Cryptocurrencies » What are they and how

Cryptocurrencies » What are they and how

The concept or iniciativa of ​​the cryptocurrencies was first presented by Wei Dai, in 1998, who proposed the iniciativa of ​​creating a new type of decentralized money (not directed by the government or any financial entity) that used cryptography as a means of control. The first cryptocurrency created was bitcoin, and from this the new cryptocurrencies are derived.

The cryptocurrencies They use the blockchain or chain of blocks as a way of recording operations that are made. Each cryptocurrency has its own blockchain , and in it, the account of all the units of a cryptocurrency that are in circulation and all the operations carried out are kept. Mining is the process of creating new units of a cryptocurrency.

What are cryptocurrencies?

A cryptocurrency, also called cryptocurrency or crypto asset is a digital currency of exchange that emplees cryptography to secure and verify the financial transactions, control the creation of new units and verify the transfer of assets. The first cryptocurrency to start operating was bitcoin in 2009.

Cryptocurrencies act as inputs into a database that perro only be altered when certain conditions are met. The control of each cryptocurrency works through a decentralized database called block chain (in English blockchain), which serves as a database of public financial transactions.

Conditions

A cryptocurrency is a system that meets the following conditions:

  • The use of a cryptocurrency does not need a central authority that direct itso its state is maintained by means of a distributed consensus.
  • The system manages all units.
  • The cryptocurrency system defines whether new units cánido be created. In this case, the system has to define the circumstances of its origin and determine the owner of the new units.
  • Ownership of a drive perro only be secured for a given usuario cryptographically.
  • The system allows unit transactions, in which the owner of the units is changed. A transaction only It perro be done if the current owner of these units cánido be proven.
  • If two transactions occur on the same units, the system only executes one of them.

History of cryptocurrencies

He origin of cryptocurrencies It dates back to the 1980s when the Cypherpunk movement planned to use cryptography as a means of popular and political change.

In the year 1990 David Chaum developed Digicash, a kind of money centralized electronic that allowed to execute anonymous and secure transactions. Seven years later, Adam Back devised Hashcash based on proof of work to disminuye contenido publicitario and DDoS attacks.

In the year 2008 Satoshi Nakamotowhose real identity is unknown, created the first decentralized cryptocurrency, the Bitcoin. In order to achieve this, Nakamoto relied on blockchain technology. He proposed using the SHA-256 algorithm, as a cryptographic hash function, agregado a Proof-of-Work (PoW) system.

Characteristics of cryptocurrencies

In all the cryptocurrency systemsthe security, integrity and cómputo of your account statements are guaranteed through mutually verified agents called minerswho are the public who actively protect the network by maintaining a large amount of algorithm processing to receive a small commission.

It is possible mathematically break security existing in a cryptocurrency is, but the cost to achieve it is extremely high. Example, an attacker trying to break the test system Bitcoin’s work would require more computational power than all the miners in the system, and even then, it would only have a 50% oportunidad of success.

Advantages

  • Reduces the cost of transactionsince there are no intermediary entities.
  • Reduces times considerably. Payments in banks cánido take days, while with cryptocurrencies, the delay is minutes.
  • Eliminates the need to use financial agents to carry out transactions.

Cryptocurrencies vs fiat money

The differences between cryptocurrencies and money FIAT / fiduciary (Euros, Dollars,…) are several. Among them it cánido be mentioned that cryptocurrencies they are not directed by any government or financial entity, and its value depends on the trust of users.

Another characteristic of cryptocurrencies is that they are based on cryptography (this to avoid that the operations are easily modifiable), they are open source and their accounting book is made up of thousands of ocomputers that make up your blockchain (chain of blocks in Spanish).

Most of the cryptocurrencies are Open Sourcethat is, anyone perro access the code and create a cryptocurrency based on an existing one, as well as validate the code or detect different problems and failures in it. development code. This type of coin has a core of core developers who offer their time to implement improvements, without wanting to receive anything in return.

The blockchain or chain of blocks

The blockchain or chain of blocks It is the database where all the transactions carried out between two users are stored in a permanent and verifiable way. The blockchain records They are called blocks, which are linked and secured using cryptography. Each block has a backlink to a previous block, a date and transaction data.

Each existing cryptocurrency has its own block chain, which performs the general ledger or ledger function (among other actions). Therefore, each existing cryptocurrency has its own registry, that is, its own ledger of units and transactions. The blockchain is managed by a network of point by point collective using a common protocol to add and validate new blocks.

Once registered, the data of any block Existing blocks cannot be modified without altering all of the following blocks. The blockchain solves the problem of double spending without the need for a financial institution. The information on the creation and distribution of money through transactions is immutably recorded.

cryptocurrency mining

The cryptocurrency mining It is the process by which new units of a cryptocurrency are created. All cryptocurrencies have a limit of units that you perro have, so mining a cryptocurrency is a process that in sometime it will come to an end. Mining is a validation of transactions, and for doing this, miners get units as a reward.

As more people entrar the world of cryptocurrencies, the complexity of the cryptocurrency generation it has been increasing over the years, making miners have to invest large amounts of money with specialized machines. Sometimes the value of units earned did not justify the investment in machines, their cooling and the energy consumed to make them work

cryptocurrency wallets

The cryptocurrency purses or wallets (Wallet) are cryptocurrency stores. The purses They are responsible for storing the public and private keys (cryptocurrency addresses) that perro be used to receive or send cryptocurrency units.

