Learn more about cryptocurrencies and find out how they work, how to buy them and why they have become so popular in the financial market in recent years.
Cryptocurrencies are "digital currencies" or "Coins" in which cryptographic technologies are used to secure their operations.
Although the idea of creating encrypted "digital money" is not new (its first concept came about in 1983 with American computer scientist and cryptographer David Chaum), it gained worldwide recognition after the creation of the Bitcoin by an anonymous programmer (or group of programmers), codenamed Satoshi Nakamoto, in January 2009.
In essence, cryptocurrencies are designed to be used as a means of exchange/payment in a decentralised way, i.e. there is no central authority that regulates their use. In other words, it's as if you were your own central bank.
Cryptocurrencies use a technology called blockchain, where several computers around the world manage and record transactions over the internet as a block of data that forms a chain (hence the name blockchain).
There are several reasons why digital currencies have become so popular in recent years - some of them are:
- The vision that cryptocurrencies like Bitcoin could become the "currencies of the future", where paper money will no longer have any value, so by buying in advance, there is the idea that the asset could become more valuable in the long term;
- The technology behind cryptocurrencies is disruptive, bringing benefits to society in general, since being encrypted and decentralised, it brings greater security to transactions (reducing fraud problems to almost zero, for example);
- The removal of central banks, since there is no central authority that controls the issuance of currencies, which consequently ends up not deteriorating the value of a cryptocurrency precisely because it does not have the power to issue it.
Currently, the digital currency market is worth around R$10 trillion (US$1.7 trillion). The 10 largest cryptocurrencies in terms of market capitalisation are: Bitcoin, EthereumTether, Binance Coin, Cardano, XRP, Dogecoin, Polkadot, USD Coin and Internet Computer.
Cryptocurrencies: concepts and curiosities
Blockchain technology
Cryptocurrencies are built on blockchain technology, which is a decentralised and distributed digital ledger. Each transaction is recorded in connected blocks, forming an immutable chain of information. This guarantees transparency, security and eliminates the need for a central authority to validate transactions.
Bitcoin (BTC)
O Bitcoin was the first cryptocurrency, launched in 2009 by a person or group under the pseudonym Satoshi Nakamoto. It laid the foundations for cryptocurrencies and is often referred to as "digital gold". Bitcoin is used both as a store of value and as a medium of exchange.
Altcoins
In addition to Bitcoin, there are thousands of other cryptocurrencies, known as altcoins. Some of the most popular altcoins include Ethereum (ETH), Ripple (XRP), Litecoin (LTC) and Cardano (ADA). Each one has specific characteristics and objectives, such as smart contracts (Ethereum), fast settlement of cross-border payments (Ripple) or enhanced privacy (Monero).
Mining
Most cryptocurrencies, including Bitcoin, are mined. Mining involves solving complex computing problems to validate transactions and add new blocks to the blockchain. Miners are rewarded with new coins as an incentive for their work.
Digital Wallets
Cryptocurrencies are stored in digital wallets, which can be online, offline, hardware or paper. Wallets allow users to receive, store and send coins securely.
Regulation and Legality
The regulation of cryptocurrencies varies from country to country. Some countries have embraced them, while others have stricter regulations or have banned them altogether. The volatility and decentralised nature of cryptocurrencies present challenges for regulators.
Use and Adoption
Cryptocurrencies are increasingly being adopted for a variety of purposes, including investment, cross-border remittances, payment for goods and services, crowdfunding (ICO), smart contracts and much more.
Volatility
Cryptocurrencies are known for their significant volatility. Prices can fluctuate dramatically over short periods of time due to factors such as market speculation, news, technological developments and regulation.
Challenges and criticisms
Despite their potential, cryptocurrencies face a number of challenges, including security concerns, extreme volatility, use in illegal activities and environmental issues due to intense mining activity.
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