Cryptocurrencies - What are they, how do they work, and what are virtual coins used for?

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Learn EVERYTHING about CRYPTOCURRENCIES

Is it possible that in the future everyone will use cryptocurrencies? Honestly, no one knows. But, believe it or not, one thing is certain. Cryptocurrencies have revolutionized the current financial system.

Banks, different Governments, and major multinational companies are investing in research and development of blockchain. If they are interested in this technology, I assure you that you should also be concerned about learning about cryptocurrencies.

Cryptocurrencies, what is a virtual currency?

For this purpose, criptomoneda.ninja gathers the best information about cryptocurrencies in one website. Our intention is to create the best guide to virtual currencies. Are you ready to receive the best cryptocurrency training for dummies?

In the first paragraphs you will find an explanation about cryptocurrencies for beginners, with an introduction to the basic concepts of digital currencies. Later on, we will teach you more advanced concepts, so that you become a true expert. If you want to know how to get started with cryptocurrencies, you've come to the right place.

If you want to know a lot more information about cryptocurrencies, visit our Bitcoin Guide.

We try to explain cryptocurrencies for dummies, so that everyone is able to understand them.

What is a cryptocurrency? Are they a scam or the money of the future?

Currently, cryptocurrencies are a global phenomenon known by most people. However, talking about them still sounds a bit geeky and most people still do not understand well what a cryptocurrency is. On the other hand, banks, governments, and many large companies are aware of their importance. If they are interested, you should also learn about cryptocurrencies.

Today it is difficult to find a major bank, a big accounting firm, a prominent software company, or a government that has not researched some cryptocurrency, published a document about them, or developed a blockchain project.

But beyond the media hype, the vast majority of people - even these bankers, consultants, scientists, and developers - have very limited knowledge about cryptocurrencies. Often they do not even understand the basic concepts of cryptocurrencies.

What are cryptocurrencies?

Cryptocurrencies are digital cash. Cash? Yes. They are not "stored on a card" or deposited in a bank account. Electronic coins are stored in cryptocurrency wallets, which, like them, are not visible: They are digital.

In a more advanced explanation, cryptocurrencies are accounting entries in a database or, more precisely, a digital ledger. But for security, all transactions made in this database are encrypted. In other words, they are encrypted coins. This is the meaning of crypto within the term cryptocurrency.

However, this is a simple explanation of cryptocurrencies. The meaning of cryptocurrencies involves a new technology that has revolutionized the industry, developing applications beyond finance.

To understand cryptocurrencies, a more detailed explanation is necessary. So let's start with cryptocurrencies from scratch.

  • What are cryptocurrencies and how do they work? What does cryptocurrency mean?
  • What is the history of cryptocurrencies?
  • How were cryptocurrencies originated?
  • What is the purpose of mining cryptocurrencies?
  • How are cryptocurrencies created?
  • Are cryptocurrencies legal?
  • How do they influence the digital economy?

What was the origin of cryptocurrencies

If we want to explain the origin of virtual currencies, we have to go back to the first one of them all: Bitcoin. Cryptocurrencies and bitcoin are two terms that always go hand in hand.

Few people know this, but creating a cryptocurrency was not the initial intention of its inventor. Let's say they are a by-product. Satoshi Nakamoto, the inventor of the most important cryptocurrency, bitcoin, never intended to invent a currency.

Satoshi's goal was to develop "a peer-to-peer digital payment system", as he stated at the end of 2008.

A peer-to-peer network, peer network, or P2P network is a computer network that shares all information amongst the peers. There is no central server, but rather nodes that behave as equals.

What Satoshi actually did was announce the first version of Bitcoin: A new electronic cash payment system that uses a peer-to-peer network to prevent double-spending. It was the birth of bitcoin and virtual cryptocurrencies. A completely decentralized network, without a central authority controlling it. There wasn't even a central server.

If they are decentralized, who backs cryptocurrencies? Who controls them?

The backing of cryptocurrencies comes from the trust of its users. Just like with a dollar or a euro, it is the people who give value to cryptocurrencies. But unlike these, there is no central organization that controls them.

