At present, the term cryptocurrencies or cryptocurrencies has become viral and well known in the world, in fact, it is considered a global phenomenon and many experts and economists assure that this type of currency will have a huge effect on industries and the countries of the whole world.
What are cryptocurrencies?
A cryptocurrency is a type of virtual or digital currency secured by means of cryptography , which gives it the advantage of not being able to be counterfeited or that double costs are incurred with it. As they are not issued by an authority, they do not suffer interference or manipulation by governments.
- Characteristics of cryptocurrencies
- Types of cryptocurrencies
- How do they work
- What are cryptocurrencies for?
- How to buy cryptocurrencies
- Examples of cryptocurrencies
Characteristics of cryptocurrencies
This new form of digital assets has different characteristics, among the main ones we can mention the following:
- It is a type of virtual currency that establishes its bases in different mathematical algorithms.
- They have a large number of servers through which calculations and checks can be carried out.
- It is an immutable type of currency , in other words, it cannot be eliminated.
- Only the owner of the cryptocurrency is the one who has a private key with which he can mobilize the funds.
- It records all transactions on a blockchain in order to guarantee security.
- It is extremely safe thanks to cryptographic security .
- They are decentralized , this means that they are not linked to banks or other types of government or financial organizations.
- No official market regulates them.
- They can be used every day and at any time.
- The transactions that are made with them are recorded in a book that uses blockchain technology so they are impossible to manipulate.
- They do not depend on any kind of policy imposed by governments.
The history of cryptocurrency dates back to the creation of a type of currency that was previously known by the name of bitcoin , which had its origin in 2009 and was created by Satoshi Nakamoto . The cryptocurrency born as a kind of response to the crisis experienced in 2008 with the aim to create a decentralized system , one that was not linked to the government or any institution of such financial .
Types of cryptocurrencies
There are several types of cryptocurrencies that can be used. These types are as follows:
The bitcoin currency was created in 2009 and it was the first decentralized currency that existed. It is the most used worldwide and its supply limit is 21 million bitcoins. It is also used as a legitimate means of exchange and many companies now accept it as a means of payment .
It emerged in 2001 and its structure is identical to that of bitcoin. It has a higher supply limit as it has 84 million units but also has a shorter target time in terms of blockchain creation . Its algorithm is also a little different and it is considered as the second choice in market capitalization.
It was launched in 2012 and the confirmation times of transactions with this cryptocurrency is faster as well as the block chain. It is easier to convert and has a change in the internal currency that gives you the ability to convert the currency into dollars , euros and yen , among others.
It emerged in 2015 and they have a better architecture than bitcoin. It uses a type of smart contract that enforces a particular transaction while forcing the parties to honor the agreements. It also has a reimbursement mechanism in the event that one of the parties fails to comply with the agreement.
This coin is a variant of Litecoin and is characterized by Shiba , its mascot, which can be recognized very easily. It has a short blockchain creation as it lasts only one minute. There is no known supply limit of any kind with Dogecoin.
This is a type of cryptocurrency that is not used but must also be mentioned.
How do they work
The cryptocurrency works by sending the transactions made between pairs from the wallets of the clients who participate in the transaction at the exact moment where the public codes coincide. These codes are related to the private passwords or to the cryptographic keys that are created by the user and that are later in charge of sending the transaction to the digital wallet .
After this process, all the transactions carried out are stored in a larger public ledger, which is known as the ” chain of blocks “ . All users using the same cryptocurrency can have access to this book as long as they own a full node wallet. After the client accesses the system, he will have the ability to observe the amount he owns and the operations he has carried out.
What are cryptocurrencies for?
Cryptocurrencies have various uses. One of the main ones is being able to make payments safely online through different platforms.
The legality of the cryptocurrency can vary from country to country and even within them. For many it is considered legal and for others illegal depending on the decrees that have been drawn up regarding them. When there is no type of framework that regulates them, they are considered ” not regulated ” and for this reason, they are not prohibited by law. In many countries they are seen as a way to launder money and are prohibited while in places like Japan , bitcoin works in the same way as real currency.
Among the main advantages of cryptocurrencies, we can mention that, through them, the process of transferring funds that occurs between two parties can be facilitated , without the need for the presence of a trusted third party, which in this case would be a bank. or some type of company that works with credit cards.
All transfers made with cryptocurrencies are secured thanks to the use of a series of keys of a public and private nature . These transfers are also made using minimal processing costs, which means that the client can avoid spending high commissions such as those charged by banks and other types of institutions. The use of cryptocurrency is a private activity which brings advantages to those people who live under governments of authoritarian regimes.
One of its main disadvantages is that the semi anonymous nature of this type of currency makes it suitable for carrying out illegal activities such as money laundering or tax evasion. Being a very volatile currency , it may be that just as it generates profits, it produces large losses to customers.
How to buy cryptocurrencies
Cryptocurrencies can be purchased , received as a payment or as a gift, and through mining . The first step will be to buy bitcoins with dollars or euros and then exchange them for cryptocurrencies. There are companies that are in charge of sales and they can also be acquired through cloud mining , a process that involves hiring a specialized company.
Most experts agree that this type of currency will be accepted and used worldwide at a certain time since new technologies are being created every day that seek to include them in everyday life.
Examples of cryptocurrencies
Some examples of cryptocurrencies are: