This article is the first in a series on the emerging world of digital assets. Additional articles explore Initial Coin Offerings, digital tokens, the virtual currency regulatory landscape, and tips to avoid fraud and scams in this area.

Social and traditional media have been abuzz with articles and information about the rising phenomenon of virtual currencies. Words and phrases like blockchain, cryptocurrency, distributed ledger, initial coin offering, and digital tokens populate our newsfeeds.

Significant uncertainty currently surrounds virtual currencies in general and their potential value as investments in particular. Only time will tell whether (and, if so, which) virtual currencies will become a mainstream component of our financial markets — and whether investments in this emerging sector make sense as part of a diversified portfolio.

Before you make any investment decisions, it is critical to understand some of the concepts underlying this emerging world of virtual currencies. According to the Commodity Futures Trading Commission, virtual currencies are “a digital representation of value that functions as a medium of exchange, a unit of account and/or a store of value.”

In other words, each currency is represented by alphanumeric codes that may be generated and recorded on a blockchain network and recognized as a method of payment by users on that network. In some cases, you can spend and trade virtual currencies, but these products do not have the same legal status as money, or “legal tender,” in the United States, Canada, Mexico, and most other jurisdictions. Read more from fool.com…

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