Crypto is often explained badly: either buried in technical jargon or wrapped in promises of easy riches. This section aims to do neither. It explains the core ideas in plain English so you can understand news stories, recognise misleading claims and make your own informed decisions. It does not tell you whether to buy anything.
The big idea
Traditional money in a bank account is a record kept by your bank, which is regulated and, for eligible deposits, covered by the government's Financial Claims Scheme. Crypto works differently. Ownership is recorded on a shared digital ledger, usually a blockchain, maintained by a network of computers rather than a single institution. You control your crypto with cryptographic keys, not a username at a bank.
That design is what makes crypto interesting to some people. It is also the source of many risks: there is often no institution to reverse a mistaken payment, no deposit guarantee, and if you lose your keys you may lose access permanently.
The guides
What is cryptocurrency?: the essentials, including how crypto differs from money, what gives it value and the main types of crypto-asset.
Bitcoin explained: the first cryptocurrency, its fixed supply, mining and why its price is so volatile.
Blockchain explained: how a shared ledger works, what mining and staking are, and where blockchains are used.
Stablecoins explained: what stablecoins are, how they try to keep a stable value and how that has failed before.
Crypto wallets, keys and seed phrases: custodial and self-custody wallets, hot and cold storage, and why your seed phrase must never be shared.
Key terms
| Term | Meaning |
|---|---|
| Crypto-asset | A digital token recorded on a distributed ledger |
| Blockchain | A shared, append-only ledger of transactions grouped in linked blocks |
| Coin / token | Units of a crypto-asset; "coin" usually means a blockchain's native asset |
| Wallet | Software or hardware that holds the keys to your crypto |
| Private key | Secret code that authorises transactions from a wallet |
| Seed phrase | A list of words that can restore a wallet; anyone who has it controls the crypto |
| Exchange / platform | A business where you can buy, sell or swap crypto |
| Stablecoin | A token designed to track the value of another asset, such as the US dollar |
| Volatility | How much and how quickly a price moves up and down |
| DeFi | "Decentralised finance": financial services run by code on blockchains |
| NFT | Non-fungible token: a unique token often linked to digital art or collectibles |
What gives crypto value?
Shares represent part-ownership of a company that may earn profits; bonds pay interest. Most crypto-assets do not generate earnings or cash flows. Their price depends largely on what other people are willing to pay, which can change quickly with sentiment, news and speculation. The Reserve Bank of Australia and ASIC have both highlighted this volatility. This is why prices can surge and crash, sometimes within days.
Crypto is not legal tender
In Australia, crypto is not legal tender. That means no one is obliged to accept it as payment, and it is not issued or backed by the government or the Reserve Bank. The ATO notes that for tax purposes, crypto is not treated as a form of money.
Custody: who holds the keys?
When you hold crypto on an exchange, the exchange usually holds the keys for you (custodial). If the exchange fails, is hacked or freezes withdrawals, you may not get your crypto back. With a self-custody wallet you hold the keys, so security and backups are your responsibility. Neither is risk-free. Read crypto wallets, keys and seed phrases.
Understanding before deciding
If you are considering buying crypto, Moneysmart suggests making sure you understand what you are buying, how it can be stored and the risks, only investing money you can afford to lose, and being wary of anyone promising high returns. Read our risks and scams section before going further.
Guides in this section
Crypto basics
What is cryptocurrency?
What cryptocurrency is, how it differs from money in the bank, what drives its price, the main types and the key risks. General information for Australians.
Read · 4 min
Crypto basics
Bitcoin explained
What Bitcoin is, how the network works, mining and the 21 million supply limit, halvings, why the price is volatile and the risks. General information only.
Read · 4 min
Crypto basics
Blockchain explained
How a blockchain works in plain English: blocks, hashes, nodes, proof of work and proof of stake, smart contracts, public and private chains, and limits.
Read · 3 min
Crypto basics
Stablecoins explained
What stablecoins are, how fiat-backed, crypto-backed and algorithmic stablecoins work, why some have lost their peg, and how Australian rules are changing.
Read · 3 min
Crypto basics
Crypto wallets, keys and seed phrases
How crypto wallets work: private keys, seed phrases, custodial versus self-custody, hot and cold wallets, security habits and the scams that target wallets.
Read · 3 min
Frequently asked questions
What is a crypto-asset?
A crypto-asset is a digital token recorded on a shared digital ledger, usually a blockchain. Cryptocurrencies such as Bitcoin are the best-known type. Other types include stablecoins and non-fungible tokens (NFTs).
Is crypto money?
Crypto is not legal tender in Australia and is not issued or guaranteed by the government or the Reserve Bank. Some businesses accept it, but none are required to.
What is a blockchain?
A blockchain is a shared, append-only record of transactions maintained by a network of computers. Records are grouped into blocks, each linked to the previous one.
What is a crypto wallet?
A wallet is software or a device that stores the keys you need to access and move your crypto. Whoever controls the private key or seed phrase controls the crypto.
What is a stablecoin?
A stablecoin is a crypto-asset designed to keep a stable value, usually linked to a currency such as the US dollar. Stablecoins carry their own risks and have lost their pegs in the past.
Why do crypto prices change so much?
Crypto prices are driven by supply and demand, sentiment, news and speculation, and crypto-assets generally have no underlying earnings or cash flows to anchor their value.
Sources and further reading
Facts on this page were checked against these primary and official sources. Conditions change — confirm before you travel or buy.
- Cryptocurrencies — ASIC Moneysmart
- Cryptocurrencies explainer — Reserve Bank of Australia
- Blockchain — Wikipedia