In 2021, cryptocurrencies, these virtual currencies, made a lot of headlines. First, Elon Musk announced the purchase of US$ 1.5 billion Bitcoins by Tesla, which would start accepting them as payment for electric cars. Then, El Salvador became the first country in the world to adopt Bitcoin as legal tender. Finally, Twitter founder Jack Dorsey stopped being CEO of the company to dedicate himself to Square and become an “evangelist” for Bitcoin.
Next, discover what’s behind the popularization of cryptocurrencies!
Cryptocurrencies: what is it?
The more digital means of payment advance, the more cryptocurrencies become relevant in the field of technology and finance. After all, they are a new form of digital money, and when they become more popular, we will be able to use them to make (more) payments.
What differentiates cryptocurrencies from the digital transactions we make with our country's currency is technology. So, to verify these virtual currencies, they will use cryptography. They do not exist physically, and to define their value, it is through supply and demand.
Furthermore, they are not physically stored in a bank: they are currencies transacted on technology-based networks blockchain, which is decentralized — that is, those who confirm the validity of cryptocurrency transactions are the computers connected to this network, and not intermediaries such as banks and card operators.
Therefore, cryptocurrencies aim to be an advancement in relation to payment systems (such as credit cards and transfers), eliminating intermediaries that charge fees for these services (such as banks and investment brokers).
Cryptocurrencies are virtual, and to protect against counterfeiting, cryptography is used. Since the Central Bank will issue them, they are theoretically safe from government interference or manipulation.
Types of cryptocurrencies
Although the best known is Bitcoin, there are several types of cryptocurrencies available on the market and which undergo different variations in value.
Therefore, check out the 5 most well-known types of cryptocurrencies:
Bitcoin
It was the first cryptocurrency, developed in 2008 with the aim of ending the use of ordinary paper money and, mainly, the influence of banks in financial operations.
Because of this, the Bitcoin It is already used as a form of payment by several companies and organizations. Thus, it can be considered the main cryptocurrency on the market.
Ether
Unlike Bitcoin, the Ether it was created with the sole intention of being a digital currency. In other words, as a payment method within its own platform, Ethereum.
This way, anyone who helps develop the platform or provides mining services is rewarded with cryptocurrencies. Finally, due to its performance, Ether became one of the most traded virtual currencies in the world.
Binance Coin
Firstly, before being one of the best-known cryptocurrencies, Binance it was an exchange. In other words, a mediator company between buyers and sellers of virtual currencies.
Furthermore, it was initially created as a token and grew within the market. Today, its main use is in virtual purchases, to pay for hotels and flights, among other services.
Cardano
A Cardano is one of the most modern cryptocurrencies in the world, and aims to bring together the best qualities and characteristics of all cryptocurrencies available on the market.
It is aimed at banks and financial operations, with the goal of being an alternative form of payment for people and institutions.
Finally, Cardano was the first cryptocurrency based on a scientific methodology.
Litecoin
A Litecoin It is very similar to Bitcoin, the only difference being in the mining process.
Thus, its main objective is to reduce the time for financial transactions carried out with normal currencies, being considered one of the main alternatives for these operations.
Cryptocurrencies: how to buy?
Firstly, to create cryptocurrencies mining is necessary, but this has nothing to do with the world of minerals. On the contrary: this mining is basically a competition between computers with high processing power to solve complex mathematical problems.
The computer owners who find the solution first receive cryptocurrencies as a reward. As proof of their work, these people receive a hash, a code that ensures the validity of that cryptocurrency, like a fingerprint.
A less laborious way to get the currency is to buy it. First, you need to have a crypto wallet (crypto wallet), which is similar to digital payment services such as PayPal or Google Pay.
Then, to trade, you use Exchange, which are websites or services that allow you to exchange cryptocurrencies between each other or use a country's currency to buy more virtual currencies (and also store them in your “savings”).
The Exchange has different formats: in some, transactions can be made by an intermediary, but in general they are decentralized: those interested in buying and selling come together to make transactions with each other (peer to peer).
