Digital currencies are the new money that began to emerge strongly for a few years, if at any time you have considered investing your money in them, here you can learn about the role of digital currency and cryptocurrencies, what they are and how they work.
Digital currency is virtual money, which means that it does not physically exist, and all purchases or transactions made with it must be electronic. It has no geographical or political borders, for which it is possible to make payments or collections to a person who is in any part of the world; In addition, the transfers are anonymous and there is the benefit of making quick payments and thus avoiding additional charges for transactions. Likewise, these currencies are issued and backed by the central banks of the countries for dogecoin price.
But what types of digital currencies exist?
Early sources indicate that in early 2009, an anonymous programmer or a group of programmers under the pseudonym Satoshi Nakamoto published an article referring to one of the digital currencies, bitcoin, as a new decentralized transaction system. Bitcoin is the first digital currency that has the highest price in the market. In addition to bitcoin, several types of digital currency have emerged, among them, we can mention: Ethereum, Dogecoin, and Cardano.
One of its main characteristics is the possibility of making transfers without the existence of an intermediary, such as banks or the State, so its control is decentralized, at this point is where the difference between a digital currency and a cryptocurrency lies., since the first one is backed by banks, and the second one does not need any intermediary.
In terms of security, this dynamic is based on cryptography or blockchains, (blockchain) which makes it work as a digital and tamper-proof accounting book, in which all transactions carried out are permanently and verifiably reflected.
How to invest in a cryptocurrency?
There are some platforms where it is possible to acquire bitcoins, and where there are a large number of registered users, and it is possible to buy by registering a credit or debit card.
The most famous platforms are:
- Coinbase
- Kraken
- LocalBitcoins
It is a very simple process, you just have to register with your personal data and create an account, after this the verification phase enters, which usually takes a while, once the account is confirmed you can start shopping.
Cryptocurrencies, how do they work?
Cryptocurrencies work very differently from traditional payments, some of them are:
It is stored in a digital wallet: Each coin contains a code that is stored in a digital wallet or also known in English as a digital wallet on a computer or cell phone with private keys.
It lacks legal protections: This type of digital currency will not have any legal protection unlike credit or debit cards, where the provider can give some guarantees for any fraudulent purchase and thus be able to recover the money; while with a digital currency the payments are irreversible, and the money can be recovered only if the seller returns it. That is why it is very important to know very well what digital currency is and how it works, so as not to fall into possible scams and make sure that the seller is reliable.
The value changes constantly: One aspect to consider before acquiring a digital currency such as cryptocurrency is that its value can change every hour, therefore, before investing it is very important to know that there is no guarantee that it is an investment that will ensure make lots of money. A clear example was when Elon Musk, CEO of Tesla, announced in a tweet in February of this year that he had bought 1,500 million dollars in bitcoin and that he planned to accept it as a form of payment, at that moment the price of the cryptocurrency skyrocketed. . But in May, Musk announced again by tweet that he would not accept bitcoins from people who wanted to buy any of his company’s cars, after this announcement the price plummeted up to 15%.
The reason for the abrupt price change is that nobody controls the cryptocurrency, therefore, it goes up and down as it moves in the market. This is one of the arguments used by many banking institutions since there is a possibility that people who deposit their “real money” in a virtual currency that is not backed by anyone, may end up losing everything.
The future of payments
Despite its variations, this payment system continues to grow rapidly and there are already many platforms, companies, and investors that are using it, such as El Salvador, whose president Nayib Bukele recently proposed the law to convert bitcoin into legal tender. in the country, which was approved and will enter into force in three months, which will make the Central American country the first country in the world to use bitcoin as its official currency.
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