Anyone who follows the economic news has probably
come across articles about cryptocurrencies - especially bitcoin or Ethereum.
However, even though they have been around for some time, not everyone knows
how to get ideas or how to invest in cryptocurrencies.
If this is the case for you, you may be leaving
options with the potential for growth, even if the return is not guaranteed. So
it is important to know more about cryptocurrencies and how they work to
determine if investing is worth it.
So, follow this content and see what
cryptocurrencies are, how they work, and how to invest in these resources.
Don't miss out!
Cryptocurrency is a digital asset that works just
like money. That is, they can be used to make purchases, exchanges, transfers,
fundraising, and more - just like a conventional currency.
However, unlike currencies like dollars and
realities - which are issued in a paper sense - cryptocurrencies exist only in
virtual environments. It restricts its use to Internet-based discussions
between individuals and organizations who accept these resources as a means of
In addition, both the issuance and storage of a
cryptocurrency are accomplished through sophisticated software and technology.
However, even if the interested party does not have a sophisticated computer or
cell phone, they can access the cryptocurrency in a variety of ways.
It is important to note that each cryptocurrency
has a specific code and thus, none is the same. This aspect prevents a lot of
financial fraud, for example, you are not likely to get "fake bills or
Also, cryptocurrencies are decentralized and not
deposited in any country's government or central bank. Thus, they are not
affected by economic policy, federal intervention, etc., and many countries
still do not have specific laws about them.
However, this does not mean that doing business
is an illegal practice. After all, investors do not have institutional
protection if they have problems with their business.
cryptocurrencies come about?
The idea of creating a virtual currency is
linked to the cyberpunk movement and the idea of anarchism, aimed at removing
the state's presence from trade relations. The idea was greater independence,
autonomy, and privacy, for example, in addition to reducing tax collection.
Many of these efforts failed in the 1990s. But,
in the next century, the landscape changed and Bitcoin became the largest and
most valuable cryptocurrency ever published.
In 2008, in the United States, the bankruptcy of
Lehman Brothers Bank plunged the world into the worst economic crisis in
history. In this context, an individual (or group) named Satoshi Nakamoto
decided to create a virtual currency that was unrelated to any economy.
At first, only a small group of programmers had
access to cryptocurrencies. But, over time, the currency began to gain
popularity on the Internet and was adopted as an effective way to perform
The more people join Bitcoin, the more its value
increases. Coin prices have risen significantly since 2013. That year, it went
from $ 13 to $ 770 - which attracted investors and speculators because of its
Since then, a few more currencies have started to
emerge based on the same technology as Bitcoin. By 2022, there are more than
9,000 types of cryptocurrencies in the world - and new digital assets are
competing for a place in this market every day.
Once you understand the concept of cryptocurrencies
and how they came about, it's worth learning how they work. So, it is worth
noting that one of the reasons for making Bitcoin a very successful
cryptocurrency was the technology behind it - blockchain.
It acts as large public and digital ledger responsible
for recording all transactions with cryptocurrency. Each new transaction is
stored in an encrypted block that needs to be verified to be accepted in the
Several users of the network perform this
procedure considering the information already available in the blockchain. If
the new block exceeds validity, it is sequentially added to the previous block
and is used for subsequent validation.
This dynamic creates an inviolable system,
considering that it is not possible to modify or delete already registered
blocks. There is no way to add new blocks with false or edited information, as
they will rarely be verified by previous blocks.
Thus, in order for this system to be able to
cheat, it is necessary to change the entire chain of blocks until the first
(root block) is reached, which is virtually impossible.
important is a blockchain for cryptocurrencies?
As you can see, blockchain works through a system
of chained record blocks. The technology verifies and records all
cryptocurrency transactions. This allows their system to record in real-time,
24 hours a day, any day of the week.
The presence of a banking institution or any
other intermediary is not required for this transaction. Transactions are
compiled, verified, and shared among system participants.
For this, users who verify the data - called
miners - are rewarded with a portion of their operational fees. Whether for
purchase, sale, or exchange, these fees are charged for each business and may
vary depending on the network used.
Thus, the structure of blockchain technology is a
factor responsible for the effectiveness of cryptocurrency. After all, it was
designed to encrypt transactions and protect them from threats in the virtual
For more than 15 years, no hacker has been able
to successfully break the network record for using blockchain technology.
Although many have tried. For example, cryptocurrency transactions are
considered quite secure, although this is not always the way to access them.
It is noteworthy, however, that there are
cryptocurrencies that do not use the blockchain protocol, although the
technology is the most common in this market.
the main features of cryptocurrencies?
After learning more about how cryptocurrencies
work, it is worthwhile to examine their key features. First, remember that they
are part of a variable income class. So the price varies according to the
In reality, the value of a cryptocurrency
monitors the law of supply and demand exclusively. So the more people are
interested in buying cryptocurrency, the higher the price will be.
On the other hand, the tendency of
cryptocurrencies to lower interest rates is to reduce their value to zero. Therefore,
both those who want to invest in the long run and those who want to speculate
in the market can use them.
There are also other features that bring
important differentiators to cryptocurrencies. Check out!
Independence is one of the most interesting
features of a cryptocurrency. As can be seen, they are decentralized and do not
follow a financial system or central bank rules. Nor do they rely on the
intervention of the banking institution to create or use them.
Another outstanding feature of these resources is
their anonymity. Although cryptocurrency trading is public, users' personal
information is not disclosed due to the transparency of the blockchain.
In other words, it is not possible to identify
movements with blockchain information alone. This feature brings more freedom
so that a person can buy whatever and whenever he wants without the risk of
There are two main ways to trade cryptocurrency
directly: peer-to-peer (P2P) and via exchange. In P2P, transactions are made
between two users without intermediaries - using computer programs connected to
Trade through exchanges is similar to stock
exchanges. They are private companies that act as intermediaries for their
clients' cryptocurrency negotiations, in the most diverse environments.
The cost of trading cryptocurrencies often varies
depending on the network traffic used. When multiple transactions are processed
simultaneously, fees tend to be more expensive. Yet, overall, the cost is low.
For example, in September 2021, a transfer of
44,598.42 bitcoins (about $2.1 billion) was recorded on the bitcoin blockchain
network. The cost of the operation was 0.000001713 bitcoins (US$0.80). It was
processed in just 1 minute.
Also, keep in mind that other fees may apply when
using the exchange, such as a brokerage fee and an escrow fee. Some companies
charge conversion and withdrawal fees for Fiat currency (real, dollar, euro,
among others), as well as limiting the minimum amount that can be withdrawn.
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