What are cryptocurrencies and why are they so successful?

In economic matters, one of the most interesting topics nowadays is the topic of cryptocurrencies. But what are they really? And why were they so successful? First, a cryptocurrency is a trading currency, just like the euro or the dollar. Unlike traditional currencies, cryptocurrencies do not exist in physical form, and therefore have no monetary equivalent, but only in digital form. This means that the existence of cryptocurrency only happens to exchange data between computers. Moreover, the basic difference between two different currencies also lies in the control and issuance of the same. In fact, traditional currencies are issued by governments and central banks: the euro by the European Central Bank (European Central Bank); Dollars from the Federal Reserve. On the other hand, cryptocurrency is completely decentralized and therefore excluded from the control of any institutional oversight or intermediary: the management of these currencies lies in the peer-to-peer Internet Protocol.

The cryptocurrency par excellence: Bitcoin

Bitcoin is the most popular cryptocurrency, as well as the first currency to be created. As the Bitcoin Earnings Specialized Site was called, the first Bitcoin transaction was dated January 12, 2009 and its creation dates back to the previous year. The creator of the new digital currency is known as Satoshi Nakamoto, a mysterious figure – or perhaps a group of people – whose true identity remains unknown today. Bitcoins can exist and be traded thanks to modern blockchain technology. Basically, this mechanism can be described as an encrypted digital archive, in which all its users subscribe.

Within this huge database, all completed Bitcoin transactions are recorded, starting with the first. The Bitcoin blockchain is completely free, that is, the algorithm that makes it work is in the public domain: no one owns the ownership or the patent. Moreover, the Bitcoin blockchain archive is completely transparent: to anyone who wants it, it is possible to check what transactions have been made, at exactly what time and between users. An important clarification regarding the latter: Also known as “addresses”, blockchain users are mainly represented by strings of numbers and letters which is why their transactions are considered “anonymous”.

What is the reason for the success of cryptocurrencies?

There are currently more than 1,000 cryptocurrencies. Consequently, digital currencies are gaining an increasingly important position in the global economy. Their success is definitely due to their decentralization, which at the same time does not jeopardize their security. The lack of controls and therefore additional commissions or taxes, but also the speed of payment times, are certainly aspects in favor of cryptocurrencies. Not to mention the fact that it allows you to transact virtually anonymously. Moreover, this wide spread is probably also due to the fact that everyone can invest in cryptocurrencies: cryptocurrency exchanges and trading are valid investment opportunities, both in the short and long term.

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