With the interest in cryptocurrency on the rise, and people looking for easy ways to buy Bitcoin and other crypto coins, it’s no surprise that some would-be investors are hoping to learn more about how digital assets work. But with crypto, sometimes truth can be stranger than fiction.
It’s been a wild ride, and we’re still not sure where cryptocurrencies are headed in the future, but here are some equally wild facts about cryptocurrencies and other digital assets.
The first commercial bitcoin transaction was for pizza
On May 22, 2010, a man in Florida paid 10,000 bitcoin for two pizzas. This is generally recognized as the first commercial bitcoin transaction.
At the time, 10,000 bitcoin was worth about $40, making one bitcoin “worth” a little less than half a cent. Today, if you had that much in bitcoin, it would be worth more than $350 million.
There are more than 4,500 cryptocurrencies in existence
As of February 2021, there were more than 4,500 cryptocurrencies in existence. While you can’t buy them all on an exchange, they are out there, some of them requiring their own wallets.
There are so many coins available because it’s relatively easy to create a coin and put it out there. But, as of this writing, the top 20 coins account for about 90% of the cryptocurrency market.
The total amount of bitcoins is limited
When the protocol for Bitcoin was set up, the limit was set at 21 million. As a result, at some point, no more bitcoins can be mined.
When you help complete transactions on the Bitcoin blockchain, you’re said to be mining, and you can receive a reward in bitcoins. The reward halves every 210,000 blocks, which has worked out to about every four years. As of this writing, some estimates put the total number of circulating Bitcoin at more than 18 million. This leaves a few million Bitcoin yet unreleased, which is part of why mining remains a popular activity.
One man wants to excavate a landfill to get his digital wallet back
In 2013, James Howells, who lives in Wales, threw out a hard drive with 7,500 bitcoins on it. When he realized how much the value of Bitcoin had shot up in recent years, he went looking for the drive. Now, he’s trying to get his local city council to allow him to excavate the landfill in an attempt to find the drive. He’s claiming to offer a portion of the proceeds if the city allows him to look through the trash.
Some cryptos, like Ethereum, have more uses than as a coin
Some cryptocurrencies have uses beyond just being a coin. The Ethereum blockchain can be used for more than just processing payments and sending currency.
While you can use ether, the native coin, for transactions, the underlying technology isn’t just about a medium of exchange. Ethereum is also used to execute smart contracts and can be used for supply chain management. Other cryptocurrencies even create their coins on the Ethereum network.
Ethereum fees are referred to as gas
When using the Ethereum blockchain to complete transactions, you’re required to pay for “gas.” On the Ethereum network, gas represents the computational effort used to complete the transaction.
Using the network for apps or transactions, even if it’s converting another coin to ether, means you need to pay for gas. Depending on the transaction and traffic on the blockchain, gas fees can feel quite high in some cases.
CryptoKitties is one of the first blockchain games
One of the first blockchain games, CryptoKitties offers a way to breed one-of-a-kind digital cats. CryptoKitties aren’t a currency — instead, they’re part of the non-fungible token (NFT) world.
Each kitty is unique and can’t be replicated; therefore, they have a unique value, similar to artwork. By the way, CryptoKitties are built on the Ethereum blockchain.
The most expensive CryptoKitty sold for 600 ETH
Back in 2018, someone paid 600 ETH for a CryptoKitty Dragon. At the time of the sale, 600 ETH was worth about $170,000. Today, though, with the price of one ether at more than $2,700, that 600 ETH would be the equivalent of more than $1.6 million. That’s one expensive digital cat!
NFTs aren’t currencies
Even though they are growing in popularity and are considered digital assets, NFTs aren’t cryptocurrencies. They’re tokens that are not used as a medium of exchange. And NFTs can’t be divided or replicated.
Today, NFTs are seeing popularity as alternative investments similar to artwork or collectibles. In fact, that’s how some people see them — digital collectibles and artwork that could potentially grow in value. There are even NFTs, like those offered by NBA TopShot, that operate similarly to digital sports trading cards.
Dogecoin started as a joke
One of the hottest cryptocurrencies in recent months is Dogecoin. However, the token started out as a joke.
The idea was that there were so many coins out there, just being introduced. So the creators of Dogecoin invented the token around the image of the surprised-looking Shiba Inu dog. This was a popular meme in 2013 when Dogecoin was introduced.
While there’s serious money in Dogecoin right now, its price remains volatile.
