What is a Cryptocurrency, and How Do Cryptocurrencies Work?

Surely you have heard the term on more than one occasion. Moreover, surely you also have a vague idea of ​​what it refers to. However, most of us users get lost in the maelstrom of this virtual money. 

In this blog post, we will approach this topic clearly so that you know what cryptocurrency is and some particularities of this payment system that has been with us for more than a decade. Shall we start?

What is Cryptocurrency?

Cryptocurrencies (also known as cryptocurrencies or crypto assets ) are digital medium of exchange that uses cryptographic methods to secure transactions. It fulfills the same function as a currency, but it is digital; you can transfer a cryptocurrency to someone on the internet without an intermediary, such as a bank. The value of each cryptocurrency is variable.

The first cryptocurrency was Bitcoin, created by “Satoshi Nakamoto, “the pseudonym of someone whose real name is still unknown, although they say he is one of the richest people in the world. Nakamoto published an article in 2009 describing a P2P payment system he called Bitcoin.

How Do Cryptocurrencies Work?

Cryptocurrencies exist solely as digital records in a database that describe specific transactions. This database is called “blockchain,” a technology used in all cryptocurrency projects. The data in this registry cannot be later modified or manipulated, which guarantees the network’s security. However, you cannot reverse a transaction either.

In other words, the blockchain is similar to a large, unchangeable, shared ledger written by many computers simultaneously.

What Kinds of Cryptocurrencies are There?

The first cryptocurrency was, as we have said before, Bitcoin, but there are currently thousands of cryptocurrencies. We show you some of them and their characteristics:

Bitcoin: It remains the most commercialized and the most popular. There are only 21 million, and there will be no more (as they say).

Ethereum: Since 2015, it has been a blockchain platform with its cryptocurrency, Ether or Ethereum. It is considered very reliable and one of the fastest. It has no emission limit.

Litecoin is similar to Bitcoin, although it includes faster payments and processes to allow more transactions. It was created in 2011, and its limit is its emission limit is 84 million.

Rippl: It is a distributed ledger system founded in 2012. It can track different types of transactions, not just cryptocurrencies. It is accepted by more number of banking entities.

Dogecoin: Founded in 2013 by an engineer from IBM and another from Adobe.

Dash: Created in 2014 and designed to send payments from person to person. It has a lower transaction cost than other cryptocurrencies and can be used entirely via text message.

How to Buy Cryptocurrencies?

To do it safely, you must choose the platform you will use. Generally, you can choose between a traditional broker or a dedicated cryptocurrency exchange. The next step is to fund your account, so you can start trading. 

You can place an order through your agent’s web or mobile platform or exchange. There are also other ways to invest in cryptocurrencies. These include payment services like PayPal, Cash App, and Venmo, which allow users to buy, sell or hold cryptocurrencies.

Once you have purchased cryptocurrencies, you must store them securely to protect them from theft or hacking.

Of course, you can use them to buy some things, like luxury goods, cars, some technology, or even insurance.

Fraud and Cryptocurrency Scams

As more people are interested in cryptocurrencies, scammers are finding more ways to use them. Attention to:

Fake websites – with dubious testimonials, incomprehensible jargon, and many promises of profit.

Virtual Ponzi Schemes: Cryptocurrency criminals promote non-existing opportunities to invest in digital currencies.

Celebrities: Scammers pretend to be billionaires or famous people who promise to multiply your investment in a virtual currency.

Romance Scams: Scammers persuade people they meet on dating apps or social media to invest or trade in virtual currencies.

We hope that the world of virtual currency has become clearer to you with this post. However, we warn you that if you want to invest in cryptocurrency, you will have to delve deeper into the subject and not stick with what we tell you in this post, which we have summarized in a very summarized way. We encourage you to leave your comments and tell us about your experience with cryptocurrencies.

Also Read: Application that Allows Businesses to Receive and Pay in Cryptocurrencies