This provides a great advantage to cryptocurrencies. In repeated occasions throughout history, Governments have devalued their currency with their own objectives, seriously harming their population. However, the value of cryptocurrencies can never be manipulated, their price self-regulates in their own market.

Satoshi was not the only one. In the nineties, there were many attempts to create digital money. All these attempts of digital currencies were controlled by a central entity. This authority dictated the value of the currency and decided when and how much money was issued. Obviously, they all failed.

The most important part of Satoshi's invention was that he found a way to build a decentralized digital payment system. The success of the project was not the creation of bitcoin, but the invention of the decentralized system. No intermediaries.

The history of cryptocurrencies and bitcoin are totally linked.

This decision became the origin of cryptocurrencies. Decentralization was the missing piece and the trigger that has revolutionized the current financial system. The reason is a bit technical and complex, but if you manage to understand it, you will know more about digital currencies than most people. Therefore, let's try to explain it in the simplest way possible.

Satoshi Nakamoto, by inventing the first one, is credited with being the creator of cryptocurrencies.

Learn more about the origin of virtual currencies in the section on the history of cryptocurrencies.

Maybe a video about cryptocurrencies can help you understand it better?

How cryptocurrencies work

In order for a virtual payment system to function, it is necessary to keep track of all accounts, balances, and transactions that occur within it. An important problem that a payment network must address is preventing double spending: preventing someone from spending the same amount twice. Generally, in current financial entity systems, a central server handles this by maintaining a transaction registry.

In a decentralized network, this central server does not exist. Therefore, coordination is needed among each entity in the network to perform this task. All nodes in the network need to have a list of all transactions to verify if future transactions are valid or if they attempt to duplicate spending.

But how can these entities reach a consensus on these records?

If network peers disagree on even a small balance, everything breaks down. They need absolute consensus. Typically, a central authority is again relied upon to declare the correct state of balances. But how can consensus be achieved without a central authority?

No one knew until Satoshi emerged. In fact, no one believed it was possible.

His greatest innovation was achieving consensus without a central authority. Cryptocurrencies are one part of this solution. As we said, they are a byproduct for the proper functioning of a decentralized payment network.

What are cryptocurrencies

If we remove all the noise surrounding cryptocurrencies and reduce it to a definition, the meaning of cryptocurrencies can be the following:

Definition of cryptocurrencies

According to the concept of cryptocurrencies, they are simply a series of limited entries in a database that cannot be changed without meeting specific conditions.

This may seem simplistic, but the truth is that it is exactly how a virtual currency can be defined.

By making an analogy with the money in a bank account... Aren't they just entries in a database that are modified according to certain conditions? Money is simply a verified entry in some type of database where accounts, balances, and transactions are recorded. Most of the money that is moved today is electronic money.

In the traditional financial system, there are two types of money: legal and bank. Legal money is the coins and bills that are legal tender. Bank money is the virtual money that exists in deposits and bank accounts. The sum of both is the Money Supply. In other words, the amount of money circulating in a given economy.

There is no difference between cryptocurrencies and bank money. They are simply a new type of money: digital. They are exactly the same: entries in a database. Why so much fear surrounding digital currencies?

Digital Economy

With the internet, our understanding of the economy has been increasingly changing. To the extent that today we already talk about the Digital Economy, also known as "Internet Economy", "New Economy" or "Web Economy".

The internet has revolutionized the world of insurance, loans, betting, commerce, and a large number of sectors. The emergence of cryptocurrencies is one more step in this 4.0 revolution. It represents a total break with the traditional economy, completely dissociating from it, so experts are already talking about this new stage as the era of crypto economy.

Investing in cryptocurrencies

Since the origin of cryptocurrencies, their popularity has only grown. This has been reflected in their price, which has only increased since then.

Therefore, another use of cryptocurrencies is as an investment instrument. There are many cryptocurrencies that can be used as examples: From Bitcoin to Ethereum, passing through IOTA, EOS, NEO or Stellar.

