How do cryptocurrencies work?

The economic and financial market has been one of the most evolved in recent decades. Its evolution is a direct consequence of the technological revolution we have been through and new possibilities for carrying out financial transactions are created every year. One of the most significant new transaction formats goes by the name of cryptocurrencies and has been generating a lot of curiosity since its inception decades ago.

In this article, we will understand everything that revolves around cryptocurrencies, from their concept, their origin, their advantages and disadvantages and their importance to the global financial market. We will also give you tips so you can invest well and have a financial return.

What are cryptocurrencies?

In a generic way, we can say that cryptocurrencies are a new type of money, which reproduces for the digital world the relationship established between people with physical money.

And how does this happen? Let’s take a simple example:

You have a R$10 bill and you are going to buy a snack at the store on the corner of your house. You deliver the physical bill, receive the salty, and leave. You have just carried out a person-to-person financial transaction, without any regulatory agency and without even needing to know the other person or their identity data.

This relationship, being physical, happens with the spatial limitation.

That is, if you want, for example, to buy a product sold by a person in another state, then you will not be able to carry out this direct exchange of money with the product. You will therefore need to carry out an online transaction, using a card or checking account, and with a financial institution intermediating and regulating this transaction.

So what does cryptocurrency do?

Cryptocurrency makes this transaction possible at a distance, from person to person, but without the interference of institutions, public or private, to regulate or intermediate. This is the great revolution proposed with the emergence of cryptocurrencies.

Summarizing :

Cryptocurrencies are decentralized currencies, unregulated by any government, and which are created from a blockchain network that is responsible for securely storing all records of the path taken by that transaction.

Cryptocurrencies generated by the Blockchain network have a value, which can be traded in dollars, or real, and which varies according to the economic context.

With this amount, you can carry out transactions in exchange for products or make various payments, like any other currency. But always without the interference of a regulatory body.

How did cryptocurrencies come about?

The first cryptocurrency appeared in 2008, shortly after a deep financial crisis generated with the bankruptcy of the Lehman Brothers bank that shook the United States and consequently the world.

From then on, many people, mainly connected to technology, began to think about ways to carry out financial transactions without the intermediary of banks or regulatory financial institutions. It was the search for a viable alternative to the money that had been used until that moment.

In 2009, with more favorable technological conditions, Bitcoin was born, the first and most emblematic cryptocurrency in the world. Bitcoin, in the words of its creator, Satoshi Nakamoto, is “a new electronic money system”.

What is the principle of this monetary revolution called cryptocurrency?

Cryptocurrencies are born with a great principle in mind, which is the decentralization of the currency, which is no longer controlled by regulatory bodies such as banks or governments. The control of the system is done by the users themselves, with the help of Blockchain, a kind of ledger that provides security and transparency to the system.

How does the cryptocurrency market work?

As cryptocurrencies are virtual currencies, we soon come to a first conclusion, which is the impossibility of carrying out physical transactions. They exist on the internet, making it impossible for you to store your cryptocurrencies in traditional bank accounts.

The first step you will have to make to enter the cryptocurrency market is to create a wallet. Quoting, buying and selling take place anonymously on the internet, and all administration of your account takes place from your computer or mobile device, such as a smartphone.

From then on, and under the Blockchain registration, you can carry out various commercial transactions via cryptocurrency, and make purchases, exchanges and payments, directly with the other person, without a body that regulates and manages this system, generating more ease. , and system reliability.

The transactions of buying and selling cryptocurrencies happen in a simple way, through the internet. In the market, called ecoins, one of the main trading platforms is Bit2me.

Some large global companies, such as WordPress and DELL already accept payment in cryptocurrencies, confirming a trend that was already imagined in the mid-2010s: cryptocurrencies are here to stay.

Mining in the world of cryptocurrencies

Each cryptocurrency transaction needs authentication, which takes an average of 30 minutes to happen. As there is no central regulator, they need to be registered, in addition to being validated one by one by a group of people, the so-called miners, who use their computers to record them on the Blockchain, which we have already seen here.

Each new transaction needs to be validated to confirm that these coins have not already been used by other people. System security depends on this validation.

Miners offer all the processing power of their computers to secure the system, and in exchange, they receive new units of cryptocurrencies.

In this way, it is through mining that new cryptocurrency units come to the market.

Advantages of investing in cryptocurrencies

Let us now know the main advantages of investing in the cryptocurrency market.

Privacy and autonomy over transactions

We have seen that one of the main characteristics of cryptocurrencies is the absence of a regulatory body, which dictates the rules and wants to know your personal information.

This absence of a regulating system offers more autonomy to the user, who is responsible for the administration and security of the system itself.

In addition, as the transaction is carried out from person to person, without the need to exchange personal information, the system provides much more privacy for the user.

Low or no transaction fees

Currently, payments and transactions are made with very low charges or even no charges at all.

Charges end up happening when a user wants faster confirmation of a transaction. In this way, and especially, compared to traditional financial systems, cryptocurrencies deliver this financial advantage.

Security offered by Blockchain

We saw in the article that the Blockchain system serves to provide security to the entire cryptocurrency system. This security is one of the advantages of carrying out this type of transaction, which is managed by the users themselves.

Great upside potential

We can even conclude that the cryptocurrency market has gone through ups and downs over the years, but even today its appreciation has been one of the highest compared to other types of investments.

Cryptocurrencies tend to offer a significant profit margin due to the high volatility that prevails in this market. In recent years, for example, most cryptocurrencies have seen a considerable increase in demand, generating robust valuations, from 100% to 400%.

Freedom of payments

Just have a unit of some cryptocurrency so that you can send or receive any amount instantly, from anywhere and with anyone else who is also within the system.

Growing acceptance

Large companies have been moving around cryptocurrencies, and players such as WordPress and DELL already accept payments in cryptocurrencies, increasing the diversity of actors involved in the system, and generating greater appreciation and security.

Tips on how to invest in cryptocurrencies safely

There is not much mystery to starting investing safely in cryptocurrencies. Here are some simple but effective tips.

Create a digital wallet

It all starts with a digital wallet. With a digital wallet of your own, with your own public and private keys, you guarantee more security, as you won’t need third-party interference.

Never invest more than you can

We have already seen that high volatility is one of the fundamental characteristics of cryptocurrencies.

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