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Cryptocurrencies: What are and how do they work?

Trends

The use of digital currencies, or cryptocurrencies, is gaining strength and it is important to understand the impact they can have.

Without a doubt, the digital revolution has changed the way we do many daily activities, from how we communicate, buy or seek information.

So it should not be a surprise that money and finance are also moving into this digitized world.

It is in this digitized and globalized world that the cryptocurrency emerges. Cryptocurrency is a digital currency to exchange goods and services that does not require intermediaries (such as banks).

Another very important feature of cryptocurrency is that it incorporates cryptography principles. Cryptography is the science that is dedicated to safeguarding information and data through the use of numbers or codes.

Cryptocurrencies are “printed” (figuratively) from very complex mathematical problems and this is why they are almost impossible to falsify.

“[Cryptocurrency] is any type of digital unit, created or obtained through mathematical calculation, whose system is based on the Internet and is used as a medium of exchange or a form of digitally stored value.”

Forbes Mexico

Currently the most popular cryptocurrency is Bitcoin, but there are already more than 700 different digital currencies, each with its own characteristics and protocols.

Cryptocurrency History

The concept of cryptocurrency was first used in 1998 by computer engineer Wei Dai. Dai was proposing the creation of a new type of decentralized digital money that would use cryptography as a mean of control.

During the 90s there were several attempts to create digital currencies but all failed.

It was not until 2009 that developer Satoshi Nakamoto managed to create the first decentralized cryptocurrency, Bitcoin.

Starting this year, other cryptocurrencies began to operate, such as Ethereum, Ripple and Litecoin.

Advantages of Cryptocurrencies

It is important to note that cryptocurrencies offer us certain advantages that conventional money or currencies cannot provide us.

  • Anonymity

Cryptocurrencies allow you to maintain your privacy when making transactions, since you do not have to give personal information, account numbers, etc.

  • Security

As I’ve already mentioned, cryptocurrencies use very complex mathematical problems making it almost impossible to falsify.

  • Speed

Cryptocurrency transactions are much faster than transactions made by financial entities.

  • No need for intermediaries

By using cryptocurrencies, transactions are made directly from person to person.

  • International

Cryptocurrencies can be used anywhere in the world.

  • Independence

Cryptocurrencies are not controlled by any country, bank, or other financial institution.

Conclusion

Cryptocurrencies are already a reality and although most of us do not yet use these digital currencies, the volume of transactions made with these currencies is increasing.

For example, in our country the daily transaction volume of Bitcoin reaches almost two million dollars.

The digital currency system will undoubtedly continue to grow and evolve and for this reason it is important that we keep ourselves informed of all these developments.