The term cryptocurrency. What is cryptocurrency and why is it needed. Cryptocurrency mining algorithms

Hello! Cryptocurrencies are very popular in the media. Some earn millions from the growth of the exchange rate, others call them another “bubble”. Politicians accuse cryptocurrency owners of money laundering, and large stores are starting to accept payments in cryptocurrency. I myself have mentioned cryptocurrencies several times, and now I decided to explain what a cryptocurrency is and why it is needed - simple and understandable language.

What it is

Cryptocurrency (crypt, coins, coins, whatever they call it) is digital decentralized money. Now we need to clarify a few issues.

What is money? It is a universal medium of exchange that cannot be counterfeited or created out of thin air. Paper money, minted coins, animal skins, shells - all of this serves as a medium of exchange. Seller and buyer acknowledge value money and they can exchange them for the desired product. Moreover, money must be valuable in itself so that it is quite difficult to obtain or produce. Therefore, tree leaves cannot be money - they are too easy to get, so they have no value.

The emergence of cryptocurrency - next step in economic development. Coins and pieces of paper are a thing of the past. They are not always convenient to use: you can carry a limited amount with you, you can count and check the change yourself, they can be lost or damaged. Electronic money is the equivalent of paper money, only manage it more convenient. From the point of view of the state and business, non-cash payments are also convenient - electronic payments are processed fast, cheap, safely.

What is decentralization? This is the way the system works in which all participants are equal. When paying by card, the terminal sends a request to the bank server, which checks the availability of money in the account, debits the required amount and sends a confirmation. If the server crashes, it will not be able to confirm payment - this flaw centralization. In a decentralized system, the terminal will contact any nearby system participants who will confirm the payment.

Who releases?

Someone has to make money. The Central Bank prints rubles, hunters mine skins, divers look for shells, and crypts are mined. Mining is inextricably linked with decentralization and blockchain. Blockchain is an archive, which consists from consecutive blocks. Each block contains information about transactions in the cryptocurrency network, that is, the blockchain stores information about movement in general everyone coins during the existence of the crypt. Each block also contains hash sum previous blocks. If you change one block, the hash of subsequent blocks will no longer match it, causing it is impossible to hack or change the blockchain. The blockchain is simultaneously stored by all participants in the system. The structure of the blockchain is in the picture.

Mining- the process of searching and signing new blocks. To do this, miners run a program on their computer that searches and hashes random numbers until one of the miners finds a number that matches the condition. Conditions are selected automatically to ensure a certain speed of mining blocks depending on the power of the computers involved in mining. For the number found, the miner receives award in the crypt. If you want to learn more about mining, watch the video.

Structure

Information about all transactions is stored on the blockchain. There will be an article coming out soon detailing how the whole system works. If we greatly simplify it, then Using records in the blockchain, you can track all coins and find out the balance of any wallet. This way you can do without a central server - the closest participants in the system can confirm that there is money in the wallet, confirm the transaction and add it to the next block to complete the transfer. You have to pay for translations commission, the size of the commission affects the speed of the transaction.

Advantages over fiat money

Impossible to steal- you can withdraw money only if you know private key. I urge everyone to pay attention to the issue security: every day we hear about another hack of a wallet, exchange or individual.
Small commissions- for transferring several million dollars to another country they will charge from zero to 5 dollars.
No central server, which can be hacked or disabled.

What is cryptocurrency for?

Like any exchange medium, crypto must be used to exchange for goods or other currencies. For cryptocurrency you can buy goods and services, while reducing fees for transferring money. Also, coin flows can be well confused and make your purchases completely anonymous.
Crypto is a good tool for long-term investment. You can simply buy coins and wait for them to increase in value. The Bitcoin price has risen from $10/BTC to $10,000/BTC in just a few years.
Cryptocurrency rate volatile, jumps of 5-6% per day are the norm. Speculators and skilled scalpers make good money from such short-term fluctuations using crypto exchanges.

Significant Cryptocurrencies

Coins differ from each other much more than fiat money. They differ in the method of extraction, commissions and scope of use. But the main characteristics are market capitalization And well.