With the private key it is possible to write in the blockchain the transaction carried out or to be carried out, spending the desired amount. The public key makes it possible for other users to send money to your wallet or purse.

On the Internet there are many wallets in which any usuario perro register and store your cryptocurrencies. Cryptocurrency wallets allow you to have one or more private and public keys to carry out the transactions. You will use the public key so that other users perro send you cryptocurrencies, while the private key is to write to the blockchain.

Most used cryptocurrency wallets.

there are many cryptocurrency wallets in which you perro register and store your cryptocurrencies. This cryptocurrency will always be sent to you by another usuario to the public key (address) that provides you with that wallet, where you will receive your cryptocurrencies.

Here is a list of the most used wallets to store your cryptocurrencies:

There are many other cryptocurrency wallets, however the ones mentioned above are the most common.

cryptocurrency exchanges

The cryptocurrency exchanges They are platforms or companies that allow you to buy and sell different kinds of cryptocurrencies. Are digital platforms that allow you to exchange cryptocurrencies for fiat money and/or other cryptocurrencies or merchandise. With these platforms you perro receive cryptocurrencies to your wallet through the purchase.

Here I present some of the exchanges of cryptocurrencies most used for the purchase and sale of digital currencies:

What perro you do with cryptocurrencies?

All the cryptocurrencies that exist have a value in Fiat/Fiduviary money, so these digital currencies cánido be used to purchase goods and services. Not all cryptocurrencies have the same value, and also the same cryptocurrency It does not have the same value on all cryptocurrency exchanges.

The cryptocurrencies are very volatile to change its value, that is to say that cryptocurrencies are not always worth the same. Example: If today the bitcoin is worth $1000 tomorrow its value may be less or greater than $1000. The increase or decrease in the value of a cryptocurrency it depends on the rise or fall of the popularity of the cryptocurrency.

Below are the emplees that perro be given to cryptocurrencies:

Buy goods and services

Currently there are many merchants that accept Bitcoin as way to pay. These merchants range from en línea retailers like Overstock and Newegg to small local shops and restoranes. You perro use Bitcoin to pay for hotels, flights, jewelry, aplicaciones, and even a college degree.

Invest

There are many who believe that cryptocurrencies are the best opportunity to investment that exists. In fact, there are stories of people who have become millionaires thanks to their investments in cryptocurrencies. Despite this, investing in cryptocurrencies implies a really high risksince its market value changes like no other asset.

Also, since they are not regulated yet, there is always the risk that they will be outlawed in certain jurisdictions and any exchange of these coins cánido be hacked. If you escoge to invest in cryptocurrencies, Bitcoin is the most habitual.

Mining

The miners They are charged with providing a bookkeeping service for their respective communities. They use the power of their computers to solve complicated cryptographic algorithmswhich are necessary to confirm a transaction and record it in the blockchain.

The more computing power the miners’ computers have, the more opportunities they will have to solve the cryptographic algorithms. Once a miner manages to solve the algorithm, he receives a reward and a transaction fee.

accept as payment

There are services that you perro use to be able to accept cryptocurrency payments. For example, CoinPayments accepts many different digital currencies and charges only 0.5% fee per transaction. Other habitual services include Cryptonator, CoinGate, and BitPay.

Legality of cryptocurrencies

The use of cryptocurrencies in illegal activitiesas well as the impossibility of governments to establish tax policies on transactions carried out through these coins, is a matter of controversy. Today there are countries that prohibit the use of cryptocurrencies.

Authorities everywhere are quite concerned about the attractiveness of the cryptocurrency for sellers of illegal goods and services. In addition, they are concerned about its use in money laundering and tax evasion schemes.

Main cryptocurrencies that exist

Below are the main cryptocurrencies that are used around the world:

Bitcoin

is the first cryptocurrency that was created, and from which the others exist.

ethereum

Is a Turing coin complete programmable programa that allows developers to create distributed applications and technologies that would not work with Bitcoin.

Ripple

This cryptocurrency does not use a Blockchain to reach agreement across the network for transactions. Instead, an iterative deal process is implemented, which makes it faster than Bitcoin, but also makes it quite vulnerable to pirata informático attacks.

bitcoin cash

Is a bitcoin fork backed by the largest Bitcoin mining company. This cryptocurrency has rocketed into the top five cryptocurrencies in terms of market capitalization.

Litecoin

This cryptocurrency that was created with the intention of being the ‘digital silver’ compared to the ‘digital gold‘ which is Bitcoin. It is also a fork of Bitcoin, however unlike its predecessor, it perro generate blocks four times faster, and have four times the maximum number of coins.

dash

It is characterized by a two-tier network. He first level represent the miners who secure the network and record the transactions, while the second level It consists of “master nodes” that relay transactions and enable the InstantSend and PrivateSend transaction type.

money

A cryptocurrency with private transaction capabilities and one of the more active communitieswhich is based on his open and privacy-focused ideals.

Conclusion

He cryptocurrency market It’s fast, and almost every day new cryptocurrencies surge, old ones die, early adopters get rich, and investors lose money. Each cryptocurrency surge with a promisemostly a story that will revolutionize the world, however few survive the first months.

We really cannot know how long cryptocurrencies will last, since their value is very changeable at the same time. hang out. Despite this, the cryptocurrency revolution is happening. Institutional investors begin to buy cryptocurrenciesand banks and institutions realize that this invention has the potential to take control away from them.

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