Cryptocurrency — a beginner-friendly guide for the crypto-curious (2024)

You might have heard about Bitcoin (or even Dogecoin), but there's so much more to cryptocurrency than that. Our guides make learning about cryptocurrency easy – allowing you to buy, trade, hold and earn crypto in less time than it takes to set up a new bank account.

Start investing today with our picks for the best crypto exchanges in Australia or learn more about individual coins and where to buy them. Don't forget to check out our best crypto wallets guide to learn how to keep your crypto safe.

What exactly is cryptocurrency?

Cryptocurrencies are digital assets that have a value, just like a $10 note is a physical token with 10 dollars of value assigned to it.

The difference is that digital currencies are electronic – they only live on the internet. In order for a cryptocurrency to have value, its coin needs to be unique, verifiable and unreplicable. The Bitcoin blockchain was the innovation that made this possible and was first laid out in the original Bitcoin whitepaper in 2008.

Crucial to crypto is the principle of decentralisation. There is no single authority or business (such as a bank or government) that controls cryptocurrencies. This idea of sovereignty over your assets and removing reliance on any sort of intermediary is something you'll hear about a lot.

Decentralisation also makes crypto a powerful medium of exchange because it can help minimise the costs and processing times of transactions.

Thanks to these innovations, legacy companies like Visa, PayPal and the big four Australian banks have also begun adopting cryptocurrency and blockchain technologies.

• Buy Bitcoin
• Sell Bitcoin
• Mine Bitcoin
• BTC price prediction
• Buy Ethereum
• Stake Ethereum
• Choose a crypto exchange
• Store crypto
• Trade crypto
• Earn crypto
• Understand DeFi

How does cryptocurrency work?

Proof of stake is a bit different. This algorithm uses staking – the process of locking up cryptocurrency on a specified blockchain wallet in exchange for a reward. Staking protocols use "nodes" – small copies of the blockchain being run on thousands of different computers.

Understanding how a crypto's algorithm works in detail isn't essential – or easy – but it can help explain movements in price.

What are the most traded cryptocurrencies?

You might be surprised to learn that Bitcoin (BTC) is not the most traded cryptocurrency, although it usually sits in the top 3.

Instead, it's the dominant crypto by market capitalisation – a metric that shows the circulating supply of a coin, multiplied by its value.

Take a look at today's top 10 cryptos by market cap in the chart below.

Where to buy, sell and store crypto in Australia

Australians can now choose from a number of established and feature-rich crypto exchanges. If you're just starting out, look for AUSTRAC-registered exchanges that offer Australian dollar deposits with your preferred payment method. More experienced investors can browse our comparison of advanced crypto trading platforms.

Click the Go to Site button when you're ready to create an account with any of the providers.

• Crypto exchanges
• Advanced trading
• Crypto wallets

Is cryptocurrency safe?

There are a number of risks associated with buying, storing and using digital currencies. Before jumping in, do plenty of research and make sure you understand how to keep your crypto safe. Some key risks to be aware of include:

• Poor regulation. Cryptocurrency is still a largely unregulated market, which means you may not be protected if your funds are lost or stolen. Look for platforms that are registered with AUSTRAC and provide an insurance fund.
• Volatile prices. Crypto is much more unpredictable than traditional markets and massive price fluctuations within a short window are not uncommon. Because of this, your investment can quickly lose its value.
• Vulnerable to hacking. Several million dollars have been lost to successful hacks of crypto exchanges, wallets and blockchains. It's important to understand that without appropriate security measures like using a hardware wallet, securing your private key and enabling 2-factor authentication, your funds could be stolen.
• Steep technical learning curve. Grasping the complex technical foundations of potential crypto investments can quickly become confusing. You'll also need to fully understand concepts like gas fees and wallet addresses before interacting with a blockchain, or else risk total loss of funds.
• Scams. As crypto has become popular, so too have crypto scams. Be extremely wary of deals that seem too good to be true, thoroughly research all platforms or projects before putting your money in, and never disclose your private key.