However, when it comes to investing in cryptocurrencies, it is VERY IMPORTANT to take into account the following tips:

  • Invest in cryptocurrencies with money that you don't need and that won't be a problem if you lose it. The cryptocurrency market is very volatile. You can make a lot of money, but also lose it all.
  • Never invest in cryptocurrencies based on someone's recommendation. In the world of cryptocurrencies, there are many people with their own interests and their recommendations may be malicious.
  • To avoid possible scams, it is essential to acquire virtual coins on verified and widely used platforms.

If you are convinced about investing in cryptocurrencies, we recommend reading the following sections:

Cryptocurrency Mining

A cryptocurrency like Bitcoin consists of a network of peers or nodes. In other words, it is a distributed network of computers. Each peer has a record of the complete history of all transactions, as well as the balance and details of each account.

A transaction is a file that says, "John gives X Bitcoin to Anthony" and it is signed with John's private key. Once signed, a transaction is broadcasted on the network. In other words, one of the peers sends it to each of the other peers. This is basic P2P technology. Nothing special.

Confirmation of the transaction is a key concept in virtual currencies. It could be said that cryptocurrencies are based on confirmation.

When a transaction is unconfirmed, it is pending and can be forged. When a transaction is confirmed, it is set in stone. It cannot be forged, reversed, and becomes part of an immutable record of historical transactions: the so-called blocks or blockchain.

The blockchain is a fundamental piece of cryptocurrency security

But then, how are transactions confirmed on the blockchain?

Only miners can confirm transactions. This is their job in a virtual cryptocurrency network. They take transactions, validate them as legitimate, and propagate them on the network. After a transaction is confirmed by a miner, every node has to add it to their database. It is now part of the blockchain.

What is cryptocurrency mining?

Cryptocurrency mining is the process of confirming transactions on the blockchain of cryptocurrencies.

For this task, miners are rewarded with a sample of a cryptocurrency, for example with bitcoins. The activity of the miner is one of the most relevant in the system.

That is, encrypted coins were created solely as a reward for miners. Its only function is that. However, they are fundamental, since cryptocurrency mining is what makes the decentralization of the system possible.

What do cryptocurrency miners do?

Anyone can actually be a miner. Since a decentralized network has no authority to delegate the confirmation task, a cryptocurrency needs some kind of mechanism to prevent a ruling party from abusing it. Imagine someone creating thousands of fake users and spreading counterfeit transactions. The system would break immediately.

That's why Satoshi established that miners need to contribute a certain amount of work from their computers to perform block confirmation. In fact, they have to find a hash - a product of a cryptographic function - that connects the new block to its predecessor. This is called proof of work.

For example, bitcoin uses the SHA-256 hash algorithm.

It is not necessary to understand the details about SHA-256. It is only important to know that they are very difficult cryptographic puzzles to solve and that miners compete to solve them. After finding a solution, a miner can build a transaction and add it to a block in the blockchain. As an incentive for this work, the miner is entitled to a specific number of bitcoins. This is the only way to create valid bitcoins.

For this reason, miners are fundamental to the operation of cryptocurrencies.

Learn more about the creation of virtual currencies and the Proof of Work system in the section on cryptocurrency mining.

Revolutionary characteristics of cryptocurrencies

As we have mentioned before, virtual currencies and bank accounts are practically the same. So why are cryptocurrencies a revolution?

The main difference, as is to be expected, is decentralization.

Bank accounts are databases controlled by people, without you really knowing what they do with them. On the other hand, cryptocurrency transactions are ensured through a series of cryptographic processes. They are not secured by people or social trust, but by mathematics. It is more likely for an asteroid to fall on your house than to compromise the security of cryptocurrencies.

To accurately describe the properties of cryptocurrencies, we will separate their characteristics into transactional and monetary ones. Keep in mind that not all digital currencies have the same properties, although they do have some common ones.

Transactional properties of cryptocurrencies

Irreversible. After confirmation, a transaction cannot be reversed. By anyone. And by no one means no one. Not you, not your bank, not the President of the United States, not Satoshi, not your miner. No one. If you send money, you send it. No one can help you if you send your funds to a scammer or if a hacker steals them. There is no safety net.


The network uses pseudonyms. Neither cryptocurrency transactions nor accounts are connected to real-world identities. Each person is identified by the so-called addresses or virtual wallets, which are random alphanumeric chains of about 30 characters.

