Crypto Currencies

What are Cryptocurrencies? – Work, Origin, Advantages and More

What are Cryptocurrencies?

Cryptocurrencies are digital help that uses cryptographic encryption to promise their ownership, ensure the integrity of transactions, and control the creation of additional units, preventing someone from making copies as we would, for example, with a print. These coins are not in physical form: they store in a digital wallet.

How do Cryptocurrencies Work?

Cryptocurrencies have some differentiating faces compared to traditional systems: they are regulators controlled by any institution and do not require intermediaries in transactions. A decentralise database, and blockchain share accounting registry are used to handle these transactions.

In line with the regulation, cryptocurrencies consider a means of payment. They are covered by customer protection mechanisms such as the Deposit Guarantee Fund or the Fund Investor Guarantee. They do not have the help of a central bank or other civic experts.

Regarding the act of these digital currencies, it is crucial to remember that once the transaction with cryptocurrencies is carried out, that is, when the digital asset is bought or sold, it is not possible to cancel the operation because the blockchain is a record that It does not allow you to delete data. To “reverse” a transaction, it needs to execute the opposite one.

Since these coins do not physically exist, you have to access a digital cryptocurrency wallet service that is regular to store them.

Origin of Cryptocurrencies

Throughout history, there have been multiple means of replacing goods and amenities. All of them have undergone evolutions and changes or, directly, have disappeared. This is the case of bartering or precious materials, which gave way to the system that has worked until now, bills and coins. However, when technology is gaining more and more ground every day, a means of exchange more in line with the times is necessary: ​​cryptocurrency.

In the wake of the cypherpunk drive in the 1980s, cryptocurrency emerged. This wall the widespread use of writing with secret keys that those who knew how to interpret could only be understood.

A decade later, David Chaun created Digicash to offer a centralized electric money system that allows more secure and anonymous transactions. Adam Black proposes Hashcash, a system to control spam and denial of service attacks in the same period.

Characteristics of a Cryptocurrencies

The main characteristics of cryptocurrencies are:

  • Cryptography: They use encryption techniques to make secure collections and payments.
  • Decentralization: They do not want to control by any institution.
  • There is no possibility of forgery or repetition: A cryptographic system guards users.
  • There are no intermediaries: Direct person-to-person contact.
  • Transactions are irreversible: Once the sum is made, there is no possibility of annulment.
  • They can exchange for other money.
  • Privacy of use: It is unnecessary to reveal your identity when doing corporate.

Advantages and Disadvantages of Cryptocurrencies

The main Advantages that characterize the cryptocurrency are:

  • The low deal costs as a result of the absence of intermediaries.
  • Security, because each coin belongs only to its owner.
  • Transparency, as transactions enter into a freely accessible registry.
  • It accumulates in a tiny space such as a USB.

On the other hand, the Disadvantages are:

  • The volatility of their prices.
  • Lack of current acceptance by some companies.
  • As they do need a regulator such as the Government or the Central Bank and provide privacy, they can use it for illegal transactions.

How many Types of Digital Wallets are there?

A numeral wallet or wallet is a software or application where it is possible to stock, send and receive cryptocurrencies. The truth is that, unlike a corporal money wallet, what store in digital wallets or wallets are the keys that give us ownership and rights over cryptocurrencies and allow us to operate with them. In other words, it is plenty to know the keys to transfer the cryptocurrencies, and the loss or theft of the keys can mean the loss of the cryptocurrencies deprive of the possibility of recovering them.

There are two types of wallets: hot ones and cold ones. The difference is that the past connects to the internet, and the latter is not. Thus, we find the web wallets, mobile wallets, and desktop wallets within the hot wallets only if the processor connects to the internet. On the contrary, hardware wallets and paper wallets within cold wallets reproduce the private essentials daily.

What is the value of a Cryptocurrency Resolute?

The cost of cryptocurrencies differs depending on users’ supply, demand, and commitment. This value is formed without effective devices that stop its manipulation, such as those currently regular securities markets. On many occasions, prices are includ without public information to back them up. We recommend you read this statement from the Bank of Spain and the National Securities Market Commission (CNMV) about the risks of buying cryptocurrencies.

Cryptocurrencies use Blockchain

Cryptocurrencies work through share records or blockchains. This technology provides them with a high-security system with the capacity to prevent, for example, the same digital asset from transfer twice or being counterfeit. Blockchain technology works like a giant ledger where vast amounts of information can record and stored. All of it is public on the network protect so that all the data and its families cannot alter or delete.

What does it mean to mine Cryptocurrencies?

This concept refers to the course necessary to validate the operations carried out over this type of digital asset. For example, if we take the case study of a bitcoin currency, mining would be based on the validation and recording of transactions in the blockchain registry.

In short, mining cryptocurrencies means well solving the mathematical snags that arise. The colliers who have carried it out obtain cryptocurrencies in exchange.


Cryptocurrencies are a category of digital money that does not exist physically but serves as an exchange currency, allowing instant transactions over the Internet and regardless of limits. Other types of digital money are virtual currencies (usual control by developers), electronic money, and Internet coupons.

In 2009, the first utterly decentralised cryptocurrency appear, Bitcoin, creat by Satoshi Nakamoto and the software supporting it (blockchain). The appearance of bitcoin was so innovative that the terms of cryptocurrency and Bitcoin merged into one. And it is indistinct to speak of one or the other. It recognises who is behind the creator’s name to this day.

These days, more cryptocurrencies based on the pioneering Bitcoin have appeared, known as altcoins.

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