Types of #cryptocurrencies
Although Bitcoin is a fairly common word today and the first that comes to mind when mentioning #cryptocurrencies, there are currently more than 1,000 #cryptocurrencies available.
Below, we list the most important #cryptocurrencies:
Bitcoin: It is the original #cryptocurrency (the first one that appeared in 2009) and the most well-known. It is the leading #cryptocurrency in the crypto ecosystem, and its main function is as a store of value, competing with gold. If you want to learn how to use Bitcoin safely, we recommend this course.
Ethereum: It is not a #cryptocurrency per se but a decentralized platform that allows for the execution of smart contracts and applications on a distributed network. These operations occur thanks to the #cryptocurrency that the system uses, ether. Currently, Ethereum is positioned as one of the projects with the most future in the entire crypto ecosystem as most projects in this environment are based on Ethereum to function.
Binance Coin: It is the official #cryptocurrency of the Binance crypto exchange and was created to facilitate transactions within this platform.
Cardano: It is one of the #cryptocurrencies that has grown the fastest in the market. It arises in what is called the third generation of blockchain to solve the scalability problems of other #cryptocurrencies like ether. It is distinguished by using unique mathematical principles and a multi-layer architecture.
Tether: It is a stable #cryptocurrency, meaning it is associated with and backed by traditional fiat currencies in the real world. Specifically, it is pegged to the dollar at a 1:1 ratio. It creates a bridge between virtual and physical currencies; although it cannot be used for exchanges between these two types of currencies, it is commonly used for investing or divesting in other crypto assets.
Polkadot: It is a blockchain protocol that aims to connect different blockchains of existing #cryptocurrencies to a universal blockchain, where transactions can be made with different currencies. Similarly, it has its own #cryptocurrency (DOT). This #cryptocurrency holds value because, depending on the amount owned, one has more or less voting power within the protocol to decide on certain aspects and updates. Polkadot aims to be the 'Internet of Blockchain.'
Ripple: It is a project that aims to help financial entities and companies around the world make transfers much faster and cheaper, thus replacing the current BIC/SWIFT system.
Uniswap: It is software on the Ethereum blockchain that allows for decentralized exchanges without the need to entrust funds to someone.
Litecoin: It is an alternative to Bitcoin but has an upper limit. By allowing larger blocks than Bitcoin, it is a more scalable currency and thus more easily usable for paying for goods and services.
Chainlink: It is a decentralized service that connects blockchains with the real world. The #cryptocurrency it uses is LINK, and it aims to be a bridge between the crypto space and the data generated by people, companies, and institutions in the real world.
Uses of #cryptocurrencies
Although in some countries transactions with #cryptocurrencies are still not accepted, many countries are already treating them like any other currency, thereby facilitating money movements, buying and selling, and investment.
An example of this is the capital of Spain, Madrid, which is gradually incorporating #cryptocurrencies to become the pioneering capital in the use of these assets. It has the longest 'bitcoin street' in Europe, where some businesses allow purchases with #cryptocurrencies.
While the uses of #cryptocurrencies are not widely spread, as mentioned, in some countries they are starting to be permitted and encouraged. The most notable uses of #cryptocurrencies are:
Payment of taxes. Some regions in Switzerland allow payment of taxes with Bitcoin and Ethereum to promote and facilitate the use of #cryptocurrencies in everyday life.
Cheap international transfers: This use is primarily occurring in developing countries, where #cryptocurrencies are used to make money movements, avoiding the restrictions imposed by currency controls. In countries where there is no established separation of powers, a weak economy, or a corrupt political and banking system, #cryptocurrencies are a refuge for citizens and companies that want to protect their savings from the volatility and risks of any other financial asset or currency.
Receiving salary. In some places, like Miami, the possibility of receiving salary (or part of it) in Bitcoins is being studied, especially in jobs that handle larger amounts of money and in more innovative jobs (football signings, freelancers, web creators, etc.).
Charging your clients. Almost 50% of the global population (mostly women) does not have access to bank accounts or debit or credit cards. Accepting #cryptocurrencies as a payment method expands the potential customer market to all those who have a mobile phone with internet access, thereby broadening potential clients.
