At this point, it is practically impossible not to have heard of cryptocurrencies. They appear in the news, they appear in the newspapers and they appear in many of the topics that we write in ADSLZone. However, the magnitude of the concept and how it works is so great that today we are going to take a few steps back and explain what you need to know about cryptocurrencies.
Below you have a series of basic concepts that will help you understand the essence of cryptocurrencies. Who knows, maybe you will become an expert from this simple starting point.
What are cryptocurrencies?
Cryptocurrencies, also called cryptocurrencies or cryptoactives, are a digital medium of exchange that performs the function of a currency, hence they are called that. Instead, compared to traditional money (money by decree, commonly called fiat money) they are completely digital, so they use cryptographic methods to secure their financial transactions, control the creation of new units and verify the transfer of assets.
Cryptocurrency is the generic denomination that houses all digital currencies. Since Bitcoin was the first and is still the most popular, the term bitcoin is sometimes used generically, but it is just one of many.
What was the first cryptocurrency?
Bitcoin, the most famous cryptocurrency still today, was the first cryptocurrency created. It was born on January 3, 2009 when the first block was mined on the Bitcoin network, and its creator is Satoshi Nakamoto. This is the pseudonym of the person or group of people who created the technology. To this day, the true identity of the person, or organization, behind the alias is unknown.
In October 2009, a few months after its creation, the first transaction was made in which 1,309 bitcoins were exchanged for 1 dollar. In 2010 the cryptocurrency began to become popular and the first public exchanges were for 1 BTC worth 0.003 dollars. That is, with 1 dollar you could get 333 bitcoins.
In December 2017, it reached a maximum price of 17,000 euros. Therefore, if 333 bitcoins had been purchased for 1 euro in 2009, they would have had a value in December 2017 of 5,600,000 euros. Its historical maximum to date was in November 2021 with a price of 68,190 dollars (58,300 euros) per BTC.
Approximate return on investment if purchased at launch (or first known price) is 32,076.35%.
What is blockchain?
The blockchain, or chain of blocks in Spanish, is defined as a chain that is constantly being updated, and contains information on all previous transactions. It is something like an accounting book of the movements of a cryptocurrency.
The operation of cryptocurrencies is based on a decentralized computer network, which involves nodes distributed throughout the world with copies of all the transactions that have been made. Its blocks or nodes are linked and secured using cryptography. Each block links to a previous block, as well as date and transaction data, and is by design resistant to data modification.
How many cryptocurrencies are there?
It is difficult to determine since new cryptocurrencies are created every week, even if they do not have a market value compared to fiduciary money such as euros or other currencies. However, it is estimated that there are more than 1,000 cryptocurrencies today.
In addition to Bitcoin, some of the most famous (those with the highest market capitalization value) are Ether, Tether, BNB, Terra, Solana, Cardano, Avalanche, Polkadot, Dogecoin or Shiba Inu.
What is mining?
Cryptocurrency mining is the necessary process to validate the operations that are carried out through this type of digital assets, the validation and registration of transactions in the blockchain registry. In short, mining cryptocurrencies means successfully solving the mathematical problems that arise. The miners who have carried it out obtain cryptocurrencies in exchange.
The process consists of solving mathematical calculations using computing power. You make your team available to the network and it is in charge of performing calculations, processing a series of transactions and sealing the blocks. Each transaction is part of a block and each block must be sealed. That is why quite powerful and expensive hardware is required, which implies a very high energy cost.