Cryptocurrencies are digital money and digital assets. The oldest and most famous virtual currency is bitcoin, which originated thirteen years ago. However, the history of internet currencies is more extended, as projects like e-gold or beenz.com were started in the 1990s. However, they did not have a long duration due to the intervention of state regulators and hacker attacks.
The creators of bitcoin learned from the initial mistakes and, in 2008, created an autonomous, decentralized system - this time entirely immune for hacker attacks and government intervention. It is based on a network of thousands of interconnected computers of various users, transactions occur. All computers in this system authorize each transaction. The transaction is written in a kind of virtual ledger. This process makes it virtually impossible to commit fraud.
The books together form a string - English blockchain. If you would like to break into an older book and falsify numbers, you would first have to uncover the keys to all the books that appeared in the chain.
Users and their computers take care of the authorization and encryption of books. These are complex, energy- and performance-intensive mathematical operations, so users receive a reward in a share of emerging bitcoins called mining. It's the only - and controlled - way for virtual money to grow.
The whole bitcoin system is built on free software, which is open source. As a result, over time, several other cryptocurrencies have emerged.
"New cryptocurrencies usually try to sell the image that the significant rise that bitcoin has had before. That's why they grow like mushrooms after the rain and shout: come and buy us quickly while we're still at a few cents, "explains economist Petr Bartoň, who lectures at the CEVRO Institute in Prague.
The philosophy of the bitcoin authors was to create an alternative monetary system that could not be affected by the decision of a central bank or a stock market crash. Instead, it should function as ordinary currency or become a means of securing capital securely.
Ten cryptocurrencies with the highest value in December 2021
Cryptocurrency Its market value (market capitalization)
Bitcoin (BTC) - $ 1.08 trillion
Ethereum (ETH) - $ 557 billion
Binance Coin (BNB) - $ 104 billion
Tether (USDT) - $ 73 billion
Solana (SOL) - $ 64 billion
Cardano (ADA) - $ 52 billion
XRP (XRP) - $ 47 billion
US Dollar Coin (USDC) - $ 38 billion
Polkadot (DOT) - $ 37 billion
Dogecoin (DOGE) - $ 28 billion
Source: Forbes Advisor
Does it make sense to invest capital in cryptocurrencies?
In 2021, the price of bitcoin rose sharply twice and fell twice again. While at the beginning of January, its value was around $ 33,000 per bitcoin, in mid-April 2021, the price rose to $ 63,000. Unfortunately, the summer was followed by a sharp fall, so in July, the value of bitcoin fell back to $ 33,000 but later began to rise again, and in November 2021, bitcoin cost over $ 67,000.
Bitcoin has experienced more dramatic ups and downs in its history. So investing your savings in it or another cryptocurrency makes sense in countries plagued by a currency crisis like Venezuela and Argentina. In the recent past and in Turkey in the second half of last year, the volume of cryptocurrency investment rose rapidly.
However, if you live in a normally functioning economically developed state, saving money in cryptocurrencies is a hazardous but potentially more profitable type of investment.
Does it make sense to make money on cryptocurrencies as a stock market speculator?
Yes, if you take it more as an adrenaline sport and expect you to lose most of your investment faster than pressing the refresh button. The mood in the virtual asset markets is changing faster than the weather. This volatility is due to several things, mainly because the virtual currency is based on faith in its ecosystem and future use, unlike the securities behind some existing companies. First, prices are often determined by publicity, emotions and sometimes by various manipulators. One tweet in which a significant figure in the field praises or criticizes a particular cryptocurrency can move its price by tens of per cent. The financial models used on common stock exchanges do not work very well; investors tend to follow the whispers on chat servers.
Is it possible to make any reliable and legal money on cryptocurrencies?
Yes, you may need to follow the old rule that the gold rush is the perfect time to sell shovels. However, as cryptocurrencies became a media-appreciative topic and began to attract investment adventurers, many thriving software companies like bitcoin profit have emerged that offer a variety of virtual token trading applications or companies that run various bitcoin exchanges for advertising and marketing. There are some possibilities.
Are cryptocurrencies beneficial, or is it just a crazy 21st-century curiosity with no future?
"Bitcoin originated thirteen years ago. And that is, of course, a short time to create a fully functioning alternative monetary system. So this battle is far from lost, "believes Petr Bartoň, who considers it a somewhat realistic scenario that some of the cryptocurrencies will stabilize over time.
"If it is to work, it is not enough to entice the bourgeoisie that bitcoin is growing. This stability is against the point of bitcoin. If it is to become a stable currency - or, for example, a unit of account for international transactions that would, for example, repay government debts - then its price must remain more or less the same. When you go to a supermarket, there are also digital displays waiting for you, on which the price of one roll would change every minute," says Bartoň.
According to him, part of the path to stability will inevitably be a partial loss of the current independence of cryptocurrencies and their incorporation into established state and international legislation.
But even if cryptocurrencies turn out to be a dead-end and disappear over time, according to many experts, they have value as a catalyst for technological development. Blockchain principles are already used in several fields, from banking to healthcare to the food industry. In recent months, their importance has also been growing to create a parallel virtual universe called the metaverse, in which it is bought mainly through cryptocurrencies. Blockchain is also the basis for investing in NFT, enabling the art trade's digital version.
