What is cryptocurrency? A crash course on how to use it | finder.com
Cryptocurrencies

What is cryptocurrency — and how can I use it?

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Cryptocurrencies like bitcoin, Litecoin and Peercoin are growing in popularity. Here’s how they work.

The value of bitcoin is reaching all-time highs in 2017, boosting interest in all cryptocurrencies — more than 700 out there at any given time. But just what is cryptocurrency, and how you can save, earn and spend it?

What is cryptocurrency?

Cryptocurrency is a digital currency for which encryption techniques are used to regulate its use and generate its release. Unlike fiat currency — like US dollars, euros and yen — cryptocurrency is not regulated or controlled by any bank, government or centralized financial authorities.

Instead, it relies on the power of the Internet to guarantee its value and confirm transactions. Users on a network verify every transaction, and those transactions then become a matter of public record. This prevents the same digital currency or coin from being spent twice by the same person.

How are cryptocurrency records kept?

That digital public ledger on which all transactions are recorded is called the blockchain. Data is stored across a network, so it’s not susceptible to exploitation by hackers or central failure.

Each record or series of records on the blockchain is known as a block. A block is sent to the network and added to the blockchain after it’s accepted by the network as a valid transfer. Once verified, the blocks cannot be changed.

What does it mean to mine cryptocurrency?

Cryptocurrencies are released to the world through a process called “mining.” For you to mine this currency, you must attempt to solve a computational puzzle known as a hash, which allows you to add the next block. These transactions are then recorded in the blockchain for all to see.

People around the world compete to be the first to solve a hash. Those “miners” who succeed in solving the hash receive a block reward — or an amount of the cryptocurrency they mined.

What equipment do I need to begin mining cryptocurrency?

Unlike mining for gold, you’ll need a few more tools than a pan and a magnifying glass. Invest in these basics to get started:

  • Mining hardware. You’ll need a ASIC chip for your computer designed specifically to mine cryptocurrency.
  • Mining software. Look for free software with easy-to-follow instructions that explain how these programs work with your ASIC.
  • Bitcoin wallet. If you complete a block, you’ll need to store your bitcoin in a wallet.

How can I buy and use cryptocurrency?

Cryptocurrency is a volatile market, with exchange rates that can wildly fluctuate by day, and sometimes by hour. Bitcoin is the better-known and most valuable cryptocurrency out there, but there are many others to explore, including litecoin, peercoin, dogecoin, monero and ripple.

When you buy or receive cryptocurrency, you are given a digital key to the address of that currency. You can use this key to access and validate or approve transactions.

You need a place to keep your key safe, which is where a cryptocurrency wallet comes in.

You have a variety of cryptocurrency wallets to choose from:

  • Desktop wallets. Software like Cryptonator allows you to send and store cryptocurrency addresses and also connects to the network to track transactions.
  • Online wallets. Cryptocurrency keys are stored online by exchange platforms like Coinbase or Circle and can be accessed from anywhere.
  • Mobile wallets. Apps like Blockchain store and encrypt your bitcoin keys so that you can make payments using your mobile device.
  • Paper wallets. Some websites offer paper wallet services, generating a piece of paper with two QR codes on it. One code is the public address at which you receive cryptocurrency, and the other is your private address you can use for spending.
  • Hardware wallets. You can use a USB device created specifically to store bitcoin electronically and your private address keys.

