Several useful facts to keep in mind
○The first cryptocurrency is Bitcoin (BTC)
Bitcoin was created in 2008 by a mysterious figure (or group of people) known by the pseudonym Satoshi Nakamoto.
At the time of the first message about Bitcoin, its price was $0.0008 per coin.
In 2010, the first purchase of goods using bitcoins was made (2 pizzas for 10,000 BTC, which at that time was about $41).
○Decentralization
Unlike traditional currencies, cryptocurrencies do not have a central issuer (such as a central bank).
Cryptocurrencies operate on blockchain technology, which provides a high level of security and transparency for transactions.
○Blockchain is a distributed ledger system where all transactions are recorded in blocks and chains.
Each transaction is secured by cryptography, and changes to the blockchain are impossible without the consensus of the network, making the system highly protected against falsifications.
○Limited number of bitcoins
The total number of bitcoins is limited to 21 million coins. This makes BTC a deflationary asset, and over time its value may increase due to scarcity.
As of now, about 19 million bitcoins have been mined, and the mining process will continue until 2140.
○Mining cryptocurrencies
Mining is the process of confirming transactions on the network and adding them to the blockchain. Miners use their computing power to solve complex mathematical problems and receive rewards in the form of new coins.
Bitcoin and Ethereum (before the transition to Proof of Stake) used the Proof of Work method, which requires significant energy costs.
○Ethereum and smart contracts
Ethereum (ETH) is the second most popular cryptocurrency after Bitcoin, but it differs from BTC in that it allows for the creation of smart contracts in addition to token transactions.
Smart contracts are self-executing contracts with the terms written in code and automatically executed without the need for intermediaries.
○Altcoins are all cryptocurrencies except Bitcoin. Examples: Ethereum (ETH), Ripple (XRP), Litecoin (LTC), Cardano (ADA), Polkadot (DOT), and others.
Altcoins are often used for innovative solutions, such as improved security protocols, faster transactions, or scalability solutions.
○Stable cryptocurrencies (stablecoins)
Stablecoins are cryptocurrencies pegged to the value of fiat currencies such as the US dollar or euro. Examples: Tether (USDT), USD Coin (USDC).
These cryptocurrencies aim to maintain a stable value, making them convenient for everyday transactions.
○Application of cryptocurrencies
Cryptocurrencies can be used for international transfers (for example, when sending funds abroad), for investment, and as a means of payment in some online stores and services.
Some cryptocurrencies can be used as assets for staking or in decentralized financial systems (DeFi).
○Legal status of cryptocurrencies
In some countries, cryptocurrencies are officially recognized as legal (for example, in the USA or Japan), while in others their use is limited or banned (for example, in India or China).
An important aspect is the legislative ambiguity regarding the taxation of cryptocurrencies, as in some countries cryptocurrencies are regarded as assets or property.
○Volatility of cryptocurrencies
Cryptocurrencies can be extremely volatile. For example, the price of Bitcoin can change by 5-10% in a single day, attracting both investors and speculators.
This volatility is important to consider when investing, as it can significantly increase or decrease the value of assets in a short time.
○Cold and hot wallets
Cryptocurrency wallets are divided into hot (online wallets always connected to the internet) and cold (offline wallets, such as hardware wallets like Ledger or Trezor).
Cold wallets are safer for storing cryptocurrencies for the long term as they are not susceptible to hacking attacks.
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