What is cryptocurrency and why is it needed

Cryptocurrency- virtual (digital) currency, the unit of which is a coin (from the English Coin). Such a coin is encrypted information that cannot be copied, therefore, cryptocurrency has a high degree of protection against counterfeiting. But how does a virtual currency differ from a conventional currency presented in electronic form? Everything is extremely simple. For ordinary money to appear on the account in electronic form, it must be deposited in the account in physical form (through a bank or payment terminal). Cryptocurrency is issued on the Internet and has no connection with ordinary currency in physical form. All about cryptocurrency can be found below.

The legal status of the virtual currency and its economic essence have not yet been determined. The peculiarity of cryptocurrency is the absence of any internal or external administrator. Due to this, banking organizations, tax or judicial authorities cannot regulate transactions with this currency.

Cryptocurrency mining: how coins are generated

Having figured out what cryptocurrency is and started working with this tool, investors are faced with such a concept as mining. What is it? Mining is the generation of new coins, carried out in the process of performing mathematical calculations. There is no single center for generating cryptocurrencies, therefore, significant computing power is required to ensure high transaction speed. In view of this, individual mining is not popular, since the cost of acquiring equipment and paying electricity bills does not pay off. So a new trend appeared - cloud mining.

The work here is as follows: the company acquires equipment for the extraction of coins, sets it up and leases it to its customers. At the same time, all expenses for electricity and maintenance of the facilities are borne entirely by the lessor. Cloud mining cryptocurrencies is divided into two types: no investments and paid. With free mining, the company provides certain capacities without charging a commission. The principle of coin mining in cloud mining is the same as in conventional mining, only the capacity volume changes.

How does mining work? In the process of mining, new blocks with information are released, which brings a certain amount of electronic money that fall into the general “piggy bank” and are registered in the public “account book” (blockchain). In parallel, operations with existing coins are processed. They are checked on computing devices of P2P network participants and added to the block chain. The participant who first solved this task receives a reward. Such a scheme was invented in order to encourage those who donate the computing power of their PCs to maintain the network and the appearance of new coins.

Above was mentioned an important concept for the cryptocurrency market - blockchain, and it should be discussed in more detail. Blockchain is a distributed database containing data on all transactions that were carried out by participants in the system. Information is stored as a chain of blocks, and a certain number of transactions are recorded in each of these blocks. If we talk about bitcoin, then transactions here are transfers of money between users' wallets. The transaction register is not stored in one place, it is stored at the same time at all participants in the system.

What is needed for cryptocurrency mining?

  • Online wallet. It is available for download on the official websites of the developers of a particular cryptocurrency. An electronic wallet is a kind of money container protected by a password.
  • Software package. Today, you can find various mining programs focused on Windows, Linux OSes.
  • Registration in the online pool of miners. Members of such communities combine their computing devices to make devices more efficient. Received coins are shared among all members of the community.
  • Reliable internet connection. It is desirable that the speed be at least 2 Mb / s.
  • Mining equipment. You can take a regular computer, but it would be better to use special computers that have more power.

The most popular cryptocurrencies

Bitcoin is the leader in popularity, and now it is difficult to find a person who would not know what cryptocurrency Bitcoin is. This currency appeared in 2009, its creator is Satoshi Nakamoto. The official site is bitcoin.org. Since the beginning of 2017, the Bitcoin exchange rate has jumped from 600 to 4,000 dollars. Analysts believe that the price of this cryptocurrency will continue to grow, which makes it attractive for investment.

This cryptocurrency appeared after the Bitcoin hard fork. In August, the bitcoin cache rate rose from 300 to 800 dollars, then collapsed again to 300 dollars. But now the currency is rapidly growing, and more and more pools are talking about supporting the BitcoinCash network.

Ethereum is not a virtual currency, it is a platform for creating decentralized online services based on the blockchain. The platform appeared in 2015 thanks to its creator Vitaly Buterin. The Ethereum exchange rate in August 2017 was near 300 dollars. Official site - ethereum.org.

Initially, this currency was launched in 2014 under the name Xcoin, but in March 2015 it received its current name - Dash. A distinctive feature of this cryptocurrency is the stability of its rate - about 300 dollars.

This cryptocurrency appeared in 2011 as a result of a fork of bitcoin. Lightcoin has no problems with scaling, like Bitcoin, due to the activation of Segwit support. Note that now in the Bitcoin network you can make no more than 7 transactions per second, the number of transactions in Litecoin is much higher. At the same time, the cost of lightcoin is now kept at $ 46. All details about cryptocurrency can be found on the official website - litecoin.org.

This cryptocurrency appeared in 2012. The official website is ripple.com. This currency is characterized by transaction security, high speed financial transactions, a small commission. While Ripple is not very popular, its rate is 0.15 dollars.

A feature of this cryptocurrency, which appeared in 2015, is that it was developed on the original open source code. In the summer of 2016, the NEM rate went up sharply, but after a drain in early 2017, a course correction took place.

How to work with cryptocurrency?

Now quite popular is the electronic way to pay for goods and services. Cryptocurrency, in particular Bitcoin, can also be used in electronic payments:

  • payment of utilities, mobile communications,
  • purchase of luxury real estate,
  • hotel or tour reservation,
  • payment for transport services.

Cryptocurrency is also a profitable investment tool. Starting to work with virtual currency, you should weigh all the pros and cons:

  • cryptocurrency is not tied to banks and is not controlled by any organizations, therefore, there is no official transaction fee. At the same time, wallets and exchangers still charge a small fee for operations with electronic money,
  • anonymity of all transactions. All that can be learned about operations with cryptocurrency is the wallet number, upon registration of which no personal data is indicated,
  • limited cryptocurrency. The rate of production of a virtual coin drops, which means that when, for example, all bitcoins are mined, the exchange rate of this currency will jump up very much.