Top 5 cryptocurrencies by capitalization:

Bitcoin. The most popular coin in the world, value - $8000 . Works with a regular blockchain, mines on farms and brings profit;
Ethereum. The second most popular crypt, created by a Russian programmer Vitalik Buterin. Smart contracts are written on Ethereum, which are executed automatically when the specified conditions are achieved. Price - $500 ;
Litecoin. Made on the basis of Bitcoin code, it introduced the technology of fast transactions, cross-currency exchange and smart contracts. Price - $200 ;
Ripple. "Banking" cryptocurrency. Used for fast and ultra-cheap transactions between banks, it cannot be mined. Price - $0.5 ;
Monero. An anonymous cryptocurrency, popular on the Darknet. Due to this, it is not so susceptible to price fluctuations. Price - $200 .

In addition to the giants, there are also cheap cryptocurrencies with small capitalization, but interesting idea.

El Petro. National cryptocurrency of Venezuela, first state crypt in the world;
GRAM. Cryptocurrency from the founders Telegram;
CryptoKitties. Blockchain-based cryptocurrency, in which instead of coins there are cards with images cats.

This is all? No, there is more several thousand cryptocurrencies that differ in functionality and audience. You can find out about them on the Coinmarketcap website .

There are the main indicators: capitalization, cost of one coin, daily trading volume, number of coins in circulation, exchange rate chart. Most coins are listed on exchanges, and this information will help you discover trend And earn money money on exchange rate fluctuations.

Cryptocurrency calculator

Sometimes I find it difficult to convert dollars into euros, and in my head it’s completely unrealistic to convert BTC to DOGE. To find out the exact value of a coin or to calculate how many BTC I will buy for $1000, I use this page .

Everything is simple there - select currencies, enter the amount and get result. Useful if you want to calculate how to add cryptocurrency to your wallet with maximum profit.

Technical analysis

To make money from trading, you need to know everything about previous price movements. On the tradingview website There is all the necessary tools for analysis: chart, drawing tools, indicators, trading volumes, history of price movements. If you are a beginner, you can look at ideas And notes other users. You can also run market simulation to test your trading strategy. The site is complex, but very useful Perhaps in the future I will write a complete guide to developing your own trading strategies.

How to buy cryptocurrency?

Crypto enjoys demand, so popular exchangers add automatic purchase of coins to their functionality. I use Bestchange to find the best rate. Buy on exchangers profitable, as their offers are often updated late. If you find the right moment, you can buy it at 5-10% more coins than you would buy on an open exchange with the current exchange rate. Exchangers accept electronic money, payment by bank cards and other crypto coins; approximately 15 minutes pass between payment and receipt of cryptocurrency.

Take advantage of favorable exchange rates

Cryptocurrency can be purchased on exchanges. There will be a link to a review of the best crypto exchanges, you can read it. Differences between exchanges functionality- you can use them to buy and store crypto on your wallet or start trading immediately. A wallet on the exchange can be used in the same way as a regular one: you can receive and send money without restrictions. Usually, when registering, they do not ask for a name, but in connection with the “legalization” and the creation of regulators in the USA, in the future exchanges may oblige users confirm identity.

List of profitable crypto exchanges

Binance;
Yobit;
Exmo;
Bittrex.

Which method did I choose? I buy crypto on open exchanges to get the maximum benefit on commissions. But I prefer to store it in a separate wallet, since exchanges regularly hack and steal coins from users’ wallets. I advise you to read an educational program on the topic of how to profitably buy cryptocurrencies, there are several tricks there.

Where to store?

On a special wallet. Each of them has public address And private key. The creators of cryptocurrencies came up with an interesting security scheme - For each operation, the wallet creates new unique addresses. Let's say you wanted to transfer coins that are in your wallet A. The wallet will first create a second wallet IN, and then send the money to the desired address. To accept a transaction, a wallet is created WITH, from which money is automatically sent to the wallet A. This way no one will know real wallet address where the money is stored.