It is worth mentioning that some companies already allow payment with #cryptocurrencies, although in the country where they are located, their use is not widespread. Everything points to #cryptocurrencies being more widely accepted in a few years, as they offer multiple improvements for citizens, businesses, and even for financial entities. For this, effective regulation will be necessary to provide legal security for all parties.
Companies related to tourism are the ones that are adopting #cryptocurrencies the fastest (for example, Destinia, 13tickets, or More Stamps Global). Of course, technology companies are also betting on this type of currency. Among them, Tesla stands out for allowing the purchase of cars with Bitcoin, Microsoft, which allows payment for Windows and Office licenses with Bitcoin in the US, Namecheap for web hosting, Wordpress, Hostinger, or ExpressVPN, among many others.
Advantages and disadvantages of #cryptocurrencies
It is important to emphasize that #cryptocurrencies are characterized by being very volatile assets, which initially provides them with great advantages, but also significant disadvantages.
Among the advantages of #cryptocurrencies, the following can be highlighted:
They are global currencies. #Cryptocurrencies are not regulated by government agencies or financial entities or banks, allowing them to be used by anyone and anywhere in the world, without limits or censorship. #Cryptocurrencies are controlled simply by their users, meaning that modifications to transaction conditions cannot be made without the consent of other holders of that #cryptocurrency. This is what are known as governance tokens, as they allow for voting on improvements and new implementations of that #cryptocurrency.
They are secure. Currently, it is impossible to counterfeit #cryptocurrencies thanks to the sophisticated cryptography they use. Each person has their cryptographic keys, and it is materially impossible for fraud to occur without the private keys of the #cryptocurrency holder.
Some #cryptocurrencies are deflationary. There is a specific and limited number of #cryptocurrencies, and their issuance decreases over time. Excess supply that would decrease the price of the #cryptocurrency is not allowed.
They perform irreversible transactions. #Cryptocurrencies, not being regulated by a central body, do not allow a third party to cancel or modify a transaction that has already been made once the good or service has been paid for.
They allow immediate transactions. In international buying and selling processes, the use of #cryptocurrencies can significantly expedite these processes, especially between countries that do not have financial treaties with each other.
They are transparent. All transactions through Blockchain are public and are recorded on a network of multiple devices, storing data in a manner that is accessible and transparent for all users, making it very difficult to introduce alterations into the processes.
They facilitate investigation: since all transactions are public, it eases the task of the police and intelligence services as they can more easily trace the receipt and sending of money from any wallet, without the need for judicial authorization. The key is that to know who the holder is, they must associate the identity of the holder with a particular wallet, just as is done with any traditional bank account.
#Cryptocurrencies also present some disadvantages, which lead to distrust and the low acceptance these currencies still have:
Possible loss of money:
If the private key to access the virtual wallet is lost, all the virtual money that was there is lost. Therefore, although some security may be lost, it is advisable to have a backup of the wallet.
Since they are not protected by any banking entity, legislation, or insurance, they carry practically the same risks as cash, except that in this case, you can keep backup copies.
#Cryptocurrencies can be stored under physical possession in a cold wallet (not connected to the internet) or in a hot wallet (connected to the internet), which may or may not be held by a third party.
In the event that the issuer of #cryptocurrencies pays for an unsatisfied good or service, or a transaction is mistakenly sent to a wallet, it cannot be reversed or refunded once the transaction has been made.
Volatility in their value: their sudden price fluctuations with sharp rises and falls make it difficult to use them in the buying and selling of goods and services, but also as a financial investment asset. On the contrary, volatility is also associated with high returns, which allows for large gains for those investors with lower risk aversion.
Continuous changes and lack of specific regulation. Although work is currently being done on the regulation of #cryptocurrencies, it is true that these regulations are pending approval. Furthermore, fluctuations in the price of #cryptocurrencies can entail fiscal risks.
Distrust from potential users. This distrust arises both from the fluctuations in prices in this virtual market and from the existing lack of knowledge, as there is still a significant barrier to entry. Additionally, the fact that many people do not know how other users operate or the way they use #cryptocurrencies can make them avoid using them.