A gold backed decentralized coin for secure investments

A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers.

No. Blockchain is the technology that allows for cryptocurrencies to work. It is a decentralized and digital ledger of transactions used for cryptocurrencies and other assets/functions. It is important to separate the technology behind cryptocurrencies from the actual cryptocurrencies.

Yes. In 2013, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FINCEN) stated that it is legal to invest in Bitcoin and use it as a form of payment as long as the seller is willing to accept it. The Securities and Exchange Commission has designated cryptocurrency as digital currency, the Commodity Future Trading Commission as commodities, and the IRS as property. You can purchase in any state, but certain states have imposed regulations. As an example, New York has a policy where any business must apply for a BitLicense if it is dealing with cryptocurrency. As adoption increases, look for regulatory and legal updates at the federal and state level.

Cryptocurrency wallets store users’ public and private keys while providing an easy-to-use interface to manage crypto balances. They also support cryptocurrency transfers through the blockchain. You hold your wallet via an exchange account, custody wallet, or outside of the exchange. You can establish an online or “hot” wallet that is internet connected—to your desktop, table or mobile phone. There is also the option to store on a device that is not connected to the internet (“cold” wallet). Cold wallets are the most secure way to store your cryptocurrency, but they are meant for longer-term holdings as they are not connected to the internet. With cold storage, you must remember your private keys (identifier number for your cryptocurrency).

Unfortunately, there is a history of exchanges and online wallets being hacked. This is one of key reasons to thoroughly research where you trade cryptocurrency and securely store your digital assets. If you are hacked, there is not FDIC insurance or anything similar. If you have a large position, you can purchase individual crypto insurance. Additionally, many exchanges finance their own insurance plans in the event of a hack. The insurance coverage is generally capped and not guaranteed, so there is still a risk of loss.

This is a rapidly evolving space on all fronts: development, investment, regulatory, and trading. All the areas surrounding cryptocurrency—trading, execution, custody—will continue to become more efficient, less expensive, and safer as the market matures and more institutional players get involved. Governments are considering additional rules, regulations, and disclosures for consistent identity collection, reducing illegal activity, and tax collection. There is still not consensus about the best use case and even what that is (viable alternative currency, store of value, investment, speculative, etc.) and that is okay. Ultimately, the stakeholders and marketplace will determine the next decade of cryptocurrency.