But not all wallets have such functions and not all are equally convenient to use. Total there is four types:

Online wallet. This is a website, a layer between you and your money. The website stores wallet data; to access it, you need to enter your login and password. At the same time, the sites give user-friendly interface and the ability to manage your money from any device that has an Internet browser. On such a wallet You should not store large amounts, since your login and password can be stolen by a virus, keylogger or other harmful program. Examples: Coinbase, Exodus, Wallet.BTC.
Wallet on the exchange. An online wallet with limited functionality, since on most exchanges you buy not coins, but contracts. The exchange wallet can only store the main currency in which the exchange carries out settlements: usually this USD, BTC or ETH. Convenient if you do not need other currencies and you actively trade in the crypto market.
Cold wallet. Access data (address, passwords) are stored in a special file wallet.dat. Why not store this file where no one can steal or spy on it, for example, on a separate flash drive? Cold wallet - storing data on a device that is generally not connected to the internet and protected from strangers. Not very convenient, but very safe if you want to make a large investment. Examples: flash drive, password on paper, hard wallets like Trezor.
Local wallet. You can store money on your computer, accept and send transactions through a special wallet program. Safe enough, but to use it you will have to download the blockchain file, which weighs several tens or hundreds of gigabytes. Examples: Electrum, Jaxx.

There are many wallets, so I chose several popular and reliable ones from each type - read the review of popular wallets. You can also look at the review at Trezor– “iron” wallet. But if you don’t know how to use crypto, you risk losing money:

Your wallet can be hacked. If you don't care about the security of your information, haven't come up with a strong enough password, and haven't secured your computer, your wallet file or online wallet password could be stolen.
The investment may not be profitable. If you are going to invest in a new and not very promising cryptocurrency, consider the probability of losing. Some cryptocurrencies are growing rapidly, others are losing value, just like with stocks, securities and fiat currencies.
You can lose on the stock market. The volatility of the cryptocurrency market is a very dangerous thing. You can determine the main trend, but it is very difficult to guess instantaneous sharp fluctuations. These fluctuations can easily cut off stops or even eat up the entire margin, so you need to trade very carefully.

Why have cryptocurrencies become popular?

The Internet is penetrating deeper and deeper into everyday life. Bank cards are a convenient way to pay for goods and services, but owners have to pay for the service. Add here the percentage for withdrawal/replenishment, various commissions and “promotions” that eat up money. With the development of the Internet, it has become possible to buy goods abroad and avoid paying intermediaries. But for international transfers too you have to pay.

Cryptocurrencies allow you to send any amount of money to the other side of the world by paying a few cents for the transfer. Cryptocurrencies allow obfuscate transactions and ensure complete anonymity. The blockchain stores all transaction information to protect the system from hacking and the coins from theft. Cryptocurrencies automate monetary relations and make them completely transparent. In simple terms this is new generation money.

At first, these opportunities were of interest only to enthusiasts, but later businessmen and investors became interested in them. Now banks, corporations and popular Internet resources are creating their own tokens and coins, implementing blockchain and starting to accept bitcoins and ether for payment. Cryptocurrencies are the future.

Summary

Cryptocurrencies - electronic money. Other users of the system recognize their value, which means they are no different from ordinary money. You can buy goods, services and fiat money with cryptocurrency.
Crypto is stored in special wallets. Before you buy coins, get the appropriate wallet and take care of his safety.
Crypto can be purchased at exchangers or stock exchanges, or mined on a computer or farm. Crypto can be used for trading, as a long-term investment or a trading tool. The crypto market is volatile, the price of some coins actively jumps up and down, and this is a good answer to the question of how earn money money using cryptocurrency.
Popular cryptocurrencies vary greatly in structure, method of use and mining. For example, Ripple used for large interbank transfers, so this coin is not interesting for ordinary users. Before you buy interesting coins, Fine their study.

I tried to talk about all the main aspects of the new type of money. If you forgot about something or you have questions, write in the comments, I will definitely answer. Goodbye, wait for new articles!

If you find an error in the text, please select a piece of text and click Ctrl+Enter. Thanks for helping my blog get better!

Today's financial market is difficult to surprise with a simple cryptocurrency with a standard set of functions and similar characteristics. Recently, more and more unique digital coins have begun to appear, which compare favorably with their predecessors. One such innovative cryptocurrency is Electroneum (ETN). Let's try to understand in more detail why it stands out so much among its analogues...

What currency is Electroneum (ETN)?

Electroneum (ETN) is a cryptocurrency that can be mined using a smartphone. Its mining does not require any specialized skills, knowledge or experience; there is no need to purchase expensive equipment or install ultra-efficient programs and applications. First of all, Electroneum is aimed at users who have not previously mined cryptocurrency, newcomers to the world of the crypto industry. It is thanks to its simple mining that this digital coin aims to teach inexperienced users “the basics of digital currency literacy.”

