What are cryptocurrencies?
Cryptocurrencies, cryptoactives, cryptocurrency, tokens or virtual currencies, according to the variety of names by which they are known, are digital means of exchange. They can be exchanged and operated like any other traditional currency, but they are beyond the control of governments and financial institutions.
They are considered as an alternative to traditional currencies, but in reality they were conceived as a completely conventional payment solution. At this time, many stores accept cryptocurrencies as a form of payment.
Although it is true that its validity as a method of payment is fundamental to its value, cryptocurrencies are usually more similar to commodities such as gold than to the foreign exchange market.
This means, at least for now, cryptocurrencies are mostly treated as a raw material: an investment whose return comes from the ups and downs of value.
What is mining cryptocurrencies?
Mining cryptocurrencies is the process through cryptocurrency transactions are verified and new units are offered.
The objective of the miners is to invest computational capacity to process transactions, to guarantee the security of the network, and ensure that all participants are synchronized. Collecting the latest transactions in blocks (that is, verified sets of transactions) and finding a solution to a complex algorithm is what is known as mining. It is called “mining”, as an analogy to gold mining, since it is also a temporary mechanism used to issue new cryptocurrencies. However, unlike gold mining, Bitcoin mining offers a reward in exchange for useful services that are necessary for the payment network to work safely. The amount of the reward varies according to the cryptocurrency in which you work.
How is this process performed?
- The miner groups new cryptocurrency transactions into a “block”.
- The block is coded and linked to the existing blockchain or blockchain.
- The miner gets his reward, which he can inject directly back into the market.
What is blockchain or block chain?
The Blockchain or block chain is a shared digital book that records all the transactions of a cryptocurrency determined between two parties. These transactions form groupings known as “blocks”, which in turn are coded and linked to each other.
The information registered in the chain of blocks is stored in millions of computers and is open to everyone, instead of being stored in one place. This makes the process transparent and immutable to modifications, without weak points vulnerable to human or computer error. Once the data is verified, it can no longer be edited without the consensus of the majority of the community.
Keep in mind that cryptocurrencies is just one of the many applications that block technology uses. Blockchain is mainly a digital platform in which all kinds of programs can be created (including identity management, security software and transaction processing).