What Is Cryptocurrency?

Cryptocurrency is digital money that works without banks. Instead of relying on a central authority to verify transactions, it uses a network of computers and cryptographic code to keep records secure and transparent.

This guide explains what cryptocurrency actually is, how it works, and why it matters. We cover the major types, address common misconceptions, and connect the basics to practical uses, including online gambling.

How Cryptocurrency Works

When you send cryptocurrency to someone, no bank processes the payment. Instead, your transaction is broadcast to a network of computers around the world. These computers, called nodes, independently verify that you own the funds and that the transaction follows the network's rules. Once verified, the transaction is grouped with others into a block and added to a permanent record.

This process happens without any central authority. Instead of trusting a single company or government to keep accurate records, cryptocurrency networks use consensus mechanisms to ensure all participants agree on which transactions are valid. The two most common methods are called proof-of-work and proof-of-stake, different systems for deciding who gets to add the next block of transactions to the record.

The result is a payment system where no single entity can block your transaction, reverse it without your consent, or change the rules unilaterally.

The Role of Blockchain

Blockchain is the technology that makes this possible. Think of it as a shared spreadsheet that thousands of computers maintain simultaneously. Every transaction ever made is recorded on this spreadsheet, and once data is added, it cannot be altered without the entire network noticing.

This creates a transparent, tamper-resistant record of who owns what. You do not need to trust any single party because the entire network keeps identical copies and constantly checks them against each other.

Wallets and Keys

To send or receive cryptocurrency, you need a wallet. Despite the name, a crypto wallet does not actually store your coins — your holdings live on the blockchain. What the wallet stores is your private key: the cryptographic code that proves you own the funds at a particular address.

Think of your private key as a password that unlocks access to your cryptocurrency. Your public key, by contrast, works like an email address. You can share it freely so others can send you funds. Anyone with your private key can access your cryptocurrency, which is why keeping it secure is critical.

Types of Cryptocurrency

Bitcoin was the first cryptocurrency, but it is far from the only one. Today, over 10,000 cryptocurrencies are actively traded, though the vast majority hold little value or see minimal use. The ones that matter tend to fall into a few broad categories.

Any cryptocurrency other than Bitcoin is called an altcoin. Some altcoins improve on Bitcoin's design, offering faster transactions or lower fees. Others serve entirely different purposes, like powering applications or maintaining price stability.

The most important distinction for practical use is between volatile cryptocurrencies (like Bitcoin and Ethereum) and stablecoins (like USDT), which are designed to hold a steady value. Understanding these categories helps you choose the right cryptocurrency for your needs.

Bitcoin

Bitcoin launched in 2009 as the first cryptocurrency, created by the pseudonymous Satoshi Nakamoto. It remains the largest by market capitalization, worth nearly $2 trillion and accounting for roughly 60% of the entire cryptocurrency market.

Bitcoin was designed as a peer-to-peer payment system with a fixed supply of 21 million coins. This built-in scarcity has led many to view it as "digital gold", something of value rather than everyday spending money. It is the most widely accepted cryptocurrency at online casinos and the one you will encounter most often.

Ethereum

Ethereum is the second-largest cryptocurrency, launched in 2015 with a different purpose than Bitcoin. While Bitcoin focuses on transferring value, Ethereum introduced smart contracts, self-executing programs that run on the blockchain and power decentralized applications.

The Ethereum network's native currency is called ETH. You need ETH to pay transaction fees and interact with applications built on Ethereum. Many other cryptocurrencies and tokens are also built on top of Ethereum's network.

Ethereum is widely accepted at crypto casinos, though its transaction fees can be higher than alternatives during busy periods.

Solana

Solana is a newer blockchain designed for speed and low cost. While Ethereum processes around 15-30 transactions per second on its base layer, Solana can handle thousands thanks to its unique design.

The practical difference for users: Solana transactions typically cost a fraction of a cent and confirm in under a second. This makes it attractive for applications that need high throughput, including online gambling.