Electroneum allows any user who has a smartphone with fairly standard characteristics to earn ETN coins even in the background.

The virtual currency was developed specifically with the needs of mobile users in mind, thereby attracting a potential market of 2.2 billion smartphone holders worldwide. Unlike its counterparts in the crypto world, ETN has a modern, tailored interface that allows users to seamlessly transfer ETN coins from one user to another in the shortest possible time.

Being a full-fledged cryptocurrency, an ETN is created and transferred only electronically, without a physical shell. Just like most Bitcoin forks, Electroneum is based on blockchain technology, so it is not controlled or operated by people, computers, or governments.

Electroneum was officially introduced to the general public on November 1, 2017, and the application wallet appeared almost a month later, on December 13, 2017.

Key Features of Electroneum (ETN)

Electroneum operates on the Monero base code, which allows transactions to be carried out on a decentralized basis. Like Monero, Electroneum contains integrated privacy and security features.

Electroneum's core code functions in such a way that there is no need to use the processing power of ASICs, which have a huge advantage over CPU miners. The mining process uses a memory-linked algorithm to stimulate the intelligent processor, giving users easier access to obtain ETN.

The key feature of Electroneum is its mobile application, created specifically to attract new users. This application is available for smartphones based on Android and iOS (implemented in March 2018). The mobile application encourages the user to share knowledge about ETN with the world. For example, a good incentive to use the application, in addition to the main mining, is a kind of referral program. Any user who invites 5 friends to the project participates in a competition (along with their referrals) where they can win an additional 5,000 ETN coins.

Electroneum developers note that, first of all, this is a mobile cryptocurrency. As a mobile cryptocurrency, it is characterized by the following main features:

simplicity and transparency of use;
complete security;
using an offline wallet;
ability to scan a QR code;
does not require special knowledge and experience;
does not require the use of high-performance facilities;
provides experience for cryptocurrency miners;
does not charge fees for creating an offline wallet;
allows you to transfer currency between different games and applications.

Electroneum (ETN) cryptocurrency rate

Since the Electroneum (ETN) cryptocurrency was introduced to the general public in its current form, its rate has changed little. Over the entire period of its existence, the cryptocurrency was able to consolidate its position and slightly improve its performance, showing slight growth. Fluctuations in the currency exchange rate are quite insignificant, without sharp rises and falls.

Under favorable conditions, the cryptocurrency has all the prerequisites for confident growth in price and further strengthening of its position.

At the time of writing the review, the cost of the ETN coin was:

1 ETN = 0.0195 USD;

1 ETN = 0.0158 EUR;

1 ETN = 1.1102 RUB.

The ETN supply is 21 billion coins.

Receiving Electroneum coins (ETN)

Electroneum can be obtained in several ways:

purchase on a cryptocurrency exchange (at the moment, this is only possible on Cryptopia);
mine on a GPU video card;
mine on a CPU processor;
extract using a smartphone (Android and iOS).

Electroneum differs favorably from other cryptocurrencies precisely in that its coins can be obtained using the most ordinary smartphone.

To start mining Electroneum, you need to install the application on your smartphone and create an account. The application will run in the background, while you can perform quite standard manipulations with your phone. In addition, to get more coins, you can play the mining game.

Mobile mining will allow the smartphone processor to take part in simulated application development. According to the developers, this does not lead to additional heating of the device or loss of battery charge. This type of mining will use a small amount of Internet traffic.

Installing an Electroneum (ETN) wallet

Like many cryptocurrency projects, Electroneum has several types of wallets. Let's take a closer look at some of its varieties.

Considering that the main focus of the Electroneum project is the creation of a mobile cryptocurrency, it is not at all surprising that the wallet is with you in your smartphone.

In order to install a mobile wallet, you just need to download the application to your smartphone. To log into the mobile application, use a single account created on the official website: https://my.electroneum.com.

The mobile application for Android smartphones is currently in beta testing. Registration for testing has been completed, so those who want to receive the coveted coins will have to wait for the full launch of the application.

Another type of wallet is to use an online wallet on the official website: https://my.electroneum.com.

Its installation is as simple as installing a mobile application on a smartphone, and, as a rule, does not cause any particular difficulties.

