What are cryptocurrencies and how do they work?

What is cryptocurrency?

A cryptocurrency is a digital asset that uses cryptographic encryption to protect its ownership and ensure the integrity of transactions, and to control the creation of additional units, that is, to prevent someone from making a transaction. Copying, such as our copying of photos. These coins do not actually exist: they are stored in digital wallets.

In short, mining cryptocurrency means successfully solving the mathematical problems that arise. Miners who realize it get cryptocurrency in Cryptex exchange.

How does cryptocurrency work?

Compared with traditional systems, cryptocurrencies have several different characteristics: they are not supervised or controlled by any institution, and they do not require intermediaries in transactions. To control these transactions, decentralized databases, blockchains, or shared accounting records are used.

According to the regulations, cryptocurrencies are not regarded as means of payment, they are not supported by the central bank or other public institutions, nor are they protected by customer protection mechanisms such as deposit guarantee funds or deposit funds. ensure.

Regarding the functions of these digital currencies, it is important to remember that once a transaction is made with encrypted currencies, that is, when digital assets are bought and sold, it is impossible to cancel the operation, because the blockchain is a record. This does not allow data to be deleted. To “roll back” the transaction, the reverse operation must be performed.

Since these coins are not physically available, you must resort to an unregulated digital cryptocurrency wallet service to store them.

How many types of digital wallets are there?

Digital wallets or wallets are actually software or applications that can store, send, and receive encrypted currency. The fact is that unlike physical currency wallets, what is actually stored in a wallet or digital wallet is the key that gives us the ownership and rights of the encrypted currency and allows us to use them for operations. In other words, knowing the key is enough to transfer the cryptocurrency, and the loss or theft of the key may mean the loss of the cryptocurrency and it is impossible to recover them.

There are two types of wallets: hot wallets and cold wallets. The difference between the two is that the former is connected to the Internet and the latter is not. Therefore, in hot wallets, we can find online wallets, mobile wallets and desktop wallets, the latter can only be used when the computer is connected to the Internet. On the contrary, there are hardware wallets and paper wallets inside cold wallets, which just print the private key on paper.

These childcare services are neither regulated nor regulated.

How is the value of cryptocurrency determined?

The value of cryptocurrency varies based on supply, demand, and user engagement. Such securities are created in the absence of effective mechanisms to prevent their manipulation, such as those that exist in regulated securities markets. In many cases, prices are also formed without public information support. We recommend that you read the statement of the Bank of Spain and the National Securities Market Commission (CNMV) on the risks of buying cryptocurrencies.

Cryptocurrency uses blockchain

Cryptocurrency operates through a shared ledger or blockchain. This technology provides them with a highly secure system that can prevent, for example, the same digital goods from being transferred twice or being forged. Blockchain technology is like a ledger that can record and store large amounts of information. Everything is shared and protected on the network, so all the data it hosts cannot be modified or deleted.

What does it mean to mine cryptocurrency?

This concept refers to the process required to verify transactions through such digital assets. For example, if we take Bitcoin currency as an example: its mining will be based on the verification and recording of transactions in the blockchain registers.

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