What is cryptocurrency?

Cryptocurrency in plain terms

Cryptocurrency is digital value that people can transfer over a computer network. Bitcoin is one example. When someone sends bitcoin, the Bitcoin network¹ checks the signed transaction and records it so the recipient can later send it on. A private key is what lets the holder authorise that next transfer.

A blockchain is the shared record of those transfers. Bitcoin is the cryptocurrency; the Bitcoin blockchain is the record used by its network. The broader term crypto-asset also covers digital assets that are not mainly used as currencies. EU law uses that broader term².

Bitcoin and the first cryptocurrency

Bitcoin began operating in 2009 and was the first decentralised cryptocurrency to achieve wide use. Earlier digital cash proposals existed, so “first” needs that qualification. Its design lets participants check the history without a bank maintaining the sole record. The Bitcoin project explains the network and private keys³ in its FAQ.

Coins, tokens and stablecoins

Bitcoin (BTC) belongs to the Bitcoin network. Ether (ETH) belongs to Ethereum and is used, among other things, to pay transaction fees on that network⁴. These are often called coins because they are native to their networks. A token is issued using an existing network's rules. For example, LINK is used to pay for Chainlink oracle services⁵; it has a different role from ETH. A stablecoin is a crypto-asset designed to follow another value, such as the US dollar. Its market price can still move away from that value. How stablecoins work explains reserves, redemption and the main risks. Altcoins are crypto-assets other than Bitcoin; altcoin season describes a comparison of their recent performance with Bitcoin.

Common ways to hold crypto price exposure

Route	What is held	Who manages the keys	Can the holder use the asset on-chain?
Personal wallet	The crypto-asset	The holder	Yes
Crypto exchange account	A claim or account balance under the platform's terms	Usually the platform	Depends on withdrawal access
Crypto ETP at a broker	A listed security tracking an asset	Custody is arranged within the product	No

Is cryptocurrency real money?

Bitcoin can be sent to another person, but not every crypto-asset is designed to be used as money or has the status of legal tender. A bank deposit and a crypto-asset also give the holder different rights and protections. Crypto prices can change with demand, supply and market conditions; none of these gives a reliable forecast.

EU rules for crypto assets

MiCA² sets EU rules for specified crypto-assets and crypto-asset service providers. It does not give every crypto-asset the protections of a bank deposit. A crypto ETP is a different holding: the investor owns a listed security linked to a crypto price, as the ETP explainer describes.

Cryptocurrency risks

Price losses can be severe. A lost private key can make a self-custodied asset inaccessible; a platform account instead depends on the platform's security and terms. Stablecoins can lose their intended link to a reference value. European supervisory authorities warn consumers⁶ that crypto-assets may be risky and protections can be limited.