Smarter Loans Inc. is not a lender. Smarter.loans is an independent comparison website that provides information on lending and financial companies in Canada. We work hard to give you the information you need to make smarter decisions about a financial company or product that you might be considering. We may receive compensation from companies that we work with for placement of their products or services on our site. While compensation arrangements may affect the order, position or placement of products & companies listed on our website, it does not influence our evaluation of those products. Please do not interpret the order in which products appear on Smarter Loans as an endorsement or recommendation from us. Our website does not feature every loan provider or financial product available in Canada. We try our best to bring you up-to-date, educational information to help you decide the best solution for your individual situation. The information and tools that we provide are free to you and should merely be used as guidance. You should always review the terms, fees, and conditions for any loan or financial product that you are considering.
With the world of finance moving online, the distinction between digital money and, well, money can sometimes seem blurry. And when you add cryptocurrencies into this mix, things get even more complicated.
However cryptocurrency is actually a relatively straightforward concept that has quickly become a staple of financial technology. And you don’t need to be either a computer whiz or a financial genius to own and trade in cryptocurrencies. Here we’re going to break down everything you need to know about this popular and growing field, starting with some of the top companies in Canada you can use to engage with this market. Click on any of the names in the list below to learn more about the company.
Simply put, cryptocurrency is a type of asset that exists purely online, and which can be exchanged and used to purchase goods and services - just like a currency. The difference between paper money and cryptocurrencies is that cryptocurrencies are not issued by a central authority, like a government, and they do not have any physical form.
As digital items can be copied, forged and stolen more easily than physical assets, the security of cryptocurrencies rely on their uniqueness. This is where blockchain has been critical.
A blockchain is a type of ledger - a database that records and stores information pertaining to the sale, trade and value of cryptocurrencies. The importance of blockchain is that it is inviolable, with each transaction secured by cryptography. Once a transaction is recorded, that’s it - it cannot be altered or falsified. These records are not stored in one centralized location, but distributed across a peer-to-peer network, and all the code behind a blockchain is open source, so it is extremely transparent. The entire history of any digital asset can be properly traced through a blockchain, meaning it guarantees the validity and security of these assets.
As cryptocurrency is separate from government-run money, it needs its own set of tools and structure, in place of traditional banks, credit cards, and wallets. The key elements of cryptocurrency are:
Cryptocurrency comes in different forms; just like there are different types of international currency (like US dollars, Canadian dollars, Pounds, Euros, Yen and so on), there are different types of cryptocurrency. The most popular of these is Bitcoin, but there are many others (over 2000 by last count), known collectively as Altcoins.
These different cryptocurrencies are distinguished from each other by their origin, their blockchain, their security features and other specifications. In theory, anyone can create their own cryptocurrency (there are even platforms that allow people to do just this), but the major types are popular because of their security, stability and useability. The top ten cryptocurrencies make up 88% of the market.
Just as you need a wallet to hold your cash in, you need a wallet to store your cryptocurrency for you. These wallets most often come in the form of computer programs that you can easily put onto your phone or computer. As digital currency clearly doesn’t need to be physically “held” somewhere, these programs in fact store the “keys” you need to hold, send or sell the currency.
There are lots of different wallets available, some that work specifically with a single cryptocurrency, and others that work with multiple. There are five major forms that wallets can take:
Exchanges are where you buy, sell and trade cryptocurrencies. Again, there are multiple exchanges available, some that work with a single type of cryptocurrency, others that can handle multiple types. They can be brick-and-mortar institutions, or purely online entities, and they typically accept multiple payment types across multiple traditional currencies, to facilitate cryptocurrency trades all over the world.
Popular exchanges include:
Cryptocurrency has many uses, some of which correlate with traditional currency, and some of which are unique to digital assets. Major uses include:
Getting started in the cryptocurrency market is very simple - you only really need a few dollars and an internet connection. However, it pays to set yourself up for success; to properly enter this market, you need to make a few decisions.
There are many different cryptocurrency options out there; although Bitcoin makes up 64% of the market’s value, other options are available, and the right one for you will depend on your intended use, the number of transactions you will be making, your location, and so on. You can then compare the liquidity and market value of currencies that may work for you; when in doubt, remember to check how widely available a given cryptocurrency is. It’s almost useless to you if no one else uses it!
Once you know which currency you’re using, it should be relatively easy to choose a wallet. Some currencies even come with specific, dedicated wallets. When considering your options here, remember that each different type of wallet has advantages and disadvantages. For example, online wallets are probably the most accessible and easiest to use, but also the least secure. Mobile wallets are convenient and secure, but a problem if you lose your phone. Hardware wallets are the safest, but also the most expensive. Consider your needs, security concerns, budget and intended use to determine what’s best for you.
Lastly, you need to choose which exchange to buy, sell and trade on. There are different types of exchange: brokers, trading platforms, and peer-to-peer exchanges. Brokers are great for novices, but cost the most. Trading platforms have the most functionality, but are more complex to use. Peer-to-peer exchanges give you anonymity, but are sometimes less secure. Not every exchange will handle every currency, so you need to find one that deals with your chosen asset; transaction fees vary, so comparing functionality and price is also an important factor. There are also geographical considerations; not every exchange is legal in every country.
Cryptocurrency is by no means a miracle currency - it has both advantages and disadvantages, and for anyone using cryptocurrencies regularly, it is important to know both. Digital assets benefit from ease of use, lower processing and transaction fees than traditionally available, and seamless integration with other aspects of life. They also offer an element of privacy that conventional banking lacks. But by the same token, the anonymity and accessibility of cryptocurrencies make them a haven for illegal use. It’s also important to remember that the value of any cryptocurrency is not absolute. As with any asset, value changes over time, and there is no guarantee what your cryptocurrency will be worth.
A cryptocurrency is a digital asset that exists purely online, and which can be used like online money - to buy and sell things, to invest, to speculate, and so on. It has no physical form and is not regulated by a central authority in the way that paper money is.
Bitcoin is the most popular form of cryptocurrency; it accounts for 64% of the cryptocurrency market.
An exchange is where you buy, sell and trade cryptocurrencies. Many different exchanges exist, and they have varying fees, functionality, available currencies, and so on. The major exchanges account for billions of dollars of transactions.
You can use bitcoin and other cryptocurrencies in a number of ways; the simplest is as an investment, in the belief that its value will go up. Bitcoin can also be used to purchase goods, wire money abroad, and pay for international bills.
Bitcoin is the most popular cryptocurrency across the world, and in Canada.
Bitcoin, and other cryptocurrencies, entrust their security to blockchain technology, which is one of the safest forms of making and recording transactions. As such, fraud and errors in transactions are very unlikely; however risk does exist in the method of buying or trading bitcoin (as exchanges and wallets can be hacked), and risk also exists in the fact that bitcoin does not have a guaranteed price. Like any asset, it may depreciate in value, so that poses a financial risk.
The Smarter Loans Staff is made up of writers, researchers, journalists, business leaders and industry experts who carefully research, analyze and produce Canada's highest quality content when it comes to money matters, on behalf of Smarter Loans. While we cannot possibly name every person involved in the process, we collectively credit them as Smarter Loans Writing Staff. Our work has been featured in the Toronto Star, National Post and many other publications. Today, Smarter Loans is recognized in Canada as the go-to destination for financial education, and was named the "GPS of Fintech Lending" by the Toronto Star in 2019.