Compare cryptocurrency marketplaces

Name Product Deposit methods Fiat Currencies Supported Cryptocurrencies
Bank transfer
Credit card
Debit card
Bank transfer (SEPA)
USD, GBP, AUD, EUR, INR, ARS, BRL, CAD, CNY. NZD, DKK, HKD, ILS, JPY, KES, CHF, MXN, NOK, PHP, PLN, SGD, SEK, AED
BTC, LTC, ETH, BCH, BAT, DASH, BTG, XRP, VOX
Buy, send and convert more than 35 currencies at the touch of a button.
Cryptocurrency
BTC, XRP, USDT, ETH, NEB, XVG, TRX, NEBL, ETH, NEO, FUN, ETC, BCC, POE, DASH, ELF, ICX, BNB, ZRX, APPC & 80+ more
Trade an extensive range of reputable coins on this world-renowned exchange, popular for its high liquidity and multi-language support.
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Electronic Funds Transfer
POLi
AUD
BTC, ETH, BCH, EOS, ZRX, AE, AION, REP, DGD, ICX, IOST, OMG, PPT, SNT, TRX, VET, ZIL, ZEC, LSK, DCR, SC, STEEM, GNT, DGB, BAT, KMD, BTG, ADA, DASH, ETC, OIST, LTC, XMR, XEM, NEO, ONT, QTUM, XRP
Buy 30+ cryptocurrencies using POLi, cash or Electronic Funds Transfer.
Credit card
Debit card
AUD, USD, EUR, GBP, CAD, CNY & 50+ more
BTC, BCH, ETH, LTC, ETC
Get US$10 in free bitcoin when you buy US$100 or more of any crypto. T&Cs apply.
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Cash
Credit card
Debit card
Bank transfer (SEPA)
USD, EUR
BTC, ETH, ETC, BCH, LTC, ADA, QTUM, XRP
Buy coins like Bitcoin, Ethereum, Ripple, Litecoin and Bitcoin Cash with credit card.
Credit card
Debit card
OKPAY
PayPal
Skrill
SOFORT
EUR, USD, CHF, GBP
BTC
Buy bitcoin through PayPal on one of the oldest virtual currency exchanges in the business.
Credit card
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Debit card
Bank transfer (SEPA)
SWIFT
USD, EUR, RUB, GBP
BTC, DASH, ETH, XRP, ZEC, XLM
Use your USD, EUR or RUB to buy and sell cryptocurrency at competitive exchange rates and with high maximums for verified accounts.
Cashlib
Credit card
Debit card
Neosurf
USD, EUR, GBP, JPY, CNY, KRW, AUD, CAD, DKK, NOK, SEK, TRY, HKD, SGD
BTC, ETH, XRP, DASH, LTC, BCH, ETC, OMG, ZRX, CVC, BNT
Buy cryptocurrency with cash or credit card and get express delivery in as little as 10 minutes.
xCoins P2P Bitcoin Lending
Bank transfer
Credit card
Debit card
eCheck
PayPal
USD
BTC
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Bank transfer
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BTC, BCH, BTG, ETH, LTC
Trade on Canada's largest cryptocurrency exchange, with same-day funding and withdrawals available.
Bank transfer
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POLi
AUD, GBP, USD
BTC, BCH, ETH, LTC, XRP, NEO, VEO & 400+ more
HiveEx.com is a global over-the-counter (OTC) cryptocurrency brokerage specialising in high-volume trades of $50,000+.
HiveEx.com and finder.com.au are members of the Hive Empire group of companies.
Cryptocurrency
Credit card
USD
BTC, BCH, MIOTA, XVG, NEO, ADA, XRP, TRX, ONT, ZIL, GAS, LTC, ZRX, QTUM, ETH, ETC, VET, ICX & 300+ more
CoinSwitch allows you to compare and convert over 250 cryptocurrencies across all exchanges.
Cryptocurrency
MoneyGram
OKPAY
PayPal
Perfect Money
Western Union
USD, EUR, RUB
BTC, ETH, LTC
Buy and sell crypto and other digital currencies on this global fixed-rate exchange.
Blueshyft
BPAY
POLi
USD, EUR, GBP, AUD
BTC, ETH, LTC, XRP, ZEC
An all-in-one platform for buying, selling and managing bitcoin, this Australia-based platform supports users and currencies from various countries.
BPAY
Cryptocurrency
POLi
AUD
BTC, ETH, LTC, XRP, ZEC
Owned by the founders of the CoinJar platform, CoinJar Exchange is an advanced digital currency exchange suited for experienced traders.
Huobi.pro Cryptocurrency Exchange
Cryptocurrency
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BTC, ETH, HT, LTC, PAI, BCH, XRP, DASH, IOST, EOS, TRX, ETC, OCN, ONT, ELF, ABT, CMT, ELA, ZEC, XZC, OMG & 75+ more
Huobi.pro is a digital currency exchange that allows its users to trade more than 190 cryptocurrency pairs.
Coinbase Pro
Bank transfer (ACH)
Bank transfer (SEPA)
Wire transfer
USD, EUR, GBP
BTC, BCH, ETH, LTC, ETC
Formerly known as GDAX, Coinbase Pro is a US-based exchange which offers fiat currency payment options, including wire transfer, ACH bank transfer and SEPA.
