If everything about cryptocurrencies sounds strange to you and you don’t quite understand what they are, how they work, or the types that exist right now, it is best that you continue reading this article where we give you all the information you need to know.
The world of cryptocurrencies is a part of technology that many people are unaware of, even if they have heard of it. The boom that these currencies have experienced in recent years has been enormous.
It is evident that as soon as you see any means of communication, this type of virtual currency has surely come to the fore from time to time, so it may be the case that we know that they exist, but we are not very clear on how exactly they work.
In this article, we are going to explain what cryptocurrencies are, but you will also understand how they work, what they are for, how they can be used, and the main types that exist, since there are more types than Bitcoins, the most popular currency and the one that everyone uses. the world has heard of.
What is a digital currency and how it works:
- What are cryptocurrencies
- How do cryptocurrencies work and what are they for?
- Types of cryptocurrencies
- How to invest in cryptocurrencies
- Mining: what it is and how to do it
- How to check the price of cryptocurrencies in real-time
- very few get rich
- What are the 23 most important cryptocurrencies right now
What are cryptocurrencies
Cryptocurrency is a digital medium of exchange that works like a currency. Cryptocurrencies or crypto assets, as they are also known, are fully digital, both in terms of transactions and the creation of new currencies.
We are talking about a different system from the one we know with banks and entities since these are controlled, while cryptocurrencies are decentralized from any type of control.
The main characteristic of cryptocurrencies is that their value is variable, which encourages speculation with them, and, therefore, someone who does not know this whole world can be faced with losing money.
Then two concepts should also be known. The first of them is that, as we have already told you, we are talking about a decentralized network, which means that everything is placed in different nodes distributed throughout the world and with information on all transactions.
The second is that of the miners, people who are part of the nodes and who, when new cryptos are generated, are the best placed to get hold of them.
In addition to this, there are exchanges, which are companies that allow you to buy them, paying with euros and thus making us holders of some type of virtual currency in a simpler way.
How do cryptocurrencies work and what are they for?
Once we are clear about what we are talking about and certain concepts that are important to know, we can better understand how cryptocurrencies work.
The operation is directly related to its internal algorithm since that is going to be what will mark the number of new units there each year.
This makes this whole world of cryptocurrencies more complicated since each algorithm is different, so each cryptocurrency also behaves differently, so the values of each one of them vary.
The entire cryptosystem is made up of nodes, as we have already told you, which are linked together through the chain of blocks or blockchains.
This is interesting to know since each transaction that we make is going to be registered in the block, causing it to pass on to the others so that all the data that has been generated cannot be modified and is recorded.
Believe it or not, cryptocurrencies have many more uses than you might expect and more ways to spend them than you might imagine.
- Investments: it is the most common way to use cryptocurrencies, since it is also a fairly simple type of use, since everything is done online, and it is the system where the most money is earned.
- Stores: there are already stores where we can pay with digital currency. In most cases, we are talking about retailers that will accept this form of payment. All this greatly enhanced the moment in which PayPal began to accept cryptocurrencies.
- ATM: there are currently more than 38,000 ATMs that can transform cryptocurrencies into the currency of the country where it is located.
- Self-employed: paying independent workers through cryptocurrencies is becoming more normal, in addition to the fact that there are already platforms such as Bitcoin, LaborX, and Ethlance that offer sections for self-employed payment through cryptocurrencies.
- Donations: they can also be used to make a charitable donation, paying some type of micro-donation to a company that is developing a product or directly to a non-governmental organization that is dedicated to charity.
- Webs: Web pages can be created from existing domain name registrars with web hosting that accept this type of currency, such as Namecheap.
- Events: tickets to sporting events can also be paid for with cryptocurrencies, such as if you go to see the San Jose Sharks of the NHL or the NBA team, owned by Marek Cuban, the Dallas Mavericks, to give two examples.
- Cards: there are websites where we can buy Amazon, PlayStation, Steam, or similar gift cards. The main one is Bitrefill.
- Vacations: some web pages dedicated to finding flights, hotels, or vacations at the best price, also already accept payment with cryptocurrencies.
Types of cryptocurrencies
Cryptocurrencies can be distributed in different types to better understand how each one of them is.
All cryptocurrencies are classified by:
- Bitcoins: as it was the first coin to appear, it is considered the market reference and that is why it is given its classification.
- Altcoins: they are all the other cryptocurrencies that are not Bitcoin, hence they are called Altcoins, that is, alternative currencies. The main one at the moment is Ethereum.