The creator (or creators) of Bitcoin remain anonymous
Bitcoin is widely credited as being created by “Satoshi Nakamoto.” However, the paper that talked about the protocol was released through a cryptography mailing list and the actual author remains anonymous.
There is a lot of speculation around the identity of Satoshi Nakamoto, but no one knows whether it’s one person or a group of people.
Elon Musk has a lot of pull when it comes to cryptocurrency prices
One person has contributed to huge swings in cryptocurrency prices in recent months — Elon Musk. When he tweets or talks about cryptocurrencies, the market listens. Or at least his devoted followers listen.
Musk has impacted the price of Bitcoin and Dogecoin, and the cryptocurrency market as a whole, just from making pronouncements about what coins Tesla will accept for car purchases and making comments on Saturday Night Live.
Despite Musk’s antics, many investors still find themselves researching how to invest in Tesla itself.
Some countries ban cryptocurrencies
Not every country allows the use of cryptocurrencies. Some countries, like Turkey, don’t allow cryptocurrency payments, while others, like Nigeria, ban cryptocurrency exchanges. One of the most significant recent bans, though, is China’s ban on financial institutions from providing services related to crypto transactions.
It’s practically impossible to actually ban the use of cryptocurrencies, even though countries can regulate access to service providers and shut down exchanges. But with one of the world’s largest economies coming out against cryptocurrencies, it’s hard to say how things will progress later.
China accounts for about 65% of cryptocurrency mining
Even though China is cracking down, the country accounts for about 65% of cryptocurrency mining in the world. China is proposing consequences for telecommunications companies and others that use their equipment for mining.
Cryptocurrency prices are extremely volatile
Cryptocurrency prices are punctuated by wide swings in price. It’s not uncommon for a coin to lose 30% to 50% of its value overnight — and then log huge gains a few days later. It’s a new asset class, and people are trying to figure out how to value various coins.
Additionally, all of the celebrity surrounding cryptos mean there’s a lot of trendiness associated with them. As a result, if something falls out of favor, it could lose value quickly, and you could be left with losses you can’t recover.
You still have to pay taxes on your crypto gains
If you’re investing in cryptocurrencies and seeing gains, you will have to pay capital gains taxes. Depending on how you manage your crypto and how you got it, you might have to pay taxes based on long-term or short-term investment gains or as income.
For example, when I received one bitcoin for an article in 2011, that would have been considered income. Today, though, if I sell the Ethereum I bought in 2016-2017, my profits would be long-term capital gains. I experimented with Dogecoin back in April, and that resulted in short-term capital gains. All of that is taxed.
How to get started investing in crypto
When you get started investing in crypto, it’s important to understand your portfolio goals and interests, as well as which coins you think are likely to have staying power. Learning how to invest money is about more than just jumping on a popular bandwagon. If you’re interested, our cryptocurrency for beginners guide can help you move forward.
You can get started investing by visiting a cryptocurrency exchange. Exchanges allow you to buy tokens using your U.S. dollars, either by connecting a bank account or using a debit or credit card. You can get an idea of which exchange you might want to use by reading our Kraken vs. Coinbase vs. Gemini comparison.
In some cases, it’s easier to use an investment app like Robinhood, which offers access to cryptocurrencies. Webull is another app that offers exposure to crypto. You can learn more about them both in our Webull vs. Robinhood comparison.
It’s important to note, though, that you don't actually own the coins with these apps like you would with an exchange. And you can’t move coins from a wallet into Webull or Robinhood. Instead, what you’re trading with these apps is an IOU from the broker, not the actual token. Read our Robinhood review for more information.
If you want to invest in cryptocurrencies, rather than just trade them through an app, you need a digital wallet. There are wallets provided by exchanges and separate wallets you can buy to keep your tokens offline. For example, I keep a small portion of my crypto portfolio in an internet-connected wallet at Coinbase for easy trading. The bulk of my holdings are in a “cold” wallet, which looks like a thumb drive and is kept in my document safe. Check out this article to learn more about Coinbase vs. Coinbase Pro.
Just remember that this is a new asset class, and it’s extremely volatile. It’s important to only risk money you can afford to lose. Right now, my crypto holdings account for about 8% of my total investing portfolio.
Cryptocurrencies offer a number of interesting opportunities for investing, as well as possibilities for the future. However, it’s essential to be careful about how you invest, especially with a new asset class. Carefully consider your risk tolerance before moving forward and make sure investing in digital assets is appropriate for your investment strategy.
Disclosure: The author has positions in Bitcoin, Ethereum, and Dogecoin.