All about cryptocurrency and its exchange can be found below. You can exchange virtual currency for real money on the cryptocurrency exchange or in special exchangers. If you need to choose the best exchange option and there is enough time at your disposal, you can exchange cryptocurrency on the exchange, since here the transaction will be implemented at the most favorable moment. If there is no time, an exchange office will come to the rescue. In this case, the exchange may occur at a less favorable rate, but very quickly.

How is the exchange of cryptocurrency for real money in exchange offices? First you need to select the currency intended for exchange and fill out a special form, which will indicate the account number from which the electronic currency will be debited, and the amount of currency that needs to be exchanged. The amount will be calculated based on the rate that is valid at the time of filling out the form. After filling out the form, you need to transfer the indicated amount of cryptocurrency to the account of the exchange office, for which real money will be credited to the account indicated in the form.

Investing in the cryptocurrency market. What is a cryptocurrency exchange?

A cryptocurrency exchange is a place where one cryptocurrency is exchanged for another virtual currency or for real money (dollars, euros, rubles). How is the cryptocurrency market different from the stock or forex markets? The difference is in high volatility, in which the virtual currency rate for a short period of time can grow by 5000% (as was the case with the bitcoin exchange rate in 2013).

Cryptocurrency exchanges are not officially recognized, they do not have a license. In fact, these are large online services where you can buy / sell virtual currency and profit from exchange rate differences.

You can choose a reliable cryptocurrency exchange to start trading in the section

How to trade on a cryptocurrency exchange?

Cryptocurrency is also a tool for trading on the exchange. To conclude transactions on a cryptocurrency exchange, you need to compare the current and previous exchange rates of virtual and fiat currencies, and then transfer the money in a suitable form. Cryptocurrency exchanges provide all the necessary services: they record completed transactions, provide detailed trading data, and perform graphing.

When trading on a cryptocurrency exchange, you need to consider:

  • the amount of virtual currency in circulation,
  • the dynamics of fluctuations of this volume to the limits of the total volume of emissions,
  • volume of transactions on several exchanges.

Rules of work on the cryptocurrency exchange:

  • Greed is the main enemy in trading virtual currency. There is no need to expect more growth or decline if analytical forecasts or intuition says that this will not happen.
  • Patience is the key to success. Do not give in to impulses, it is better to wait for convincing signals to complete a purchase or sale operation.
  • Control the glass of quotes.
  • Monitoring the volume and capitalization of the cryptocurrency market.

What are the prospects for cryptocurrencies?

The popularity of virtual currency continues to grow, and analysts are rather optimistic about the prospects for cryptocurrency and its mining. At the same time, some experts are sure that the virtual currency, in particular Bitcoin, will grow at a rapid pace for a couple of months, and then the rate will just as rapidly go down. Other analysts believe that a few more years the virtual currency will bring investors a good return.

In Japan, given the demand for cryptocurrencies, they legalized virtual currency and now it can be used to pay for any goods and services. In some CIS countries, including Russia, cryptocurrencies are not officially recognized and this issue remains open. As for Forex brokers, more and more companies are adding to the list of tools for trading and cryptocurrency.

Some financial regulators consider the cryptocurrency market, and especially the blockchain sphere to be promising. So, at the iFX Financial EXPO 2017, which was held in Cyprus, the head of the CySEC regulator raised a question regarding the development of new areas of activity, especially the blockchain.

What is cryptocurrency - in simple words for dummies

The term was fixed in everyday life after publication in the Forbes magazine in 2011, where the name "cryptocurrency" was mentioned, in English - crypto currency. In other words, it is a digital or electronic currency that is produced on the Internet and stored here on virtual wallets. A physical analogue of it is simply absent.

When creating this currency, a special cryptographic cipher is used, consisting of sequential hashing and digital signature. Hence the first part of the word - crypto.

At first glance, cryptocurrency is similar to traditional electronic payment systems. However, the differences are actually enormous. And the first is the method of issuing and storing money, which we will talk about later.

But first about the pros ...

As in any concept, there are also advantages and disadvantages. Let's start with the advantages of cryptocurrencies, and among the main ones, we note:

  • decentralization
  • direct exchange in the absence of intermediaries,
  • transparency,
  • anonymity,
  • small fees for transfers, or even their absence,
  • not afraid of inflation,
  • ease of use.


When creating a cryptocurrency, there is no centralized authority that deals with emissions, that is, it issues title units, such as the Fed in the United States, the Central Bank or the National Bank in the Russian Federation or Ukraine, respectively, when it comes to ordinary money. If you take payment systems like WebMoney or Yandex.Money, they also belong to certain organizations and are controlled by them.

In the situation with cryptocurrency, there is no such central regulator. They are based on the blockchain system - in other words, a distributed database. Depending on the popularity of a particular cryptocurrency, it is stored simultaneously on thousands, or even millions of computers around the world at the same time.

A few words where cryptocurrency comes from

Cryptocurrency is created using mathematical calculations and is a computer-generated code. In most cases, the process is as follows.

Users send transactions to each other, which are collected in blocks sequentially interconnected, and thus are confirmed. With each block found, a certain number of crypto coins is issued, which is received by the one who confirmed the block.

Cryptocurrency is generated using mathematical calculations and is computer-generated code. It is issued in blocks connected by sequential hashing.

Such a process is called mining, and those who do it are called miners. Thus, this currency is issued and stored decentralized.

To build, figuratively speaking, a mint at home and turn on the printing press, anyone can, subject to certain conditions. It is enough to have a powerful computer and install the appropriate program on it.

By analogy with the gold rush that hit humanity in the 19th century, today a cryptocurrency rush has swept the world. Entire mining farms are created, which tirelessly generate new and new coins (coins).

But that is not all. With a great desire, you can create and launch into circulation your own personal cryptocurrency. If it inspires trust among users, success is ensured.