Solana's catch is that it is newer and has a shorter track record than Bitcoin or Ethereum. It has also experienced occasional network outages, though reliability has improved significantly.

Stablecoins and USDT

Most cryptocurrencies are volatile. Their prices can swing dramatically in hours. Stablecoins solve this problem by pegging their value to a stable asset, typically the US dollar.

USDT (Tether) is the largest stablecoin, with a market cap exceeding $180 billion. Each USDT token is designed to be worth exactly $1, backed by reserves held by Tether Limited. This stability makes USDT useful for transactions where you want predictable value.

For gambling, stablecoins offer an advantage: the money you deposit today will be worth the same tomorrow, regardless of what happens in the broader crypto market. You avoid the risk of your balance dropping (or rising) due to price swings while you play.

What Gives Cryptocurrency Value?

Unlike traditional currency, cryptocurrency is not backed by a government or central bank. There is no physical asset behind it, no promise from a nation state. So why is a single Bitcoin worth tens of thousands of dollars?

The answer comes down to a few key factors: scarcity, utility, network effects, and trust. Understanding these helps explain why prices fluctuate and why some cryptocurrencies hold value better than others.

Supply and Scarcity

Like any asset, cryptocurrency prices reflect what buyers are willing to pay. When demand grows faster than supply, prices rise. When supply outpaces demand, prices fall.

Many cryptocurrencies have limited supply built into their code. Bitcoin, for example, will never exceed 21 million coins. This programmed scarcity creates a dynamic similar to precious metals. You cannot print more Bitcoin the way governments can print more dollars.

Utility and Network Effects

Cryptocurrencies that do something useful tend to hold value better than those that do not. Bitcoin enables peer-to-peer transfers without banks. Ethereum powers applications and smart contracts. Stablecoins offer price stability. The more practical use a cryptocurrency has, the more demand it generates.

A cryptocurrency also becomes more valuable as more people use it. Bitcoin's large user base and widespread recognition give it a significant advantage over newer competitors, similar to how a social network with millions of users is worth more than one with hundreds.

Trust and Collective Belief

Ultimately, cryptocurrency value rests on collective belief. People accept that Bitcoin has value because enough other people accept that it has value. This is not so different from traditional money. The US dollar is valuable because people trust the US government and economy. Cryptocurrency is valuable because people trust the underlying technology and expect continued adoption.

For gambling purposes, what matters most is that cryptocurrency can be exchanged reliably. As long as casinos accept it and you can convert it back to traditional currency, crypto works as a medium of exchange.

How Cryptocurrency Is Used

Cryptocurrency started as an experiment in digital money. Today it serves many practical purposes, from international payments to powering applications.

The most common uses include trading on exchanges (buying and selling crypto as an investment), cross-border payments and remittances, and paying for goods and services. Stablecoins alone processed over $27 trillion in transactions during 2024, with a growing share going toward remittances and everyday commerce.

For most people, the appeal is straightforward: cryptocurrency can move money faster and cheaper than traditional banking, especially across borders. A transfer that might take days through a bank can settle in minutes on a blockchain.

Cryptocurrency and Online Gambling

Online gambling has become one of cryptocurrency's most popular use cases. The crypto casino market saw over $26 billion in bets in Q1 2025 alone, nearly double the previous year.

Several factors drive this growth:

1. Faster transactions. Crypto deposits appear in your casino account within minutes. Withdrawals that might take days with traditional banking often process in under an hour at crypto casinos.
2. Lower fees. Without banks as intermediaries, transaction costs drop significantly. Many crypto casinos cover network fees entirely.
3. Privacy. Cryptocurrency transactions require only a wallet address. Many crypto casinos offer no-KYC options, meaning you can play without submitting identity documents.
4. Global access. Because crypto operates outside traditional banking systems, players in regions with restricted banking can still access online gambling.
5. Provably fair games. Some crypto casinos use blockchain technology to let players verify game outcomes are genuinely random.

