How does cryptocurrency work, Bitcoin, ether, ripple… Still unknown to the general public only some time ago, these virtual currencies have gradually made themselves known thanks to their strong dynamics. In 2017 alone, the price of the most famous of them, bitcoin, has increased by more than 500% to 6,000 dollars (5,166 euros).
Other cryptocurrencies are not left out. Sign of the craze for these new alternative payment methods, the majority of them also grew rapidly. Back to the questions we are asking about digital currencies.
How does cryptocurrency work, the initial idea
Cryptocurrencies began to appear in 2009 in the wake of bitcoin, considered the “benchmark” in the sector. Before reaching a wider audience, virtual currencies were first used by small communities formed by their developers who wanted their money.
Their idea was to create currencies independent of central banks, in other words out of the control of the public power. “Bitcoin does not belong to a state or a bank,” this is the first point answering how does cryptocurrency work.
But to ensure the credibility and security of these digital currencies, developers have resorted to two essential elements that allow the existence of virtual currencies: on one hand a computer protocol and on the other hand the technology of the “Blockchain“ .
How does cryptocurrency work and What is it made of?
Bitcoin and its sisters, we understood it, are not regular coins. It’s a IT protocol, an intricate program that creates and defines a virtual currency, which is its DNA.
The protocol defines in particular the number of “parts” available and their computer size, that is to say their speed of circulation and their storage power.
Once created, a IT protocol can be modified by any developer who connects on the network, except that for a change to occur in the characteristics of a cryptocurrency, it requires the unanimity of the community, that is, all active developers.
According to industry professionals, around 10,000 coders are currently working on the bitcoin protocol, hence its stability, but also the difficulties to change the currency. It is also because of these difficulties that part of the bitcoin community, which is in favor of increasing the network’s capacity to process more transactions, launched Bitcoin Cash this summer.
Where to keep them?
After understanding how does cryptocurrency work, let’s be more practical. To use a virtual currency, you need an electronic wallet, which stores bitcoins, ethers, ripples… Portfolios are available on smartphones via applications or computers via dedicated sites.
For more security, some professionals recommend using smart cards that connect to computers and smartphones to secure the storage of cryptocurrencies.
Where can I buy some?
It is possible to buy virtual currencies on the internet and in specialized online platforms, with commissions, which range between 5% and 10% of the transaction amount. How does cryptocurrency work? There are dozens of sites that sell cryptocurrencies especially against euros and dollars. To sell its virtual currencies, the procedure is the same, also with commission fees.
What purchases are they used for?
How does cryptocurrency work and what about practical utility. Currently about 100,000 websites, like Expedia or ShowroomPrivé, accept virtual currencies. Bitcoin is accepted much more regularly than other virtual currencies.
Payments in virtual currencies are still marginal, however. Most users who buy it, primarily want to invest and trade, while cryptocurrencies have continued to rise. The majority of investors especially want to invest in bitcoin to take advantage of the rise in its price. Hence, last year we were facing same opportunity it is safe to assume that history repeats. However, the majority of volume and market cap is still testing same lows we are waiting on EFT – SEC.
How does cryptocurrency work and speculation?
Virtual currencies are regularly in the news after a crash or a sharp rise in their value. Beside low trading volumes, mainstream media directly impact traders sentiment. In the same way more like earning seasons for stocks.
This situation results in reality from the status of virtual currencies. How does cryptocurrency work on the speculative point of view? They are still in the development phase and seek their balance between means of payment and financial asset.
On some days, they can fall or increase by more than 10%, which feeds comments on their highly speculative nature.
Read for more articles.
cryptocurrency workcurrencies 2.0How does cryptocurrency work