By the way, it is worth noting that in individual cryptocurrencies all tokens are issued at the start of the system, and are not extracted gradually over time. These include, for example, Ripple, Cardano, Stellar and others.

And through classic mining, coins are mined from such currencies:

Lack of intermediaries

As a rule, we exchange money (in cash in this case we are not talking) through intermediaries. It can be banks, payment systems, exchangers. All of them establish their own rules of exchange, which at any moment can also change. In any incomprehensible situations, your accounts may be blocked.

In the case of cryptocurrencies, there are no such intermediaries. Here, each user transfers money directly to the wallet of another user from any corner of the world.

Thus, the essence of cryptocurrencies is to eliminate a third party when conducting transactions, that is, intermediaries in the person of banks, exchangers. Another caveat - such transfers are difficult to track, for example, by tax authorities. More precisely, all transactions in electronic cash systems are visible to anyone.

It’s not a problem to see how much, from which wallet and to what amount they transferred. The question is different - to connect these wallets with a specific person is not easy. The main goal of this approach is to eliminate fraud during transactions and maintain anonymity.

In the absence of intermediaries, the strictly established transaction fee disappears. You can often transfer money if not for free, then for a small fee.

Another issue is that it is more profitable for a miner to process those transfers that include larger remuneration in the first place. However, compared with the commissions of banks or exchange offices, here you can set the amount as a fee an order of magnitude lower.

What is cryptocurrency?

Let's figure out what is hidden under the term “cryptocurrency”, that these are in simple words, and why it is called that way. The name Crypto Currensy, meaning "cryptocurrency," appeared in Forbes magazine in 2011. And since then, the name has firmly come into use.

Cryptocurrency called a special kind of electronic means of payment. Strictly speaking, this is a mathematical code. It is called so because of the use of cryptographic elements in the circulation of this digital money, namely, an electronic signature.

The unit of measurement in this system is considered to be “coins” (literally, “coins”). Cryptocurrency has no real expression such as metal coins or paper notes. This money exists exclusively in digital form.

A fundamental feature that distinguishes crypto money from real ones is the way they occur in digital space. So, real means of payment must first be deposited to a specific account or electronic wallet, and cryptocurrency units appear already in electronic form.

Digital money is “released” in various ways: ICO (initial coin placement, investment system), mining (maintaining a special platform for creating new crypto money), and forging (the formation of new blocks in existing cryptocurrencies). That is, cryptocurrency literally arises from the Internet.

Another important difference from the common currency is the decentralization of output. The issue of electronic currency is the generation of a mathematical code followed by an electronic signature.

Only the Central Bank has the right to issue real money, but anyone can issue crypto money. In order to perform transactions using cryptocurrency, you do not need to contact any third-party organizations (banks).

Payments using digital money are carried out in exactly the same way as regular electronic transfers using a bank transfer system. The only exceptions are the exchanges through which crypto money can be monetized, that is, transferred to ordinary means of payment.

The circulation of such a currency takes place according to the "block chain" system (literally "closed chain" translated from English). This system is a database distributed across millions of personal computers worldwide. At the same time, storage and recording of information during the circulation of crypto-money occurs on all devices at once, which guarantees absolute transparency and openness of transactions.

What does cryptocurrency look like

But essentially nothing. There are simply no physical analogues. It is impossible to transfer cryptocurrency physically from hand to hand. In fact, these are only transaction records. Let's say Vasya transferred 2 bitcoins to Gaucher - this will look like an entry on the blockchain about the transaction. And Gosha’s wallet balance will show off these 2 bitcoins until he transfers them to someone else.

Why is cryptocurrency so popular

The popularity of cryptocurrency is due to the requirements of the time. In the age of the widespread dissemination of information technology, universal means of payment are extremely demanded, which could be calculated in the electronic space without reference to a specific country or institution. Cryptocurrency has become such a tool.

For payments with virtual money, only their number is used, therefore, cryptocurrency does not need a real expression. Digital payment tools are protected by a cryptographic code, which makes them more reliable in comparison with “real” money. And due to the absolute decentralization of the issue of virtual coins, they can neither be faked nor prohibited.

Another feature that contributes to the popularization of cryptocurrencies is complete anonymity. When conducting transactions, no one will receive any information about the payer or recipient, from all the data only the electronic wallet number will be used.

And the attractiveness of cryptocurrency is that it can be obtained independently. That is, digital currency can be obtained almost “out of thin air”. But you can also earn money by buying and selling, as well as investing cryptocurrencies. At the same time, crypto money can be exchanged for traditional cash, as a result of which they are capable of generating quite tangible income.

Cryptocurrency mining algorithms

As already mentioned, all transactions in cryptocurrency systems are encrypted in a special way. For this, different algorithms are used. For Bitcoin, for example, SHA-256, for Litecoin - Scrypt. Their transactions are confirmed using PoW (Proof-Of-Work, proof of work). In addition to PoW, Novacoyne also uses (PoS, proof of storage). Other cryptocurrencies, such as NXT, only use PoS.

Other hashing algorithms worth mentioning are X11, X13, X15, N-Scrypt, CryptoNote, each with its own minuses and pluses.

Types of Cryptocurrencies

Digital money first appeared in 2008, and by now there are already several thousand varieties of it. There is a large category (almost 50%) of crypto money that is actually not provided with any content. These are the so-called soap bubbles. We will not take them into account.

The most common types of cryptocurrency:

1. Bitcoin (BTC, bitcoin, currently one bitcoin is equivalent to 4200 US dollars). Cryptocurrency Bitcoin in simple words is the very first digital currency on the basis of which all subsequent ones were developed. Bitcoin developer (development team) - Satoshi Nakamoto. A limit of 21,000,000 has been declared for this currency, however, it has not yet been reached.

2. Ethereum (etherium, equal to 300 US dollars). This is the development of the Russian programmer Vitaly Buterin. Such a currency appeared relatively recently - in 2015. Now it is quite popular along with bitcoins.