If you are considering crypto gambling, we recommend using trusted crypto casinos we recommend.

Common Misconceptions About Cryptocurrency

Several persistent myths discourage people from learning about cryptocurrency. Understanding the actual reality helps you make informed decisions.

"Cryptocurrency Is Only Used for Crime"

This is one of the oldest myths. While criminals have used cryptocurrency, illicit transactions account for less than 1% of total cryptocurrency volume according to blockchain analytics firm Chainalysis.

In fact, cryptocurrency's public ledger makes it easier to trace than cash. Every transaction is recorded permanently on the blockchain. Law enforcement agencies regularly use this transparency to track and recover stolen funds, something far more difficult with physical currency.

The vast majority of cryptocurrency activity involves legitimate uses: trading, payments, remittances, and accessing financial services.

"Cryptocurrency Is Completely Anonymous"

Cryptocurrency is pseudonymous, not anonymous. Your transactions are linked to a wallet address rather than your name, but every transfer is recorded on a public ledger that anyone can view.

Blockchain analytics companies specialize in tracing cryptocurrency movements. Once a wallet address is linked to a person (through an exchange account, for example), their entire transaction history becomes visible.

True anonymity requires additional steps like privacy coins or mixing services, which most casual users never use. For everyday transactions, cryptocurrency leaves a clearer trail than cash.

"Cryptocurrency Has No Real Value"

Critics argue that cryptocurrency is worthless because it is not backed by physical assets. But this misunderstands how value works.

The US dollar has not been backed by gold since 1971. Its value comes from trust in the US government and widespread acceptance. Cryptocurrency derives value from similar factors: scarcity, utility, network effects, and collective trust in the underlying technology.

Bitcoin's fixed supply of 21 million coins creates genuine scarcity. Ethereum powers billions of dollars in decentralised applications. Stablecoins facilitate trillions in cross-border payments. These are real use cases generating real demand.

Risks of Cryptocurrency

Cryptocurrency offers genuine advantages, but it comes with real risks. Understanding these helps you make informed decisions and protect yourself.

Price Volatility

Cryptocurrency prices can swing dramatically. Bitcoin has dropped 50% or more multiple times in its history, sometimes within weeks. Smaller cryptocurrencies are even more volatile.

This volatility cuts both ways. The same price swings that create profit opportunities can wipe out your holdings. Crypto assets are far more volatile than traditional investments like stocks or bonds.

Crypto volatility in gambling means the cryptocurrency you deposit today might be worth significantly more or less when you withdraw. Using stablecoins like USDT eliminates this risk since they maintain a steady value.

Scams and Fraud

Cryptocurrency attracts scammers. Investors lost nearly $3.1 billion to cryptocurrency scams and hacks in just the first half of 2025.

Common scams include fake investment schemes promising guaranteed returns, phishing attacks that steal wallet credentials, fraudulent exchanges and wallets, and "rug pulls" where project creators disappear with investor funds.

Protect yourself by being sceptical of guaranteed returns (no legitimate investment offers them), verifying websites and apps before entering credentials, using reputable exchanges and wallets, and never sharing your private keys with anyone.

Security and Irreversibility

Unlike credit card payments, cryptocurrency transactions cannot be reversed. If you send crypto to the wrong address or fall victim to fraud, your funds are typically gone with no recourse.

You are responsible for securing your own holdings. Losing your private keys means losing access to your cryptocurrency permanently. There is no bank to call, no password reset option.

Hardware wallets offer the strongest security for significant holdings. For casino deposits and withdrawals, use reputable platforms and double-check wallet addresses before confirming transactions.

Regulatory Uncertainty

Cryptocurrency regulation varies dramatically by location and continues to evolve. What is legal today might face restrictions tomorrow. Some jurisdictions have clear frameworks while others remain ambiguous.

