So you’ve been hearing lots of talk about bitcoin and ethereum. That’s normal. Cryptocurrency is now trendy with online users, who see it as a way to access money outside of the financial system that rules the non-digital world.
These users believe that having this digital currency is the best way to access their money in a decentralized way, uninfluenced by third parties. And they’re right. As a matter of fact, that’s the main issue surrounding digital currency.
This type of digital currency first came about in 2009, thanks to bitcoin, as a way of creating a financial system parallel to the traditional one, regulated by its own rules.
Bitcoin’s goal was to remove external influence from the market and build, among everybody who participated in the currency, a decentralized system where citizens could exercise free trade without intermediaries driving up prices.
In other words, bitcoin doesn’t depend on any government and doesn’t add exchange fees, transaction fees or money changing fees (dollars, euros, etc.).
How does cryptocurrency work and what’s the advantage of using it?
Given that there’s no organization in charge of creating or managing this currency, where did it come from? The main difference between cryptocurrency and euros or dollars is that it’s made by users.
Also, one of the big differences compared to traditional money is that the production of cryptocurrency can’t inflate, since it’s based on a model of collaborative creation. This way, possible wrongful and illegal money production is avoided, since the speed it’s produced is limited by a previously defined value that’s in the public domain.
Moreover, defenders of these digital currencies, whether bitcoin, ethereum, etc., argue that the security they provide is based on computer protocols that protect them from fraud, piracy and possible theft. Another advantage is the possibility of earning revenue through what is called data mining, which creates large investments in information technology.
Not all that glitters is gold
With all the advantages of cryptocurrency, you might wonder why the entire world doesn’t produce it and use it for transactions. Because, like everything in life, there are pros and cons.
Although the concept of cryptocurrency, especially bitcoin, is to build a digital and secure collaborative system, it’s true there have been cases of theft and piracy. In recent weeks, we’ve seen the news of ethereum theft, the second most important cryptocurrency on the market, through the hacking of an Israeli startup’s website. This company released an ICO (Initial Coin Offer), which investors could direct money to in order to finance the startup. However, within minutes, a computer hacker changed the receiving address, making off with 43 million Ether tokens, which the current market would value at 8 million euros.
Also, these cryptocurrencies are linked to cases of theft and data theft. Cybercriminals take advantage of the currencies’ possibilities to make completely anonymous and untraceable payments, and ask for ransom to release stolen data using these digital currencies.
Getting started with the cryptocurrency market
The cryptocurrency system is a constantly growing market that can provide many benefits, but you also have to be very careful when making decisions. If you want to get into it, it’s a good idea as long as you consult experts or get to know the ins and outs. After all, remember that you’re dealing with money and any decision should be a well-made one.
If you feel like trying it or have already done so, tell us about your experience.