These are the two main, most used Electroneum wallets. In addition to the main ones, there are other wallets for this digital currency: Electroneum Wallet and ElectroneumGUIWallet, but they are not particularly popular among a wide range of users.

Electroneum (ETN) Forecast for 2018

The main goal of the developers is to improve mobile cryptocurrency in a form in which it will meet all the needs of users. Considering the fact that every second user worldwide has a smartphone, Electroneum has every opportunity for its mass use. With growing popularity, improvement of service and strengthening of its position, this cryptocurrency has every chance for dynamic development, and, accordingly, growth in its total value on the exchange. Having positive trends in its development, the appearance of cryptocurrency in the lists is possible not only on the Cryptopia exchange (where it is already traded), but also on other trading platforms.

The development team does not stand in one place, the project is steadily developing and improving its functionality. The nearest plans of the Electroneum project include the release of its own full-fledged software for game consoles and other innovative ideas. If most of the plans are implemented, then an increase in the price of ETN shares is simply inevitable...

Hello! In this article we will talk about cryptocurrency and try to give all the most important information about it.

Today you will learn:

What cryptocurrencies exist?
Why are they so popular?
How can you make money on them?

What is cryptocurrency

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

Cryptocurrency called a special type of electronic payment instrument. Strictly speaking, this is a mathematical code. It is called that because when circulating this digital money, cryptographic elements are used, namely an electronic signature.

The unit of measurement in this system is “coins” (literally “coins”). Cryptocurrency does not have any real expression such as metal coins or paper bills. This money exists exclusively in digital form.

The fundamental feature that distinguishes crypto money from real money is the way it appears in the digital space. Thus, real means of payment must first be deposited into a specific account or electronic wallet, and cryptocurrency units appear in electronic form.

The “issue” of digital money occurs in various ways: this is ICO (initial coin offering, system), and mining (maintaining a special platform for creating new crypto-money), and forging (formation of new blocks in existing crypto-currencies). That is, cryptocurrency literally emerges “from the Internet.”

Another important difference from conventional currency is the decentralization of issue. The issuance of electronic currency involves 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 make 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 via a cashless payment system. The only exceptions are exchanges through which crypto money can be monetized, that is, converted into regular means of payment.

The circulation of such currency occurs according to the “blockchain” system (literally “closed chain” in English). This system is a database distributed across millions of personal computers around the world. At the same time, the storage and recording of information when circulating cryptomoney occurs on all devices at once, which guarantees absolute transparency and openness of the transactions performed.

Why is cryptocurrency so popular?

The popularity of cryptocurrency is due to the demands of the time. In the age of widespread dissemination of information technology, universal means of payment are extremely in demand, which could be used to pay in the electronic space without being tied to a specific country or institution. Cryptocurrency became such a means.

For payments with virtual money, only their number is used, so the cryptocurrency does not need real expression. Digital means of payment are protected by cryptographic code, which makes them more reliable than “real” money. And due to the absolute decentralization of the emission of virtual coins, they can neither be counterfeited nor banned.

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

And also the attractiveness of cryptocurrency is that you can get it yourself. That is, digital currency can be obtained almost out of thin air. But you can also buy and sell, as well as invest in cryptocurrency. At the same time, crypto money can be exchanged for traditional money, as a result of which they can generate quite tangible income.

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 backed by any content. These are the so-called soap bubbles. Let's not take them into account.

The most common types of cryptocurrency:

1. (BTC, bitcoin, at the moment one bitcoin is equivalent to 4200 US dollars). Bitcoin cryptocurrency, in simple words, is the very first digital currency, on the basis of which all subsequent ones were developed. Bitcoin developer (developer group) – Satoshi Nakamoto. This currency has a stated quantity limit of 21,000,000, however, it has not yet been reached.

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

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

4. Z-cash(Z-cash, 200 US dollars).

5. Dash(dash, $210).

6. Ripple(Ripple, $0.15).

In addition to the indicated names, Darkoin, Primecoin, Peercoin, Dogecoin, 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 means “coin” in English. For BTC, or bitcoin, not only a program has been created, but also a special digital wallet in which this currency can be stored.

In addition, there are now even special ATMs where you can convert bitcoins into regular paper money, and a number of retail chains and stores accept this currency for payments along with regular bills and coins.

