What is a cryptocurrency? What’s the point ? How are they made? What makes them valuable? What are the different types of cryptocurrencies? How to invest in crypto currencies? What trends for cryptos for the end of 2021 and the beginning of 2022? Our Top 10 virtual currencies in circulation as well as the price of the main cryptocurrencies of the day. Operation, uses and recommendations, taxation, discover everything you need to know before investing in digital currencies such as Bitcoin, Ethereum, Dogecoin, Binance Coin, Ripple… which are no longer virtual.
Crypto currency and virtual currency: what is it?
Definition of a cryptocurrency
Cryptocurrency refers to both a cryptographic currency and a peer-to-peer payment system. These digital currencies are therefore virtual currencies in the sense that they are characterized by an absence of physical support: neither coins nor banknotes, and payments by check or bank card are not possible either.
These are alternative currencies that are not legal tender in any country in the world. Their value is not indexed to the price of gold or to that of conventional currencies, nor are they regulated by a central body or financial institutions. There are no central banks at their head. And yet, security and transparency are their main assets! Indeed, cryptography secures transactions which are all verified and recorded in a public domain, ensuring both confidentiality and authenticity thanks to Blockchain technology.
The Blockchain: basic technology of cryptocurrency
Crypto currencies are all based on the same principle: the Blockchain. Cryptocurrencies are a series of numbers stored on a computer in the form of blockchains. The principle is actually quite simple and particularly well explained in the article published in Les Échos Bitcoin and crypto currencies, new digital coins: “Take a database. Allow anyone to make changes to this database, on the sole condition of declaring themselves a “member”. Set up a very long and very complex control procedure that must be carried out each time a certain number (“block”) of changes is requested. This procedure is carried out not by a single controller, but by all voluntary “members”. Once validated, the “block” of changes is dated and added to the others in the register. Finally, allow everyone to read the registry, and you have a blockchain database.” Thus, it is up to the network (all the peers) to validate and confirm each transaction.
This technology and this system are the basis of the vast majority of crypto-currencies, but Blockchain applications do not stop there. Indeed, it could disrupt the entire financial sector but also certain sectors such as the legal or administrative sector by making it possible to do without trusted third parties. No need for a notarial deed or civil status register or cadastre with this distributed register technology which helps to make data safer and more transparent. Blockchain technology is after all a technology whose database cannot be changed without meeting certain conditions.
How is cryptocurrency made?
People who make cryptocurrency are called miners. They are also said to be mining a crypto-currency. Minors are an integral part of the process. Without them, the Blockchain would be frozen. A minor indeed confirms the transactions that take place on the Blockchain.
For example, imagine that Peter gives 3 Bitcoins to Paul. The transaction will be immediately broadcast on the network, in peer-to-peer, made up of computers called nodes. However, it is only after a certain period of time that the transaction will be confirmed by the computers belonging to the network using the algorithms specific to said Blockchain. Once committed, the transaction now forms a new block of data for the ledger. It is added to the others in the existing Blockchain, permanently and immutably.
Behind these network computers are miners who validate the transactions. To confirm a transaction, a miner must find the product of a cryptographic function that connects the new block to its predecessor. This is called proof of work. In exchange for their services (and the computing power mobilized for this purpose), they obtain a reward which takes the form of tokens or tokens.
How to mine a cryptocurrency?
To mine a cryptocurrency, it is usually sufficient to install software on your computer using the processor or the graphics card, or even both, in order to be able to solve the cryptographic problem requiring a relatively large computing power, which will allow you to touch new units of the crypto-currency in question.
Be careful though, the main cryptocurrencies have become too difficult to mine for individuals alone. The mining of many of them has become largely professional and takes place partly in farms, buildings of several thousand m2 where tens of thousands of servers are running day and night to mine cryptocurrencies (Bitcoin, Litecoin, etc). China once occupied a prominent place in cryptocurrency mining, but this industry no longer exists in the Middle Kingdom since the Chinese state banned mining or using crypto assets. Thus, in September 2019, 76% of the energy used for Bitcoin mining in the world came from virtual currency miners based in China, a share which has today collapsed to 0. But the US share has jumped. , from 4% in September 2019 to 35% in August 2021. Another beneficiary of China’s withdrawal from this sector: Kazakhstan, with a share of energy dedicated to Bitcoin mining of 1.4% in September 2019 and which rises in August 2021 to 35%.
Faced with this competition from farms, cloud mining type solutions have been developed. No investment in specific hardware is required. All you have to do is get in touch with a company that has invested in the necessary equipment and “rent” your computing power. But beware, there are many scams!