Cryptocurrency is “virtual” and is generated and exchanged exclusively electronically. Therefore, there are no Bitcoins in paper or metal format in circulation. It is interesting to note how some concepts traditionally used for legal tender currencies – ie “wallet” – have also been “transferred” to the context of virtual currencies which uses the term “digital/electronic wallet ” or ” digital/electronic wallet” ” or e-wallet. This means that there is no central body that issues them, protects them, and controls their diffusion. For those who want to learn more about crypto and the Defi resh community is the best place.
What are cryptocurrencies and how are they managed
Cryptocurrencies are managed directly by the private individuals who hold them, thanks to the goals achieved by digital encryption systems, the latest of which is represented by blockchain technology. Not just a simple virtual currency, therefore, but a real system that:
- it is not tied to the economic and financial performance of a particular country in the world;
- it is not tied to interest rates or national and international monetary policies;
- it guarantees the value of the cryptocurrency thanks to its immutable cryptographic units, i.e. their specific code.
Be careful though: a cryptocurrency is not a digital currency . In fact, the latter has the same characteristics as traditional currencies, as these are therefore issued by a central authority and exist only in the digital market. More than 2000 cryptocurrencies exist today.
Bitcoin is also the first cryptocurrency ever created , whose domain was registered online in 2008 and the first ever transaction was made in 2009.
Cryptocurrencies: the blockchain technology
The security of cryptocurrencies is guaranteed by a protection system called blockchain (literally chain of blocks): a digital and shared register of codified data which contains information in chronological order relating to every single existing cryptocurrency unit, as well as the transfers it has instantly from one user’s wallet to another’s. There are five digital wallets available for cryptocurrencies in total and they are divided into wallets for desktop, for mobile devices or online, hardware or paper-based wallets.
Any attempt to alter the data of each individual cryptocurrency unit automatically blocks the links between the blocks in the chain, thus allowing the intruder to be identified, so to speak, and reported as fraudulent by the network’s servers. The process and set of complex calculations that allows you to create a blockchain, by checking the transactions made and adding new blocks, is called mining and, in technical jargon, it is said that the blocks are mined.
Within the network there are some computers called miners (miners) who guarantee that the process of creating the cryptocurrency through the blockchain is carried out correctly. Through really complex calculations, miners are therefore able to create new blocks in the data chain, selecting the latest transactions, known as to be reviewed, to verify the actual availability of funds in order to complete them. Once the check has been performed, the miners proceed to a second verification, to verify that the sender of the transaction has indeed transferred the necessary funds through his private key.
Cryptocurrencies: ambiguity and possibility
The world of cryptocurrencies is certainly exciting and revolutionary, above all for the possibilities that these new virtual money can offer in terms of investments, trading and online purchases. In fact, sender and recipient do not have names and surnames, but everything that appears on the outside is just a series of numbers . In order for them to be truly considered a valid alternative in international markets alongside traditional currencies, they will certainly have to abandon their decentralization and accept regulations and controls on their use. Therefore, optimize and perhaps even limit or reduce some of their functions, in order to prevent them from being used for illegal purposes. Their popularity has sparked a very strong debate, which is still ongoing.
Finally, I hope the above information has helped you gain some insight into cryptocurrencies. If you want to invest in cryptocurrencies, learn more about the different trading strategies. Never invest more than you can afford because cryptocurrencies are highly volatile and unpredictable. If you want crypto explained, read other articles from this blog and don’t forget to share your opinion.