Technology has changed the way people work, communicate, shop and even pay for goods. Cash is losing ground in business and consumer preferences in favor of contactless payment methods like Apple Pay. With the rise of smartphones, consumers can pay for items digitally. Now, a new emerging payment method is cryptocurrency. Understand the fundamentals of Cryptocurrencies

2. In 2008, a person or group of people published the whitepaper for Bitcoin under the pseudonym Satoshi
Nakamoto , thus paving the way for cryptocurrencies. To date, it is not clear who is behind this pseudonym and,
consequently, behind the idea of ​​this revolutionary digital payment tool. Furthermore, for many it is still not clear
what exactly a cryptocurrency is, despite the fact that about a decade after the appearance of Bitcoin there are
over 2,000 different suppliers of these digital payment systems, as evidenced by the list of
the CoinMarketCap web portal .
Content
1.What is a cryptocurrency?
2.Main features of a cryptocurrency
3.What are cryptocurrencies used for?
4.How exactly does payment with a cryptocurrency work?
5.How do you invest in a cryptocurrency?
6.What cryptocurrencies exist?
7.In summary: Advantages and risks of cryptocurrencies at a glance

3. What is a cryptocurrency?
A cryptocurrency (also crypto money) is a digital means of payment typically based on blockchain technology and
cryptographic procedures such as hash functions and digital signatures . Unlike classic currencies,
cryptocurrencies do not involve coins or banknotes, as all payment units are exclusively
digital. These usually asymmetrically encrypted currency units are collectively generated across the entire system
and, in most cases, when a cryptocurrency is launched, a defined number of units is established.. The concept of
"mining" for the process of generating units has become widespread, and this explains why we often hear about
"cryptocurrency mining".
Most cryptosystems are based on a decentralized structure : not only the generation of new currency units but
also the individual operations are typically performed in a collective mode, where multiple participants control and
countersign them on the respective system. Communication usually takes place via a peer-to-peer network where
all computers have the same rights.
Unlike central bank money, classic cryptocurrencies do not have a "Single Point of Failure" , therefore they do not
have single instances on the network, whose functionality or whose action could endanger or dominate the
currency system. An exception are cryptocurrencies such as Ripple , managed by private companies that claim a
large part of the production of units and distribute it according to their own rules.

4. Main features of a cryptocurrency
Following the Bolívar Fuerte hyperinflation on August 20, 2018, Venezuela not only introduced the new Bolívar
Soberano currency, but also linked it to the Petro cryptosystem . Even if the Venezuelan government speaks of
the "first state cryptocurrency", the Petro lacks, precisely due to state regulation, the decisive characteristics of a
currency, such as the decentralization of the system or the equality of rights among all participants . Similarly
controversial are the privately managed systems already mentioned, such as Ripple.
Looking more precisely at the three elementary components of a cryptocurrency, the systems managed by private
companies and the state satisfy the "crypto" aspect but do not have much to do with the classic Bitcoin principle.
Encryption
Cryptography not only gives the name, it is also the decisive discipline for the security of cryptocurrencies. Behind
the concept of "cryptography" lies the science that deals with the encryption and general protection of data and
information. Both are indispensable for a cashless and fully digital payment system, which should basically work
without a central and regulatory body. Two cryptographic procedures are mainly used in cryptocurrencies:
•hash functions
•digital signatures
Hash functions are the basic piece of the puzzle for verifying data integrity and encoding participant account
addresses and operations. Furthermore, they form the basis of blockchain and block mining. Digital signatures
allow you to prove the status of encrypted information without exposing it. This possibility is also used to protect
the content of e-mails . In cryptocurrencies, this technology is ideal for signing transactions and communicating
approval of a transaction to the network.

5. Blockchain
The blockchain is the decentralized ledger of a cryptocurrency, where all operations are listed in the form of
blocks. The registration of the individual blocks takes place without gaps and in chronological order so that, over
time, a verifiable , mostly open and lasting registration results . Administration is up to the participants of the core
peer-to-peer network, who follow a defined protocol to validate new operations. Consequently, all
nodes automatically download an integral copy of the blockchain which makes a central instance superfluous for
viewing the operations that have taken place.
A blockchain-based data record is not editable without the approval of the other members.
Block mining
The third important column of cryptocurrencies is the so-called block mining. This is the process required to add
new operations to the cryptosystem in the form of blocks in the blockchain . Mining requires specific software,
capable of solving mathematical questions and therefore also the hash functions at the base. All network
participants can work to find the solution to the respective mathematical problem posed to validate a new
transaction block. In this case we also speak of proof of work ("proof of work"), to be provided. If a block is
successfully extracted and the result of the hash function is guaranteed, all participants can verify that the solution
is correct.

