Cryptocurrencies are the unicorn of this century, considered by some to be the money of the future, viewed with diffidence, but also as a serious investment opportunity.
Although this is not an economics blog, it is still interesting to talk here about cryptocurrencies, the digital currencies without nationality that are generated by computers, which have now become a global phenomenon.
It is worth giving at least a smattering or an introduction so as to start the most curious, those who have never heard of it and those who have not quite understood what it is.
Today, in 2017, many large banks and investment companies work with cryptocurrencies, while individual individuals have managed, even with a few thousand Euros, to obtain important real earnings thanks to these virtual currencies.
Trying, therefore, to go beyond the press releases and newspaper articles that only chat and statistics, let's see here what cryptocurrencies are, what cryptocurrency means and how you can start using digital coins such as BitCoins, to make payments online and investments.
READ ALSO: Bitcoin: how digital currency created for the internet works
Bitcoin, invented by the unknown Satoshi Nakamoto, was born as a peer-to-peer electronic payment system, with the aim of facilitating internet payments between people in different countries, to avoid currency exchange fees. The most important feature of Satoshi Nakamoto's invention is that of operating in a decentralized digital money system and without being under the control of a country. This feature is essential for a reliable payment system to record transactions and know who spent the money and how many.
Usually, this check is done by a central server that keeps the balance register (i.e. the difference between income and expenses)
In a decentralized network, where there is no such central control unit, there is a need for self-control by every entity that enters this network. Each peer on the network must have a list of all transactions to check if future transactions are valid or are a scam attempt. Obviously there must be no conflict between entities and all must have the same synchronized list.
This thing of control over transactions without a central unit seemed impossible, at least until the invention of BitCoin.
The cryptocurrency is therefore based on insertions in a database that no one can change in the absence of specific conditions (if you want to make an analogy, you can take our bank account and note how the bank statement is nothing more than a database of entered figures) . The mechanism governing cryptocurrency databases such as Bitcoin consists of a network of peers, each of which has the complete history log of all transactions.
This register is nothing more than a file with the words " Claudio gives X Bitcoin to Giuli o", protected by an encrypted key. If I have to give Bitcoin to Giulio, I send this encrypted file from my signature to the peer-to-peer network and Giulio will be able to receive and cash it. The transaction then becomes known and known in real time from the whole network, waiting to be confirmed. While before confirmation the transfer of virtual money can also be canceled, after confirmation it enters the "blockchain" and can no longer be withdrawn.
Only miners can confirm transactions. These miners take the transactions, stamp them as legitimate and spread them on the net. After a transaction is confirmed by a miner, each node must add it to its database and become part of the blockchain. To do this mining job, miners are rewarded with Bitcoins. Since the miner's activity is the most important part of the cryptography system, we need to try to understand what he does.
READ ALSO: Meaning of Blockchain, what it is and what it is used for
What cryptocurrency miners do "> hash", the product of a cryptographic function, to connect the new block with its predecessor. This work is called Proof-of-Work and with Bitcoin it is based on the SHA 256 Hash algorithm.
Beyond what it means in detail, it is only important to know that miners have to solve a kind of puzzle to build a block and add it to the blockchain.
The puzzle becomes increasingly complex depending on the power of the computer used by the miner, because there is only a specific amount of cryptocurrency that can be created in a given time.
As an incentive, the miner has the right to receive a specific number of Bitcoins.
Miner activity is the only way to create valid Bitcoins.
READ ALSO: How to create (undermine) Bitcoin: required computers and programs
We could say that with Bitcoin the currency management process is much more transparent than the real banking one, governed by people we don't know according to rules made by them. Bitcoin is democratic and self-managed by those who own virtual currency and its use cannot be limited by anyone. The guarantee on Bitcoin is given by mathematics and with the power of cryptography technology, it is practically impossible that it will be compromised.
To describe cryptocurrencies, let's talk about its transactional and monetary characteristics.
The properties of Bitcoins and cryptocurrencies are :
- irreversibility of transactions, which means that it is impossible to reverse a transaction after confirmation.
Nobody can ever do that, not even a bank, not even a miner. If you send money to a scammer, this is clearly lost.
- Anonymous currency, which means that cryptocurrency accounts are not tied to identity in the real world.
Bitcoins are received on so-called addresses from which it is impossible to trace the owner.
- Fast and global currency ; money transfers are not like wire transfers, but are immediate anywhere in the world.
- Safe currency : cryptocurrency funds are impossible to steal because they are locked in a public key cryptography system.
Only the owner of the private key can send the cryptocurrency coin.
A Bitcoin address is more secure than any safe.
- There are no authorizations to ask anyone to use cryptocurrency, just download free software to receive and send Bitcoins or other cryptocurrencies.
- The cryptocurrency market works like the gold market and you can't have a debit account, either you have it or you don't have it.
The main cryptocurrencies that can be bought and used for payments or investments are:
- Bitcoin, the first and most famous cryptocurrency coin.
