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  1. Financial Markets
  2. Financial Markets

Crypto

The cryptocurrency or cryptocurrency is a type of digital currency that uses cryptography to provide a secure payment system. These encryption techniques serve to regulate the generation of monetary units and verify the transfer of funds. They do not need a central bank or other institution to control them.

Cryptocurrencies are a type of digital currency, which are those that do not exist in physical form, but that serve as exchange currency, allowing instant transactions through the Internet and regardless of borders. Other types of digital currency are virtual currencies (usually controlled by developers), electronic money, and internet coupons.

In 2009, the first fully decentralized cryptocurrency appeared, Bitcoin, which was created by Satoshi Nakamoto along with the software that supports it (blockchain). To this day it is not known who is behind the name of the creator. The appearance of bitcoin was so innovative that the terms of cryptocurrency and Bitcoin are merged into one and it is indistinct to speak of one or the other.

In our days, more cryptocurrencies based on the pioneer Bitcoin have appeared, which are known as altcoin, some of them are Namecoin (2011), Litecoin (2011) or Peercoin (2012).

Origin of cryptocurrencies

Throughout history, there have been multiple means of exchange for goods and services. All of them have been undergoing evolutions and changes or, directly, they have disappeared. This is the case of barter or the use of precious materials, which gave way to the system that has worked until now, the bills and coins.

However, in an age where technology is gaining more and more ground every day, a medium of exchange more adjusted to the times is necessary: ​​the cryptocurrency.

In the wake of the cypherpunk movement in the 1980s, cryptocurrency emerged. This art defended the widespread use of writing with secret keys that could only be understood by those who knew how to decipher them.

A decade later, David Chaun created Digicash to provide a centralized electronic money system that allowed for more secure and anonymous transactions. In the same period, Adam Black proposed Hashcash, a system to control spam and denial of service attacks.

Although it would not be until 2009 when Bitcoin emerged, the first fully decentralized cryptocurrency.

Characteristics of a cryptocurrency

The main characteristics of cryptocurrencies are:

  • Cryptography: They use encryption techniques to make secure payments and collections.

  • Decentralization: They do not need to be controlled by any institution.

  • There is no possibility of forgery or duplication: A cryptographic system protects users.

  • There are no intermediaries: Direct person-to-person contact.

  • Transactions are irreversible: Once the payment is made, there is no possibility of cancellation.

  • They can be exchanged for other currencies.

  • Privacy of use: It is not necessary to reveal your identity when doing business.

Advantages and disadvantages of cryptocurrencies

The main advantages that characterize the cryptocurrency are:

  • Low transaction costs, as a consequence of the absence of intermediaries.

  • Security, since each coin belongs only to its owner.

  • Transparency, since the transactions are incorporated into a free access register.

  • It accumulates in a tiny space like a USB

.

For its part, the disadvantages are:

  • Volatility of their prices.

  • Lack of current acceptance by some companies.

  • By not needing a regulator like the Government or the Central Bank and providing privacy they can be used for illegal transactions.

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Last updated 3 years ago

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