WHAT ARE CRYPTOCURRENCIES FOR?

WHAT ARE CRYPTOCURRENCIES FOR?

MOST USED CRYPTOCURRENCIES

The first cryptocurrency or cryptocurrency that operated in the international market was bitcoin, but later, others were created, promoting a market that is gaining more followers. Thus we have:

1. Bitcoin

It is recognized as the cryptocurrency that started the entire movement of digital currencies by presenting itself as an alternative to the traditional monetary system. It is the most popular, and the fluctuations in its price strongly impact the rest of the market.

2. Ether (Ethereumn)

Considered the second most popular cryptocurrency, it is better known as Ethereum, the digital platform’s name that allows buying and selling transactions.

3. Litecoin

Of a lower value, it is said that it works with a mechanism similar to that of bitcoin. This digital currency is easier to get and, therefore, moves faster between people.

4. Dash

This cryptocurrency is based on the Bitcoin code but has a series of innovations in terms of security and speed to carry out transactions on the network.

5. DogeCoin

Created in 2013, its name and image were inspired by a meme. Its operation is similar to that of other cryptocurrencies, but its popularity is due to celebrities such as Elon Musk, owner of Tesla.

WHAT ARE CRYPTOCURRENCIES FOR?

Although its operation is digital, cryptocurrencies fulfill the function of a regular currency, so – like any other means of payment – they can be used to purchase products and services.

But even though their use has expanded and is usually used more frequently in the main e-commerce platforms, they are not regulated by any financial entity, neither in Peru nor in any country in the world.

More and more businesses accept and promote their use in sectors such as real estate, tourism, automotive, and others. Not long ago, for example, WeWork began accepting cryptocurrency payments in partnership with BitPay, a cryptocurrency payment service provider.

Since April, the flexible space provider has accepted Bitcoin (BTC), Ethereum (ETH), USD Coin (USDC), Paxos (PAX), among other cryptocurrencies, as a form of payment for its services. But it has also announced that it will keep this coin on its balance sheet, for which it will pay its owners and external partners in cryptocurrencies.

The same decision has been made by Elon Musk’s electric car company Tesla; While companies such as KFC, Microsoft, Expedia, WordPress, Reddit, or Paypal are other of the many recognized brands that promote payment with cryptocurrencies and allow their users to make payments with this virtual currency or electronic means of exchange.

WHERE ARE THEY BOUGHT AND SOLD?

Before starting in buying and selling cryptocurrencies, it is important to consider two basic concepts: ‘blockchain’ and ‘exchange.’

Known as a “chain of blocks,” the ‘blockchain’ is the network on which cryptocurrencies work and stores all changes that occur immediately. In short, it functions as a kind of “ledger,” which is public and accessible.

While an ‘exchange’ is the platform that allows transactions with cryptocurrencies, in that sense, it works as an “exchange market” because it allows you to buy, sell or exchange your cryptocurrencies for local money, in our case for soles.

However, Bitcoin also has some disadvantages that need to be taken into account:

    Exposure to Bitcoin-specific fraud and scams: Being the most popular cryptocurrency globally and can be used relatively anonymously, Bitcoin has been the currency used to carry out scams, frauds, and attacks in greater proportion than other currencies. If you want to learn how to avoid scams and fraud on the Internet, we recommend our Cybersecurity courses.

    The black market activity could harm your reputation and usefulness: Bitcoin attracts cyber criminals involved in the Dark Web and other crimes on the network due to the anonymity they grant and the ease of carrying out transactions. Furthermore, as with cash, the international legal system is not prepared to prevent or solve this problem, including money laundering or the financing of terrorism. The CIA and many intelligence and investigation experts point out that it is in the interest of cybercriminals to use cryptocurrencies since it facilitates their traceability and investigation, unlike cash that leaves no trace. 

    Susceptible to high price volatility: Although Bitcoin is one of the most liquid and easiest cryptocurrencies to exchange, it is still susceptible to large swings in its value over short periods. Therefore, while Bitcoin may be a good option n for investing, it is not very suitable for conservative investors due to its lack of regulation and high volatility. Also, as the value of Bitcoin varies so much from one day to the next, it is difficult for users to use it as an exchange method.

    No returns or refunds: One of the biggest disadvantages of Bitcoin is the absence of a standard policy for returns or refunds. In this way, users affected by fraud (such as bank phishing) cannot request a refund using Bitcoin. The decentralized structure of Bitcoin makes it impossible for someone to mediate disputes between users.

    Possibility of being replaced by a superior cryptocurrency: Some newer cryptocurrencies make it even more difficult to track money flows or identify users. Others even have systems that allow users to exchange cryptocurrency units directly for physical currencies, thus reducing the associated fraud risks. 

Therefore, over time, some of these alternatives, such as Ethereum, could outperform Bitcoin, hurting its value. Environmental Damages from Bitcoin Mining: Bitcoin mining consumes huge amounts of electricity, necessary for its operation and safety. Depending on the origin of the electricity used by Bitcoin miners, for example, coal plants, it could be very harmful to the environment.

 On the contrary, the mining activity is increasingly professionalized, so miners (or mining companies) prefer using renewable or clean energies not to assume the associated electricity costs. This has caused solar panels or other renewable energy systems to spread in many countries, making the system more sustainable and reducing its impact on the environment.

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