Kraken Cryptocurrency Exchange
Electronic Funds Transfer
Bank transfer (SEPA)
Wire transfer
USD, EUR, GBP, JPY, CAD
BTC, BCH, ETH, ETC, XMR, DASH, LTC, XRP, XLM, REP, ICN, MLN, ZEC, USDT, GNO, EOS
Exchange multiple cryptocurrencies through a range of payment methods, including Electronic Funds Transfer, SEPA or Wire Transfer.
Bithumb Cryptocurrency Exchange
Cryptocurrency
Wire transfer
KRW
BTC, BTG, BCH, DASH, ETC, LTC, EOS, XRP, ETH, QTUM, TRX, ICX, VET, XMR, ZEC, MITH
A global platform where users can make KRW and cryptocurrency deposits to purchase up to 15 popular cryptocurrencies.
Bitstamp Cryptocurrency Exchange
Debit card
Credit card
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Bank transfer (SEPA)
Wire transfer
AstroPay
USD, EUR
BTC, BCH, LTC, ETH, XRP
A global cryptocurrency exchange that facilitates crypto to fiat transactions, where you can use EUR or USD to buy bitcoin and popular altcoins.
Bittrex Digital Currency Exchange
Cryptocurrency
Wire transfer
USD
BTC, ETH, XVG, SC, XRP, DOGE, STRAT, XMR, ADA, OMG, ETC, BCC, XLM, DGB, UKG, QTUM, ZCL, RDD, LTC, NEO, XRP & 120+ more
Buy from one of the largest cryptocurrency exchanges with a selection of over 190+ cryptocurrencies and 3 USD pairings.
Gemini Cryptocurrency Exchange
Electronic Funds Transfer
Wire transfer
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BTC, ETH
Trade bitcoin and Ethereum at a US-based exchange where payments can be made in USD.
Exmo Cryptocurrency Exchange
Credit card
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Payeer
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Bank transfer (SEPA)
Wire transfer
USD, EUR, RUB, PLN, UAH
BTC, BCH, ETH, ETC, XRP, KICK, DASH, WAVES, ZEC, XMR, LTC, DOGE, USDT, ADA, INK
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YoBit Cryptocurrency Exchange
AdvCash
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Payeer
Perfect Money
USD, RUB
BTC, BTG, DASH, ETH, LTC, DOGE, WAVES, LSK, BCC, TRX, ABYSS, PAC, ZEC, XVG, EOS, ETC, RDD, TOKC, B2X, TTC & 400+ more
Pay in USD, RUB or trade crypto to crypto at this Russian-based cryptocurrency exchange with hundreds of coins listed.
KuCoin Cryptocurrency Exchange
Cryptocurrency
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BTC, BCH, DAG, ETH, XRP, EOS, LTC, ADA, TRX, NEO, ONT, STEEM, BTM, BCD, ZINC, VET, OLT, NUSD, LOC, ZEN & 50+ more
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HADAX (Huobi Autonomous Digital Asset eXchange)
Cryptocurrency
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BTC, ETH, 18T, BUT, LXT, CDC, UUU, AAC, CNN, UIP, UC, GSC, IIC, MEX, EGCC, SHE
Owned by the team behind Huobi.pro, HADAX lets users vote for cryptocurrencies it should list.
Cryptocurrency
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OMG, TRX, ZRX, SAN, ATMI, AID, BAT, SNT, QSH, REP, DAT, TNB, RLC, EDO, AVT, ELF, FUN, GNT, RCN, YYW, SPK, MNA, SNG, IOST, DTA, HOT, NIO, DGX, BBN
With a focus on tokens linked to the Ethereum network, Ethfinex is an exchange listing several ERC-20 compatible tokens and is owned by the team behind Bitfinex.
Mercatox Cryptocurrency Exchange
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Payeer
Perfect Money
Yandex Money
USD, EUR, RUB
BTC, XRB, ETH, DCN, BCH, NIO, TRX, DASH, COB, DOGE, PRIX, DSR, XCPO, LTC, VERI, LOC, NUA, PKT, PPT, ICO & 80+ more
Supporting over 100 coins, you can exchange a variety of cryptocurrency pairs on this peer-to-peer platform.
CryptoBridge Cryptocurrency Exchange
Cryptocurrency
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BTC, BCH, RVN, LTC, ALQO, LCC, ECA, SMART, POLIS, BCO, COLX, IC, XP, BWK, HTML, QBIC, ZNY, DOGE, VSX, DASH & over 40+ more
Offering over 80 cryptocurrency pairings, CryptoBridge is a decentralised exchange that supports the trading of popular altcoins.
Bleutrade Cryptocurrency Exchange
Cryptocurrency
-
BTC, BTG, DASH, ZET, XVP, XPM, WDC, VTC, VRC, UNO, TROLL, START, SLR, SLG, RDD, QTUM, PPC, POT, OK, NVC, NMC, NLG, NEOS & 25+ more
Trade an array of cryptocurrencies through this globally accessible exchange based in Brazil.
