What are cryptocurrencies, advantages and risks – economy

Rome, December 13, 2021 – The financial sector is changing due to the implementation of digital technologies. The Cryptocurrencyor virtual currencies, the most famous of which is Bitcoin. Also among the most prevalent Ethereum and litecoin. Here’s what it is and what the benefits and risks are.

Encryption means “hidden”. In fact, the cryptocurrency is visible and can only be used by knowing a certain thing computer code. Of course, it exists only in a “virtual” form and is generated and exchanged only electronically. You will not find bitcoins, coins or notes.

When there is the consent of the participants in the transaction, the cryptocurrency can be traded in the mode peer to peer, that is, directly, without intermediaries, to purchase goods and services, as if it were a legal tender in all respects. Cryptocurrency can be closedAnd Unidirectional or bidirectional According to whether it cannot be exchanged for an “official” currency or not. For example, Bitcoin is a two-way virtual currency because it can be converted into the main official currencies and vice versa. Many cryptocurrencies use an extension blockchain technology, which uses a decentralized network to record and approve the executed transactions. Basically, with this technology, it is very difficult to modify the transaction data once it is entered into the system and this is a guarantee of security.

Virtual currencies are not legal tender anywhere in the world and are therefore accepted as a means of payment on a voluntary basis. Virtual currencies are not regulated by Central government agencies, but is generally issued and controlled by the issuing body according to its own rules, which members of the reference community agree to abide by. There are countries that have decided to try, under their control, the use of virtual currency in their countries, such asUruguay with e-peso, or advertised its use without getting more information about it, for example Venezuela With Petro, or, again, who have initiatives in business in this regard, such asEstoniaThe Sweden as well JapanWhich announced by 2022 that it intends to put a virtual currency on the market.

Legal tender coins are usually identified with functions The unit of accountfrom Payment method or payment generally accepted and store of value. The high volatility of cryptocurrencies certainly does not allow the correct functioning of the “unit of account” function: the prices of the main cryptocurrencies are subject to Too big fluctuationsEven on the same days. So it is very ineffective, not to mention impossible, Prices of goods and services in cryptocurrency units. With regard to the value storage function, it must be borne in mind that due to the way it is designed, the more it is used to push goods and services, the more will increase in value. This is because the number of cryptocurrency units that can be produced is limited, with the creation of new cryptocurrency this is limited and decreasing over time. So the more transactions in cryptocurrencies are settled, the higher their value. In the end, It is not a commodity currency, that is, they also do not have a use function, such as gold for example. Instead, they can push more and more, in the near future, to fexchange fat.

Anyone can do this, so there may be thousands of virtual currencies in circulation at the same time. According to statista.com, there are files about six thousand. To create or distribute cryptocurrencies, you can use Ico, “initial coin offering”. The first ICOs were launched to raise funds for new cryptocurrencies, while later the main goal was to directly fund business ideas.

Once virtual currencies are issued, they can be bought or sold on a single currency exchange platform, called an exchange platform, using legal tender funds (for example, euros, dollars, etc.). Exchange platforms that buy and sell cryptocurrency through are not currently regulated, so there is no requirement for one Specific legal protection In the event of dispute or bankruptcy.

How to shop with cryptocurrency
Many websites and online stores have started accepting cryptocurrencies, especially Bitcoin, as a payment method. It is possible to buy everything from Nft – non-replaceable token – This is a digital work, for example, a virtual terrain video game. To make a digital purchase, you need a file crypto wallet, which is a virtual wallet containing public and private keys that are used to spend and receive cryptocurrencies. a public key It is a code known to all users of the system. there secret keyInstead, it is only known to the user and used to sign transactions.

Cryptocurrency is believed to be beneficial because No commissions. Cryptocurrencies also provide greater speed and efficiency in foreign payments and remittances.

The relatively anonymous nature of cryptocurrencies makes them Attractive to criminalswhich can be used for money laundering and other illegal activities. Cryptocurrencies can pose significant risks even in terms of tricks. On the other hand, monetary policy management risks seem quite unlikely, given their current limited outreach. As for the risks to financial stability, only the widespread use of cryptocurrencies could mark their beginning.

There are risks to consumers where there are none Accurate legal framework It can protect them in the event of economic losses, for example, due to fraudulent behavior, bankruptcy or the interruption of the activity of online exchange platforms where personal digital wallets are kept. The future probability ofInstant Transfer Bitcoin and other cryptocurrencies in the official currency at market prices.

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