Cryptocurrencies, also called cryptocurrencies, are digital means of exchange (virtual currencies), therefore they can be exchanged like any other currency.
Bitcoin was the first to start operating in 2009, outside the control of governments and financial institutions, that is, in a decentralized way.
These types of virtual currencies have a limit and are created by "miners".
They are told like this since they do the process through which cryptocurrency transactions are checked and new units are offered.
Miners collect the latest verified transactions in blocks, these blocks are encrypted and linked to the existing blockchain, also called blockchain (shared digital book where all transactions of a certain cryptocurrency between two parties are recorded).
They get a cryptocurrency reward for doing this.
They can be transferred instantly to anyone anywhere in the world
There is no official market, and can be operated 24 hours a day, all year round.
They are very volatile, their price can vary greatly in just a few hours.
They are widely accepted, although they are not yet globally accepted
They are not regulated at the moment
There is no system to compensate losses in case of fraud, or technical failure
They are limited
Transactions are recorded in a shared book
Its value is not exclusively linked to the behavior of a particular economy
Its value depends on the commitment of users to maintain their price when converting them to traditional currencies
There are a large number of cryptocurrencies currently available, all with their own characteristics and applications, among them we can highlight:
It was the first cryptocurrency and the best known today.
It is used as a means of payment globally.
It was created in 2008 by Satoshi Nakamoto, it is not known if it is an anonymous person or group of people, as this name is a nickname.
Bitcoin has a limit of 21 million units.
Bitcoin is divided into submultiples, called satoshis.
Its graph is equal to that of any currency and it is quoted against the currency of several countries.
Therefore, you can do a technical analysis of Bitcoin as you do with any other financial asset, such as stocks.
On August 1, 2017, the new version of bitcoin was made and those who then had bitcoins, went on to have that same amount in Bitcoin Cash.
It allows faster operations and with lower commissions.
Litecoin was considered the silver of Bitcoin, this being considered digital gold.
It was one of the first coins after Bitcoin, created in 2011 by Charlie Lee, a former Coinbase executive (platform on which most cryptocurrencies are bought).
It has an improved encryption of Bitcoin, being much faster.
This is its main advantage.
However, it has currently lost popularity.
It was created in 2013 by Billy Markus and Jackson Palmer, copying Litecoin technology.
It is exchanged in a decentralized way.
There are 100 billion coins, and it is the second most exchanged after Bitcoin, being the cheapest with respect to commissions and it is faster than Litecoin.
It was created in 2011 by Vitalik Buterin.
Ethereum, in addition to serving as a currency for transactions such as Bitcoin, also allows smart contracts, such as financial exchanges, crowfunding platforms and intellectual property.
It uses blockchain technology but there is no currency limit.
Ripple is a currency, created in 2012, pre-mined based on debt, known as XRP.
An XRP is an IOUs (promissory note in Spanish), that is, a debt.
Ripple is actually the name of the company that created it but is associated with the coin.
Ripple does not use blockchain technology and is not decentralized, which requires knowing the identity of whoever operates it.
It is faster than Bitcoin and there are 100 billion Ripples.
However, not all are in circulation since the company keeps half as collateral.
There are already banks operating with it.
Neo (former Antshares), is a cryptocurrency created in China, which has the backing of the Chinese government because they consider it a national creation.
There are cryptocurrencies that are banned in China, like Bitcoin.
This has a certain advantage, it is already known as "the Chinese Ethereum" and there is a lot of interest in it.
Digital Cash (Dash)
It was created in 2014 by Evan Duffield.
Its difference from other digital currencies is that it allows instant transactions and private transactions.
These functions are not managed by miners, but are processed through masternodes on a second level.
It is decentralized like Bitcoin but eight times faster.
At the moment it is not well known.
However, some experts consider it to be one of the safest coins because their masternodes must have at least 1,000 Dash to act.
Despite all the advantages that cryptocurrencies may have, you should consider the following:
They are not yet legalized but some governments are already starting to develop regulations on cryptocurrencies.
However, you should bear in mind that it is mandatory to pay taxes on cryptocurrencies, according to the legislation of most countries.
There are many cryptocurrencies and nobody knows for sure which will be the most prosperous in the future, so perhaps the safest thing would be to invest in the most popular, accepted and well-known cryptocurrencies.
The transactions are irreversible, which means that if you make a mistake and send them to someone else, you will have lost your cryptocurrencies.
Exchanges still invest a lot of money in security.
Therefore, it is not known if they are as safe as thought.
Recommendations to avoid scams
Because cryptocurrencies have attracted people with little or no financial knowledge, this has sparked many scammers, so you have to be careful.
The main scams are promises of large investment returns, exchanges that keep your money, false ICOs, alleged “brokers” of dubious origin, among others.
For this, and like anything you intend to do, you must train well on the subject.
You must read, practice in demo, learn from experts, in order to create your own trading or investment system with cryptocurrencies.
In addition, it is recommended to acquire cryptocurrencies on verified platforms and never invest on the recommendation of anyone.
There are many people with their own interests.
And of course, never invest all your money in cryptocurrencies or a very large percentage, nobody knows for sure what will happen to them.
Just invest money that you don't need and that you can lose it.
In the "Recommended Brokers" resources section you will find verified and reliable cryptocurrency brokers.
Main uses of cryptocurrencies
1. Buy to hold for a while
This is how the first people began to invest in cryptocurrencies, they bought to see what was happening since it was something very new, and when they became popular they sold them for a profit, such as the case of Bitcoin that shot up its price in 2017.
Some also speculated in the short term with them, bought on low days and when there was a good movement, generating a profit, they sold them.
2. Speculate with cryptocurrencies using derivatives.
There are Cfds (available 24 hours, every day) and futures (like the Cboe XBT) on cryptocurrencies.
They have the advantage of being able to operate in the short term, in a leveraged way, enough units of Bitcoins or Ethereums for example.
However, as we have already seen, the risk is high since the loss may be greater than the money invested in the operation, due to the very high volatility of cryptocurrencies.
If the movement goes to the side you need, that's great.
If you are a novice in trading, cryptocurrencies are not recommended to start.
It is preferable that you start with not so volatile assets to learn how to operate and when you have more experience try crypto.
Anyway, as always, if you do it first practice a lot in demo.