6. What are cryptocurrencies used for?
The fact that cryptocurrencies are also called crypto moneyit is no coincidence: the similarity with real currencies
that include banknotes and coins and the fact that representatives such as Bitcon or other influential alternatives ,
such as Ethereum, IOTA or Monero , have a counter value (demand and users), have led to consider the digital
currency systems as possible means of payment for the future . In particular, Bitcoin is already used in this sense,
as various online sales platforms, such as Expedia , have started accepting payments via
cryptocurrencies. However, the first of the cryptocurrencies has not yet established itself as a means of payment,
which is mainly due to its highly fluctuating value.
How exactly does payment with a cryptocurrency work?
If the units of a cryptocurrency have a certain value , which can be converted into central bank currencies such as
the euro, the prerequisite for use as a means of payment is essentially satisfied. But in order to actually pay with
digital money, the seller must also accept the respective cryptocurrency as a means of payment. A key pair ,
consisting of a public and a private key , is required for payment execution .
The public key is visible to everyone and has the same function as a bank account number: it serves as the
starting address from which a user initiates a payment with the respective cryptocurrency. The private key, on the
other hand, is used to verify the operation and is therefore comparable to a password or a TAN. Only the owner of
the respective cryptocurrency can see the key used to initial the operation. Finally, the wallet , as the virtual wallet
in cryptocurrency is called, is generally automatic. When paying, users only need to enter the sum and
the destination address , ie the payee's public key.

7. How do you invest in a cryptocurrency?
Cryptocurrencies are a highly coveted speculative object after the Bitcoin price boom in 2017. The interest in
investing in the crypto money sector has quickly risen significantly, although there are various approaches to
investing in any of the currencies available on the market. market.
As for the currency market, crypto money can also be used as an exchange commodity , where the classic price
fluctuations are exploited to multiply one's capital. The difference is that there are no central banks, financial
controls, or state regulators for cryptocurrency to monitor and intervene when the market heats up. Purchase, sale
and exchange of currency units of the different cryptosystems arrive on trading platforms such
as AnycoinDirect.eu or Bitcoin.de , which also feature the most recent courses. Alternatively, you can invest
indirectly in cryptocurrencies via the stock exchange, by betting on price fluctuations or by purchasing company
shares. active in the cryptocurrency sector.
What cryptocurrencies exist?
Considering the fact that there are over 2,000 different cryptocurrencies around the world , it is not surprising that
even the expertsknow all suppliers and their models. Those wishing to invest in crypto money therefore have no
other option than to intensively observe the market in search of suitable solutions. Particularly for newer or lesser-
known currencies, there is always the risk of falling victim to fraud or that the whole system will collapse. The
following list presents some of the established cryptocurrencies, which are distinguished by a high market
capitalization , therefore by a relatively high sum of shares in circulation:

8. Cryptocurrency Abbreviation Description
Bitcoin BTC Bitcoin, released in 2009, is not only the
forerunner of cryptocurrencies, but is
also the most important digital currency
still today, with the highest value in
Dollars, Euros, etc. By the end of 2018,
more than 17.4 million of the maximum
21 million had already been put into
circulation, rarely used for payments but
mainly for investments.
Bitcoin Cash BCH Bitcoin Cash is a Forkof Bitcoin, born in
2018, preceded by a multi-year
discussion within the Bitcoin
community. The reason for the dispute
was the block size limit of 1MB and
therefore the low transaction rate of
Bitcoin (around 7 per second). Bitcoin
Cash currently allows a limit of 32MB,
which makes 130 trades per second
possible.
Ripple XRP Ripple is not a classic cryptocurrency
either, but more a universal exchange
platform for currencies

9. Cryptocurrency Abbreviation Description
Ethereum ETH The Ethereum cryptocurrency, whose
currency units are defined Ether, has been
officially used since 2015. Digital payments
play a secondary role in the system
developed by Vitalik Buterin: the focus is
mainly based on the possibility of
concluding Smart Contracts (i.e.
commercial contracts) without
intermediaries. These are usable in the
form of code scripts in the Ethereum
blockchain.
Monero XMR Monero attaches great importance to user
anonymity, guaranteed by features such as
hidden addresses or group signatures. The
CryptoNight algorithm employed aims to
prevent mining using ASICs (specific mining
hardware), while the developers aim to
force the mining process with
commercially available PCs. This results in
a constant adaptation of the mining
difficulty to keep the block generation
speed constant.

10. In summary: Advantages and risks of cryptocurrencies at a glance
Cryptocurrencies offer decisive possibilities and chances that classic currencies lack. In particular, blockchain
technology has so far convinced across the board, and it is therefore no coincidence that it has been adopted in
numerous projects outside the financial sector. The abandonment of a central regulatory unit, firmly anchored in
most cryptosystems, is also a promising approach. The resulting freedom to regulate the market is, however, also
one of the major problems: also due to the lack of a concrete equivalent value, the prices of crypto money are
subject to strong fluctuations, with the constant risk of a total collapse of the system.
Advantages and disadvantages of cryptocurrencies compared to general monetary or currency systems at a
glance:
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Advantages of cryptocurrencies Disadvantages of cryptocurrencies
anonymity strong fluctuations in value
quick operations potential speculative bubbles
simple application possible hacker attacks
worldwide availability (beyond
state borders)
no access to the account after the
loss of the access key
no limitation of the operation limit exclusively virtual money
free from the influence of banks no loss insurance
blockchain technology