For US players, this means paying attention to both federal guidance and state-level rules. Crypto gambling operates in a complex regulatory environment where laws vary significantly between states.

Understanding your local regulations helps you stay compliant and choose appropriate platforms.

Cryptocurrency in the United States

The US is one of the world's largest cryptocurrency markets. Up to 65 million Americans hold or use digital assets. Understanding the legal and tax landscape helps you use cryptocurrency confidently.

Legal Status

Cryptocurrency is legal to buy, sell, and hold in the United States. You do not need a licence to own crypto for personal use.

The regulatory framework has evolved significantly in recent years. The GENIUS Act, signed into law in July 2025, established the first federal rules for stablecoins. It requires issuers to maintain 100% reserve backing and comply with anti-money laundering standards.

Multiple federal agencies share oversight depending on how cryptocurrency is used. The SEC regulates assets that qualify as securities. The CFTC oversees commodity derivatives. The IRS treats all cryptocurrency as property for tax purposes.

Cryptocurrency and Taxes

The IRS classifies cryptocurrency as property, similar to stocks or real estate. This creates potential tax obligations when you sell, trade, or spend crypto.

Selling cryptocurrency for profit triggers capital gains tax. If you hold the crypto for more than a year, you pay long-term capital gains rates (0%, 15%, or 20% depending on your income). Crypto held for a year or less faces short-term rates matching your ordinary income bracket (10% to 37%).

Simply buying and holding cryptocurrency does not create a taxable event. Tax obligations arise only when you dispose of crypto through selling, trading, or using it for purchases.

Since 2025, cryptocurrency exchanges must report transactions to the IRS using Form 1099-DA. Keep detailed records of all your crypto purchases and sales to ensure accurate reporting.

Gambling Considerations

Crypto gambling in the US operates in a legal gray area. Online gambling is regulated at the state level, and most states have no specific legislation addressing offshore crypto casinos.

Most crypto casinos operate offshore, outside US jurisdiction. They accept American players even from states without legal online gambling. While this technically exists in a gray area, enforcement targets operators rather than individual players. Players are not prosecuted for using offshore crypto casinos.

The grey area means you're operating without the consumer protections that come with regulated gambling. If a dispute arises with an offshore casino, you have limited recourse.

Tax obligations are clearer. The IRS treats gambling winnings as taxable income regardless of whether you win in dollars or cryptocurrency. The fair market value of crypto winnings at the time you receive them determines the taxable amount.

Getting Started with Cryptocurrency

Getting cryptocurrency is simpler than it looks. The basic path is that you set up a wallet, buy some crypto through an exchange, and use it.

Most beginners start on a major exchange like Coinbase or Kraken. These platforms let you buy cryptocurrency with a bank account or card, and they provide a built-in wallet to store it. Once you're comfortable, you can move funds to your own wallet for more control.

Start small. Buy a small amount, send a test transaction, and learn how everything works before committing more. The learning curve is real but manageable.

Cryptocurrency Terms to Know

• Blockchain: A shared digital ledger that records all transactions across a network. Once data is added, it cannot be altered.
• Wallet: Software or hardware that stores your private keys and lets you send and receive cryptocurrency. It accesses your funds but doesn't hold them directly.
• Private key: A secret code that proves ownership of your cryptocurrency and authorises transactions. Anyone with your private key can access your funds.
• Public key: An address you share with others so they can send you cryptocurrency. Like an email address for receiving money.
• Altcoin: Any cryptocurrency other than Bitcoin. Includes Ethereum, Solana, and thousands of others.
• Stablecoin: A cryptocurrency designed to maintain a stable value, typically pegged to the US dollar. USDT and USDC are common examples.
• Decentralized: Operating without central control. No single company or government runs the network.
• Transaction fee: A small payment to the network for processing your transaction. Fees vary by cryptocurrency and network congestion.

Frequently Asked Questions