Bitcoin serves as the golden digital standard across the cryptocurrency industry, is used as a global means of payment and is the preferred currency of cybercrime and illegal black markets.
After seven years of existence, the Bitcoin price has increased from zero to over 3200 Euros, with incredible growth since January 2017, when it was worth 900 Euros and from January 2016 when it was worth 300 Euros.
Bitcoin works and is destined to remain in the world.
- Ethereum is the second most widespread crypto currency, different from Bitcoin in the way in which transactions are processed in a more flexible way, used for investments.
- Ripple, a less popular and currently little used project.
- Litecoin, one of the first cryptocurrencies born after Bitcoin, which however has no real use and remains as a reserve in the case of Bitcoin failure.
- Monero, a cryptocurrency that reinforces the encryption and privacy of transactions that become untraceable.
In addition to these, there are hundreds of cryptocurrencies from different families, most of which are just attempts to reach investors and make money quickly.
The revolutionary impact of cryptocurrencies can be understood by thinking about the power that these monetary currencies take away from the central banks of the states which cannot therefore regulate the money supply, inflation and deflation. Also for this reason the administrators of the big world banks despise BitCoins and demonize them as an instrument of illegality destined to deflate and die in a short time. In reality, however, the spread of cryptocurrencies is constantly increasing, investments are now all profitable and safe, with a growth in value that does not seem to stop and that in any case maintains stability over time.
Cryptocurrencies are like gold, a solid asset protected by political influence, national laws and all prohibitions. They are also a means of fast payment worldwide, very private and anonymous, perfect for the black market and any illegal activity such as those of the Deepweb sites.
With their growing value, then, cryptocurrencies have also become a means of growing speculation, with an extremely dynamic market that has opened new horizons for all investors. It is common for a currency to gain 10% of its value in one day and sometimes even much more, then losing the same the next day or even growing by 1000% in a week.
To start with cryptocurrencies and Bitcoins
Given that this blog can not take any responsibility in the case of wrong investments, those who want to buy Bitcoin to have an investment portfolio or to make micropayments to the sites that accept them or even to exchange money with other people, can easily do so on the CoinBase site .
On the Steem website (one of the best and most used in the world) it is possible to create a blockchain account to manage crypto-currency portfolios, buy and sell.
To learn more about Bitcoins, I can recommend reading articles on the specialized Blockgeeks site, which explains everything about how Cryptocurrencies work.
Although this is not an economics blog, it is still interesting to talk here about cryptocurrencies, the digital currencies without nationality that are generated by computers, which have now become a global phenomenon.
It is worth giving at least a smattering or an introduction so as to start the most curious, those who have never heard of it and those who have not quite understood what it is.
Today, in 2017, many large banks and investment companies work with cryptocurrencies, while individual individuals have managed, even with a few thousand Euros, to obtain important real earnings thanks to these virtual currencies.
Trying, therefore, to go beyond the press releases and newspaper articles that only chat and statistics, let's see here what cryptocurrencies are, what cryptocurrency means and how you can start using digital coins such as BitCoins, to make payments online and investments.
READ ALSO: Bitcoin: how digital currency created for the internet works
What is cryptocurrency or cryptocurrency
Cryptocurrencies are born as a secondary product of another invention, Bitcoin, which is practically the first cryptocurrency in history.Bitcoin, invented by the unknown Satoshi Nakamoto, was born as a peer-to-peer electronic payment system, with the aim of facilitating internet payments between people in different countries, to avoid currency exchange fees. The most important feature of Satoshi Nakamoto's invention is that of operating in a decentralized digital money system and without being under the control of a country. This feature is essential for a reliable payment system to record transactions and know who spent the money and how many.
Usually, this check is done by a central server that keeps the balance register (i.e. the difference between income and expenses)
In a decentralized network, where there is no such central control unit, there is a need for self-control by every entity that enters this network. Each peer on the network must have a list of all transactions to check if future transactions are valid or are a scam attempt. Obviously there must be no conflict between entities and all must have the same synchronized list.
This thing of control over transactions without a central unit seemed impossible, at least until the invention of BitCoin.
The cryptocurrency is therefore based on insertions in a database that no one can change in the absence of specific conditions (if you want to make an analogy, you can take our bank account and note how the bank statement is nothing more than a database of entered figures) . The mechanism governing cryptocurrency databases such as Bitcoin consists of a network of peers, each of which has the complete history log of all transactions.
This register is nothing more than a file with the words " Claudio gives X Bitcoin to Giuli o", protected by an encrypted key. If I have to give Bitcoin to Giulio, I send this encrypted file from my signature to the peer-to-peer network and Giulio will be able to receive and cash it. The transaction then becomes known and known in real time from the whole network, waiting to be confirmed. While before confirmation the transfer of virtual money can also be canceled, after confirmation it enters the "blockchain" and can no longer be withdrawn.
