How Do Cryptocurrencies Work? (Like Bitcoin)

Cryptocurrencies. No Superman fans, the cryptocurrencies that Superman's mother brought in her purse, you already know, don't you? For the planet Krypton... Sorry, I'm a hopeless geek. You've probably heard stories of people becoming millionaires by investing in "Bitcoin" or some other cryptocurrency... which sounds very attractive, but: How do cryptocurrencies work and ...is it safe to invest in them? To begin with, it is necessary to understand cryptocurrencies as a monetary system; That is, they do not have a value because of the material from which they are made or because of their physical usefulness, but because we agree so. The difference between a 100 dollar bill and a piece of paper with the text “100 dollars” written in crayons is that people, through institutions, agree to say that the first has value and the other does not. . The way any currency defines its value is by its importance in the market. The more people are interested in buying them, the more valuable they are. As happens at an auction. If many people are interested in an item, offer more for it and its price in the market will be higher. Bitcoin is NOT unique of its kind, there are hundreds of cryptocurrencies. They are called that thanks to their “encrypted” nature; that is, protected through encryption. This characteristic makes them a very attractive monetary system because it is difficult to alter or hack, and because it is not controlled by a bank or a government. With traditional currencies, every time you want to make a transaction, it must be approved and carried out by a banking institution. That same organization could be fraudulent or in the worst case scenario, it could be hacked or “raided.” That is why cryptocurrencies choose to use a decentralized transaction system, known as Blockchain, which works as follows: 1. Each transaction that is made is called a “block” and acquires a unique and unrepeatable code. , let's think of a kind of DNA to identify the operation. Similar to a serial number on a banknote. 2. That block is recorded forever, with detailed information such as the sender and receiver of the exchange, amount, among other data. 3. The user network records the operation virtually immediately. Any user, like you or me, can install blockchain on their computer. 4. That block “joins” a huge CHAIN where absolutely all the operations that have been carried out with that cryptocurrency are listed. They are displayed chronologically and, as it is duplicated in many accounts, it is impossible to alter or delete a transaction once it has been added to the blockchain. Imagine that a person works in a small store and keeps notes of each transaction that occurs in the store. If this person wants to cheat, they could “modify” the data and not report any of the operations. It would commit fraud, and it would be difficult to prove. But if 10 different people keep records of all the operations at the same time, fraud would be practically impossible to commit, because each of them has a record that proves what really happened: whoever has a different record must be lying. The blockchain operates in a very similar way, but with thousands of people and computers around the world monitoring and recording all cryptocurrency movements. A hacker could bypass the security of a computer, but it is virtually impossible for him to do so with all the individuals overseeing a blockchain. This quality has made the blockchain a very attractive system for buying and selling. Everything sounds very safe and nice with Bitcoin and digital currencies, doesn't it?...well, when something looks too good to be true, it probably is. Until now, the cryptocurrency market is based on speculation. This is a very dangerous economic practice based on “riddles” which creates great instability since the value of something can skyrocket one day, and fall precipitously the next. Imagine an auction in which they offer a pencil with which one of the Beatles is believed to have written a song. Then you “speculate” that its value must be enormous and you buy it for a large amount thinking that it is an excellent investment because many would like to have it and that is why it will be worth more in the future. But you discover that no one wants to buy your pencil, so its value plummets and instead of making a profit, you lose all the money you spent...ouch! Acquiring cryptocurrencies should not be seen as an investment, rather it is a bet, where you can win money if the predictions come true, or lose it all in a single operation. NOTE, cryptocurrencies themselves ARE NOT a scam, but their current market is based exclusively on speculation, therefore it can be a dangerous environment. They could become more secure if, as time goes on, more institutions accept them as a valid transaction. For now, if you are interested in entering the world of cryptocurrencies, remember that you are not investing, but betting. That's why you shouldn't risk more money than you are willing to lose. Curiously! Have you made transactions with any cryptocurrency? Or do you know someone who has done it? Tell us your experience in the comments! And if you liked this video, there are more on our YouTube channel: youtube.com/curiosamente.