In recent years, one can hear about cryptocurrencies from everywhere, so even people far from the field of IT and finance began to wonder what cryptocurrencies are and why they are needed at all.
Cryptocurrency is essentially digital money that uses cryptography to confirm any change in the system, such as transferring money from one wallet to another. The peculiarity of the system is that it does not have a single or main center, influencing which someone could significantly affect the entire system. As a result, cryptocurrencies cannot be controlled and regulated by centralized institutions such as governments and banks, and no intermediaries are required to transfer funds.
Where did it come from?
The history of the emergence of cryptocurrencies goes back to the distant 1990s, when some companies tried to use complex encryption for payments, however, the creation of the first cryptocurrency was still far away. The first and most important cryptocurrency today, Bitcoin, was developed in 2008 and launched as a payment system in 2009 by a mysterious person under the nickname Satoshi Nakamoto, whom no one has ever seen. The creator called Bitcoin an electronic cash system.
Why are cryptocurrencies so good?
The ease of use. In order to start using cryptocurrency as a means of payment, you do not need to register, upload documents, confirm your identity or phone number. To do this, you only need to use your email address. You don’t even need to download and install large and complex programs, you just need to download the wallet client. This also ensures the anonymity of payments.
Security of transactions. Due to the decentralization of the system, each block is an equivalent node in the network and participates in the confirmation of any changes. Each transaction is information that is divided into parts and distributed in encrypted form across all blocks, the number of which is close to 700 thousand as of mid-2021. This means that in order for an attacker to transfer money to his wallet to steal it, it will be necessary to make changes to all blocks at once. To do this, one need to hack simultaneously more than 350 thousand mini servers, which is now impossible at all.
Inflation protection. The absence of a central regulator guarantees protection against inflation, because no one can decide to suddenly print another certain amount of new money or play with interest rates. The maximum issue of the cryptocurrency is initially known and cannot be more, while its value is determined solely by market demand.
The attitude of the official authorities towards them in different countries is ambiguous. The inability to control and regulate crypto finance does not please governments that operate at the expense of taxes and power. On the other hand, the governments of many countries already understand the huge potential of cryptocurrencies, so they are trying to somehow comply them with local laws to regulate them and even start to issue their own cryptos.
All the advantages of cryptocurrency over other types of money make them a very attractive financial instrument. This is why the popularity of cryptocurrencies is constantly growing both among ordinary people and among large investors.
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