Cryptocurrency, also known as digital or virtual currency, is a form of money that exists purely online. Unlike physical cash, there are no coins or bills—everything is digital. You can transfer cryptocurrencies directly to someone online without intermediaries like banks. The most well-known cryptocurrencies are Bitcoin and Ether, but new crypto-assets continue to emerge.
People use cryptocurrencies for fast payments and to avoid transaction fees. Some invest in them, hoping their value will rise. Cryptocurrencies can be purchased with a credit card or, in some cases, through mining. They’re stored in a digital wallet, either online, on your computer, or on a physical device.
Before buying, understand that cryptocurrencies lack the protections of traditional currencies like the U.S. dollar. Scammers often demand payments in crypto because transactions are typically irreversible.
Cryptocurrencies vs. U.S. Dollars
Cryptocurrencies differ significantly from traditional currencies:
1. Cryptocurrencies Are Not Government-Backed
- Unlike bank deposits in the U.S., cryptocurrencies aren’t insured by the government. If a digital wallet provider shuts down or gets hacked, recovery options are limited.
2. Volatile Value
- Prices can swing dramatically within hours. An investment worth thousands today might drop to hundreds tomorrow—with no guarantee of recovery.
Considering a Cryptocurrency Investment?
Before investing, assess the risks and learn to spot scams:
Red Flags
- Guaranteed Returns: Promises of high profits are likely scams—even if endorsed by celebrities.
- Research Companies: Look up reviews with terms like “scam” or “complaint” before investing.
👉 Learn more about safe crypto investments
Paying with Cryptocurrency
Key differences from traditional payments:
1. Limited Buyer Protections
- Crypto payments are final—no chargebacks or disputes like with credit cards. Verify the seller’s reputation before transacting.
2. Refund Risks
- Refunds may not match the original crypto value. Ask how refunds are calculated.
3. Public Transaction Records
- While transactions are pseudonymous, details like wallet addresses and amounts may be visible on blockchains, potentially exposing user identities.
Cryptocurrency Scams
As interest grows, so do scams. Watch for:
- Fake Investment Opportunities: Offers to “double your money” or achieve “financial freedom.”
- Phony Guarantees: No legitimate investment guarantees profits.
Cryptojacking
Scammers hijack devices to mine crypto without consent. Signs include:
- Slower device performance
- Rapid battery drain
- Frequent crashes
Protect Yourself:
- Install antivirus software.
- Avoid suspicious links and websites.
- Consider browser extensions to block cryptojacking scripts (research before installing).
Reporting Scams
Report fraud involving cryptocurrencies to:
- FTC: ReportFraud.ftc.gov
- CFTC: Call 866-366-2382 or visit CFTC.gov/TipOrComplaint
- SEC: sec.gov/tcr
👉 Stay updated on crypto security
FAQ
Q: Are cryptocurrencies safe?
A: They carry risks like volatility and lack of buyer protections—only invest what you can afford to lose.
Q: Can I reverse a crypto payment?
A: No. Transactions are permanent once confirmed.
Q: How do I store cryptocurrencies securely?
A: Use reputable wallets (hardware wallets for large amounts) and enable two-factor authentication.
Q: What’s the best crypto for beginners?
A: Bitcoin and Ether are the most established, but research thoroughly before buying.
Q: How do I spot a crypto scam?
A: Avoid “guaranteed returns,” pressure to act fast, and unsolicited offers.