Bitcoin and other digital currencies evolve more and more to mainstream and gain a lot of attention.
Thanks to the rapid growth, investors have long recognized the potential and are benefiting from the increases in value. Bitcoin, for example, was released in 2009 and was initially available for a few cents. It then peaked in December 2017 at around 20,000 US-Dollar. Many experts still refer to this as the beginning.
Ethereum is also one of the best-known cryptocurrencies and plays an important role. Through the ethereum blockchain and the smart contracts used, other projects can publish their own applications based on the blockchain. This led to a very high variety of new cryptocurrencies, all of which serve different purposes.
- What is Bitcoin?
- How to buy Cryptocurrencies
- How to store Cryptocurrencies
- The Future of Cryptocurrencies
What is Bitcoin?
Bitcoin is the first digital currency that enables secure transactions between two users. It was published by Satoshi Nakamoto in 2009 and is based on a technology called blockchain.
Up until the development of bitcoin, numerous attempts were made to design digital money. However, these always failed due to various criteria, such as forgery protection. The bitcoin blockchain is considered to be the most secure and has booked 586 million transactions so far.
Bitcoin does not require a bank account and is therefore accessible to everyone. There are also no owners and the bitcoin blockchain is managed by the participants.
They continuously check all data in the network for correctness. This can be compared with a database, which only allows entries if all participants agree. Participants receive payment in the form of bitcoins for providing computing power to secure the data. This process is called bitcoin mining and ensures the security of the network.
Beyond that, there is no other way to create bitcoin. This ensures the uniqueness of every bitcoin and prevents counterfeiting.
How to buy Cryptocurrencies
In addition to Bitcoin, numerous other digital currencies have established themselves. Many of them are based on the ethereum blockchain and thus meet the ERC20 standard. Smart contracts allow transactions to be linked to certain conditions, which creates numerous new possibilities.
For example, there are numerous currencies that are linked to real national currencies. In addition, numerous companies have created their own tokens in order to offer their customers certain services.
These tokens are tradable on the open market and are subject to different exchange rates. The price of a token is always calculated from the relationship between supply and demand. The higher the interest in a particular token, the higher its value.
When buying cryptocurrencies, make sure that you choose a reputable exchange. Since this is a very young market, there are also flawed platforms and security holes. The market leader Binance is one of the largest and safest providers and offers most cryptocurrencies.
Users can also use other services there, including staking and trading with leverage. Binance also offers customers the opportunity to lend capital and generate passive income through interest.
How to store Cryptocurrencies
If you want to hold cryptocurrencies for a longer period of time, you should transfer them to your own wallet. Although it is also possible to store the coins on the exchange, a wallet is the safest option.
In order to send the coins to your own wallet, you need the public key. This represents the public address of the recipient and is comparable to an account number or email address. Then you make a transaction from the exchange to your own wallet.
The wallet is the digital purse and stores all coins. This means that only the user can access it. The private keys can also be viewed in the wallet, which provide proof of possession of the coins. This is comparable to the bank pin or the password for the email address. For this reason, the private key should never be published.
The Future of Cryptocurrencies
The blockchain is still a very new technology. However, the potential can already be seen. Many cryptocurrencies create new solutions for existing problems.
The demand for efficient methods is growing, especially as digitization advances. This affects, among other things, industry, business and research. But digital identities and voting rights can also be mapped using tokens. This could simplify political elections in the future while creating greater transparency and accessibility. Manipulation during elections could also be prevented.
Tokenization also takes place in other areas. Security tokens can be used to transfer property and voting rights from the real world to the digital world. This means that stocks and securities, raw materials, real estate and precious metals can also be represented on the blockchain in the form of tokens. These can be traded on the free market and are therefore easier and cheaper to transfer than before.
Investors and startups can also benefit from tokens. These can serve as evidence and the generated returns can be distributed proportionally to the token holders. There are also numerous companies that enable loans in this way. Decentralized finance (DeFi) is one of the fastest growing sectors among crypto projects. Smart contracts can be used, for example, to grant personal loans and lenders automatically receive interest.
One of the best-known and most reputable companies is Nexo, based in London. Nexo enables instant loans through cryptocurrencies and offers attractive interest rates. Holders of the Nexo token also receive a dividend, which is paid out in proportion to the company’s profit.
Central banks are also already using blockchain technology. In October 2020, the Bahamas became the first country to officially introduce a national currency in digital form. China, Sweden and Norway are also testing central bank digital currencies (CBDC). The European Central Bank is also researching various options for developing a digital Euro.
Since there are already numerous companies doing research on cryptocurrencies, new applications will continue to be developed in the future. These have the potential to improve and redesign existing methods in various areas.