Credit card
Debit card
USD, EUR
BTC, BCH, ETH, XMR, ZEC, DASH, XRP, ETC, LTC, DOGE, XLM,1ST, ADX, AMP, ANT, BAT, BCN, BNT, BTG, CFI, CVC & 70+ more
Access competitive crypto-to-crypto exchange rates for more than 35 cryptocurrencies on this global exchange.
Bank transfer
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POLi
NZD
BTC, BCH, ETH, LTC, XRP, EOS, ZRX, REP, STORJ, TUSD
A New Zealand-based cryptocurrency exchange that allows you to buy and trade between NZD and major cryptos on a full-featured trading platform.
Cancoin P2P Crypto Exchange
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Flexepin
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BTC, ETH
Buy and sell bitcoin with privacy on this multi-signature, peer-to-peer exchange that supports a wide range of payment options.
BitQuick P2P Bitcoin Marketplace
Bank transfer
USD
BTC
Buy and sell bitcoin fast through a cash deposit at your local bank branch or credit union, or via a money transfer service.
Cryptonit Cryptocurrency Exchange
Wire transfer
OKPAY Bank transfer (SEPA)
Advance Cash
EUR, USD
BTC, ETH, ETC, ZEC
Cryptonit is a secure platform for trading fiat currency for bitcoin, Litecoin, Peercoin and other cryptocurrencies which can be delivered to your digital wallet of choice.
Paxful Cryptocurrency Marketplace
Cash
Credit card
Cryptocurrency
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Flexepin
Neosurf
Neteller
M-PESA
PayPal
Perfect Money
WebMoney
Western Union
iDEAL
SEPA
Skrill
SWIFT
AUD, USD, EUR, GBP, CAD, CNY & 50+ more
BTC
Connect with bitcoin buyers and sellers through this peer-to-peer marketplace that accepts cash, credit and more than 300 other payment methods.
Livecoin Cryptocurrency Exchange
Cryptocurrency
Payeer
Perfect Money
Qiwi
USD, EUR, RUB
BTC, BCH, ETH, LSK, LTC, XMR, XEM, DASH, BCC, DBIX, CLOAK, EMC, NEO, TIME, SHIFT, STRAT, DOGE, DTR, DGB, VOX, ESC, MONA & 140+ more
Trade at an exchange that has an extensive offering over 160 coins and numerous fiat and altcoin currency pairs.
Cryptopia Cryptocurrency Exchange
Cryptocurrency
-
BTC, BCH, ETH, LTC, DOGE, NEO, XMR, POWR, DASH, PIVX, XEM, OMG, GNT, ZEN, NRG & 500+ more
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Altcoin.io Decentralised Exchange
Cryptocurrency
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*Note that while the platform is under development, it is expected to support BTC, ETH, REP, ANT, BAT, EOS, SALT, CVC, DNT, SNT & 20+ more
Launching in 2018, Altcoin.io is a decentralised peer-to-peer cryptocurrency exchange powered by atomic swaps. Sign up now for early access.
ShapeShift Cryptocurrency Exchange
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-
BTC, BCH, BTG, ETH, ETC, FUN, 1ST, ANT, BAT, BNT, BLK, CVC, CLAM, DASH, DCR, DGB, DNT, DOGE, EDG, EOS, FCT, GAME & 25+ more
A global exchange where no account is needed to begin trading cryptocurrency to cryptocurrency.
BigONE Cryptocurrency Exchange
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BTC, ETH, EOS, OMG, USDT, ADX, AE, AIT, ATN, ATT, BAT, BCDN, BIG, BTM, BTO, CANDY, CDT, CHAT, AT, CPS & over 60+ more
A crypto-to-crypto exchange listing over 100 pairings and low trading fees.
PayPal
Credit card
Debit card
TBA
AUD, USD
BTC, BCH, ETH & more TBA
To be launched in August 2018, Nauticus is an Australia-based exchange registered with AUSTRAC which aims to cater to a global market.
Poloniex Digital Asset Exchange
Cryptocurrency
-
BTC, ETH, XRP, DOGE, XLM, ETC, STRAT, LTC, SC, DGB, BCH, LSK, XMR, LOOM, BAT & 50 more
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USD, EUR, JPY
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With options to buy bitcoin and popular altcoins through credit card, wire transfer and more, BitfFyer offers users the choice of paying with cryptocurrency or USD, EUR and JPY.
Stellarport Exchange
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-
XLM, BTC, BCH, USDT, OMG, ZRX, KIN, MOBI & more
Stellarport taps into the Stellar Decentralised Exchange to provide buyers and sellers with access to XLM and various other cryptocurrencies.

