What are cryptocurrencies and how do they work?

Cvbj 2021-11-27 10:11

You do not require more than an Internet connection to start trading cryptocurrencies.

Photo: TamimTaban / Pixabay

Cryptocurrencies is digital money designed to allow users to send payments online quickly to anywhere in the world without having to go through a bank and without government supervision.

The anonymous creator of Bitcoin, the original and most popular cryptocurrency today, said in a document where he explained Bitcoin that he wanted to create a peer-to-peer electronic cash system, which means that he could instantly send money to someone else, something. as well as PayPal, but without the company doing the transactions for you.

The idea of Bitcoin was that removing banks and brokers from this procedure could lower fees and allow senders and receivers to maintain the privacy of the exchange.

In addition to avoiding banks, many followers of cryptocurrency see it as a new way to fight against corrupt and oppressive governments, since aims to remove governments from financial transactions entirely by operating completely anonymously.

You do not require more than an Internet connection to start operating with cryptocurrencies, which makes it different from opening an account in a traditional bank, since the latter asks you for a lot of information to give you a credit or debit card.

Many critics, including the Chinese government, which even banned cryptocurrencies, say that crypto assets can also be used for illegal activities such as money laundering and gambling.

On the other hand, the US government, for example, has taken steps to ensure that those who buy cryptocurrencies actually pay the taxes they owe when they make a profit.

Besides this, cryptocurrency prices are extremely volatile. For most of the first five years of Bitcoin’s existence, it was worth less than $ 1,000 per coin. But in 2017, it rose to $ 20,000, before dropping again to less than $ 5,000 in 2018 and skyrocketing to more than $ 60,000 per coin in 2021.

Also, it is difficult to buy many of the things that you really want to buy with crypto. While the number of companies that accept Bitcoin as payment is growing, such as AT&T and Microsoft, it will still be much easier to get a credit card for most of your daily purchases.

How do they work

Blockchain (or chain of blouqes) is the technology used to create cryptocurrencies. While traditional money is created by governments and managed by banks, cryptocurrencies aim to bypass these authorities.

Instead of relying on a particular bank’s accounting system to keep track of who owns what, cryptocurrencies store this information in what is called a “distributed ledger” stored simultaneously on thousands of computers around the world, which are known as nodes.

This ledger, which records all account balances and transactions for a particular cryptocurrency, is known as a blockchain. While the ledger is public, making it difficult for anyone to fool the system by creating new currencies themselves, the accounts are anonymous and offer the secret that most people crave.