3. Lightcoin (litecoin, LTC, equal to 40 US dollars). The currency was developed by programmer Charlie Lee and has been released since 2011. Litecoin is considered an analogue of silver among cryptocurrencies (and Bitcoin is an analogue of gold). The issue of lightcoins, as well as bitcoins, is also limited and amounts to 84,000,000 units.

4. Z-cache (Z-cash, $ 200).

5. Dash (dash, $ 210).

6. Ripple (Ripple, $ 0.15).

In addition to these items, Darkcoin, Primecoin, Pircoin, Dodzhkoin, Namecoin and many others are also used in electronic circulation.

The most popular of all cryptocurrencies is Bitcoin. Its name is made up of the words “bit” - the smallest unit of information and “coin”, which in translation from English means “coin”. For BTC, or Bitcoin, not only a program has been created, but also a special digital wallet in which you can store this currency.

In addition, now there are even special ATMs in which you can transfer bitcoins into familiar paper money, and a number of retail chains and stores accept this currency for settlement along with ordinary banknotes and coins.

How to get cryptocurrency

In addition to the mining mentioned above, when miners receive a commission for the generation of electronic currencies, you can get hold of coins either by accepting them as payment for goods or services, or for cash on specialized cryptocurrency exchanges. Among the popular:

You can also purchase digital coins using exchange offices, which are happy to exchange dollars, euros, rubles or hryvnias for popular cryptocurrencies.

There are so-called cryptocurrency taps that give out tokens for free for performing certain actions - viewing ads, solving captcha. However, you can get with their help a very scanty amount of coins.

Advantages and disadvantages of cryptocurrencies

By their basic characteristics, digital money is significantly different from ordinary. This entails not only solid advantages, but also some disadvantages for users.


  1. Anyone can get that kind of money with the help of specially organized activities (mining). Since there is no single emission center and no bodies controlling this process, no one can forbid ordinary citizens to get crypto money on the network.
  2. All operations with cryptocurrencies (the so-called transactions) occur absolutely anonymously. The only public information in this case is the electronic wallet number. And all information about its owner is closed.
  3. A decentralized issue, in addition to the ability to raise money for everyone, also determines the lack of control over this process.
  4. Each type of cryptocurrency has a release limit. Thus, excessive emission is impossible and, as a result, there is no inflation in relation to this money.
  5. The cryptocurrency is protected by a unique code like an electronic signature, therefore it is copy protected, and therefore it cannot be faked.
  6. With transactions, there are practically no commissions, since when conducting transactions with the help of cryptocurrency, the role of a third party in relations - banks, is excluded as unnecessary. Therefore, such payments are relatively cheaper than using ordinary cash.

With all the variety of positive characteristics, cryptocurrency has its drawbacks.


  1. If the user has lost the password from his electronic wallet, this means for him the loss of all the funds in it. Since there is no control over the conduct of transactions using digital money, there are no guarantees of their safety.
  2. Cryptocurrency is characterized by high volatility in connection with the specifics of its circulation (volatility means a frequent change in its value).
  3. Concerning cryptocurrencies, various negative impacts may be made by national monetary regulators (for example, the Central Bank of the Russian Federation).
  4. Since over time, the process of mining crypto coins is becoming more and more complicated, then mining using the equipment of individual users is becoming less and less profitable.

Each of the existing types of cryptocurrencies has both advantages and disadvantages inherent in them all in the aggregate.

In general, all cryptocurrencies of the currency are characterized by the same features as modern money, namely:

  • They are universal
  • Are a means of exchange
  • They can be accumulated,
  • Perform the calculation function.

The cost of digital money varies depending on supply and demand.

How to make money on cryptocurrency

Currently, there are a number of ways to make money on bitcoins and other virtual currency:

1. Purchase and sale of cryptocurrency. This is done on special exchanges or electronic money exchangers. The principle of action is to buy a currency during a decrease in its value, and sell it during a raise. Most often, such trading is associated with bitcoins, since their value is higher than other types of cryptocurrency.

2. Cryptocurrency Investments. Investments are made by transferring a certain amount of electronic money from one person in trust to another. Typically, brokers deal with trust management issues.

3. Extraction of electronic money (mining). In simple words, cryptocurrency mining is the process of mining cryptocurrency using special software. On a regular home computer, large volumes of cryptocurrencies cannot be produced, rather significant capacities are needed, and, therefore, the purchase of additional equipment. A powerful graphics card and processor are needed. In addition, special devices are used - the so-called mining farms that produce cryptocurrency.

4. Cloud mining. For such a production of digital currency, you do not need to buy additional devices. To do this, there are special services on which you can sell and acquire computing power. That is, the service generates cryptocurrency for you, and you pay for the power spent.

5. Cryptocurrency Distribution. Such services are usually provided for attracting referrals or introducing letters from pictures (captcha), that is, in fact for increasing website traffic. These are the so-called gateways, cranes or distributors. There are also special bitcoin games in which you can earn electronic money. On such services, earnings are low: a small portion of bitcoin (Satoshi) is distributed in an hour.


Thus, cryptocurrency is a new word in monetary circulation. Its occurrence is due to the needs of the time. Despite the fact that crypto money does not have a real expression, they can participate in various market operations almost on a par with traditional currency units.

Currently, there are a number of ways to earn cryptocurrencies, as well as options for making profit from them, which is what the most advanced users use.

In general, cryptocurrency in its characteristics is largely similar to traditional money, however, it also has a number of fundamental differences that allow digital money to gain more and more popularity in the modern information space.

How to store cryptocurrency

There are special cryptocurrency wallets for this. They come in many different types:

  • In the form of a program for installation on a computer - in this case, your coins are stored on your hard drive.
  • As an application for mobile devices.
  • Online wallets that can be accessed through the browser. For example, blockchain.info.
  • Hardware wallets in the form of physical media, similar to a regular USB flash drive.