The Blockchain
Blockchain is the incorruptible digital register of economic transactions that can be programmed to record financial transactions and any exchange of value.Only miners can confirm transactions. These miners take the transactions, stamp them as legitimate and spread them on the net. After a transaction is confirmed by a miner, each node must add it to its database and become part of the blockchain. To do this mining job, miners are rewarded with Bitcoins. Since the miner's activity is the most important part of the cryptography system, we need to try to understand what he does.
READ ALSO: Meaning of Blockchain, what it is and what it is used for
What cryptocurrency miners do "> hash", the product of a cryptographic function, to connect the new block with its predecessor. This work is called Proof-of-Work and with Bitcoin it is based on the SHA 256 Hash algorithm.
Beyond what it means in detail, it is only important to know that miners have to solve a kind of puzzle to build a block and add it to the blockchain.
The puzzle becomes increasingly complex depending on the power of the computer used by the miner, because there is only a specific amount of cryptocurrency that can be created in a given time.
As an incentive, the miner has the right to receive a specific number of Bitcoins.
Miner activity is the only way to create valid Bitcoins.
READ ALSO: How to create (undermine) Bitcoin: required computers and programs
We could say that with Bitcoin the currency management process is much more transparent than the real banking one, governed by people we don't know according to rules made by them. Bitcoin is democratic and self-managed by those who own virtual currency and its use cannot be limited by anyone. The guarantee on Bitcoin is given by mathematics and with the power of cryptography technology, it is practically impossible that it will be compromised.
To describe cryptocurrencies, let's talk about its transactional and monetary characteristics.
The properties of Bitcoins and cryptocurrencies are :
- irreversibility of transactions, which means that it is impossible to reverse a transaction after confirmation.
Nobody can ever do that, not even a bank, not even a miner. If you send money to a scammer, this is clearly lost.
- Anonymous currency, which means that cryptocurrency accounts are not tied to identity in the real world.
Bitcoins are received on so-called addresses from which it is impossible to trace the owner.
- Fast and global currency ; money transfers are not like wire transfers, but are immediate anywhere in the world.
- Safe currency : cryptocurrency funds are impossible to steal because they are locked in a public key cryptography system.
Only the owner of the private key can send the cryptocurrency coin.
A Bitcoin address is more secure than any safe.
- There are no authorizations to ask anyone to use cryptocurrency, just download free software to receive and send Bitcoins or other cryptocurrencies.
- The cryptocurrency market works like the gold market and you can't have a debit account, either you have it or you don't have it.
The main cryptocurrencies that can be bought and used for payments or investments are:
- Bitcoin, the first and most famous cryptocurrency coin.
Bitcoin serves as the golden digital standard across the cryptocurrency industry, is used as a global means of payment and is the preferred currency of cybercrime and illegal black markets.
After seven years of existence, the Bitcoin price has increased from zero to over 3200 Euros, with incredible growth since January 2017, when it was worth 900 Euros and from January 2016 when it was worth 300 Euros.
Bitcoin works and is destined to remain in the world.
- Ethereum is the second most widespread crypto currency, different from Bitcoin in the way in which transactions are processed in a more flexible way, used for investments.
- Ripple, a less popular and currently little used project.
- Litecoin, one of the first cryptocurrencies born after Bitcoin, which however has no real use and remains as a reserve in the case of Bitcoin failure.
- Monero, a cryptocurrency that reinforces the encryption and privacy of transactions that become untraceable.
In addition to these, there are hundreds of cryptocurrencies from different families, most of which are just attempts to reach investors and make money quickly.
The revolutionary impact of cryptocurrencies can be understood by thinking about the power that these monetary currencies take away from the central banks of the states which cannot therefore regulate the money supply, inflation and deflation. Also for this reason the administrators of the big world banks despise BitCoins and demonize them as an instrument of illegality destined to deflate and die in a short time. In reality, however, the spread of cryptocurrencies is constantly increasing, investments are now all profitable and safe, with a growth in value that does not seem to stop and that in any case maintains stability over time.
Cryptocurrencies are like gold, a solid asset protected by political influence, national laws and all prohibitions. They are also a means of fast payment worldwide, very private and anonymous, perfect for the black market and any illegal activity such as those of the Deepweb sites.
With their growing value, then, cryptocurrencies have also become a means of growing speculation, with an extremely dynamic market that has opened new horizons for all investors. It is common for a currency to gain 10% of its value in one day and sometimes even much more, then losing the same the next day or even growing by 1000% in a week.
To start with cryptocurrencies and Bitcoins
Given that this blog can not take any responsibility in the case of wrong investments, those who want to buy Bitcoin to have an investment portfolio or to make micropayments to the sites that accept them or even to exchange money with other people, can easily do so on the CoinBase site .
On the Steem website (one of the best and most used in the world) it is possible to create a blockchain account to manage crypto-currency portfolios, buy and sell.
To learn more about Bitcoins, I can recommend reading articles on the specialized Blockgeeks site, which explains everything about how Cryptocurrencies work.
