What is Cryptocurrency and how does it work?

🔸 Cryptocurrency – meaning and definition

Cryptocurrency is essentially digital money that uses cryptography to secure transactions. It does not rely on any central bank or regulatory authority; it operates through a decentralized system to record movements and create new monetary units.

🔸 What is cryptocurrency?

I am fascinated by how this digital payment system frees us from bank dependency. Anyone can send and receive payments from anywhere in the world. Instead of physical bills that we exchange in person, transactions exist as simple digital entries in a database that records every movement. When I move my cryptoactivos, everything is recorded in a public ledger, while my funds rest securely in my digital wallet.

The name “cryptocurrency” comes from the encryption that verifies each transaction. This advanced coding protects the storage and transmission of data between wallets and public ledgers, providing us with security.

Bitcoin, born in 2009, remains the undisputed queen of the market. Although I cannot deny that much of the current interest comes from speculators who sometimes inflate prices to absurd levels.

🔸 How does cryptocurrency work?

Cryptocurrencies operate on a distributed ledger called blockchain, where all coin holders keep the transaction record updated.

Units are created through mining, a process that consumes computational power to solve complex mathematical problems. We can also acquire them through intermediaries and store them in special wallets.

The curious thing is that by owning cryptocurrencies, I have nothing tangible in my hands. I only possess a key that allows me to move digital records without the need for reliable intermediaries.

Although Bitcoin has been around since 2009, this technology is still in its infancy. Soon we will see how bonds, stocks, and other financial assets are traded using blockchain.

🔸 Examples of coins

There are thousands, but the following stand out:

● Bitcoins:

The pioneer since 2009, developed by the mysterious Satoshi Nakamoto, whose real identity remains an enigma that personally intrigues me.

● Ethereum:

Born in 2015, it is not just a cryptocurrency but an entire blockchain platform. Its coin, Ether, ranks second after Bitcoin, although it seems to me that it offers much more interesting possibilities.

● Litecoin:

Similar to Bitcoin but more agile, it has implemented innovations to streamline payments and allow for more transactions, something that Bitcoin should have done a long time ago.

● Ripple:

Created in 2012, Ripple goes beyond cryptocurrencies and allows tracking of various types of transactions. It already collaborates with traditional financial institutions, which makes me question its true decentralizing spirit.

Cryptocurrencies other than Bitcoin are known as “altcoins”, although some deserve more recognition for their technological advancements.