If you buy coins on the exchange, they can be kept directly on the balance of this site.

How without cons?

If there are advantages, then there are disadvantages. In the case of electronic cash, it is important to pay attention to the safety of the wallet, as well as its password. If access is lost, you can say goodbye to money forever. Restore it is unlikely to succeed.

It is also worth considering the irreversibility of transactions. If you mistakenly transferred money to the wrong wallet, it will be possible to return it only with the voluntary consent of its owner.

Among the minuses, it is also worth mentioning the ambiguous attitude of different states towards the existence of cryptocurrencies. Some consider them as a means of payment, for example, Japan, others either restrict their circulation or completely prohibit all work with them.

What is cryptocurrency for?

Cryptocurrencies are a kind of symbol of freedom. Lack of control, transfers directly to each other - such opportunities attract many.

And therefore, given the increasing popularity of virtual money, more and more stores in the world are beginning to accept them as payment. Also, cryptocurrencies are increasingly used as an investment tool. However, given their increased volatility, this is done carefully.

What cryptocurrencies are - how it all began and what we have

The first and currently the most expensive cryptocurrency was released in 2009 and is called Bitcoin. She came up with her anonym or a group of people hiding under the name Satoshi Nakamoto. It is with it that most often the very concept of cryptocurrency is associated.

Since that time, a great many different electronic currencies have appeared with original and not very concepts, most often tailored for a specific industry. For example, IOTA for the Internet of things.

Their number has already successfully exceeded one thousand. Most of them duplicate each other, differing only in names.

Developers are doing their best to outdo each other. This is how cryptocurrencies appear for owners of Facebook accounts (Face), the LGBT community (GayCoin). Others are dedicated to famous people and contain their names in their names - EinsteinCoin, TeslaCoin.

In March 2018, the top 10 cryptocurrencies are as follows:

Most often, new cryptocurrencies are released for specific tasks. If bitcoin was developed exclusively for transactions and it is often called virtual gold, then, for example, Ethereum is not only for money transfers, it already has smart contracts in it. Also, based on its network, decentralized applications are launched. By the way, the role of the silver analog in the world of cryptocurrencies is assigned to Litecoin.

What is cryptocurrency secured by

It is worth noting that digital currencies are not provided with anything: neither gold and currency reserves, nor the economy of a particular state. The only thing that determines their value is demand. The higher it is, the more expensive you have to pay for a certain currency unit. In addition, the creators of certain cryptocurrencies most often set in advance the volume of issue, upon reaching which the coins will no longer be issued. For example, Bitcoin has 21 million coins.


The concept of “cryptocurrency” refers to digital types of currency. It is created and transmitted using cryptographic methods, mainly based on blockchain technology. "Coins" are issued initially in electronic form literally due to mathematical calculations. In simple words, cryptocurrency is an artificial payment system, equivalent to real money, having an official rate.

The concept of cryptocurrency in simple words

The term “cryptocurrency” was first discussed in 2011, starting with the publication of Forbes magazine. Since then, the name has become firmly established and is applied to coins (literally coins) that do not have expression in the form of paper banknotes or coins made of metal. This kind of money exists exclusively in the digital space.

Prospects for the development of cryptocurrencies are interconnected with the progress of Internet technologies.

Unlike other electronic payment systems, cryptocurrency initially appears without the participation of real money. To become the owner of a certain amount of coins it’s enough to connect to the service of their creation, become a member of a unified mining network and wait for your “earnings”. This is the key difference between cryptocurrency and real money - the latter are issued strictly by decision of the Central Bank of the Russian Federation.

Why virtual money is popular

Any type of cryptocurrency does not have an official status as a means of payment (a number of countries have already recognized bitcoin, but this issue is still being discussed in Russia). But typical properties like decentralization are attractive to users. The owner of any of the existing cryptocurrencies is not tied to any geographical point, state or political system. Despite pegging the exchange rate to real money like the US dollar or the euro, digital money is "valuable in itself."

Virtual money gained popularity for the following reasons:

  • High prevalence, versatility. It is easy to create a wallet on any computer, smartphone or tablet on various operating systems.
  • Simplicity, openness of settlement operations. A complete history of incoming and outgoing transactions is stored without time limits.
  • Each node of the cryptocurrency generation system is equal, there is no single center, which excludes the possibility of blocking wallets, canceling and controlling payments.
  • Maximum anonymity increases the independence of the payment system. When making payments, you can specify the address, account number at the request of the owner of the wallet from which the payment is made.

Conducted transactions are protected by a cryptographic method. Without transferring the block with a special verification code, it will not be possible to confirm the financial transaction. If this is done, no one will be able to cancel the money transfer, which excludes fraud when paying for goods / services with cryptocurrency.

Due to the high reliability of electronic wallets protected by a private key, cryptocurrency can be used to create savings. Savings will come in handy as a universal means of exchange, a method of payment in online stores or on freelancer exchanges. Many users accumulate bitcoins in the calculation to earn due to a significant increase in the exchange rate against the US dollar / Russian ruble.


When a user understands what cryptocurrency is and how to use it, it is worth paying attention to a number of disadvantages inherent in this payment system. They are common to most online resources and are easily dispensed with due attention to the security of your computer.

Cryptocurrencies are subject to the same risks as online real-money accounts.

It is recommended to focus on the following points:

  • Password Security. There is a danger of both its loss (forgot, you can’t replace it due to a change in the SIM card, e-mail), and theft of credentials. The second is fraught with the loss of all funds in the wallet.
  • High volatility. At a change in the cryptocurrency rate, you can both earn and receive losses. It all depends on the rate fluctuations after the purchase of "coins", whether the owner will immediately spend the currency or will seek to create savings.
  • High probability of restrictive laws. In Russia, the Central Bank, as the main regulator of the financial system, seeks to control the entire money supply in the country. An initiative is already being expressed to limit the number of cryptocurrencies that will be available to individuals (in total terms).

