What is cryptocurrency and why was it invented

What is cryptocurrency and why was it invented

As you know, happiness is not in money, but in their quantity. Every person dreams of becoming rich using simple and painless ways - win at a casino, discover an oil field or get rich on mining. In search of passive income, many people are interested in what is cryptocurrency - a term that hides even more incomprehensible words - blockchain, ICO, node, decentralization and others. And the first crypto-signs were invented by a certain Satoshi Nakamoto, whose identity is considered fictional. Those who choose this type of investment no matter what, need to figure out how to work with this system.

What is a cryptocurrency

The concept itself implies several formative facts. First, it is important to understand that this is a cryptocurrency that exists only in the digital world. It has no real attributes. If you can withdraw money from a bank card at an ATM and receive real banknotes, then this is impossible to do in the world of crypto signs.

The next factor is that accounting for electronic money is provided by a decentralized payment system. When withdrawing funds from a card or bank account, there is a certain mechanism that checks that there is money, they can be withdrawn. This mechanism coordinates all transactions. In turn, the activity of the bank is regulated by the Central Bank of the country. There is no vertical hierarchy in cryptocurrency, only horizontal.

Benefits and risks

When typing information in a cryptocurrency search engine, people first of all want to know which cryptosigns are going up. To issue such electronic money, an ICO, Initial Coin Offering, is announced. This is an announcement to raise funds from investors, a fixed number of new units of cryptocurrencies. The term is derived by analogy with the IPO - the initial offer of shares. But ICO, that is, the initial offer of crypto money, does not have any state regulation. And when buying shares of an enterprise, these securities are subject to the laws of the country in which they were issued.

Do not miss:  The Fortress 2 team leaked the source code, and you apparently can get malware while playing

It should be noted that in 2018 Facebook and Google announced bans on advertising cryptocurrency and related financial mechanisms. Some financiers are categorically against advertising this type of investment because they are practically not backed by anything.

Ordinary "fiat" money also does not have collateral, as before, for example, with gold. But the government is responsible for the currency of each country. With the onset of a crisis and the depreciation of money, some measures will be taken. In the event of a collapse of crypto money, there is practically nowhere to turn. All checks of companies issuing tokens come down to checks by exchanges trading electronic money.

Cryptocurrency trading has an important feature - the impossibility of canceling a confirmed operation. Payments occur without intermediaries and are irreversible. If third parties made a payment, and through their fault the crypto money was sent to an erroneous or non-existent address, a refund to the former owner is not possible. When a person pays for a purchase at a shopping center, but an erroneous purchase goes through, he can contact the checkout control center. The money will be returned immediately or within a few days.

How trading is carried out

The first cryptocurrency is Bitcoin, it was first released in 2009. All cryptocurrencies that are not bitcoins are called altcoins. They first appeared in 2011. But bitcoin still holds the palm, its share in the crypto market is about 60 percent. Earnings on crypto money basically comes down to buying and selling them at a more favorable rate.

There are the following principles of functioning of cryptocurrencies:

  • Decentralization - any transactions are performed by network participants without the involvement of any issuer.
  • Security - the use of various encryption algorithms protects against hacker attacks. But hacks still happen.
  • Anonymity - the user has a wallet number that is not associated with his identity.
  • Deflation is the opposite of inflation. When issuing cryptosigns, the finite number of issued coins is known.
Do not miss:  What to expect from Google Chrome in 2020

To trade, you need to open a cryptocurrency account. In Russia, bitcoins of blockchain technology are not prohibited. Cryptocurrency is stored, which you can choose according to your preferences. The law on taxation has already been approved. It is very difficult to become an investor and open startups on your own. This is due to the fact that it is difficult to obtain a license and open an account.

You can even get a license in EU countries such as Lithuania, Malta and Estonia. Licensing will cost 2-5 thousand euros. Opening an account for cryptocurrencies is much more difficult. It is believed that this is a high-risk area, including for the use of illegal means - financing of terrorism, money laundering. Therefore, banks put forward a whole system of requirements, including checking customers. It is almost impossible to open an account for cryptocurrency in an ordinary bank in the European Union.

Many people are faced with the question: why was the cryptocurrency created and by whom? For some, this is a game of appreciation for the purpose of making a profit, like in a casino. According to some citizens, this is an extremely risky project that not everyone can trust.

Please rate the article
Translate »