Cryptocurrencies are perhaps the next big step in the evolution of the Internet, but they also represent a high level of complexity. Which makes the news flow difficult to measure, but stimulating for potential investors.
Recent press headlines have focused on the rise and then fall in the price of bitcoin, as well as the rush of new cryptocurrencies to market. Investors who are not yet present in bitcoin market they naturally wonder if they should go in now or if they haven’t missed the boat.
Business owners are also wondering if they should implement a way to get paid in cryptocurrency. A way to get ahead of the potentially changing payments landscape.
But the rise of cryptocurrencies has implications for sectors beyond the financial realm. While predicting the future is difficult, a good place to start is to familiarize yourself with the basics of cryptocurrency. Therefore, there are several trading platforms who have appeared in order to be able to try these new active ingredients to understand them.
Cryptocurrencies – What exactly is it?
Cryptocurrencies are digital currencies that exist only online and operate through peer-to-peer technology. Unlike fiat currencies, which are issued and guaranteed by a country, they do not have a paper version. Furthermore, no central bank controls their supply.
Cryptocurrencies can be used like any other currency: as payment or as an investment.
They can be purchased on certain exchanges or directly online through various platforms. Likewise, they can be purchased in small fractions of coins, meaning they can theoretically be used to make small purchases as well as larger purchases.
In the case of bitcointhe number of coins that can be produced is limited to 21 million, which attracts investors because it strongly limits possible inflation.
But if bitcoin is the largest as well as the most popular cryptocurrency, it is only one of them. However, only a few of them – such as Ethereum, Ripple, Dash and Litecoin – have achieved significant penetration.
Blockchain at the heart of cryptocurrencies
While cryptocurrencies are intriguing on their own, there is more excitement around the network that powers them, known as blockchain. Bitcoin was the first use of blockchain technology, but the two are not the same.
Blockchain it is rather an ever-evolving system of code books, all of which are interconnected and widely distributed among many users. Changes to one block require changes to previous blocks. Each modification then leaves a record, which makes the array practical impossible to hack.
Crypto-currencies: between mystery and ecological impact! So many are asking questions about what will happen with these new coins. Various parties are also concerned about the effects it will have on our lives in the long run.
If investors are focusing on the potential of cryptocurrencies as alternative investments or payment systems, it is the potential of blockchain which may prove to be more transformative.
Where do cryptocurrencies come from?
Unlike fiat currencies, cryptocurrencies are not issued by a central bank. Instead, they are taken out! A term that reflects the amount of labor required to produce them. We talk about mining, where miners give themselves time and computing power to help verify cryptocurrency transactions and add them to the blockchain.
By doing so, they are rewarded with new coins. This process requires special equipment and consumes a very large amount of energy, which makes mining very expensive.
This is why there has been a sharp rise in prices for computer components in recent years, and more specifically for graphics cards. The latter make delivery possible power needed for mining. We are not satisfied with 2-3 graphics cards, but dozens, if not hundreds, which are assembled in series to mine cryptocurrencies.
According to Mitch Steves, analyst at RBC Capital Markets in San Francisco: “Mining issues will likely be resolved over time by new technological innovations such as the Lightning Network. This technology works as a payment protocol that can be placed on top of a cryptocurrency blockchain to speed up transaction times and use less energy.