The Two Faces of Cryptocurrencies

Cryptocurrencies: These virtual assets, whose value depends on the laws of supply and demand, but above all, on the trust that people have in them, still have several challenges ahead. What makes them attractive to investors? And what should companies that decide to include them in their operations consider?

In 2009, a person or a group of people of unknown origin, under the pseudonym “Satoshi Nakamoto”, announced to the world the launch of a revolutionary virtual asset: bitcoin, the first cryptocurrency in history.

At that time, a bitcoin had no value, but, twelve years later, on April 13, it reached the record, per unit, of $62,700 dollars and its popularity is already so great that it has caused the emergence of different cryptocurrencies. competitors —currently almost 10 thousand are known, the most popular being ethereum, ripple, litecoin, binance, ripple, tether, cardano and dogecoin— which are also gaining the trust of people and increasing their value considerably.

Dollar value of bitcoin

However, despite the fact that their use is becoming more frequent, many companies still do not know what they are or what the characteristics of these virtual assets are, and this lack of information could prevent them from making the best financial decisions. What are the differences between a cryptocurrency and a traditional currency?

The main difference is that the cryptocurrency is a unit of electronically stored information. When a person has cash, such as coins and bills, they can physically store them in a piggy bank or safe; however, when you decide to purchase a cryptocurrency, you exchange a certain amount of cash for data that is stored in an electronic wallet. Everyone can also mine cryptocurrencies with computers or special tools. For example in the case of Helium, everyone who wants to mine needs some kind of Helium hotspot. For those of you who are interested in mining Helium, this Helium hotspot for sale is worth considering.

Another unique feature of cryptocurrencies, which is very attractive to investors, is that they operate thanks to a technology that guarantees their absolute protection, known as blockchain. What is the blockchain? Let’s imagine it as a group of people who form a circle holding hands; they all recognize who makes up the circle, they all have a record of every interaction that has happened between them and they can all detect if a stranger wants to enter the circle and prevent it.

This is a simple way to understand the blockchain, a closed structure, made up of computers that, due to their constant surveillance and registration, facilitate the secure transaction of digital assets without the need for an intermediary — contrary to what happens in the case of traditional money. —, using highly traceable technology, which makes it possible to identify operations and prevent fraud.

Together, these attributes have caused both companies and investors to look at cryptocurrencies as the evolution of money as we know it, but before betting on them, it is also advisable to consider the different challenges that this implies.

The main difference between a cryptocurrency and a traditional currency is that the cryptocurrency is a unit of information stored electronically.

Value at the service of demand

One of the main disadvantages that this type of virtual assets presents, compared to traditional currencies, is its volatility, which is explained because its value is not determined by an institution, but by the confidence generated by the market itself; that is, it is a question of “faith” on the part of the investors.

This means that, unlike a traditional currency, which receives its value thanks to the support of the central bank of a State, the cost of a cryptocurrency is established by the laws of supply and demand: if the demand goes up, it increases immediately. ; if demand goes down, it decreases instantly.

 

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