Cryptocurrencies or crypto assets are virtual currencies that are gaining great popularity with the public during the last couple of years. But this popularity is only relative since how they work is still unclear for many, and they are often mistaken for stock market speculation. And yet, as virtual as they are, cryptocurrencies do make it possible to make payments over the Internet. So, how do these cryptocurrencies work?
Principles of Cryptocurrency
The first cryptocurrency emerged in 2009 when a mysterious figure under the pseudo Satoshi Nakamoto created Bitcoin. It is the first decentralized dematerialized currency, created to be an alternative to tangible currencies: it has the characteristic of being completely independent of central banks and States on the one hand and of functioning only on the Internet on the other hand.
Today, there are nearly 10,000 decentralized currencies circulating on the Internet, which have become dynamic assets where investors try their luck. You can research the most promising cryptocurrencies, for example, if you are thinking of getting into the crypto trading business!
How to Ensure Secure Exchanges?
In the traditional monetary system, the central bank is responsible for managing and formalizing transactions. But as far as cryptocurrencies are concerned, this task is carried out by a computer network. That network is based on blockchain, a database responsible for managing transactions, securing them, and controlling the issuance of cryptocurrency.
The blockchain ensures the inviolability of the computer protocol and the certification of exchanges within the framework of Bitcoin transactions, for example. The blockchain is a kind of public register in which a copy of all transactions is archived. Everything that is written there is final and cannot be falsified by anyone in any way.
How to Get Cryptocurrency?
If you want to get some cryptocurrencies, you ought to have a digital wallet. To fill your wallet with Bitcoins or other cryptos of your choice, you can buy it on specialized platforms called crypto brokers.
There are multiple asset brokers offering cryptocurrencies such as Bitcoin, Litecoin, Ripple, and traditional currency trading, commodities, and futures. Also, there are crypto-only brokers where you can trade crypto for fiat and vice versa. You need to check the availability of the specific asset you want to invest in and read the broker review to check the trading conditions, fees on transactions, and other aspects of their service.
You can also proceed with mining: in practice, this involves transcribing transactions using your own computers (or a rented system) to receive newly issued cryptocurrency in return.
Not every crypto coin can be mined. For instance, unlike bitcoin, Ripple cannot be mined. The only ones who can get it are, in fact, those who created it.
Today anyone with knowledge and means can create an altcoin. Altcoins are all cryptos besides Bitcoin and make part of the specific projects.
Therefore, not all are suited for paying for goods and services. Instead, they are linked to the projects created to bring new technological and business solutions.
Those who invest in these become some sort of business owners just as the shareholders become owners of the parts of the company the shares they have bought. Concerning this, we must mention the ICOs. The ICOs stand for initial coin offering.
You can become an early investor in a project you believe might have success. For instance, Ethereum is one of the most successful ICOs so far. The early investors in ETH reaped significant profits.