What are cryptocurrencies and why are they important?

Why cryptocurrencies are important

With the development of new technologies, it is very common to hear about terms that are gaining relevance in the financial sector, such as the case of cryptocurrencies, a new way of handling money digitally. Through this note, we explain the basic questions you should know about this topic.

Cryptocurrencies are virtual currencies that use digital encryption for their operations and with which economic transactions can be carried out without the need to go through a bank or financial institution as an intermediary to verify their authenticity; hence its great popularity.

One of the main differences that this type of electronic currency has compared to conventional currency is that they are only on the web and can only be used digitally. That is, you cannot carry cryptocurrencies in your wallet, but you can carry it on your cell phone.

The project of making this type of coins arose in 2009 by a person (or group) who called himself Satoshi Nakamoto and was born to establish a disruptive technology in a global commercial exchange where, regardless of the country of origin, transactions could be carried out. easily and transparently.

Another aspect that makes cryptocurrencies very popular is that they can be used to buy anonymously; Although each transaction of this type of currency remains in a public record, the names of the buyers and sellers are not revealed, only their wallet identifications. While this keeps user transactions private, it can also lead to illegal activity transactions. However, and according to a study conducted by Stanford University, it was revealed that in the case of Bitcoin (a type of cryptocurrency) only 1% of transactions are used for this purpose.

What is your future?

The future of these digital currencies is still very uncertain, although the truth is that it will be a topic that we will hear more and more and hence the importance of understanding the context in which it is being developed.

Currently, the main problem they face is the lack of regulation, which is why various nations have focused attention on this aspect. In UK, it is sought to achieve this through the recent Fintech Law that highlights the need to take the first steps in the generation of a legal framework that provides regulation for the use of this technology in financial matters.

The types of cryptocurrencies

Bitcoin was getting into everyone’s mind, controlling more than 90% of the cryptocurrency market. At the close of May 2017, Bitcoin got around 45%, followed by Ethereum (26%) and Ripple (11%).

Those who are delving into this topic, predict which will be the 10 cryptocurrencies that will gain popularity and in which they could be invested this 2021:

  • Bitcoin
  • Ripple
  • Litecoin
  • Ethereum
  • Dogecoin
  • Polkadot
  • Shiba Inu
  • NEM
  • Cardano

In the case of Bitcoin, these are some of its characteristics:

  • A pioneer since its creation in 2008, it has positioned itself as a leader in the digital market, accounting for 45% of the value of the entire cryptocurrency market.
  • This digital currency has a network that has access to the record of transactions, called Blockchain (chain of blocks), so that each transaction is communicated to the entire network and therefore cannot be duplicated, making it a single and traceable unit.
  • Bitcoin wallets have a secret fragment called a “private key”, used to sign transactions, providing mathematical proof that the transaction is made by the owner of the wallet.
  • Transactions are certified through people connected to this network, which are called “miners.”

We know that any topic related to digital seems to change with just a blink since it is estimated that its openness expands the possibility of creating new cryptocurrencies; It is calculated that 2 are being created on average per day. Its risk and use today operate clearly in a speculative market, that is, supply and demand govern its value. Knowing its use and applications will make the UK aware and participate by joining the wave of necessary international regulations and thus participate in a reliable way in this that is already beginning to have more and more interference in the world economy.