Everyone is talking about cryptocurrencies. The explosion in the price of Bitcoin last year, when it reached its maximum price and touched $ 20 thousand dollars, caused the eyes of the world to settle on the crypto. Suddenly, from wild citizens to financial giants, they became interested in cryptocurrencies. Their sidereal price gave them a new attraction.
How to Buy Cryptocurrencies Online?
It is easy, safe and fast.
- Create an account at Coinbase or Binance.
- Confirm your identity by uploading the requested documents (photo of passport, for instance).
- Add a payment method. For example credit card or bank transfer.
- Choose which cryptocurrency you are buying. (E.g. Bitcoin, Ethereum, Ripple, DASH, EOS, ADA, BNB, NEO or VET)
- Choose how much crypto you are byuing.
- Confirm the purchase.
If cataloged as a pastime of nerds and geeks, they became, in the opinion of the mass public, an opportunity for investment, savings and, why not, speculation. But what are cryptocurrencies? How do they work? What are they for? To answer all these questions we have no choice but to write this article, as exhaustive as possible. Explaining that it is a cryptocurrency is not easy.
Cryptocurrencies, sometimes called virtual currencies, digital money/cash, or chips, are not exactly like US Dollars, Euros, Venezuelan Bolivars or Peruvian Soles. They exist “online” and are not usually backed by a government (there are exceptions). They are backed by the respective user networks that keep them as Bitcoin.
What is a cryptocurrency?
Technically speaking, cryptocurrencies are transactions or entries targeted in a restricted database. Specific conditions must be met to modify these transactions. Created with cryptography, transactions are protected with mathematics, not with people. Transactions are published in a database, but it is a special type of database that is shared is a peer-to-peer network.
For example, when you send Bitcoin to your friend Maria, you are creating and sending an entry to the Bitcoin network. The network makes sure that the same entry does not exist twice, and does so without a central server or authority.
That is, the network makes sure that you did not try to send your friend Maria and your other friend Ana the same Bitcoin. The peer-to-peer network solves the problem of “double spending” (sending the same Bitcoin to two people) in most cases making each user have a complete record of the history of all entries made within the network.
The complete history has the balance of each account, including yours. The innovation of cryptocurrencies is to reach an agreement between many people without a central server or authority.
When were cryptocurrencies “born”?
We could say that cryptocurrencies were born in 2008 when the domain name bitcoin.org was registered on August 18. Then, on October 31, the mysterious Satoshi Nakamoto, who designed Bitcoin, publishes an article that launches the ball: “Bitcoin: a peer-to-peer electronic cash system.”
The first Bitcoin transaction occurs when Nakamoto sends Hal Finney, a computer programmer, 10 Bitcoin (BTC) on January 12. Bitcoin is the first digital currency created without the intervention of any government, central bank or organization. Under the pseudonym of Satoshi Nakamoto, a person or a group of people proposed and created a completely free digital currency, supported by its users through a P2P network. Until today the identity of its creator remains a mystery.
Why are cryptocurrencies important?
These are the reasons why cryptocurrencies are really important:
- They are one of the safest and most reliable means of payment. In a world where there are a lot of scammers and looters, we all need to trade in the safest way possible. The cryptocurrencies provide us with that security that makes them an important source of investment now and in the future.
- How do they work? You really do not need to deal with a third party when it comes to cryptocurrencies. Cryptocurrency gives people a sense of security and confidence.
- Low cost. It is not necessary to disburse money to exchange cryptocurrencies. All you need to be able to carry out transactions is your cell phone and a basic knowledge of cryptocurrencies.
- You can store your cryptocurrencies in a secure wallet. Cryptocurrencies give you the option to store your money in two types of portfolios that can be easily transferred to your account. And the wallets have no charge to store your money.
- For most people, privacy is the highest priority. When it comes to cryptocurrencies, you can expect your transactions to be highly confidential. You can make your transactions and be anonymous.
- Security: You do not have to share your credentials with anyone. This helps you avoid identity theft. You decide what information you want to share with the merchant if something seems suspicious to you.
- Autonomy. When it comes to cryptocurrencies, there is no third party involved that requires any commission or money. You are the only person who is using your account.
How a cryptocurrency works
The cryptocurrencies work like this: They are generated by the network in most cases to encourage peers, also known as nodes and miners, to work to secure the network and verify entries or transactions. Each network has a unique way of generating and distributing them among its peers.
Bitcoin, for example, rewards its peers (miners) for “solving the next block”. A block is a group or entries with all transactions. The solution is to find a hash that connects the new block with the old one. From here comes the term chain of blocks. The block is the group of entries and the string is the hash. Hashes are a type of cryptographic puzzle. Think of them as Sudoku puzzles that the classmates compete to connect the blocks.
Characteristics of cryptocurrencies
Because of the number of cryptocurrencies that exist, some cryptocurrencies work a bit differently, but most of them share these basic characteristics:
- Actions are irreversible: After you send a cryptocurrency and the network has confirmed it, you cannot recover it. The cryptocurrencies are one-way, without chargebacks.
- They are anonymous. Anyone can open a portfolio, without the need for identification, and have different stages of anonymity depending on which file you use.
- They are fast and globally accessible. The tickets are transmitted immediately through the network and are confirmed in a couple of minutes.
- They are designed to be very safe.
- They have a limited supply or circulation: The amount in circulation is established since its inception. For example, there will be only 21 million Bitcoin, unlike currencies like the Dollar, the Euro or the Bolivar that is not known how many there really are and whoever controls it can print money at your convenience.