At first glance, cryptocurrencies seem anonymous. However, most current exchanges require identification to acquire them. That is, they link addresses to individuals. In addition, addresses can also be identified by the IP address of the device where they were used. Therefore, it is not so easy to use virtual coins for money laundering.


Fast and global. Transactions are propagated almost instantly on the network and are confirmed within a couple of minutes. Since they take place in a global network of interconnected computers, their physical location is irrelevant. It doesn't matter if I send cryptocurrencies to my neighbor or someone on the other side of the world.

If we compare it with traditional banking, the differences are evident. National bank transfers usually take one or two days to complete. When it comes to international transfers, things become more complicated. They usually take several days and have exorbitant fees.


Security. Cryptocurrencies are stored within a cryptographic system of public keys. Only the owner of the private key can send cryptocurrencies. The strong cryptography makes it impossible to break this scheme. Cryptocurrencies are secure.


No permission needed. You don't have to ask anyone to use cryptocurrencies. It's just software that everyone can download for free. After installing it, you can receive and send bitcoins or another cryptocurrency. No one can stop you. There is no guardian.


Transparent. Since you can download the software, anyone can see its code. Unlike the banking system, where you don't know what they do with your money, the code of cryptocurrencies is public and anyone can see it. The rules are written.

Monetary properties of cryptocurrencies

Controlled issuance. Most cryptocurrencies limit their supply. In bitcoin, the supply decreases over time. The maximum number of bitcoin units to be issued will be reached around 2140. All cryptocurrencies control their supply through programming written in the code. The rules of the game are written and cannot be changed. This means that today you can calculate the monetary supply of a cryptocurrency at any moment in the future. There are no surprises. Cryptocurrencies are limited.

For example, through the following page, you can find out how many bitcoins there are today.


Differences between cryptocurrencies and banks: Virtual currencies do not support debt. The money in your bank account is created through debt. Central banks issue money through debt. It is a promissory note system. Cryptocurrencies do not represent debts. They only represent themselves. They are as pure as gold coins.

In order to understand the revolutionary impact of digital currencies, it is necessary to take into account the two types of characteristics. Bitcoin as an irreversible and pseudonymous means of payment is an attack on the control that banks and governments have over their citizens' monetary transactions. It cannot be prevented that someone uses bitcoin. It cannot be prohibited for someone to accept a payment. A transaction cannot be undone.

Furthermore, since cryptocurrencies have a limited and uncontrolled source not governed by a government, bank, or any central institution, they represent an attack on the reach of monetary policy. They take away the control that central banks have over inflation or deflation, which allows them to manipulate the money supply.

Cryptocurrencies as a revolution of the current financial system

Virtual currencies have become a success, mainly due to their revolutionary properties.

Surely Satoshi Nakamoto, the inventor of cryptocurrencies, never imagined what he had really created. While any other attempt to create a digital payment system did not attract a critical mass of users, Bitcoin had something that caused excitement and fascination.

Cryptocurrencies are a digital asset. Solid and secure money free from political influence. Money that promises to preserve and increase its value over time. Virtual currencies are also a fast, convenient, and globally accessible means of payment.

However, although cryptocurrencies were created as a payment system, their use as a speculative medium diminishes their usefulness as a means of payment. Digital money gave rise to an incredibly dynamic and rapidly growing market for investors and speculators. Exchanges like Coinbase or Binance allow the trading of hundreds of cryptocurrencies. Their daily trading volume exceeds that of the main European stock exchanges.

What are cryptocurrency exchanges?

Cryptocurrencies are not traded on the stock market, they have their own market. They are acquired through exchanges or cryptocurrency exchange houses. These systems are platforms that allow for the exchange between FIAT currencies and cryptocurrencies, and between different cryptocurrencies.

If you want to learn more about them and discover the most secure platforms, you can read our tutorial on the best cryptocurrency exchanges.

Similarly, Initial Coin Offerings (or ICO, for its English acronym) gave life to incredibly successful crowdfunding projects, where often an idea was enough to raise millions of dollars. For example, the fundraising for the "DAO" project was over 150 million dollars.

