What Are Cryptocurrencies And How They Work

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Cryptocurrencies: Bitcoin, Ether and Dogecoin. These are some cryptocurrencies that have become popular in recent years and that have made many people, companies and even countries rethink their relationship with the economy. However, there is still a lot of confusion about what cryptocurrencies are, how to use them and other more technical details.

After all, how does a currency that only exists in the virtual world work? How to know its value? How to get this money, where to store it and where to spend it? In fact, all of this is still a bit complex, as ways of using cryptocurrencies are still being discovered. In addition, their values ​​fluctuate a lot, making them a very high risk investment.

What is Cryptocurrency?

The first thing to know about cryptocurrencies is that they are a kind of virtual money. This means that it exists only as codes and does not have a real-world representation.

For example, when you receive your salary, it is possible to make payments or transfer to other accounts via the internet. It is possible for you to spend months or even years without ever withdrawing your money, working with her only virtually. However, it has a physical representation — banknotes or coins — meaning you can “take it” from the digital environment to the real environment.

With cryptocurrencies this is not possible. All financial transactions are carried out through digital wallets — recently, Signal began testing payments with cryptocurrencies, using a specific wallet for this purpose. You can also exchange them for physical money, and the process is very similar to a currency exchange, but this is also done digitally.

In short, cryptocurrencies are “codes”, a very specific sequence of information, which needs to be digitally validated and which only exists in the virtual world. They have a value, which tends to fluctuate a lot, and can only be exchanged within the same system that serves to validate them, the blockchains.

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