Compare up to 4 providers

Why should I use cryptocurrency?

You already use debit cards and credit cards — two tools that “digitize” your dollars, pounds or euros. But there are a few advantages to using cryptocurrency over your standard government-issued currency.

  • Low transaction fees. Because miners are simply rewarded cryptocurrency from the network itself, there are typically little to no fees for core transactions.
  • Ownership. With your digital key, access to your currency is yours alone. Unlike money you store at a bank, your use of your cryptocurrency cannot be frozen or limited by any entity.
  • Identity protection. Paying with credit or debit cards requires submitting sensitive banking information that could be stolen or compromised. Cryptocurrency can be sent directly to a recipient without any information other than total amount you want to send.
  • Accessibility. Billions of people can access the Internet, but not everyone has access to banks or money exchange systems. Cryptocurrency requires no bank or line of credit to make or receive payments electronically.
  • Risk-free for sellers. Payments using cryptocurrency can’t be reversed, which means merchants don’t have to worry about stopped payments. The blockchain makes it difficult for you to be defrauded.

Are there drawbacks to using cryptocurrency?

Aside from the difficulty of understanding the concept of cryptocurrency itself, there are a few drawbacks to using it:

  • General awareness. More people and businesses are starting to accept cryptocurrency, but it’s a small number compared to those accepting debit and credit cards.
  • Volatility. Cryptocurrency exchange rates can vary greatly. Which means the amount you pay or receive one day could be wildly different the next. The market should eventually settle down, but it’s hard to predict where the rates will be.
  • Newness. Even popular bitcoin is new and growing. It could take time before the various cryptocurrencies reach their potential. Similarly, some may fall by the wayside, while others come to dominate the market.

What’s the most popular cryptocurrency?

Among the burgeoning 700 cryptocurrencies in use at a time are the heavy hitters of the market. These popular ones are those you’ll be able to spend more easily.

  • Bitcoin. The original cryptocurrency, bitcoin is also the most valuable. Its good reputation and large user base have cemented it as the leader for now. It’s entering the mainstream and can even be spent at retailers like Amazon and Victoria’s Secret.
  • Blackcoin. A proof-of stake verification system requires users to stake coins from their own wallet for the right to verify a Blackcoin block. If the block isn’t verified, the coins are spent. This makes for a quicker mining process that consumes less power.
  • Dash. This cryptocurrency prioritizes anonymity by using “Masternodes” to complete multiple transactions at once. There is no public ledger, which makes it harder for others to observe your savings and transactions.
  • Litecoin. Started by a former Google employee, litecoin caught on quickly and is accepted by more retailers than some other cryptocurrency. Litecoin plans on releasing a total 84 million coins — far more than bitcoin’s 21 million.
  • Dogecoin. This cryptocurrency created the hash algorithm Scrypt, which was supposed to prevent large companies from monopolizing its mining. That didn’t work, but it still has a large following.
  • Peercoin. Its hybrid proof-of-stake/proof-of-work system sets this cryptocurrency apart. There’s also no hard limit on the possible number of coins minted, though it’s designed to eventually attain a 1% inflation rate.

Terms you may encounter with cryptocurrencies

51% attack. An attack on the blockchain, whereby a group of miners controls more than half of a network’s computing power and can refuse to verify transactions and pay users. It hasn’t happened, but it’s a possibility discussed in the market.

Block. Each record or series of records on the blockchain.

Block reward. An amount of bitcoin given to the person who adds a new block to the blockchain.

Blockchain. A digital public ledger on which the entire history of a cryptocurrency is recorded.

Proof of stake. A system that replaces the concept of “mining” with a consensus algorithm, whereby miners put up a stake of their currency to verify a block of transactions.

Proof of work. A hash that is so difficult, it could only have been solved through significant work or power.

Bottom line

Cryptocurrencies offer a new way of storing and spending money anonymously and without the use of a centralized bank or financial institution. The technology is relatively new, and so it’s not yet widely understood or accepted as a means of payment. But it’s growing quickly and could be an important method of financial transactions in the future.

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2 Responses

  1. Default Gravatar
    KimJanuary 24, 2018

    It sounds to me like you can earn cryptocurrency and store it online but exactly how is it spent? Can you go to a store and purchase something with cryptocurrency?

    • finder Customer Care
      JudithFebruary 2, 2018Staff

      Hi Kim,

      Thanks for reaching out to finder. I hope all is good on your end.

      You may earn cryptocurrency by “mining” or by trading. You may spend cryptocurrencies by trading your cryptocurrencies (if supported by the crytocurrency exchange) for fiat or real currencies, such as US Dollars or Euro or you may use your cryptocurrencies online or in-store for goods and services with retailers or shops that accepts cryptocurrencies as a mode of payment.

      Please check out our tracker here for more information on where you could spend your cryptocurrency.

      I hope this helps.

      Cheers,
      Judith

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