HitBTC crypto exchange terminal window.
Application of the Monero cryptocurrency on a mobile phone.
A cryptocurrency, cryptocurrency or crypto asset is a digital medium of exchange that uses strong cryptography to secure transactions, control the creation of additional units, and verify the transfer of assets using distributed ledger technologies. [1][2][3][4] Cryptocurrencies are a type of alternative currency or digital currency. There is controversy that cryptocurrencies have to be decentralized control or centralized currencies by central banks or another entity, leaving these entities and / or central banks without any function. It could be the case that it is massively adopted and becomes fiat currency for the entire planet. Cryptocurrencies generally use decentralized control rather than a central bank digital currency (CBDC). [5]
Control of each currency works through a decentralized database, usually a blockchain, which serves as a database of public financial transactions.
The first cryptocurrency that began operating was Bitcoin in 2009,[6] and since then others with different characteristics have appeared such as Litecoin, Ethereum, BNB (Binance), Bitcoin Cash, Ripple or Dogecoin.
In cryptocurrency systems, the security, integrity, and balance of your statements (accounting) is ensured by means of a structured network of agents (segmented file transfer or multi-source file transfer) who verify (distrust) each other called miners, who are mostly the general public . and actively protect the network (the lattice) by maintaining a high algorithm processing rate, in order to have the opportunity to receive a small tip, which is distributed randomly. [7]
Breaking the existing security in a cryptocurrency is mathematically possible, but the cost to achieve it would be unbearably high. For example, an attacker attempting to break Bitcoin’s proof-of-work system would need greater computational power than the entire lattice (network-swarm) of all the miners in the system, and even so, would only have a 50% chance of success (authentication round no.), in other words, breaking Bitcoin’s security would require a capacity greater than that of tech companies the size of Google. [8]
It is anticipated that in the future quantum computing could become a reality, which would break the balance in case developers could not implement the system in time to use post-quantum algorithms. [9]
Cryptocurrencies make possible the so-called internet of value, also known by the acronym IoV ( internet of value), also called the Internet of money: they are Internet applications that allow the exchange of value in the form of cryptocurrencies. This value can be in the form of contracts, intellectual property, shares, or any ownership of something with value. Things of value could already be exchanged before using payment systems such as PayPal. However, the difference between paying with something like PayPal and paying with a cryptocurrency is that paying with PayPal requires that the payment be made through private networks such as credit cards and banks, while payment using cryptocurrencies has no intermediaries. It goes directly from the buyer to the seller. In this way, you have a system of universal transfer of value, free of intermediation.
This system:
- It reduces the cost of the transaction, since there is no intermediation.
- Reduce times. Although online payments are fast, settlements between the parties take time and the seller receives the amount days after payment. With cryptocurrencies, the delay is on the order of minutes.
- Eliminates the need to use financial agents to transact.
In addition, among them, several advanced exchanges stand out that allow us to register, place the information and start making transactions. This greatly benefits users who trade cryptocurrencies. History[edit]
In 1983, American cryptographer David Chaum conceived an electronic monetary cryptographic system called eCash. [10][11] Later, in 1995, he implemented DigiCash, which used cryptography to annoy money transactions, albeit with centralized issuance and settlement (payment). [12] This system required software to withdraw money from a bank and designate specific encrypted keys before they could be sent to a recipient. This allowed the digital currency to be untraceable by the issuing bank, the government or any third party.
In 1996, the NSA published research entitled How to make a Mint: the Cryptography of Anonymous Electronic Cash. This research described a cryptocurrency system, published on an MIT mailing list. [13] Later, in 1997 it was published in The American Law Review (Vol. 46, Issue 4). [14]
The concept or idea of cryptocurrency was first described by Wei Dai, in 1998, where he proposed the idea of creating a new type of decentralized money that would use cryptography as a means of control,[15] The first cryptocurrency to be created was Bitcoin,[16] created in 2009 by pseudonym developer Satoshi Nakamoto, which uses the SHA-2 set of cryptographic functions (exactly the SHA-256) as its PoW (proof-of-work) scheme. [17][18] Subsequently, other cryptocurrencies have appeared, such as Namecoin (an attempt to decentralize the DNS domain name system, which would make internet censorship very difficult), Litecoin (which uses scrypt as a PoW scheme, as well as, to have a faster transaction confirmation), Peercoin (which uses a hybrid PoW/PoS [proof of work/proof of stake] scheme, it also has an inflation rate of around 1%) and Freicoin (which implemented Silvio Gesell’s concept by adding depreciation over time). [19] Many other cryptocurrencies have been created, although not all have been successful, especially those that have not brought any innovation.
Since their creation, cryptocurrencies have been gradually gaining the attention of the general public and the media. [20] Since 2011, interest has risen rapidly, especially during Bitcoin’s dizzying rise in April 2013.
On August 6, 2014, the United Kingdom announced the launch of an initiative for the study of cryptocurrencies. This study should include what role this type of currency could play in the UK economy, as well as the analysis to determine which regulations should be considered. [21]
In June 2021, El Salvador became the first country to accept Bitcoin as a legal tender. [22]
In August 2021, Cuba followed resolution 215 to accept Bitcoin as a legal tender, which will avoid U.S. sanctions.[23]
On September 21, 2021, China banned all use, transaction, mining or trading of cryptocurrencies, with the intention of preventing capital flight. It thus became the first country to condemn this digital market. At the stock market level, Bitcoin and other cryptocurrencies fell considerably in the stock market after Xi Jinping’s decision. [24][25]
In April 2022, the European Union issued a law prohibiting anonymity when transferring cryptocurrencies. The EU Parliament banned anonymous transactions with cryptocurrencies through official exchanges. Formal definition[edit]