Advantages and disadvantages of cryptocurrencies

According to its main characteristics, digital money differs significantly from conventional money. This entails not only continuous advantages, but also some disadvantages for users.

Pros:

Anyone can get this kind of money using specially organized activities (mining). Since there is no single emission center and no bodies controlling this process, no one can prohibit ordinary citizens from obtaining crypto money online.
All operations with cryptocurrencies (so-called transactions) occur completely anonymously. The only open information in this case is the electronic wallet number. And all information about its owner is closed.
Decentralized issuance, in addition to the possibility of everyone earning money, also determines the lack of control over this process.
Each type of cryptocurrency has an issue limit. Thus, excess emission is impossible and, as a consequence, there is no inflation in relation to this money.
The cryptocurrency is protected by a unique code like , so it is copy-protected and therefore cannot be counterfeited.
There are practically no commissions for transactions, since when conducting transactions using cryptocurrency, the role of a third party in the relationship - banks - is excluded as unnecessary. Therefore, such payments are comparatively cheaper than using regular cash.

With all the variety of positive characteristics, cryptocurrency also has disadvantages.

Minuses:

If a user has lost the password for his electronic wallet, this means for him the loss of all funds in it. Since there is no control over transactions using digital money, there are no guarantees of their safety.
Cryptocurrency is characterized by high volatility due to the specifics of its circulation (volatility means frequent changes in its value).
In relation to cryptocurrencies, attempts may be made to exert various negative influences on the part of national monetary regulators (for example, the Central Bank of the Russian Federation).
As the process of mining cryptocoins becomes more and more complicated over time, mining using the equipment of individual users becomes less and less profitable.

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

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

They are versatile;
They are a means of exchange;
They can be accumulated;
Perform a calculation function.

The value 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 currencies:

1. Buying and selling cryptocurrency. This is done on special exchanges or electronic money exchangers. The principle of operation is to buy a currency when its value decreases, and sell when it increases. Most often, such trading is associated with bitcoins, since their cost is higher than other types of cryptocurrency.

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

3.Extraction of electronic money (mining). Cryptocurrency mining, in simple words, is the process of extracting cryptocurrency using special software. It will not be possible to produce large volumes of cryptocurrencies on an ordinary home computer; quite significant power is required, and, consequently, the purchase of additional equipment. A powerful video card and processor are required. In addition, special devices are used - so-called mining farms, which produce cryptocurrency.

4. Cloud mining. For such digital currency production, you do not need to buy additional devices. For this purpose, there are special services where you can sell and purchase computing power. That is, the service generates cryptocurrency for you, and you pay for the power expended.

5. Cryptocurrency giveaway. Such services are usually provided for attracting referrals or entering letters from pictures (captcha), that is, in fact, for increasing site traffic. These are the so-called gateways, taps or distributors. There are also special Bitcoin games in which you can earn electronic money. Earnings on such services are small: a small portion of Bitcoin (Satoshi) is distributed per hour.

Conclusion

Thus, cryptocurrency is a new word in monetary circulation. Its emergence is due to the needs of the time. Despite the fact that crypto money has no real expression, it can participate in various market transactions almost on a par with traditional currency units.

Currently, there are a number of ways to earn cryptocurrencies, as well as options for making a 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 increasingly gain popularity in the modern information space.

Recently, in the news, social networks, and just in friendly conversations, you can often hear such a concept as cryptocurrency. Since you are reading this article, you are most likely trying to understand what a cryptocurrency is, what types of cryptocurrencies there are, why they are so popular, what their advantages and disadvantages are, as well as how you can get cryptocurrencies and make money on them.

What is cryptocurrency?

So, let's figure out what cryptocurrency is and what its essence is. Cryptocurrency is a type of digital currency, the creation and control of which is based on cryptographic methods of information processing.

Cryptocurrency is an alternative. The idea of creating digital money arose in 2008 after the global financial crisis against the backdrop of large financial institutions, the rapid growth of a number of countries (primarily the USA, EU, Japan) and the active launch of the printing press to cover growing debts.

