Cryptocurrencies — virtual coins that allow people to make transactions online without the need for a central authority such as a bank — are growing in popularity. Launched in 2009, Bitcoin, the most prominent cryptocurrency, has a market value of more than $1 trillion. It and rival currencies are exchanged on decentralized computer networks between people with digital wallets, whose transactions are recorded publicly on tamper-proof ledgers known as blockchains. Unlike traditional national currencies, which get part of their value from being legislated as legal tender, the prices of many cryptocurrencies fluctuate based on global supply and demand.
Proponents say cryptocurrencies can revolutionize finance by empowering consumers and wresting power from central banks and Wall Street. Critics say the speculative markets are an attractive tool for criminal activities, such as money laundering and terrorist financing. They also raise concerns about privacy, market volatility, and the environmental harms of mining, which consumes vast amounts of electricity to validate transactions.
The rise of cryptocurrencies has forced regulators to begin crafting rules for the new sector, even as they struggle with how best to balance consumer protection, financial stability, and innovation. Some governments have embraced the technology, while others are banning it or limiting its use.
Cryptocurrencies have seen wild price swings, and the value of a single coin can change dramatically in just a few weeks. Despite these challenges, the phenomenon has captured popular imagination, with some people using cryptocurrency as an investment vehicle and others accepting it as a way to pay for goods and services.
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