What are Cryptocurrencies?

A “cryptocurrency” is a concept with a long history that has surely crossed your mind countless times, and that if you have arrived here without knowing what it is, you are surely determined to find out. It will not take too long to explain what cryptocurrencies are, and of course once this question is solved, it will be very clear that you have been missing out on something quite important for some years.

Its birth dates back more than 10 years ago, when Satoshi Nakamoto created Bitcoin, the first cryptocurrency in the world. This word is probably familiar to you; the characteristics of this first cryptocurrency would define in the future all the qualities that would make this digital exchange system one of the most influential of all time.

Cryptocurrencies are a monetary system that, unlike conventional currencies or metals such as gold or silver, they do not have a value based on this or any institution or central bank. They were conceived with the purpose of moving away from government control and acquiring a neglected value of a material good. That is to say: The value of a cryptocurrency depends on its demand.

After Bitcoin, cryptocurrencies expanded their presence and diversified, there are currently more than 12,000 different cryptocurrencies, it is an exponential growth in almost 8 years. What explains this boom? What is its value based on? Are cryptocurrencies safe?

What is the value of cryptocurrencies?

Once we have understood that the value of a cryptocurrency is based on its supply and demand, it is important to know what the system that supports this fashionable concept is, and this will explain the value and importance of this new financial system.

Since its creation, the foundation of its value, is explained in its name, this money (currency) is based on cryptography, which in other words is the creation of complex keys that need to be validated and that consequently make it very difficult to steal them, hack or fake them. Cryptocurrencies solve a problem that common money has had since its invention: If you steal it, it is yours.

In addition to its strong security and validation methods with which it is protected, a cryptocurrency also cuts risks and costs that traditional currencies face, such as intermediaries, risk and the speed and anonymity of transactions.

Just so you have an idea of ​​the value that cryptocurrencies can have: In May of 2010 a programmer in Florida paid in exchange for 2 pizzas with a value of 42 dollars, with 10,000 bitcoins; 10 years later, that amount of bitcoins is valued at the roughly equivalent of $ 39 billion. Amazing! Isn’t it ?

Of course, this date would eventually become an event known as “Bitcoin Pizza Day”, and the effervescence of this financial system grew like foam.

All of the above is perhaps very elementary, and it is possible that when thinking about cryptocurrencies we can confuse this concept with electronic money, however that is precisely what makes the great difference between both monetary systems. While electronic money transfers are always regulated by a central bank, which usually charges a commission, cryptocurrency transactions are based on a decentralized system known as “Blockchain”.

The blockchain is one of the wonderful solutions on which cryptocurrencies base their success. But finding out what the Blockchain consists of is a matter of another article.