Read the Australian government's crypto investment warning for more guidance on keeping your money safe.

FAQs

• Cryptocurrency is a type of digital asset secured by a database known as the blockchain. Blockchains are designed to ensure privacy and security using complex cryptographic algorithms.

  Cryptocurrencies have a huge number of potential uses. They can be spent like money, ensure contract transparency, manage supply chains and much more.

• Cryptocurrency prices rise and fall like any other speculative investment, and can be heavily influenced by public announcements and media sentiment. Some coins, like Bitcoin, have a small supply and high demand, which can also affect its value.

  You might be able to make money with crypto by buying from an exchange and holding it, trading it or earning it, but each method has unique risks attached.

• The Australian Tax Office treats cryptocurrency as an asset. In this sense, it's viewed more like a stock than a currency.

  This means profits made from buying, selling or trading crypto can be subject to capital gains tax (CGT). This includes selling one crypto for another.

• Buying, selling and holding cryptocurrencies may trigger a taxable event. Consult a financial adviser, refer to the latest guidance from the ATO and read our guide to crypto tax in Australia to find out more.

• Yes, cryptocurrency can be sold via exchanges and brokers for a local currency like Australian dollars. In some places, you can even use a crypto ATM to convert digital assets directly into cash, though this does attract high fees.

• Unfortunately for investors, there's no such thing. The best cryptocurrency will be whichever you believe has real utility and that suits your personal investment goals.

  Bitcoin and Ethereum are widely considered to be the "blue chips" of crypto because of their high market cap and proven use-cases. Check out our guide to which cryptos to buy now for a look at what's trending today.

• Cryptocurrency can be a good investment if you've conducted extensive research and understand fundamental trading strategies. Investing in a highly volatile asset comes with the potential to magnify your losses as well as your profits, so only invest what you can afford to lose.

• Money spent on cryptocurrency goes to whoever sold the digital asset, similar to any other exchange of value. This is usually an exchange or broker service, but it can also be a stranger if you've used a decentralised finance or P2P platform.

Get started with crypto

If you're just starting out in the world of crypto, it can feel overwhelming. Use our simple guides to research and compare different coins or take a look at our curated list of the best crypto exchanges and wallets to buy and secure your chosen assets.

Best crypto exchanges

Best crypto wallets

Learn how to buy Bitcoin, Ethereum and other cryptos

There are now well over 15,000 cryptocurrencies and tokens, with new coins launching all the time. We've cut through the noise and written guides on how to buy some of the most traded cryptos, like Bitcoin and Ethereum, as well as hundreds of others.

How to buy Bitcoin

How to buy Ethereum

Crypto buying guides (A-Z)

Compare crypto exchanges in Australia

Compare dozens of major Australian and global exchanges on features, fees, selection of cryptos and more in our comprehensive platform reviews.

Best crypto exchanges Australia

Crypto Trading Platform Awards

CoinSpot exchange review

Find the best crypto wallets to store your cryptos

Hardware, mobile, hot, cold… it's tricky knowing where to start with crypto storage. Our guides explain what's in a wallet to help you find your best options for convenience and security.

Best cryptocurrency wallets

Best hardware wallets

Best non-custodial wallets

Cryptocurrency stats and predictions

Get expert insights and analysis across the crypto sector or use our forecasting tools to help predict where a coin's price might move.

Finder Crypto Adoption Index

Bitcoin price prediction

Crypto price predictions (A-Z)

Crypto news, research and tools

Crypto evolves at breakneck speeds, with new concepts, coins and technologies emerging all the time. Keep on top of the latest trends with our industry news, consumer research and handy tools.

Cryptocurrency news

Crypto research

Crypto tools

Written by

Thomas Stelzer

Publisher

Tom Stelzer is a publisher and writer for Finder, covering investing and cryptocurrency. He previously worked for Finder as a writer in Australia and the UK, covering things like personal finance, loans, investing, insurance as well as small business and business loans. He has a Master of Media Arts and Production and Bachelor of Communications in Journalism from the University of Technology Sydney. See full bio