Mining is losing popularity due to a sharp increase in the complexity of algorithm calculations and a constant increase in the hardware requirements of computers used for calculations. The profitability of the purchase depends on the current rate and changes in the near future. As long as there is a tendency for its constant growth, temporary adjustments towards decreasing the price of cryptocurrencies are insignificant, bitcoins and analogues remain an attractive investment tool.

Cryptocurrency Earnings

Interest in cryptocurrency is manifested not only as one of the ways to create online accumulation. An Internet wallet is beneficial due to the absence of the risk of theft when unauthorized persons enter the house or as a result of force majeure such as fire, flood. You can earn money on various cryptocurrencies without a direct purchase, a lot depends on the knowledge of the situation, the ability to predict the course change.

A cryptocurrency business can be profitable.

There are several common ways to make money on the same bitcoins:

  • Investments in cryptocurrency. Buying coins at a depreciation and selling them at peak values. This allows you to earn due to exchange rate differences.
  • ICO (Initial Coin Offering). Creating the first coins of a new cryptocurrency allows you to become the owner of coins at the lowest price. Subsequently, they are exchanged for real currency at any time when the rate rises to the desired value.
  • Trading Trading on the exchange with a pair of BTCUSD can be carried out both to lower and to increase the exchange rate.

A separate consideration is the work of a cryptocurrency earnings consultant. Ideally, you can not even have your own electronic wallet, but only understand the system, be able to explain the intricacies of its work to other users. Such a business is popular due to the lack of large financial investments and the ability to conduct it throughout the country, regardless of the location of the owner.

In 2017, the most famous cryptocurrency options are Stratis, Nem, Ripple, Ethereum, Dash, Litecoin. They went up in price in less than a year to 30-90 times. Those owners of digital currency who acquired it at the very beginning of mining improved their financial condition and became the owner of significant amounts in terms of rubles / US dollars.

Why is Bitcoin popular?

Many of the benefits of digital money are examined with bitcoins. Therefore, when they study the question of what cryptocurrency is in simple words, they mean BTC. Its rate has also sharply increased over the past few months, which attracts specialists on earnings on exchanges (due to periodic growth / fall in prices).

The popularity of bitcoin is also associated with its recognition of a number of states as one of the official payment systems (for example, this happened in Japan). The remaining benefits are common to all types of cryptocurrency:

  • Complete transaction transparency. Only the owner of the money can carry out the transfer, and as soon as he does this, no one is able to cancel the operation.
  • Increased anonymity. Only wallet number is available to users of the system, personal data are not published or transmitted.
  • Guaranteed currency deficit. There is a strict limit on the number of coins generated, this is due to the Satoshi calculation algorithm (the “penny” of bitcoin).
  • Lack of inflation. The digital nature of the cryptocurrency makes it possible to ensure its independence from economic, political, natural factors that directly affect the rates of real currencies.

Bitcoin value is constantly growing, forecasts for further growth are positive. Due to this positioning, its popularity will continue to grow. As a result, the term for calculating the last coin is approaching exponentially. At the time of this event, the Bitcoin rate can change unpredictably, but until this is discussed, users of the system expect to have time to earn before the final day.

Capitalization, price and ratings

View a list of the most popular cryptocurrencies on specialized sites. An example is coinmarketcap.com. Here in the form of a table shows the top of the most common cryptocurrencies, their price, market capitalization, price chart and other indicators.

Our site also has its own rating of cryptocurrencies, where you can find out their current value in relation to the dollar, ruble, hryvnia, view charts.

By the way, in December 2017, the total cryptocurrency capitalization exceeded the $ 500 billion mark. And in January 2018, it completely exceeded the figure of 800 billion. In March, this figure has already dropped to 360 billion. Bitcoin is also the leader with a figure of 150 billion dollars.

To find out the rates of a particular currency, you should use one of the currency converters presented on the network. For example, cryptonator.com

Legal regulation of cryptocurrency

Different countries today have different cryptocurrencies. Japan officially recognized Bitcoin as legal tender in the spring of 2017 and exempted from the consumption tax on sale. More recently, it and in Germany began to be treated as a unit of account.

Favorable attitude to cryptocurrencies in Switzerland. In the USA and Canada, they are treated as valuable property, and in Bulgaria - as a financial asset. The UK sees digital money as a foreign currency. Iceland forbids its citizens to buy tokens on exchanges, but mining, on the contrary, welcomes.

Is cryptocurrency banned in Russia? - Not. While officials are pondering the eternal question of "to be or not to be," here everyone conducts operations with cryptocurrencies at their own peril and risk.

They are planning to adopt the corresponding cryptocurrency law in Russia this year. In January, the Ministry of Finance published the preliminary text of the bill according to which mining will be classified as entrepreneurial activity, and cryptocurrencies will not be legal tender.

In the so-called “gray zone” there is cryptocurrency now in Ukraine. Back in 2017, 3 bills were submitted to the Verkhovna Rada to regulate this area, but so far none of them have been adopted.

What will happen to cryptocurrency in 2018

What will happen? - Further growth and development. This snowball is unlikely to stop anyone. Some cryptocurrencies may sink into oblivion, while others will replace them. The top 10 cryptocurrencies can change - more powerful systems will crowd out those who have stopped in their development. However, digital money will no longer be able to disappear from our lives. Even if they are banned by individual states. In general, today we are talking more about the regulation of cryptocurrencies and in 2018, active steps will continue to be taken in this direction.

Prospects for the development of the cryptocurrency market

The practical use of cryptocurrencies as money largely depends on state policy. The European Union considers bitcoins as a universal contractual tool, and in a number of Asian countries they officially adopted it (Japan) or limited their use up to a complete ban on coin ownership (China).

