Ether is the currency of the Ethereum network. This offers to create and work with smart contracts in your own blockchain. Ether can be traded on numerous exchanges. The best known example of this...
1. What is a cryptocurrency?
2. What is a blockchain?
3. Why the mining of cryptocurrencies makes no sense
4. The chances of cryptocurrencies
5. Risks of cryptocurrencies
Bitcoin was launched in 2009 as the first cryptocurrency. Since then, numerous other cryptocurrencies have been added. Anyone who is new to this topic has many questions about cryptocurrencies. What is this exactly? How do cryptocurrencies work? What are the advantages and disadvantages compared to Fiat currencies? How will these questions (and more) be answered or explained in this article.
What is a cryptocurrency?
Cryptocurrencies do not exist in physical form, but purely digitally. The “coins” that someone owns are stored in a “wallet” (or the so-called “private keys” that prove possession). Cryptocurrencies can then either be sent and received digitally. Alternatively, they can be blown out in the form of so-called “paper wallets” (a paper wallet is a piece of paper that stores a code that shows how many coins are in the wallet). It is also possible to save the coins in a hardware wallet. This is a wallet that looks like a USB stick. The coins are stored when using a hardware wallet neither online nor on the computer. this enormously increases the security of using cryptocurrencies.
Cryptocurrencies are usually built on a blockchain (there are also some without blockchain, but more on that later). On this all transactions are stored and can therefore also be reconstructed. This means that cryptocurrencies – contrary to widespread opinion – are not anonymously usable. There is only a handful of cryptocurrencies that claim to be able to guarantee complete anonymity.
What is a blockchain?
A blockchain can be thought of as a database on which all relevant information of a krpyto currency is stored. The interesting thing is that the blockchain does not run on a server, but runs on many computers at the same time. People who use computers to participate in the blockchain are commonly referred to as miners. They provide computing power to keep the blockchains running and, for example, confirm transactions. Every time they find a new block (a block is created every few minutes and stores the latest transactions), they get-as a reward-coins from the cryptocurrency that they have put together.
Why cryptocurrency mining makes no sense
At this point we would like to point out that it is no longer really worthwhile to mine cryptocurrencies (at least not the bigger ones like Bitcoin). This has the following reasons: On the one hand, highly specialized hardware is required, the cost of which may amount to several thousand euros. On the other hand, the required investment costs are far too high in relation to the “mined” coins.
Another point that makes the mine unprofitable is the so-called “sweatiness” with which new blocks can be found. This increases at regular intervals. Against this background, meanwhile, almost only in pools meant. This means that a large number of participants join together and search together for new blocks. But even this kind of mines is only profitable if you have very low Enregie- and hardware costs.
Cryptocurrencies without blockchain
As mentioned earlier, there are cryptocurrencies that are not built on a blockchain. one of the most interesting of these currencies is IOTA. The IOTA organization is a non-profit organization that includes well-known companies such as Bosch or Cisco. The cryptocurrency makes it possible to securely communicate devices of the Internet of Things and to make payments among each other. There are no fees and the transactions are very fast.
IOTA uses a so-called directed acrylic graph (DAG) instead of a blockchain. In contrast to cryptocurrencies like Bitcoin, transactions are not confirmed by miners who receive a premium for it. Instead, two random previous transactions must be confirmed before each transaction. One of the biggest advantages of IOTA compared to Bitcoin is the Saklierbarketi. The system can theoretically be infinitely scaled without any loss of performance. The market capitalization of this cryptocurrency is currently 2.1 bln dollars, which puts IOTA in seventh place.
The chances of cryptocurrencies
Crypto currencies were created to circumvent dependence on Fiat currencies or central banks. The use of Fiat currencies is based on the confidence that the central banks will guarantee the usability of the currencies. Kyptocurrencies, on the other hand, do not require Zenatral banks. They are organized decentrally. Another advantage of cryptocurrencies is the ability to send and receive them at low fees. Fiat currency transactions are relatively expensive, especially when cross-border. This can be handled with cryptocurrencies.
Last but not least, cryptocurrencies have a high development potential. The prices of numerous currencies have multiplied in particular in 2017. For return-oriented users, cryptocurrencies are therefore very attractive.
The risks of cryptocurrencies
Cryptocurrencies are still a relatively recent technological innovation. This means that they still have to prove themselves. the oldest currency Bitcoin is currently under 10 years old. Cryptocurrencies are generally very volatile and so-called pump and dump currencies occur regularly. In addition, the flood of ICO’s (Inital Coin Offerings: comparable to the file entry of a company with the difference that no shares, but a cryptocurrency is spent) has led to a number of fraud cases. In the process, ICO’s have turned out to be scams.
Investing in Cryptocurrencies: You Should Note This
If you want to invest in cryptocurrencies, you should pay attention to a few things so as not to fall for cheaters. In addition, there is the danger of bet on the wrong currencies and then lose money in the hope of extreme price gains. In the following, we want to give you a few tips that make sense when investing in cryptocurrencies.
Thoroughly analyze the website & white paper.
You should take a closer look at the website in the first step. Is she professionally designed or is she just more reminiscent of a homepage building set? Are the contents clean (and error-free) processed? Does an SSL certificate exist, ..? A reputable company will also produce a high-quality whitepaper that covers at least 25-30 pages. Sometimes it will even offer a separate technical white paper for download.
Critically examine the team behind the ICO
Is the idea or approach of the company promising?
Just putting out a new currency that does not really do anything different or better than the existing beretis will not be that interesting for investors,
Is cryptocurrency technology reliable and secure?
Of course, this question is hard to answer for a loan. Here it makes sense to research in detail and, if possible, to consult expert opinions. For example, forums such as bitcointalk.org or crypto-currency-focused investors (example: jaynemesis, one of the most successful popular investors at etoror and a recognized expert in cryptocurrency matters) have reported on and hosted Bloomberg regularly video chats on twitch.
We hope that in this post we answered the most important questions about the theme cryptocurrencies. We hope that our tips will help you find your way around the jungle of cryptocurrencies.