In recent years, the issuance and use of so-called virtual currencies or cryptocurrencies has multiplied.Open in a new window. There are more than 1,500 virtual currencies in circulation. In September 2018, it was calculated that virtual currencies moved almost 200,000 million dollars in the market.
The first virtual currencies emerged in 2009 as a consequence of recent technological developments. There are many types of virtual currencies. Although the pioneer and the most popular is bitcoin, there are many others, (the best known are litecoin, dashcoin, peercoin, dogecoin; etc …)
These coins are characterized by:
not have a specific issuer
not be under the control of any government or Central Bank
its scope is global. It is not centralized in a geographical area or in a specific group
spread across the internet
Probably, you have ever wondered if virtual currencies can replace money. No. These currencies are not a common and generally accepted means of payment or exchange. In fact, the term coins can certainly be misleading and, therefore, their name has recently evolved towards virtual assets or crypto assets.
The European Central Bank was one of the first organizations to define virtual currencies as “a type of unregulated, digital money, which is issued and generally controlled by its developers, and which is used and accepted among the members of a determined virtual community ”(October 2012 Report).
There is no unanimity on the definition, since it is disputed whether it is a means of payment or a means of exchange. The nuance is important since if one thing or another is considered, a prior authorization may or may not be required to operate from those entities whose activity is to issue virtual currencies.
Today, within the EU, cryptocurrencies are defined in Directive (EU) 2015 / 849Open in a new window as a digital representation of value not issued or guaranteed by a central bank or by a public authority, not necessarily associated with a legally established currency, which does not have the legal status of currency or money, but which is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically
The operation of virtual currencies is complex to understand without knowledge of new technologies. Cryptocurrencies do not have physical notes or coins attached.
Most are quasi-anonymous, as transactions are recorded so that users are known only by their public virtual currency addresses, without being able to easily obtain their real identity. These transactions are based on blockchain technology.
Virtual currencies are issued through private entities and are denominated in their own unit of account. The value of digital currencies depends solely on whether there are other users willing to purchase them.
Currently, there is no State in which any virtual currency is legal tender.
Transactions are made without intermediaries, directly from person to person, through certain websites that lack supervision since it is an unregulated activity.
Bitcoin and cryptocurrencies, in general, can only be used on those websites (online store) that accept this type of currency.
Outside of the world of online shopping, there are also some physical establishments that accept virtual currencies
Virtual currencies pose significant risks for consumers
High volatility. Cryptocurrencies are subject to strong fluctuations since their value depends on other users willing to acquire them. Also, price formation is not transparent and could be manipulated.
Cybersecurity Security in transactions with virtual currencies is not the same as in traditional payment systems. There are multiple operational and theft incidents through cyber attacks.
Difficulty in guaranteeing the rights of consumers. In the event of the acquisition of goods and services through virtual currencies, it would be impossible for any consumer to claim their rights if a problem arises with the payment or with the product purchased.
(BCH) is a cryptocurrency, open source software project, and alternative implementation of the Bitcoin project originating from the coordinated division of the Bitcoin (BTC) network on August 1, 2017. Its aim is to continue what its supporters consider the vision original by Satoshi Nakamoto based on his interventions and the Bitcoin whitepaper, considering the development and adoption of the network as a peer-to-peer electronic cash system that scales according to a growing demand until reaching a scale global without relying on solutions like the Lightning Network.
Its irruption into the ecosystem is the result of a long disagreement on the scalability of Bitcoin that took place between 2015 and 2017.2
Virtual commerce has resulted in the creation of a new form of payment: virtual currencies, with lower interest rates than credit cards and whose transaction is carried out exclusively through computers (it does not have physical representation like banknotes). Although there are currently more than 150 of these virtual currencies, today I want to show you some of the highlights
Bitcoin is the virtual currency that has had the most acceptance since it emerged in 2008 thanks to the contributions of Satoshi Nakamoto. This payment system is not governed by any bank, in fact, anyone with the necessary knowledge can create a Bitcoin although it is increasingly difficult due to the algorithms and mining that must be implemented.
Thanks to the emergence of this “cryptocurrency” and the subsequent release of its source code as part of the free software community, other alternative currencies or altcoins have emerged. Its current market is valued at $ 7.38 trillion.
Its name refers to PPCoin or Peer-to-Peer Coin and was created by Scott Nadal and Sunny King, software designers. As the first digital currency to combine the “proof of status” and the “proof of work”, the Peercoin network consumes less energy, which means that there is no exact number of coins, that is, they can be created unlimitedly unlike of the Bitcoin it is estimated that there may only be 21 million. Its current market is valued at $ 21.2 million.
This system uses a different protocol than altcoins, also functioning as a distributed currency exchange, a payment system and a currency. Its founder and CEO Chris Larsen, advertises it as a protocol, just like SMTP for emails only that Ripple works to move money.
After Bitcoin, it is the most widely used digital currency in the world. It was created in 2011 by Charlie Lee who is recognized as the second best Bitcoin programmer. As “proof of work” it uses scripts that are decoded by any CPU. It has faster block generation than Bitcoin and its current market is estimated to be valued at $ 201.8 million.
Contrary to Bitcoin, this coin has a 1 minute time block and was created in 2013 by Jackson Palmer and Billy Markus. Like PeerCoin, there is no limit to the amount of Dogecoin that can be created, which makes this cryptocurrency the ideal form of payment for small financial transactions.
Litecoin is an anonymous cryptocurrency based on a P2P network. The principle of the P2P network is that there is no type of authority that regulates the currency, which differentiates it from traditional currencies. The nodes of the network direct transactions, validity, and everything that concerns this currency.
The anonymity of the network is based on the fact that at no time the identity of the actors is known. Each user will have an electronic wallet (a simple file) that contains all their monetary units. If the bearer is stolen or loses these units, he will no longer have anything. In short, the file is the bag of bills.
Litecoin was created in 2011 in order to be a complement to Bitcoin. Bitcoin is the most widespread cryptocurrency today. However, Litecoin has other advantages compared to Bitcoin: its network is planned to handle 84 million Litecoin, that is, 4 times more than Bitcoin (predicted for 21 million).
The Litecoin network is also faster, it only takes 2 min 30 to generate a transaction where the Bitcoin network requires 10 minutes. For this reason, Litecoin is much more manageable.
There are many platforms that offer the exchange of Bitcoin, and more and more of Litecoin, against American and European monetary values.
Whatever the project to initiate on Litecoin, it must always be borne in mind that the only people responsible for the money are the users themselves. Therefore, you must be aware of the security of said file that stores the currency.
Just as Bitcoin is open-source (the development code is public and modifiable), it is possible to improve or create another project from this.
By way of conclusion, it is convenient to know that the detractors of Litecoin explain that this currency should not be in operation, since it complicates the concept of digital currency and makes it less interesting. Also, if there is a problem with Bitcoin, it should be fixed by itself, and not through the creation of another alt currency.