In this rich ecosystem of coins and tokens, there is extreme volatility. It is common for a coin to increase its value by 10% in a single day, only to lose the same amount the next day. There are even cases of daily revaluations of 100%. If you are lucky, the value of your coin can grow up to 1000% in one or two weeks.

If you want to better understand why they are volatile, we recommend reading the article that explains the cryptocurrency bubble.

Main cryptocurrencies

Although Bitcoin remains by far the most famous cryptocurrency, different types of official cryptocurrencies are emerging that are having a strong impact on the industry. Below, we present examples of the most popular cryptocurrencies today. Due to their widespread use, they are cryptocurrencies with a future and probably the best cryptocurrencies to start.

Bitcoin

It is the first and most famous. The first worldwide cryptocurrency. Bitcoin serves as a standard throughout the virtual cryptocurrencies industry. It is used as a global means of payment. In 2017, its value exceeded €16,000 ($19,000 at the exchange rate), and its transaction volume reached almost 500,000 daily transactions.

The Bitcoin world is here to stay. It is the largest cryptocurrency in the world.

Read more about Bitcoin.

Bitcoins are divided into submultiples, known as satoshis. There are different websites where you can get some satoshis for free. The most widespread are known as bitcoin faucets, where you can quickly get fractions of this cryptocurrency.

If you are interested in learning more about satoshis and finding out which are the safest websites to get free bitcoins, we recommend the following readings:

Ethereum

The idea of the young cryptographic genius Vitalik Buterin has long been in second place within virtual currencies, although Ripple currently holds this position. The Ethereum blockchain is not only valid as a digital payment system, it also allows you to execute so-called smart contracts or smart contracts.

This flexibility makes Ethereum the perfect instrument for developing blockchain applications, which has made it one of the most interesting cryptocurrencies.

To get an idea of the flexibility that digital contracts offer to Ethereum, take CryptoKitties as an example.

It is a fun game of virtual pets, like the famous Pou but with virtual kittens, that is developed entirely on the Ethereum Blockchain.

In the following article, you can learn many more use cases of blockchain.

But this flexibility comes at a cost.

After the hacking suffered by the DAO project (a smart contract based on Ethereum), the developers decided to make a parallel fork of the project. This gave rise to Ethereum Classic.

In addition to this, there are several Ethereum clones. Moreover, other famous tokens have been developed on the Ethereum protocol such as DigixDAO or Augur. This makes Ethereum more of a family of cryptocurrencies than a single currency.

In the following link, you can read more about Ethereum.

Ripple

Perhaps the least popular (or even most hated) project in the cryptocurrencies community is Ripple. However, it is the third coin by market capitalization.

The Ripple protocol has a native currency, known as XRP. However, XRP represents IOUs or, in Spanish, promissory notes. In other words, it is a debt-based cryptocurrency. XRP, the currency, does not serve as a means to store and exchange value, but rather as a token to protect the network against spam.

This cryptocurrency was created by the company Ripple Labs. This company manages the Ripple network, and the tokens are distributed by them at will. As you can see, this coin contradicts all the properties that make cryptocurrencies a revolutionary project.

However, important banks seem to like Ripple and are adopting the system at an increasing rate.

Litecoin

Another well-known cryptocurrency is Litecoin. It was one of the first cryptocurrencies after Bitcoin.

This type of cryptocurrency was labeled as the silver to bitcoin's gold. It is a faster protocol than bitcoin, with a larger token supply, and a new mining algorithm. Litecoin represented a true innovation, perfectly suited to be the younger brother of bitcoin.

Litecoin is one of the types of bitcoin

From the Litecoin code, other digital coins emerged, which made them faster than bitcoin. Some examples of faster cryptocurrencies are Dogecoin or Feathercoin.

Litecoin could not find a real use case beyond being "digital money" (Bitcoin already served that purpose). As a result, it lost its second place after bitcoin. However, it is still being actively developed. It is actively traded and serves as a "safe haven" when Bitcoin fails.

Monero, the anonymous cryptocurrency

Monero (XMR) is a type of cryptocurrency that was invented to add privacy features that Bitcoin lacks. Although Bitcoin and other virtual currencies use pseudonyms, every transaction is documented on the blockchain and the trace of transactions can be followed. With the introduction of a concept called ring-signatures, the Monero algorithm was able to eliminate that trace in the blockchain.

