Crypto 101

Welcome to SoFi’s Guide to Crypto

Curious about crypto? Since cryptocurrencies are volatile and involve a high degree of risk, it can be a good idea to do some research. Learn about the basics with this hub!

Crypto For Beginners

Cryptocurrency, often abbreviated to “crypto,” is a new type of digital currency. Crypto is decentralized, meaning that it is not controlled by a central authority like a bank or government, and instead is exchanged person-to-person. Cryptocurrencies use a network of computers and cryptography, or the art of writing code, to secure and process transactions—which occur 24/7 and are processed in minutes, all around the world.

Ready to learn more?

Here is a basic overview of some very important crypto topics:

Different Types of Crypto

While Bitcoin may be the most well known cryptocurrency, there are others as well.

Bitcoin

Bitcoin was created in 2009, making it the first and most widely-known cryptocurrency. It is a scarce asset issued under a predictable schedule, with the rate halving every four years until it stops at 21 million units. Bitcoin is held in digital wallets, which allow its owners to hold, access, and spend them. An increasing number of retailers are accepting bitcoin for their goods and services, but bitcoin transactions also happen on trading exchanges.

What is Bitcoin & How Does it Work?

Ethereum

Ethereum is a computing platform that enables decentralized applications to be built. Its programming language is considered to be more flexible than earlier cryptocurrencies, and allows transactions to occur in seconds. As opposed to relying on a central company to play gatekeeper and run applications, ethereum utilizes a system of “nodes”—computers and servers that are independently operated.

What is Ethereum?

Litecoin

Litecoin is based on blockchain technology like Bitcoin, with its main distinction being a faster time to confirm transactions. While Bitcoin’s average confirmation time is around 10 minutes, Litecoin is roughly 2.5 minutes. Litecoin is sometimes considered the “silver” to Bitcoin’s “gold.”

What is Litecoin & How Does it Work?

Commonly Asked Questions

How Does Bitcoin Mining Work?

Bitcoin was the world’s first cryptocurrency, and it is created through a fairly complex process called mining. Put simply, miners are all racing to solve complex mathematical problems. When they do, the transaction is confirmed and added to the blockchain—and the miners get rewarded with new Bitcoin.

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How Does Blockchain Work?

Blockchain is a distributed ledger that records the transactions of a cryptocurrency network. It was invented alongside bitcoin as a decentralized way to transact with digital money. On the most basic level, it is the technology that enables Bitcoin to move about the Internet.

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How Do Crypto Exchanges Work?

A cryptocurrency exchange is similar to a stock exchange, but with a focus on cryptocurrency tokens rather than stock trades. Essentially, a crypto exchange offers a platform where customers looking to buy and sell cryptocurrency assets can exchange the digital tokens in values based on current market prices.

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Is Crypto Secure?

Bitcoin and other cryptocurrencies are held in digital wallets, secured by private keys (similar to a password to an email). If your private key is lost, your bitcoin is lost.

Even as crypto exchanges grow in popularity and more sophisticated security systems are designed, hacks and instances of theft still continue to take place.

SoFi secures all crypto holdings from fraud or theft—so your holdings are protected.✝

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How are Cryptocurrencies Taxed?

Buying crypto isn’t a taxable event, but selling crypto and purchasing goods and services with crypto is. For federal tax purposes, virtual currency (crypto) is treated as property, with the same tax rules as other property transactions like stocks. Refer to this IRS notice and their FAQs for more details.

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Trading Crypto through SoFi

Bitcoin, Ethereum, and Litecoin are all tradable today through SoFi Invest®. Crypto is tradable 24/7 and is purchasable in dollar terms, allowing you to buy tiny fractions of coins. You must reside in a licensed state, and please note that while the crypto industry is evolving, it is still nascent and volatile—so be careful!

✝SoFi takes security seriously across all of the brand’s products. SoFi Invest uses a number of tools to secure crypto holdings against theft, including two-factor authentication, SSL encryption, partnering with trusted exchanges like Coinbase to complete transactions, and not sharing personal information about our members with crypto trading partners and custodians. Before you purchase crypto through SoFi Invest, it is important to understand the volatility of its value, and therefore its inherent risk.

There is a minimum of $10 to buy or sell crypto. SoFi will apply a markup of up to 1.25% for each crypto transaction. For more information, visit SoFi.com/crypto.

This is not an offer, or solicitation of any offer to buy or sell any security, investment or other product.

The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.

1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Digital Assets—The Digital Assets platform is owned by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal/.

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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