- Stablecoins: this type of coin is different since the intention is that its value and price are constant and do not vary. An example of a stablecoin is Tether.
- Shitcoins: they are coins that do not add any value to the blockchain. They go on the market with the sole purpose of speculating on their price.
- Memecoins: for many, they are a variant of shitcoins. They are based on popular Internet memes and although some begin to seek to have a utility, the reality is that their original objective has always been to get easy money since they do not have any utility. The most popular are Dogecoin and Shiba Inu.
- Tokens: are those cryptocurrencies that cannot function outside the network of another cryptocurrency. That is, those that do not have their chain of blocks.
How to invest in cryptocurrencies
In Spain, only in the year 2021, 60,000 million euros were moved in cryptocurrencies or what is the same, an average of 1,275 euros per inhabitant.
There are several ways in which we can operate with cryptocurrencies.
The first way we have is to use a virtual purse, also known as a wallet. The companies that manage all this are the exchanges, which we have already told you about above.
In this type of company we can buy cryptocurrencies, and then sell them and try to make a profit with this operation, knowing that they charge for the management expenses of each one of the operations.
The prices of the digital currency that we have purchased can vary considerably in a short time, since, as we told you before, they are not centralized or controlled by any entity as is the case with normal money.
These companies also serve to protect us against possible fraud, since they control the cryptocurrency values to ensure client transparency in all the operations they carry out.
Some of the best cryptocurrency exchanges are Coinbase, Bitpanda, Binance, Bit2Me, and Crypto.com
We will also be able to use the services of an authorized broker or agent to be our intermediary with these products.
You can sign a contract for difference (CFD) which are agreements where the difference in the value of an asset is exchanged between the opening and closing. This will help to achieve a better contractual relationship and greater security.
Mining: what it is and how to do it
One of the ways we have to get cryptocurrencies is to mine. With this system, we will be able to have digital cryptocurrencies that we will later be able to invest in or use to buy things.
Mining cryptocurrencies consists of solving complex mathematical problems, in exchange for receiving a reward. To achieve this, what we are going to need is a mining machine or a computer, knowing that it must be powerful and that it will be on for a long time.
If, for example, we want to mine the Ethereum cryptocurrency, we must perform the following steps:
- The first thing is to create a virtual wallet in MetaMask, for example.
- Then check if the GPU drivers are up to date.
- Install the Ethereum mining software. There are different types of mining software, although ethermine.org is recommended
- We choose the mining pool. Two examples are 2miners or determine.
- Now you have to wait to receive rewards.
From there, you must be yourself to decide what you do with the profits and how you are going to spend the benefits when the amount is already considerable.
You can invest it in the ways that we have told you or spend it in all the options that you have been able to read the lines above.
How to check the price of cryptocurrencies in real-time
Obviously when we want to sell our cryptocurrencies, what we want is to do it when we get more profit.
For that, you must look at the evolution of its price and thus be able to make the correct decision, since we are talking about coins whose value is highly variable, both due to their strong falls and rises.
We will have at our disposal two methods to see in real-time how the value of our cryptocurrency is, being able to use Google or specialized websites.
Search in Google
The first method is to use the Google search engine since it implements a module that can show us the values of our cryptocurrency in real time.
To do this, all we have to do is enter the search engine and write in the search area something similar to, for example, the Ethereum value.
At that moment we will see how Google takes out the information on the value of the cryptocurrency that we have chosen on the screen.
In addition, we will have a system to be able to know how much it is worth at this precise moment in a different currency, although the euro will come out by default.
We will also see a graph with the history of the value over a month, being able to use different tabs to modify it and see how it is in one day, five days, one year, and five years in which Google has data on this cryptocurrency.
Specialized web pages
There are also web pages that are specialized in this type of information, where we can see the value of our cryptocurrency in real time.
Some of them offer more advanced possibilities than the ones we saw on Google.
- Coinbase: this is one of the best-known websites when it comes to buying cryptocurrencies, also having its monitoring system. What we are going to have to do is register and save our cryptocurrencies.
- Bitstamp: it is the direct competition of the web that we have seen before since it is also a reference to buy cryptocurrencies and exchange them for euros. Of course, it has an index where we can see the status of cryptocurrencies.
- Crypto maps: is the one that has taken the most care with the interface of all the ones that we are going to teach you. Shows an interactive map with the total value of the cryptocurrency market.
- Coindex: if you do not want to register to have information about the values of your cryptocurrency, then you should choose Coindex since it shows you all the information you need such as the current price, its value change in the last 24 hours, and a graph with the evolution in the last days.