This was developed through an algorithm known as CryptoNight.

The first implementation of CryptoNight was in Bytecoin. However, it was heavily pre-mined which led to rejection from the community. Monero was the first non-pre-mined clone of Bytecoin and created a lot of expectation. There are many projects based on the CryptoNight algorithm, but none have achieved the same popularity as Monero.

Some black markets and the deep web have found an advantage in Monero's anonymity. For this reason, in many of these illegal markets, Monero has been adopted as the current currency.

In addition to these, hundreds of projects based on cryptocurrencies have been born. Many have been only a quick way to make money. However, many others are representing a true technological innovation. Other cryptocurrencies with a future are IOTA (one of the most interesting cryptocurrencies of 2017), EOS, TRON or Cardano.

What cryptocurrencies exist

The popularity of bitcoin has sparked great interest in the world of virtual cryptocurrencies. There are more and more cryptocurrencies in the world, although few have achieved notable success. Currently, there are thousands of types of virtual coins and their number continues to increase.

Why are there so many cryptocurrencies?

The reason why there are so many cryptocurrencies is due to ICOs. Through these instruments, any company can acquire financing by issuing a virtual currency. However, there is a problem: they are not yet regulated.

If the Stock Market is supervised by government agencies (the CNMV in the case of the IBEX 35 in Spain), cryptocurrencies have no central control. Anyone can create a cryptocurrency. This is one of the ingredients of the cryptocurrency boom.

What are virtual currencies?

From criptomoneda.ninja we track more than 3,000 cryptocurrencies. You can find out how many virtual currencies exist in the "List of cryptocurrencies" section.

Risks of cryptocurrencies

Cryptocurrencies are not exempt from dangers. It is a new financial asset that many people without economic training have accessed. Therefore, .

Among the risks of cryptocurrencies, we can highlight: market volatility and scams.

Cryptocurrencies are a financial asset with a lot of volatility. Daily variations in their value above 10% are common. In addition, there are more and more cryptocurrencies in the world and nobody knows for sure what future they will have. Although many cryptocurrency experts trust in their future, nobody can guarantee their consolidation or the measures that Governments will take against them.

That is why it is very important not to have a significant percentage of your investments in cryptocurrencies. To avoid the dangers of cryptocurrencies, we constantly repeat the following (and we will not tire of doing so):

  • Invest in cryptocurrencies money that you don't need and that won't be a problem if you lose it.

Another risk of cryptocurrencies is scams. There are many of them: promises of high investment returns, exchanges or trading platforms that keep your money, fake ICOs...

That's why cryptocurrency education is very important. You must create your own criteria and investment strategy. You must read a lot.

In our section on cryptocurrency scams, we collect all the frauds we find on the internet. We try to update it frequently, so we recommend you take a look before using any new platform.

ICOs are financial mechanisms through which companies obtain financing by issuing a cryptocurrency.

Some of the most important cryptocurrencies today, such as Ethereum, come from an ICO. However, the reality is that most of them do not succeed. Investing in this type of instruments is very risky. To avoid scams and learn more about them, we recommend the "Cryptocurrency ICOs" section.

In addition to the previous recommendation, the following should be added:

  • Never invest in cryptocurrencies based on someone else's recommendation. In the world of cryptocurrencies, there are many people with their own interests and their recommendations may be malicious.
  • To avoid possible scams, it is essential to acquire virtual coins on verified and widely used platforms.

Advantages and disadvantages of cryptocurrencies

Cryptocurrencies are not perfect. Although they have multiple advantages, they are a developing technology, so they still have some drawbacks.

As a conclusion about cryptocurrencies, we present their main advantages and disadvantages. However, if you want to delve deeper into the topic, we have prepared a specific article with all this information. In it, we also present the benefits and drawbacks of the most well-known cryptocurrencies. You can find it at the following link.

» Related article: Advantages and disadvantages of cryptocurrencies.

