With a recent rise in popularity, cryptocurrency has the potential to reshape the future of our financial world. But what exactly is it? Crypto can be very confusing, so let’s break down everything you need to know before you jump into investing.

The Basics

Cryptocurrency is a form of digital money that solely exists electronically. It’s universal and can be used to buy goods and services around the world. Created in 2009, Bitcoin was the first cryptocurrency. Though it remains the most popular and valuable, there are now over 6,000 different cryptocurrencies including Ethereum, Litecoin, Dogecoin and Tether.

How does cryptocurrency differ from traditional currency? The answer is in the name—crypto refers to the cryptographic techniques (called blockchain) used to ensure secure transactions. These techniques make cryptocurrency decentralized, meaning it is not controlled by a bank or third party. Decentralization could potentially make it a more fair, fast and transparent financial system.

How to Invest

Crypto can be bought and sold on cryptocurrency exchange websites like Coinbase Exchange and Binance. After making an account on an exchange site, you can fund it with real money. Then, choose which cryptocurrencies you want to buy and submit the order. Once the exchange processes the order, the cryptos are stored in a digital wallet that is either hosted by the site or an independent wallet provider.

PROS

• Security due to blockchain technology and lack of human involvement
• Lower fees when compared to traditional banking fees
• No government involvement could mean more stability
• Potential for big profits due to an active market
• Efficient and readily accessible transactions

CONS

• “There’s no intrinsic value and it is not backed by anything… Devotees will tell you that, like gold, its value comes from its scarcity.”^*
• It’s unregulated, making it volatile and risky.
• It’s not FDIC-insured or protected, which is why financial advisors suggest if you want to buy it, do it with money you can lose.
• It’s the currency of choice for cyber criminals and illicit businesses due to its anonymity.
• And the aforementioned anonymity and security has already proven to be hacked.
• If you lose your “seed phrase” or “private key,” your crypto is gone.
• You have to be vigilant. You must store your private keys carefully on a secure device. Cyber criminals are hunting for easy targets.

^*brookings.edu

FOR TEENS, BY TEENS!

Founded in 2020 by New York City high schooler Abigail Li, Cryptocurrencyteens aims to provide resources on financial literacy, investing and cryptocurrency that are easy for teens to understand. Its team is composed of teens interested in the financial and business world, and they are dedicated to educating their peers on important financial topics while combating the rise of misinformation online.

On the podcast, they interview financial experts on a wide range of topics including Bitcoin, NFTs, investing and more. The website includes helpful resources and links to further your financial education. (Spotify)

BEWARE OF SOCIAL MEDIA

Social media can be tricky when it comes to finding financial resources. Many financial influencers (or “finfluencers”) spread inaccurate and misleading information that isn’t relatable for younger generations.

However, there are online creators who are changing this. Here are a couple of trusted “finfluencers” who make reliable financial content for teens and young adults:

Taylor Price
TikTok: 1.2M followers | Instagram: 89k followers
Focus: Side hustles, saving, financial freedom

Sonny Fazio
TikTok: 16.8K followers
Focus: Cryptocurrency, investing, NFTs

Crypto v. NFTs

Non-fungible tokens (NFTs) are digital assets that represent real-world objects like art and in-game purchases, for example. NFTs are bought and sold online, often with cryptocurrency, and are normally encoded using similar software. NFT allows buyers to own the original item purchased, and built-in authentication serves as proof of ownership. According to Forbes, NFT collectors view these “digital bragging rights” as highly valuable.

Unlike physical money and cryptocurrency, NFTs are non-fungible. Each has a unique digital signature, making none of them equal to one another. This means it can't be exchanged for other NFTs.

ASK A BANKER

Q: What do you think about cryptocurrency?

“I believe it will continue to play a larger role in commerce as we move to the future. Many businesses and consumers are already accepting it.

Pros: As with any investment, there is an opportunity to build wealth, and it is becoming easier to buy/sell and pay for goods and services.

Cons: Cryptocurrency is not government regulated. Personally, there are still too many unknowns around cryptocurrency that make them a higher-risk investment. It’s also the currency of criminals. Do your research and don’t put all your eggs in one basket.”

– David Coleman
Vice President of Commercial Lending
First Financial Bank

Sources: Investopedia, Forbes, USA Today, NextAdvisor, N26, Cryptocurrencyteens