Cryptocurrencies, million dollar ideas or technology bubbles?

cryptocurrencies technology

The cryptocurrencies born in 2008, but every year they take more strength and position themselves as “revolutionary being” against the money as we know it so far. What is your technology? Do they have a future or are they a scam?

The cryptocurrencies have become a media boom more than a decade of his birth. Everyone is talking about bitcoinethereumElon Musk, and the possible decentralization of world money. But the road has been long and it has challenges to overcome as thousands of people join the movement for financial freedom. However, there are still many doubts. What exactly are we talking about? Are cryptocurrencies really a solid option against the money we know?

Cryptographic technology

Cryptocurrencies or digital money are a means of digital exchange using cryptography technology as the main operation.

“Look at them as digital goods or assets that are designed in a special way trying to imitate the characteristics that legal tender currencies have. They try to have, above all, containers of value, to have the function that a currency has in an economy. The issue is that they are not issued by a central bank of any country. On the contrary, they are part of what we know as DeFi or decentralized finance and that they try to be more inclusive on the issue of economic empowerment to the person. They are created as projects led by people or groups of people,” says Jose Ravines, CEO of Invenio, a local financial consulting firm.

To understand its operation, the main term that we must take into account is the blockchain or the chain of blocks. This is a single record that is distributed in network nodes and is what maintains the history of each of the transactions of a cryptocurrency. Any creation, purchase, sale or transfer of any currency is written on it, becoming a fundamental part of the cryptographic process.

“The example that is usually given to explain this is a large accounting book where all the transactions made by all the accounts with their respective balances are recorded, but which is distributed in nodes around the world. In addition, we are talking about an open-source which can be accessed by anyone who raises “ says Emiliano Limia, Press Officer for Latin America Buenbit, digital market offers buying and selling cryptocurrencies in different countries.

The specialist points out that blockchains maintain vital information of all processes: they have valid records and transactions from a previous block and contain their own records, which gives them a specific place throughout the network. It explains that, if all the blocks have a record of another, a hacker would have to try to violate each of the nodes of the chain to make a true alteration in the blockchain.

“The blockchain system is prepared to create incentives so that every time a block is generated, it is a correct block. Not one that a hacker could have come, put his name and change. There will be 500 machines that say ‘that’s Leonardo’s ‘and, even if there is someone who tries to hack and says’ that’s from José’, it makes it difficult at the system level for them to validate that this is true. This makes it virtually impossible for this cryptography security to be compromised” says Ravines.

The utility of the blockchain not only focuses on cryptocurrencies but also serves to protect any digital file that exists on the network such as an image, video or sound, now known as NFT or non-fungible token.

And who checks that everything is going perfectly? The same users, called nodes, which do not have a name or surname, but digital wallets that work in the system evenly and continuously.

“The validator nodes, which are active all over the world, keep the network active (and make the system secure with an incorruptible record), group transactions, form blocks and add them to the chains that are joined one by one in a cryptographic system that gives you security. Every time a block is validated, the validator node receives a reward in bitcoin and this is how the chain is built”,  indicates Limia.

The star of the boom: bitcoin

The cryptocurrency that started it all and that generates the greatest worldwide interest is bitcoin.

To talk about its origins we must go back to 2008, when a hitherto anonymous Satoshi Nakamoto conceived this project as a digital currency. The bitcoin is made up, in honor of its creator, of 100 million satoshis, its minimum unit of account. “It gives a magic touch not knowing after 12 years who the programmer was,” says Limia.

When someone wants to send money abroad, they must make the request to their bank, who will transport the money in their systems to other international ones under a commission. The bitcoin was born in order to eliminate third parties, the banks, and puts the user as the protagonist under the already explained technology of the blockchain. “You can interact through banks or other systems, but you always need a third party. What bitcoin proposes is a person-to-person exchange, peer-to-peer, digitally. It is a disruptive and revolutionary entity”, he continues.  

The first bitcoin coins began to be “manufactured” (mined) in January 2009, when its technological network was put into operation; the initial bitcoins were created by Satoshi himself. In two years, 2011, it was added to its first exchange platforms, where they can be purchased with traditional money.

A clear event marked the mainstream start of bitcoin. On May 22, 2010, a student named Laszlo Hanyecz paid 10,000 bitcoins to another student, named Jeremy Sturivant, for two pizzas at a time when no local knew for sure about cryptocurrencies. At that time, their digital currencies were worth $40, but, at today’s exchange rate, they are equal to more than $365 million. The Bitcoin Pizza Day would mark the first purchase with this money and start its upward trend that has been delayed by a series of events.