_ This article is prepared for beginners and/or people with low knowledge about cryptocurrencies to understand a little more about the topic.
What are cryptocurrencies?
Cryptocurrencies are virtual coins, with no physical equivalent, that use cryptography to secure transactions and payments and to control the creation of new monetary units.
How cryptocurrencies work and what they are used for
Cryptocurrencies are decentralized digital assets, as they are not controlled or backed by any central bank, and their exchanges do not require intermediaries. The control of cryptocurrency transactions depends on a decentralized database, usually a blockchain.
Cryptocurrencies are used as an alternative means of payment to legal tender and more frequently as an investment. However, unlike other financial assets, cryptocurrencies are not subject to any specific regulation, do not have the backing of a public authority, nor are they covered by any consumer protection mechanism.
How many types of cryptocurrencies exist?
Currently, it is estimated that there are more than 9,000 cryptocurrencies in the market. The most popular are bitcoin, ethereum, tether, and ripple.
What is bitcoin?
Bitcoin is the first cryptocurrency that began operating (in 2009) and is also the most known and has the highest market capitalization. Currently, one bitcoin is trading near 23,000 dollars on exchange platforms. This cryptocurrency can be found on this platform as $BTC
What is blockchain technology and what is its relationship with cryptocurrencies?
Cryptocurrencies use blockchain technology to ensure the security and integrity of transactions, as well as to generate new units of cryptocurrency.
Blockchain is a technology that organizes information into blocks, information that must be validated by all participants in the network and that, once recorded, is unalterable. It is somewhat like an indelible accounting book shared among a network of thousands of interconnected computers. The characteristics of blockchain have helped the development of cryptocurrencies, as by creating a shared record of all transactions and establishing a decentralized validation method, it facilitates the direct exchange of digital currencies without the need for intermediaries.
What is mining cryptocurrencies and what does it consist of?
Mining cryptocurrencies is the process followed to create additional monetary units of a cryptocurrency. Cryptocurrency mining consists of solving a mathematical problem posed by a network of agents known as miners, using powerful computing equipment for this purpose. Whoever solves the problem first receives a reward, which is new units of the cryptocurrency being mined.
What is a virtual wallet and what types are there?
A virtual wallet is software that serves to store, send, and receive bitcoins and other cryptocurrencies. It would be the equivalent of a bank account in the world of cryptocurrencies. Virtual wallets are protected by an encryption system, so only the owner can access it using a password or security pin.
In addition to virtual wallets in the form of software, there are physical or hardware wallets (similar to a credit card or USB drive) where cryptocurrencies can be stored; as well as paper wallets, which are nothing more than the printing of the private key on paper.
Who determines the price of cryptocurrencies?
The price of cryptocurrencies is subject to fluctuations. Transactions are usually carried out on exchange platforms similar to the foreign exchange market, and, as is the case here, the price of each cryptocurrency will rise or fall depending on supply and demand.
How can I check the value of cryptocurrencies in real time?
There are many websites that show real-time fluctuations of cryptocurrencies. You can check their current value and see how it has evolved over the last day, week, month, year, or several years. The Google search engine itself offers a module with that data when querying about a cryptocurrency.