With the development of technology, those who closely follow the economy today are also divided into two: On the one hand, those who defend traditional currencies, and on the other hand, those who see the future in crypto money markets such as Bitcoin.
Although the teams seemed to be separated, cryptocurrencies continued to develop as organic assets and settled in our daily lives until some companies made their salary payments in this way.
When the crypto money market, which has been quietly progressing for about three years, has been moving again in the last quarter of 2020, attention has once again turned here. Then let’s take a closer look at what is crypto money, what is behind this rise.
While doing this, let’s take a look at the blockchain technology that makes all this exchange possible. Let’s look at how this technology, which allows the transfer of crypto money, which is not a tangible object like traditional currencies, to be done in a virtual world without intermediaries, transparently and securely, works. Let’s learn how this system, which is considered an account book that keeps a record of crypto money, works.
Bitcoin was the first crypto money to enter our lives, if not into our wallets. But since that first meeting in 2008, confusion about the definition has not been cleared. To understand cryptocurrency, we need to look at what is not as much as we look at what it is.
What is cryptocurrency? It is a fully digital, encrypted virtual currency. It is produced after a wide range of mathematical verification operations carried out by computers, i.e. ‘mining’ (Just as the miner processes the soil and reaches the reserve, the information is processed here, and an ordinary citizen can ‘print’ cryptocurrency). It is exchanged and transferred, stored in digital wallets, converted on cryptocurrency exchanges. It is replaced only by the initiative of the person who has it.
What is not cryptocurrency? It is not a currency produced by any state. It is not connected (decentralized) to centralized monetary and banking systems. It is not managed by anyone. It is not produced, earned or traded by classical means. Imitation is almost impossible. Nor is it a physical object.
Since it is the most known, most circulating unit, it may be appropriate to say ‘the dollar of crypto coins’ for Bitcoin (BTC). All other units are called ‘altcoins’. Ethereum, Ripple, Litecoin and Iota are a few of them. Since the first cryptocurrency created was Bitcoin, and other units in the market are traded depending on the BTC pair, we hear his name the most. Of course, because he left behind an urban legend: no one knows who or ‘who’ Satoshi Nakamoto, who gifted the world the first Bitcoin, was!
Let’s also open up a little bit about crypto money mining. In this process, which requires computers with special software and equipment, you confirm financial transactions and provide transfers by solving complex problems. If you make the transaction correctly and quickly, you will be rewarded with newly produced crypto coins.
So why did the crypto coins, which have been in circulation for more than 10 years, suddenly excite everyone? The answer is actually hidden in the nature of money: Bitcoin, the highest volume unit of the crypto money markets, broke a record on November 30, 2020 after three years of normal course and exceeded $ 19,850. This equated to an increase of 8.7 percent, and this year’s increase was recorded by over 170 percent.
According to economic experts, the following factors were behind this record, which was considered very important for Bitcoin, which had a very active value chart:
- Acceptance and engagement at the institutional level increased. Now, cryptocurrencies have entered the radar of a much wider segment, including traditional financial firms. Institutional investors started to invest in this unit, which they found reliable. Similarly, much more opportunities have been created for investors to play with cryptocurrency using controlled exchanges or tools they are comfortable with.
- Online payment system PayPal gave its customers permission to use cryptocurrencies in October. This was perceived as a positive signal in terms of opening up to a wider audience and becoming widespread.
- Central banks, which want to combat the economic slowdown caused by the coronavirus outbreak, have also increased spending at unprecedented rates at the global level. Many investors who do not want their money to lose value have started to see crypto coins as safer against the potential losses that may arise from these loose monetary policies.
- Crypto coins also did not remain indifferent to current developments. The price rise was also triggered by the disappearance of uncertainty in the US elections and the positive news about the coronavirus vaccine began to come.
- Bitcoin’s supply, production is limited. In addition, at a regular period (every four years) this supply is halved. The last halving took place in May 2020. Therefore, the demand increased, but the fact that there were few digital coins to be bought increased the price.
We said the existence, the price, now let’s take a look at what the Blockchain technology behind this whole crypto money system means…
In the clearest terms, Blockchain means the ledger where all transactions related to a crypto money are kept. For this reason, it is also called the ‘encrypted ledger’.
This system records transactions on many different computers, and all stakeholders involved in the network can see these transactions. The data (process) is constantly updated with the entries. But here it is separated from any database, because no transaction can be subsequently modified, manipulated or deleted. There is also no single storage center. Many users attribute the transparency and security of cryptocurrencies to this logic.
According to the system, each data entry constitutes a transaction, and successive transactions constitute a block. A peer-to-peer distributed system is used to validate blocks, and after receiving approval, the transaction or block is added to the system. The block filled with data is chained to the previous block, which links them all together in chronological order. All these stages are also shared with everyone on the network.
In fact, this system, which is a typical record-keeping logic, is used in many different sectors such as health, transportation, science and industry as well as virtual currencies.
As our lives go digital, we will surely have many more digital notebooks and virtual wallets like this. It’s not too late to learn or to have one! If you are curious about such concepts, maybe you would like to take a look at our content titled ’10 Groundbreaking Technological Developments of the Last 10 Years’…
The articles contained herein consist of financial information, savings and savings suggestions, general comments and recommendations and are not within the scope of investment consultancy. Investment consultancy service is offered by authorized institutions to the individual by taking into account the risk and return preferences of the people. These recommendations may not be appropriate for your financial situation and risk and return preferences. Therefore, making and acting solely on the basis of the information contained herein may not produce results in accordance with your expectations.