Cryptocurrency is not money or cash, but it is similar.

Cryptocurrency is not stock, but it has market value that is tracked exactly like stock.

So “what is Cryptocurrency” you ask? I am going to give you my two best answers:

Cryptocurrency is a digital property which is an intangible financial asset, which only exists in digital form.

Or, we can state it like this:

Cryptocurrency is a financial asset which only exists in digital form. The type of financial asset that cryptocurrency is categorized as is “digital property” for purposes of ownership, trading, and taxation.

Cryptocurrency is “digital property!” Perhaps you could nickname it E-property!

Like cash, you can exchange cryptocurrency for certain goods, but only where the seller has approved cryptocurrency as a form of payment. Trading cryptocurrency is like a barter system, trading digital property for other digital property, or for something else.  

A barter system is a system of exchange. A barter transaction is a direct exchange of goods for other goods. This is done without using a medium of exchange, such as money. Cryptocurrency is a digital good instead of a physical good. Like traditional bartering, you don’t need a bank to act on your behalf to exchange cryptocurrency for another good or service. Therefore, you can barter cryptocurrency for other things. You can also trade it for regular money at the exchange rate of its current market value. Trading cryptocurrency is a lot like buying and selling stock. Let’s get a better understanding of what cryptocurrency is by comparing cryptocurrency to similar items we’re already familiar with!

How is Cryptocurrency like cash?

Cryptocurrency was originally made to mimic cash – digitally – holding a numeric value. This allows it to match a seller’s numeric value price.  As you know with U.S. cash, a penny coin is 1 cent ($0.01) and it’s the smallest numeric value for cash. With cryptocurrency, the smallest numeric value is 0.00000001 of one digital coin (that’s 8 decimal places)! All cryptocurrencies are coin based, but they are digital coins. These digital coins are used for digital trade.

How is Cryptocurrency NOT like cash?

Cash is real physical money that you can hold in your hand and can be deposited or withdrawn at any bank. Cryptocurrency is not physical money, and it cannot be deposited or withdrawn from banks. However, you do not need a bank with cryptocurrency. Instead it can be stored on an online exchange, or in a digital wallet. A digital wallet can come in the form of a special smartphone app. Unlike real money, you cannot get a cryptocurrency loan to purchase things like car loans or mortgages. Most cryptocurrencies, unlike cash, has a fluctuating market value, just like stocks or real estate. Cash coins (i.e. dimes, nickels, quarters, pennies) have a different numeric value of the same currency (i.e. U.S. cash). But different cryptocurrency coins are not of the same currency. Every different cryptocurrency coin is a different brand of digital property.

How is Cryptocurrency like stock?

Cryptocurrency is bought and sold just like stock. Cryptocurrency has a market value just like stock. The market value of different cryptocurrency coins increases and decreases based on supply and demand for that particular coin, just like specific shares of stock. Stock is ownership in a company, cryptocurrency is ownership in a digital property. Both stock and cryptocurrency have a market value based on supply and demand, and both can be sold for cash.

How is Cryptocurrency NOT like stock?

Owning stock is ownership in a real company. There is no ownership in a company with cryptocurrency. When you purchase cryptocurrency, you are simply purchasing digital property.

How is Cryptocurrency, a digital property, like physical property?

Property can be anything you own, such as a flashlight for example. Cryptocurrency is something you can purchase and own. When people hear the word “property” they often think of real estate or land. Real estate and land have a market value based on supply and demand. Cryptocurrency also has market value based on supply and demand.

How is Cryptocurrency, a digital property, NOT like physical property?

Cryptocurrency is digital, physical property is physical, that part is obvious! Cryptocurrency has an exact numeric value. Its value can be looked up online exactly the same way as stock values are looked up. Physical property is generally valued within a price range, not an exact numeric value. Cryptocurrency on the other hand, always has an exact numerical value, not a price range. Some providers of goods and services (most are not U.S. based) are beginning to except cryptocurrency as a form of payment. But physical property typically would not be used as a form of payment, unless agreed upon by the buyer and seller in a contract.

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