The ancestor of cryptocurrencies is Bitcoin, developed by Satoshi Nakamoto, whose identity has not yet been established - perhaps it is even a pseudonym, which also belongs not to one person, but to a whole group of developers. In relation to Bitcoin, Satoshi Nakamoto used the term “electronic cash”, and the term "cryptocurrency" gained a foothold in digital currencies after the publication in 2011 of an article in Forbes magazine about the Bitcoin system “Crypto currency”.

The functioning of cryptocurrencies is based on blockchain technology. Blockchain is a system for storing information in the form of a chain of blocks. Moreover, all information (database) is stored not on a separate server, but on many devices that participate in this system, and anyone can become a participant in this system (something similar to a torrent when distributing/downloading information). When any information about such a payment is made, it is displayed on all devices (the data is synchronized via the Internet), so it is practically impossible to hack such a system.

The entire chain of transactions in the blockchain is publicly available (as a rule, information about completed transactions is not encrypted and is available in clear text). Figuratively, the blockchain can be represented as an electronic register in which all transactions are consistently recorded. At the same time, entries in the registry can only be made with the consent of the majority of network participants through the use of cryptographic elements (digital signature based on a public key system + sequential hashing), and it is not possible to make changes to previous entries, i.e. You cannot change or delete a previously carried out transaction, just like you cannot insert a new entry into the middle of the register.

Cryptocurrencies do not have a material medium (unlike fiat money, which can be represented in the form of and) and exist exclusively in digital form.

There are ongoing discussions about the economic essence and legal status of cryptocurrencies. In different countries, cryptocurrencies can be considered as a specific (exchange) product and may have restrictions on circulation (for example, a ban on transactions with them for banking institutions). For information on the status of cryptocurrencies in Ukraine, see.

Digital money is issued in various ways:

ICO(Initial coin offering, from English - “initial coin offering, initial placement of coins”) is a form of attracting investments in the form of selling to investors a fixed number of new units of cryptocurrency received in a one-time or accelerated issue;
Mining(from the English mining - mining) - obtaining cryptocurrencies using special technical devices and program code. Users who search or mine on the Internet are called miners. The mining process itself involves solving mathematical problems, as a result of which a chain of blocks of information appears. For each block found, the miner receives a certain amount of cryptocurrency;
Forging(from the English Forging - forging) or Minting(from the English Minting - minting coins) - the creation of new blocks in the blockchain in various cryptocurrencies based on confirmation of ownership shares with the opportunity to receive rewards in the form of new units and commission fees.

A distinctive feature of most cryptocurrencies is the decentralization of their issuance. Unlike fiat money, where it is carried out in countries, the issue of cryptocurrencies is not assigned to a separate center, but is carried out everywhere, because Anyone can participate in the mining process.

Payments using digital money are carried out in exactly the same way as regular electronic transfers in the system, carried out by and. The only exceptions are exchanges through which crypto money can be cashed out, that is, converted into fiat.

Why are cryptocurrencies so popular?

The popularity of cryptocurrencies is due to the current level of technical development and popularization - it is very convenient to have a virtual one, not tied to a specific country or a specific one, and through which you can quickly and cheaply make payments.

Cryptocurrencies are protected by cryptographic code, so they are more reliable than regular money - they cannot be counterfeited.

Most cryptocurrencies are not afraid, because Unlike fiat money, they cannot be issued additionally - only a pre-agreed and limited quantity (for example, no more than 21 million Bitcoins can be issued).

Another reason for the popularity of cryptocurrencies is their decentralization - the absence of a single financial and software center managing the system. The functioning of the blockchain is not influenced by the central bank, government, or large corporations. Of course, large miners can initiate certain changes to algorithms and processes, but their implementation is only possible if they are supported by the majority of participants.

Anonymity of transactions plays an important role in the popularization of cryptocurrencies. Of course, in a blockchain system you can track all payments and see how many of the same bitcoins were sent from one wallet to another, but determining who exactly is the owner of the wallet is quite difficult and sometimes unrealistic. Anyone can create a wallet (and more than one) to store cryptocurrency - they will need to install the appropriate software and have access to the Internet.

Types of cryptocurrencies

Digital money first appeared in 2008, and by now there are already several thousand varieties of it. There is a certain category of cryptocurrencies that are actually not backed by any content and have all the signs of soap bubbles. However, there are also a number of very successful and promising projects.

Currently, the most popular cryptocurrencies are the following.

