitcoin emissions alone could increase average global temperature above 2°C, according to research in the journal Nature Climate Change. It is even estimated that Bitcoin mining consumes the same amount of electricity as all the data centers in the world, according to research in the journal Joule. Crypto taxes and economic stats
When cryptocurrencies were first created, it was nearly impossible for government tax agencies to track them. The hallmark of blockchain transactions is anonymity, meaning one could not prove the identity of the buyer or the seller. Since 2014 however, the IRS has stated that cryptocurrency is treated as property for federal income tax purposes. Although the agency itself has not released official estimates yet, a new analysis from Barclays figures that the IRS loses an estimated $50 billion per year from taxes that should be paid on cryptocurrency assets. Buying and holding cryptocurrency is not considered a taxable event. You can buy and hold the crypto for as long as you want (though you do have to disclose that on your tax return) but once you decide to sell (or realize the gain or loss) you will need to from the sale. The future of crypto
The popularity of cryptocurrency has grown in recent years as access to crypto has become easier. The asset is still incredibly volatile, and in 2022 rising interest rates have caused selloffs in Bitcoin, as skittish investors have offloaded what is still considered to be a risky investment. Governments around the world, including the United States, have also started to analyze how to regulate cryptocurrency. On March 9, 2022, U.S. President Joe Biden to call for a broad review of digital assets, including cryptocurrencies.) Federal agencies are currently reviewing digital currencies and assessing the risk they pose to overall financial stability, among other considerations. The difficulties of tax reporting and the controversy surrounding crypto have resulted in the digital asset being entirely banned in nine countries: Algeria, Bolivia, Bangladesh, Dominican Republic, Ghana, Nepal, North Macedonia, Qatar and Vanuatu. China, which used to account for the majority of the world’s bitcoin mining, has now outlawed cryptocurrencies altogether as well. Cryptocurrency, although available as a method of payment for some companies scattered throughout the world, has not made the official leap as a widely available currency. Several major companies already accept cryptocurrency as a form of currency or payment, but the list is relatively limited: AT&T offers customers a payment option through BitPay. Microsoft allows Bitcoin to pay for Xbox store credits. Overstock.com allows payment on its website with Bitcoin and other cryptos. Game streaming platform Twitch accepts Bitcoin and Bitcoin Cash as payment. AMC theaters allow moviegoers to purchase tickets with Bitcoin and other cryptos. The Dallas Mavericks allow the use of Bitcoin for purchasing game tickets and merchandise through the team’s website. So far, El Salvador and the Central African Republic accept crypto as legal tender, although both countries have had significant problems with its implementation. Bottom line
Cryptocurrency’s volatile nature and controversy surrounding climate impact make it a . Even a more established coin like Bitcoin is risky. All cryptocurrencies are fairly new, and it is difficult to compare asset-backed investments like stocks to digital currencies that are backed purely by investor sentiment. Cryptocurrencies have become popular in recent years, but still face a number of challenges. Increasing regulatory oversight by governments throughout the world, extremely volatile price swings and fickle investor sentiment will continue to pressure the future of digital currencies. SHARE: Bankrate reporter Georgina Tzanetos covers investing and retirement. Bankrate senior reporter James F. Royal, Ph.D., covers investing and wealth management. His work has been cited by CNBC, the Washington Post, The New York Times and more. Related Articles