What are cryptocurrencies?
Cryptocurrencies are a type of digital currency that uses cryptography to protect transactions and control the creation of new units. Unlike traditional currencies, which depend on banks or governments, cryptocurrencies operate in a decentralized environment. For example, you can send and receive money directly from one person to another without the need for an intermediary such as a bank.
This flexibility and speed are further defined by impressive statistics: in 2021, the total volume of cryptocurrency transactions exceeded $15 trillion.
History of cryptocurrencies. All about cryptocurrencies
Cryptocurrencies began in 2009, when Bitcoin was launched by an anonymous individual or group known as Satoshi Nakamoto. Bitcoin was created as an alternative to the traditional banking system, allowing secure and anonymous payments. You can find the founding document of the first cryptocurrency here.
You can learn more about bitcoin on the Abarai platform academy . This non-custodial exchange is highly recognized in Romania for the seriousness with which it treats each client and for the phone support in Romanian.
Articles to help you better understand how Bitcoin works can be found on the following links:
After Bitcoin’s success, other cryptocurrencies have been introduced. For example, Ethereum, launched in 2015, enables the development of decentralized applications and has had a significant impact on the tech industry. Statistics show that Ethereum has hosted over 3 million smart contracts as of 2021.
Do I have to invest in these cryptocurrencies? Definitely not, you have to do your research, get very well interested and after the study, decide whether it is a good idea to invest or not.
Main cryptocurrencies
In the cryptocurrency market, a few have stood out for their popularity and use:
Bitcoin (BTC) – It is considered the “digital gold” from our point of view is the “digital cash”, with a market capitalization that exceeded $800 billion in 2022, which means it accounted for about 45% of the entire cryptocurrency market. Bitcoin has been used successfully in an underground economy, this story is described in the article “Ross Ulbricht, drug emperor and pioneer of the virtual currency economy, pardoned by Donald J Trump“
Ethereum (ETH ) – It revolutionized the concept of cryptocurrency with its decentralized application platform. In 2023, Ethereum saw a 50% increase in the use of smart contracts over the previous year.
Ripple (XRP) – This is used by banks to make fast international transfers with fees of around $0.00001 per transaction. On their official website you can find more information, all with a simple click here.
Litecoin (LTC) – Its rise in popularity is due to its transaction confirmation time, which is 2.5 minutes, compared to 10 minutes for bitcoin.
Cardano (ADA) – This bills itself as a more efficient development platform, with a unique consensus protocol that reduces energy consumption by up to 99% compared to Bitcoin.
How blockchain technology works
Blockchain is the core technology behind cryptocurrencies. It functions as a digital public ledger, which stores all cryptocurrency transactions in a network of computers. Each group of transactions is organized into a “block”. Once the block is complete, it is added to the previous chain of blocks, forming a permanent data structure.
This architecture ensures that data is transparent and difficult to tamper with. For example, about 51% of the network would have to agree to a block to be changed, which significantly reduces the risk of fraud and corruption. This aspect is very important which is why we wanted to include this in “All about cryptocurrencies”.
You can find more information about blockchain by reading the following article What is blockchain?
How to choose an electronic wallet
Not your keys, not your crypto!
It is a common quote among experienced cryptocurrency users. This quote refers to the fact that if you don’t own the private keys to your wallet, then the cryptocurrency is not yours. How would this translate into easier to digest language, if you install your own wallet and you store your own funds it is safe, for a number of reasons both cybersecurity but also regarding the governance of funds.Those who only store their funds on exchange platforms such as Binance or Coinbase, give control to those platforms. They just have a dedicated account and do various operations on their account with the platforms’ consent.
Ok but how can they buy bitcoin or other cryptocurrencies without those platforms being involved? You can use a non-custodial cryptocurrency exchange (which does not store your funds). It’s very simple, you just specify the address where you want to receive the cryptocurrency and that’s where you will receive the funds. More on how to choose the right exchange and the difference between exchanges can be found here.
To manage cryptocurrencies, you need an electronic wallet. There are different types of wallets, each with their own advantages and disadvantages:
Hardware wallets – These are the most secure because they encrypt data and store it offline. For example, the Ledger Nano S is a popular hardware wallet because of its high security.
Software wallets – These are apps available on computers or smartphones. For example, Exodus offers a user-friendly interface for managing cryptocurrencies.
Online wallets – Although easy to access, they are more vulnerable to cyber attacks. Coinbase is an example of an online wallet that combines ease of use with security measures.
When choosing a wallet, consider: the security offered, the accessibility on your devices and the types of cryptocurrencies supported.
You can learn more about this topic by reading the article https://www.abarai.ro/post/portofel-criptomonede-ledger-solutia-perfecta-pentru-investitori
Safety tips for investors
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Investing in cryptocurrencies comes with risks. Here are some recommendations to protect yourself:
Don’t invest more than you can afford to lose – Crypto market volatility can lead to significant losses. For example, bitcoin fell by 80% in 2018.
Use two-factor authentication – This can reduce the risk of unauthorized access to your account.
Store cryptocurrencies in hardware wallets – This maximizes your security given the risks associated with online storage.
Be wary of suspicious messages – Phishing can lead to financial losses. Avoid clicking on unsafe links.
Stay informed – Follow cryptocurrency news and updates to stay well-informed in an ever-changing field.
Journey’s end
Cryptocurrencies have changed the way we think about and interact with money. From Bitcoin to the latest innovations, this form of digital currency brings both opportunities and challenges.
If you’re just starting out, make sure you educate yourself, choose the right e-wallet and invest responsibly. Every choice you make matters. Be prepared and make informed decisions on this exciting journey into the world of cryptocurrencies. Good luck on your journey!