Virtual currencies: how do they work and how to take advantage of them?
Atualizado: Fev 17
Those who have the habit of following the news in the economics and finance books certainly heard about the almost limitless rise of Bitcoin, the best known of virtual currencies. Along with this fever, however, many doubts arose. After all, the idea of a form of money that only exists in the virtual world is still quite unusual for most people. Because it was thinking about exactly that we decided to prepare this post!
Follow the next topics to understand what these currencies are and what are the main options available on the market today, in addition to knowing ways to enjoy the advantages they can offer. Come on?
Since humanity began to live in organized societies, many different objects have fulfilled the function of money - salt, chocolate and precious stones are some examples. Over time, coins made of metal and paper began to be used to represent wealth and exchange goods.
For much of the 19th century, all major currencies had their equivalent value stored in gold or other valuable metal by governments - it was the so-called ballast, which served to guarantee their real value. With the arrival of the First World War, this practice was put aside, mainly due to the unavailability of precious metals in sufficient quantity to keep the ballast of all the money that circulated. After that, the currency models that we have today came into force, whose value lies in the belief of people and the financial market in the economic stability of the governments and central banks that issue them. Enter the advancement of technology, allowing the creation of a new way of moving values: virtual currencies. Existing only in the form of a digital file, virtual currencies are created by a complex computational process known as mining. That's right: they are not printed by any government, but they serve the same function as traditional currencies, making payments, buying goods and providing services. Decentralization
As virtual currencies are not issued by any government, they do not depend on a central bank or on the existence of a state for its regulation and indexes, for example. The price fluctuations of cryptocurrencies happen according to their own economy, without major state interference. As you will understand later, the central element existing in the process of virtual currencies is the blockchain system, which functions as an electronic book used to account for all transactions carried out. Anonymity The complex technology behind the cryptocurrency system guarantees the reliability of transactions while ensuring relative anonymity for the user, since no personal information is required. It is precisely this anonymity that causes critics of cryptocurrencies to raise questions regarding the facilitation of illicit activities, such as drug and arms trafficking or money laundering. Low zero No costs are charged for carrying out transactions with virtual currencies, since there are no authorities interfering in the activity and imposing any type of fee. This is possible because, unlike traditional currencies, cryptocurrencies are not issued, thus not generating any type of expense for the completion of transactions. The operations with these currencies are made in virtual wallets, which function as a kind of e-mail address, being possible to send and receive amounts through them. The verification of the validity of a transaction is done by complex cryptographic systems that demand computers with great processing capacity. We are talking about blockchain, a type of decentralized database that records all transactions publicly and prevents the use of the same currency in another movement.
Also called altcoins, find out more about other virtual currencies that at some points work in a similar way to Bitcoins! Litecoin Litecoin works in a very similar way to Bitcoin, so much so that it is known as digital silver, while the most famous coin is nicknamed digital gold. The big difference is that Litecoin requires less processing power from computers to perform encrypted operations, resulting in faster transactions. Peercoin The main particularity of Peercoin is the quest to reduce energy consumption in transactions involving Bitcoin, through the lower processing capacity required to confirm transactions. Ripple is a payment system with its own currency, XRP. Unlike Bitcoin, XRP is not decentralized and tries to establish itself as a global resource transfer mechanism, allowing the movement of different types of currency more quickly. Cardano Created in 2015 by Charles Hoskinson, Cardano is a distributed computing platform that runs the blockchain for the ADA cryptocurrency. It was one of the currencies that appreciated the most in 2017. Stellar was created to be inserted in a new global financial system. The platform allows transactions to be carried out in any type of currency without the need for mining - unlike Bitcoin, for example. NOR Usually appearing on the list of the 10 most valuable virtual currencies in the world, NEM uses an algorithm different from Bitcoin. It benefits investors with the possibility of carrying out more transactions on the network without the need for powerful hardware to do the mining. In this way, coin creators are able to reach more people. It still presents itself as a more ecological option because it uses less energy. Zcash One of the principles of Zcash is privacy. Each transaction carried out with this currency automatically hides the shipping source and destination information through a scheme called decentralized anonymous payment of the Zerocash protocol. The Zcash gained market and became popular very quickly, being currently one of the most popular virtual currencies.
Despite all the specific qualities of cryptocurrencies, such as security, transparency and reliability, there is a dilemma that has not yet been overcome, stability. Take as an example the money you carry in your wallet or bank account, the reais. Despite all the ups and downs of our economy, the real remains relatively stable, with purchasing power predictable enough that the prices you saw in the supermarket today will remain the same or similar tomorrow. With cryptocurrencies, that's not how it works. Because they are financial assets, as well as commodities such as gold, soybeans and the like, cryptocurrencies have their prices regulated by the market itself and its agents, that is, it is the internal demand that defines the variation of its price. For example: The more people issue purchase orders for an asset, the greater its demand in the market and, therefore, the higher its price; the more people issue sales orders, the lower the demand and therefore the lower the price. For that reason, cryptocurrencies are not yet widely used in physical commerce. Even though there are inns, restaurants and other retailers who are surfing the trend today, the fact that these currencies are so volatile presents itself as a negative point today. In that sense, currently, cryptocurrencies are more like an investment asset than a commercial unit for you to use in trade close to home. That is why stablecoins are a possible solution to this dilemma. Basically, currencies based on this concept try to support their variation at some point of reference, such as the dollar. In this way, it is possible to eliminate the volatility of an asset traded in the market, bringing the user closer to the consumption experience that he would have with his local currency. How to take advantage of virtual currencies? Now that you have a better understanding of what virtual currencies are and have even seen some possibilities, it's time to learn what are the best ways to use them. Transact securities securely and privately Because of its encryption systems, it is very safe to make transfers with virtual currencies. They can be done between people from anywhere in the world, without any barriers. Only those involved in the operation know how much has been moved. Invest the value obtained
The rapid growth in the value of Bitcoin has prompted many to seek this currency as a form of investment. Despite the possibility of high profitability, however, volatility makes putting money in virtual currencies a high-risk application. Those interested in buying virtual currencies should look for so-called exchanges, types of exchange offices that convert money and also act as stock brokers. When hiring this service, you need to find out about the fees charged. The main tip is not to apply high values. As it is possible to buy fractions of virtual currencies from 10 reais, the ideal is to act with caution. Not to mention that low regulation, as with other applications, requires extra care.
Betting on consortia The truth is that everything that is new ends up generating a lot of doubts. Furthermore, it is difficult to predict what the future of virtual currencies will be. Some say, for example, that it is a fad and that the growth of its values is a bubble that will soon burst. At least for now, therefore, the ideal is to transfer the profit to safer conventional investments from the moment a good gain is achieved with virtual currencies. To do this, you can exchange your cryptocurrencies for cash and invest in reliable investments. Here, consortia enter, for example, great alternatives to transform money into assets, contributing to the formation of personal assets. How to buy virtual coins? To buy virtual currencies, it is necessary to link a real bank account to the online wallet. However, as much as you look for safe sites to register, you should always take into account that business conducted over the internet always involves risks, however small. After this step, it is good to be aware of currency values, in the same way as with shares traded on the Stock Exchange. If you are able to profit from the process, you can use cryptocurrency for both depositing an account and making purchases on large chains.