In today’s world, a huge number of business transactions take place on the Internet. The foreign exchange market has not bypassed that. Special electronic money, called cryptocurrency, has been created for online trading. They do not exist in material form, these currency are not printed or minted in reality. This is only a special set of digital data. Create currency special miners. In order to purchase a certain amount of cryptocurrency, there is a special contract confirming your right to own.
Who are the miners? The term «mine» means mining. That is, crypto needs to be extracted in the same way as precious metals, for example. Since all transactions with such currency are carried out through Internet resources, miners are engaged in double-checking of such actions. The feature of cryptocurrency is that its developers initially install a certain number of units that can function on the market. One of the first reference currencies in the world market was Bitcoin. In addition to it there are still a large number of types of electronic money. The Forex market allows its customers to work with such types of currencies as Bitcoin Cash and Gold varieties, as well as with Ethereum, Ripple, Litecoin and EOS independent currencies.
Regular cash flows are regulated by global banking institutions. In the Internet space, special blockchain journals play this role. They record the movements of cryptocurrency.
What is Blockchain?
This log is a set of digital blocks, each containing specific information. All blocks are built in a strictly defined sequence. Blocks have a large number of copies, for reliability stored on different computers. Since electronic transactions are carried out regularly, blockchain is constantly increasing. Consider what information is contained in each block:
- The individual code of the block itself;
- Individual code of the predecessor block;
- Information about the seller’s and buyer’s personal information and the amount of the transaction.
The work of blockchain depends entirely on the work of miners.
However, in 2016, a cryptocurrency was created, the blockchain of which does not contain a chain of information blocks. Its work is regulated by the users themselves. All performing transactions are independently confirmed by the receiver and the sender. It is called this blockchain Tangle, and the cryptocurrency working on it – IOTA. Working without the confirmation of miners benefits from the absence of high fees for the operations performed, as well as saving time.
Any currency, whether material or digital, requires special storage. For cryptocurrency, it’s a special wallet.
Work Of The Cryptocurrency Wallet
Each user has an individual encrypted virtual wallet. The information transmitted from the sender to the recipient is encrypted so that only the holder of the wallet to which it was sent can open it. There are two types of wallets: hardware and software. Software loses in functionality and security to hardware in many parameters. Let’s take a look at the advantages of the hardware wallet:
- High level of protection against malicious software that can harm the computer;
- The possibility of keeping private keys;
- The possibility of using several crypto currencies simultaneously without the need to create a separate purse for each currency;
- More reliable verification of the device used for the wallet, etc.
The Most Popular Cryptocurrency
Let’s look at the history and features of the most famous digital currencies:
- Bitcoin and its varieties. Bitcoin was the first to appear in the electronic currency market. And its creator is Satoshi Nakamoto. Its quota is strictly 21 million units. The emergence of Bitcoin in the currency market has become a revolutionary innovation in the sphere of trade. In just a few years its cost has increased by a huge number of times. If at the very beginning of the appearance of the 1 Bitcoin cost 0, 0008$, at the moment its value is more than 8 thousand $. With the development of blockchain in 2017 and the introduction of its new version, an offshoot from the initial bitcoin was created, which was called Bitcoin Cash. This kind of cryptocurrency is more improved and supports a much larger number of operations carried out. Another improvement is the creation of Bitcoin Gold. A feature of this branch is the possibility for Bitcoin owners to replace the original version with a new currency. The creation of an improved currency would allow its owners to make more profits through the development of a completely different mining algorithm;
- Ethereum. This cryptocurrency is a whole world system of interacting computers. The latest smart contract developments are gradually taking this currency to a new level. Its cost increases, and popularity begins to outperform Bitcoin;
- EOS. The currency is very similar to the previous one, but benefits from the use of improved technologies, which allows for a much larger number of transactions in a shorter period of time. This cryptocurrency creates the most favorable conditions for trade;
- Litecoin. At the heart of this crypto is the same blockchain as in Bitcoin. But thanks to improved software, blocks are created four times faster than the creation of bitcoin blocks. In addition, the originally set quota exceeds the number of Bitcoin units by 4 times;
- Ripple. It is a completely new payment system, characterized by increased security and the use of innovative technologies in the work.
- Stellar. It is an extensive open source platform based on a public and distributed blockchain network with its own cryptocurrency called Stellar Lumens. This is a Fork of the Ripple system, but it works faster and is aimed at working with banks.
- Tether. These coins are built on the blockchain and use the Omni Layer protocol. Any user on the planet can make USD equivalent transfers. The cryptocurrency is backed by real dollars and has its own USD in EUR reserve.
All crypto currencies created after Bitcoin are called altcoins and their number is constantly increasing. At the moment more than a thousand digital currencies are already known.
Prospects Of Cryptocurrency In The Financial Market
Cryptocurrency have gained great popularity for trading because they are not tied to the world economic and political situation. The creation of exchange contracts for Bitcoins attracted a large number of investment funds, and also led to the decision of some states to use cryptocurrency at the state level.
It is important to remember that the price of crypto currencies is extremely variable, and the course is subject to sharp changes. This creates good conditions for trading, but at the same time increases the risks of losses.