Russia has not yet decided on its attitude to digital currency. The Central Bank of the Russian Federation proposes to create its own analogue of Bitcoin (under state control), but until the legislative framework has been developed, it will not appear. Law enforcement agencies consider such means of payment as a way of financing illegal activities or laundering money obtained by criminal means. How exactly the system of legislation regarding cryptocurrencies will develop, time will tell.

In the meantime, traders around the world use pairs like BTCUSD to make money at the jumps in the value of bitcoin, including a growth trend and a systematic price correction. Access to trade is provided by the same brokers that work in the Forex market with the currency of the countries of the world, precious metals. The high volatility of a pair with Bitcoin provides a chance to earn money quickly without directly buying a cryptocurrency.

The difference between cryptocurrency and conventional electronic money

A key distinguishing feature of digital money from standard electronic money lies in its mode of occurrence. If ordinary electronic money (WebMoney, PayPal ...) appear as a result of depositing real money to the account, the cryptocurrency is created immediately in electronic form and is a mathematical code.

  • It is also worth noting that its significant advantage is that it has much larger production capacities for accounting and release, since cryptocurrencies are created thanks to the users themselves and are decentralized.

In simple words, then cryptocurrency is encoded algorithm (no wonder the name crypto), in which the limit of tokens (keys) is laid. Each key is a single coin (monetary unit). And now, each person has access to this algorithm, if you manage to calculate this aglo-rhythm, you can pull one token out of it (or at least all).

But all the algorithms are created in a complex way, and token mining requires complex computers with powerful processors and video cards. The cryptocurrency mining process is called mining (from English maining - mining, mining), but more on that below.

Cryptocurrency structure and name history

  • The name comes from a phrase in English "Crypto currency", Featured in Forbes in 2011. The literal translation of the phrase "cryptocurrency" is firmly in use among users and financiers.
  • The unit of measure in such a system is “coins"Or in Russian"coins", They are also called"tokens". Hence the names of various variations of Bitcoins, Litecoin and others.It is important to understand that such a currency is not related to metal coins, but has a strictly digital nature.
  • Payments are made similar to non-cash electronic transfers. The only exceptions are exchanges where you can convert digital coins into familiar money.

Thus, we found out that the cryptocurrency system is an analogue of money, but in virtual space. It is created immediately in digital form and globally released due to the productive capacity of other users. Now let's move on to other concepts and terms.

What is mining, ICO, blockchain and farms

To begin with, any token is based on blockchain (from English blockchain or continuous chain) It is a huge network of blocks, which is distributed across all users' computers and contains the required information. It turns out that this is just a global database that is not stored on one server, but for all users at the same time (decentralized).

As we have already said, tokens are obtained using other devices and production facilities in the network. As part of the production, several directions can be distinguished:

  1. Classic mining - The process of creating (mining) crypto-money and its release using special programs on a computer. To do this, you need a fairly powerful processor and a video card; it will not work to release a large number of coins on an average computer.
  2. Mining farm - A very powerful system of several video cards and a processor, which allows you to extract more tokens using programs. A farm is a network of computers connected to each other. The largest mining farm in China pays $ 30,000 for electricity daily.
  3. ICO - The initial release by the company of its new coins and investment system. In fact, it’s just an investment in startups, followed by profit in the form of keys. ICO is necessary to attract attention, because the more users there are, the more money will be extracted from it.
  4. Forging (from English Forging or forging) - the creation of new blocks within the framework of one type of cryptocurrency is an alternative to mining, but does not require expensive equipment.
  5. Hard fork - Change by developers of the code, which will change the structure and allow the use of additional capacities and blocks. A striking example is the split of one cryptocurrency into Ethereum and Ethereum classic.

As a result, each of the above directions allows you to issue new types of crypto money or coins for existing ones.

Classification and Leaders

The first crypto-money appeared back in 2008, since then they managed to develop thousands of different variations. Not all altcoins have real weight, many of them have practically no capitalization and are “blistering". Let's pay attention to the three most common currencies:

  • Bitcoin (BTC) is the founder of cryptocurrencies, the very first representative. Currently, Bitcoin is the No. 1 leader. The developer is still unknown, but according to legend, this is a certain Satoshi Nakamoto. The limit on the issue of coins is limited by the figure of 21 million, which has not yet been reached.
  • Ethereum (ETH) is the idea of ​​Russian programmer Vitaly Buterin. It is a platform for creating new online services based on the blockchain. The first release took place in 2015, but Ethereum has already become one of the world leaders.
  • Litecoin (LTC) - is considered an analogue of silver in the field of crypto money. The developer is Charlie Lee, and the date of foundation is 2011. The issue limit is limited to 84,000,000 coins.

There are still many different crypto money, more than 2000, but they are less popular. Among the famous there are still DarkCoin, Neo, Ripple, Dash, Z-Cash.

Watch a video about cryptocurrencies in Russia and the world:

The reason for the popularity of cryptocurrency and its advantages

Modern technology and the globalization of society need a new currency. A global monetary unit that is not tied to any country would be useful to people, and it could be settled at various retail outlets on the network. It is this need that cryptocurrency satisfies. The lion's share of popularity is based on earning potential (mining), but pay attention to its other advantages:

  1. The calculations are completely anonymous. In fact, no one can get information about who made the payment or received it. Only the wallet number will be known, but information about the owner is missing.
  2. Only the number is used for paymentsAs a result, digital coins do not require real expression in paper money.
  3. Protected by cryptographic code, and this makes them a fairly reliable means of payment, even in comparison with classic money.
  4. Due to the decentralization of coin issuance, it is impossible to counterfeit, and also prohibit. The process cannot be controlled in any instance.
  5. Limited editiontherefore, inflation in relation to such money is impossible.
  6. Anyone can get money with the help of mining, as a result, earn real means of payment by exchanging tokens on the exchange.
  7. Transactions are practically free of commissionsbecause the process takes place outside the banking system.