Main advantages of cryptocurrencies

  • They use a decentralized system, so your money will not be controlled by third parties.
  • They operate in a global and fast system. This represents a clear advantage over traditional banking.
  • It is not anonymous, but it uses pseudonyms: No one can profit from your banking information.
  • It is secure. It cannot be counterfeited. Its protocol is designed to prevent double spending.
  • It is inexpensive. The costs of its transactions are considerably cheaper than those of traditional banking.
  • It is a completely transparent system. Its code is open and transactions are published.
  • It allows for microtransactions due to the high divisibility of digital currencies.
  • You can make instant transfers 24 hours a day, 365 days a year.
  • It does not take up space.
  • They have controlled issuance. Their value cannot be manipulated by governments.
  • The future of cryptocurrencies goes far beyond financial systems. Multiple services are being developed thanks to blockchain.

Main disadvantages of cryptocurrencies

  • Currently, the value of cryptocurrencies is very volatile. Its price can vary considerably within hours.
  • There are too many cryptocurrencies and the reality is that few will become truly useful. No one knows which cryptocurrencies will be the most prosperous, not even if some of the already created ones are. For these reasons, perhaps it would be safest to invest in popular cryptocurrencies.
  • They are still not globally accepted and nobody guarantees that they will be in the future.
  • Cryptocurrencies are still not legalized. Some governments are currently developing regulations regarding them. Nevertheless, do not forget that, according to the legislation of most countries, it is mandatory to pay taxes on cryptocurrencies.
  • Cryptocurrency exchanges still need to invest a lot in security.
  • Cryptocurrency transactions are irreversible. If you make a mistake, you will have lost your cryptocurrencies.
  • Cryptocurrencies have attracted many people without financial knowledge, which has led to the emergence of numerous cryptocurrency scammers.
  • Many cryptocurrency projects have no real backing.
  • The creation of cryptocurrencies using the "Proof of Work" protocol consumes a lot of electrical energy. Fortunately, there is another protocol called "Proof of Stake" that does not require as much energy. Many famous cryptocurrencies, such as ethereum, are starting to introduce it into their code.

What will be the future of cryptocurrencies?

The cryptocurrency market is fast and wild. Almost every day new types of cryptocurrencies emerge, and old ones that have not worked die. The first to adopt the new cryptocurrencies become rich, and many investors lose money.

Each cryptocurrency comes with a promise. Few survive the first months. Most are manipulated by speculators and live as zombie coins until the last holder loses hope of seeing a return on their investment.

The reality is that the markets are biased. But this does not change the fact that cryptocurrencies are here to stay and change the financial system and revolutionize technology.

This is already happening. People around the world buy Bitcoin to protect themselves from the devaluation of their national currency. Especially in Asia, where there is a very active cryptocurrency market. In addition to other countries with conflicts, such as Pakistan, or political problems, such as Venezuela or Argentina.

In addition, more and more companies are discovering new uses of blockchain and developing real applications based on smart contract technology.

The revolution is already happening. The Digital Economy is a fact. There are increasingly more types of virtual money. Institutional investors are starting to buy cryptocurrencies. Banks and governments realize that this invention has the potential to take control away from them. Cryptocurrencies change the world. Step by step.

You can stand aside and observe... or you can become part of history.

Cryptocurrencies Summary: Conclusion

Too much information about cryptocurrencies at once? Don't worry, it's normal not to understand everything at once. As a summary of cryptocurrencies, we will review their main characteristics. The most important aspect of the definition of cryptocurrencies is that:

  • Cryptocurrency transactions are irreversible.
  • Not all digital currencies are deflationary, but they do have controlled emission.
  • They use pseudonyms, although they are not completely anonymous.
  • Transactions are fast and global.
  • They are a completely secure system.
  • Cryptocurrency networks are transparent and public.
  • Cryptocurrencies do not support debt.

And you? Do you think cryptocurrencies are the money of the future?

We hope that after this online cryptocurrency course you have learned all about cryptocurrencies. If you still have any doubts, you can ask any question in the comments. Even if you want further explanation about cryptocurrencies.

Did you find this explanation about cryptocurrencies for dummies interesting? We have much more content on our bitcoin page. Learn much more in the section about the bitcoin guide.