Once a curiosity of tech nerds, cryptocurrencies have grown into trillion dollar technologies with the potential to upend traditional finance. Cryptocurrencies are virtual coins that use advanced coding to mint new coins and verify transactions on decentralized computer networks, eliminating the need for a central authority such as a bank. Bitcoin, first created in 2009 by the pseudonymous Satoshi Nakamoto, is currently the most widely traded cryptocurrency. Others, including Ethereum, have gained popularity in recent years.
In addition to being used as a store of value, cryptocurrencies are sometimes used to pay for goods and services or to invest in other digital assets. But the price volatility of some cryptocurrencies can make it difficult to predict their purchasing power and discourage businesses from accepting them as payment. And despite regulatory frameworks like securities laws, investors in digital currencies have less protection than those who invest in stocks or mutual funds.
Some cryptocurrencies are also used for illicit activities, such as ransomware attacks (in which hackers infiltrate computers and shut them down), money laundering, and the purchase and sale of illegal drugs. While authorities have shut down darknet markets, these efforts have not stopped criminals from using cryptocurrency to fund their operations. The proliferation of cryptocurrency also raises concerns about cyber security, with hacking of cryptocurrencies causing billions of dollars in losses since 2018.