Any phenomenon has its drawbacks, their minimum number also ensures popularity, reduces negative and causes relative trust. Among them it is worth highlighting:

  1. Over time, the cryptocurrency mining process becomes more complicated, competition is growing and mining has already become not the most profitable business, as before.
  2. If you lose access to the wallet, the user loses money. Since the network is not controlled and is decentralized, no one can help with the return of funds.
  3. Cryptocurrencies differ in that they change in price quite quickly on available exchanges and platforms (have high volatility) Today they are growing rapidly in value, but it is not known what will happen years later.
  4. The further actions of the authorities of various states are unknown. in relation to such money. Maybe they will try to oppose her, maybe not.

Cryptocurrencies in general have much more advantages than disadvantages, but it is rather difficult to call them a conservative investment. Rather, they are something fast-growing and promising, but at the same time risky.

How to make real money on cryptocurrency

Today, there are several different directions for generating income.

Trading and speculation. Perhaps this is a classic way to make a profit. It’s enough to buy cryptocurrency when it grows. Many brokers offer cross rates BTCUSD, LTCUSD and others, so you can trade instantly. For example, the Libertex broker, which has a 20-year history, offers trading with the most famous cryptocurrencies:

By opening the asset page, you can view a detailed price chart, statistics and news feed and comments. Here you can connect indicators.

In addition, you can earn on binary options that bring maximum benefit in the shortest possible time:

Options are transactions with a fixed profit, it is important that your contract condition is fulfilled, if you bought an option to increase the rate, say for 5 minutes, then you will make a profit if after 5 minutes the quote is higher than at the time of purchase.

Mining. A few years ago, conventional mining was overly profitable, because there was simply no competition. With the development of technology and the popularity of cryptocurrencies, access to such income began to become more and more expensive, and began to be created. mining farms. Separately, it is worth mentioning about cloud mining through special services, which are still relatively profitable.

Thus, there are several sources of income from tokens, mainly investment and speculation, since mining over time is a thing of the past.

The legal status of cryptocurrency in the world

Due to the fact that crypto-currencies received a wide resonance in society, government bodies became interested in their situation. In general, their position is still neutral. Consider the most popular countries:

  • USA - A tax project for crypto-money has already been developed, but is not yet applied.
  • RF - In Russia they are still discussing, there is still no precisely expressed position.
  • China - Digital money is prohibited for legal entities, but there are no restrictions for citizens.
  • Germany - cryptocurrencies are equated to ordinary money.
  • European Union - operations of citizens will not be taxed by decision of the European Court.

As a result, the majority of countries so far have a neutral attitude towards virtual money and are not taxing them, and are in no hurry to express their position, but politics can change at any time.

Cryptocurrency emission

The issue of any cryptocurrency is called mining, that is, mining. The issue of this money is called that for the reason that any electronic money has more in common with precious metals, and not with ordinary currencies. The essence of mining is as follows:

  1. A user who wants to issue virtual money installs special mining software on his PC
  2. Specialized software, using the processing power of the processor / video card / ASIC, solves certain algorithms
  3. When a solution to the algorithm is found, a new block is created in the blockchain system
  4. The miner / miners who created the new block receive a certain amount of electronic coins as a reward for this.

Mining any cryptocurrency is complicated over time, and the more blocks are created, the more complicated the algorithms you need to solve in order to get new coins. Therefore, mining new cryptocurrencies is much easier than Bitcoin. But for the production of the very first and most famous electronic currency in 2017, very large computing power is required, so today bitcoin mining is possible either in the pool or on very powerful (and expensive) ASICs.

Current cryptocurrencies for 2017

Today, several cryptocurrencies can be settled online, although their prevalence and liquidity are different. If you rank these electronic currencies by popularity, the list will look like this:

  1. Bitcoin - a system that was created in 2009 by an anonymous person calling himself Satoshi Nakamoto. In August 2017, the Bitcoin exchange rate exceeded 1 to 4000 to the US dollar.
  2. Ethereum (ether) - cryptocurrency developed in 2015 by a Canadian programmer with Russian roots Vitaly Buterin. Its course at the beginning of September 2017 is 1 to $ 335.
  3. Litecoin - Currency, which is also called virtual silver. The lightcoin system was launched in 2011, and as of September 3, 2017, 1 LTC on the exchange costs $ 77.
  4. Dogecoin - cryptocurrency based on the lightcoin algorithm. The Dogecoin system was launched in December 2013. At the beginning of the second half of 2017, for 3 DOGEs on the exchange, they gave 1 cent.
  5. Peercoin - a peer-to-peer system launched in 2012, which differs from other cryptocurrencies in terms of emission features, namely, the ability to create this money in two ways at once (by calculating a share or by performing work). Now 1 PPC = $ 1.95.

The above is not a complete list of cryptocurrencies existing today, since in fact there are much more. However, the difference between the popular electronic currencies listed in the list and the little-known virtual currencies is that they can be sold on the stock exchange for dollars or exchanged in fiat money (any state currency) online exchanger without any difficulties.

The attitude of the authorities towards virtual money

In 2017, the attitude of state authorities towards cryptocurrencies is still wary. But if 4-5 years ago the vast majority of official government bodies simply turned a blind eye to the existence of such money, now the situation has changed, and states are trying in one way or another to take control of the circulation of electronic payment units.

In countries such as the Netherlands, New Zealand, Singapore, Germany and Australia, as well as in offshore zones and some US states, the use of cryptocurrencies is not only forbidden, but also encouraged. The authorities of these states set themselves the goal of integrating the circulation of electronic money into the existing financial system.

But Russia, China, Indonesia and a number of other countries have taken a different path - the path of banning cryptocurrencies. However, despite the prohibitive laws, and in these countries, users actively use electronic money, since there are no real levers of influence on the turnover of bitcoins and other virtual payment units in government bodies.

Watch the video: How Does Bitcoin Work? (April 2020).