Cryptocurrencies: What Are They?
Among the most modern concepts of financial operations are cryptocurrencies. Created to be used in digital media, they were surprised by presenting an extraordinarily safe, organized system and its enormous value.
That’s why these digital ciphers have become so popular. Today, it is even possible to invest in stock exchanges exclusively using online currencies. And the profits are impressive!
Anyone who is already aware of how they work and dominate this market will already be ahead of the future economy. So how about knowing more about them?
What Are Cryptocurrencies?
To begin the conceptualization of the theme, we can identify a cryptocurrency as money in itself. But, unlike the one we know, which has a physical, tangible, and concrete identification, whether on paper or in currency, cryptocurrencies are digital files.
Therefore, they are not issued or controlled by any government or regulatory body. There is no “Central Bank” behind the concept, and they are, in short, self-managed.
What Are Cryptocurrencies For?
Cryptocurrencies emerged as an alternative to strengthen the security of digital financial transactions. In short, the proposal was that transfers of sums of values could be made without the need for an intermediary and without the risk of invasion by criminals, who would take part of the money away. The famous “hackers.”
In this way, we can define that the main proposal of cryptocurrencies is to be used as currency, essentially. Thus, it can have three uses:
- Serve as a means of exchange, as a form of payment, and as a receipt in commercial transactions;
- Store of value, “keeping” it so that it increases in value and increases its price;
- As a unit of account, to base the cost of other products.
How To Get Cryptocurrencies?
If any government or the regulatory body does not issue cryptocurrencies, the question remains: how to get them? This is where the process known as “mining” comes in. Essentially, every digital transaction involving cryptocurrencies is recorded on a data chain known as a blockchain.
Blockchain is a cutting-edge security technology verified in several steps of registration. For information to be recorded in the block, the authorization of all participants in the chain is required. This ensures that the same cryptocurrency has not been used twice, as it is, in short, a digital file. Those who perform the records of operations on the blockchain are the so-called “miners.” They verify and register the information in the data blocks, validating them.
In exchange for this work, they receive new units of cryptocurrencies, making this digital economy spin. That’s why mining is the most popular way to get them.
Why Are They Considered So Safe?
Cryptocurrency transactions are considered highly secure. After all, they are directly tied to blockchain technology. Straightforwardly, the blockchain is a connection of information that cannot be changed, guaranteeing enormous credibility to what is recorded in the data chain.
Therefore, if there is a transaction record via digital currency, where details about the cryptocurrencies are included, this becomes eternal, without the possibility of change.
Cryptocurrency Price Variation
The value of cryptocurrencies is another highlight, which justifies all the attention and popularity they have gained in recent times. Want proof? One unit of bitcoin easily exceeds $50,000—something around more than R$ 300 thousand. But how is it possible that she has gained so much appreciation? The oldest existing market law explains this: supply and demand.
If we get into a basic concept of economics, we know that the more money there is in circulation in a market, the lower its value. In a very simplified way, this is more or less how inflation works. Therefore, if there is a lot of money issuance by regulators and governments, it will be less valued. However, cryptocurrencies are not created by default. Getting them is quite complex, as we explained earlier.
Therefore, there is a fixed amount of cryptocurrencies in the digital “market.” They are not reissued, cannot be used twice, and are not made on-demand. This causes its value to increase as there is more scarcity.
Advantages Of Knowing More About Cryptocurrencies
Cryptocurrencies tend to be the foundation of the economy of the future. Being increasingly connected in a digital world, operating finance through online means, using them is an efficient way to ensure more security. In addition, they are unified currencies, which do not undergo exchange variation, unlike the many available in each country.