To carry out transactions with cryptocurrencies, you must use the blockchain. There are some cryptocurrencies that allow you to maintain privacy so that no one discovers the source, quantity or destination of transactions. However, most cryptocurrencies (including Bitcoin) do not operate this way.
Dealing with cryptocurrencies also has its share of risk. Anyone who buys, sells or invests in cryptocurrencies should always inform themselves about the risks, which to date are basically their volatility and lack of regulation.
What is cryptocurrency mining?
Making a comparison with paper money, when a bank needs to put more money into circulation, it prints more banknotes. It's the same case with cryptocurrencies.
Mining cryptocurrencies is nothing more than putting more virtual currencies into circulation, however, what defines everything in this case are the algorithms. Furthermore, it is during mining that cryptocurrency data is validated on the blockchain.
However, this mining process is not simple, as it requires a computer with great processing capacity. The more you have to mine, the better the computer needs to be.
How to mine cryptocurrencies?
First of all, it is important to highlight that each cryptocurrency will have its own mining process. Because of this, the first step is to have a cryptocurrency wallet, as that is where you will receive rewards for mining.
Furthermore, the cryptocurrency mining process requires a computer with extremely advanced software. This is because to mine, the device needs to solve a series of equations before other miners.
Therefore, computers need to have a lot of processing power. Currently, one of the best known for cryptocurrency mining is ASIC.
Finally, check out some programs below that allow you to mine Bitcoins and other virtual currencies:
- CGMiner
- BFGMiner
- Awesome Miner
How to invest in cryptocurrencies?
There are two ways to invest in cryptocurrencies: peer-to-peer and directly with specialized brokers, which are called exchanges.
Check out how to negotiate in each of them:
- Peer-to-peer: in this case, the person trades directly with another person who is selling their cryptocurrencies, without any intermediary. Therefore, in this system trading tends to be more open and faster, in addition to not having to pay fees. However, peer-to-peer is a means more susceptible to possible scams.
- Exchanges: Also known as brokers, exchanges are intermediaries that connect investors to the best deals in the world of cryptocurrencies. The process is simple and can be done online, but in most cases they will ask you to pay a fee for the intermediation to be carried out.
Cryptocurrency values
Just like shares on stock exchanges, the price of cryptocurrencies also varies. Therefore, the prices of virtual currencies can change according to a series of factors.
For example, the most common is the “law of supply and demand”, that is, the more a cryptocurrency is in demand, the greater its value will be, and vice versa.
Furthermore, the technologies used to develop currencies also influence their value. The greater the technology, the higher the price.
Finally, the circulation of that currency in the digital environment and the actions that can be done with it can also make the price increase or decrease.
3 promising cryptocurrencies to know
To understand which are the most promising cryptocurrencies on the market, it is important to follow the main portals and charts on the subject daily. Often, by carrying out this monitoring, it is possible to find good investment opportunities.
However, there are some cryptocurrencies that could represent the future of virtual currencies, or put an end to some problems.
So, check out 3 promising cryptocurrencies:
- Elrond: considered one of the most promising today, Elrond promises to put an end to some problems in the blockchain. Thus, it has big names in the sector in the project, in addition to having launched its own brokerage and has a series of investors, such as Audi.
- Avalanche: One of the biggest advantages is that your transaction is cheaper. Furthermore, unlike other cryptocurrencies, Avalanche stands out for its speed, scalability and its network. Finally, it has advantages in its programming and is made up of three blockchains.
- The SandBox: has a very promising technology for cryptocurrencies. This way, its platform allows trades to be made in the metaverse. Thus, companies like Tesla, for example, already use the system.
How to declare cryptocurrencies?
In 2022, the Federal Revenue required 5 thousand reais to declare cryptocurrencies above R$. In this way, it is understood that virtual currencies function as goods or a financial application.
On the Revenue website there is a tab to open an Assets and Rights form. It is worth noting that for each cryptocurrency a new form must be opened. In other words, each type of virtual currency cannot be mixed.