Bitcoin

Dogecoin

Dogecoin (DOGE) - another replica of Bitcoin (or rather Litecoin) significantly redesigned. Dogecoin appeared in 2013 as a joke (the name comes from the Internet meme Doge), but has become quite popular. It is distinguished by a very large (unlimited) number of monetary units (they are called Doge) and their extremely low cost (which is quite logical). The commission in the system is extremely low, and this cryptocurrency is also quite often used for donations to charity.

Peercoin

Peercoin (PPC)- one of the Bitcoin clones with a number of improvements. For example, Peercoin has significantly increased security and simplified the mining process, which reduces the overall energy consumption of computing resources connected to the system. At the same time, Peercoin does not have anonymity, which hinders the growth of its popularity.

Dashcoin

Dashcoin (DSH)- similar to the previous currency, but only here anonymity is implemented (transactions are anonymized thanks to the Darksend mechanism). At the same time, mining has a lower energy intensity and high security (a combination of several cryptographic algorithms is used). The launch of the cryptocurrency, which at that time was called Xcoin, occurred on January 18, 2014. From January 28, 2014 to March 25, 2015, the cryptocurrency was called Darkcoin.

The DASH network operates so-called masternodes - special nodes that ensure the operation of the PrivateSend transaction mixing mechanism. To stimulate the work of masternodes, a reward is provided, which is 50% of the miner’s reward for the found block. The DASH system also implements the InstantSend instant transaction service. Another feature of DASH is the use of the X11 hashing algorithm.

Primecoin

Primecoin (XPM)- a clone of Bitcoin, in which, instead of sorting through numbers in search of the desired hash, miners perform calculations that are more useful to science (they look for pseudo-prime numbers). Also, the Primecoin system is ten times faster than its “parent”, there is a smooth increase in the complexity of calculations (after each block found), miners receive payment depending on the complexity of the completed task, and the total number of monetary units was not initially limited, but their appearance is regulated algorithmically.

Monero

Monero (XMR)- the system operates on the basis of the CryptoNote protocol and is focused on increased anonymity of transactions (transaction details are not available for viewing). Monero has no limit on the number of currency units to ensure mining always supports the system. By the way, the peculiarity of mining this particular cryptocurrency is that it is desirable to participate in the calculations not only of video cards, but also of the processor. And it also has a very large amount of data transferred with transactions (almost an order of magnitude more than in Bitcoin).

IOTA (IOTA)

IOTA is a transaction protocol system for IoT (Internet of Things). IOTA is also unique in that network participants are not divided into users and transaction validators. Each node both sends and confirms transactions that are not packaged into blocks (which distinguishes IOTA tokens from the vast majority of other digital currencies).

The throughput of the IOTA network is proportional to the number of nodes and their activity. It is expected that over 50 billion devices will be connected to the network in the next decade. With this in mind, IOTA offers a way to conduct microtransactions between these devices.

The goal of IOTA is to allow such devices to make micropayments in real time, in conditions of free competition and without commissions.

NEM

NEM (XEM) is a digital currency that gained popularity in early 2015. The NEM cryptocurrency has gained very high popularity in Japan. The project is led by a team of developers who have set themselves the main goal of bringing the security and speed of banking transactions to a new level. For this purpose, in partnership with the ZAIF exchange, a closed Mijin network has already been created and is successfully operating based on the NEM blockchain.

Zetcash (Zcash) or ZEC (ZEC)

Zcash (ZEC)- the world's first cryptocurrency based on an interactive cryptographic protocol zero-knowledge proof(zero knowledge proof). This means that one of the interacting parties can verify the validity of a mathematical statement without having any other information from the other party.

Like Bitcoin, Zcash works on the blockchain, but is completely anonymous: even the amount of transactions is hidden - each payment is published in a common block chain, but information about the sender, recipient and amount of funds remains hidden from other participants in the system.

Advantages and disadvantages of cryptocurrencies

Cryptocurrencies have a number of distinctive features compared to classical ones, and therefore they have both positive and negative properties.

The advantages of cryptocurrencies are:

Mining, i.e. Anyone can participate in the process of issuing digital currencies (the mining process also confirms the chain of payments) and receive an appropriate reward for this.
Decentralization and deregulation are an anarchist’s dream, the basis for building a free digital economy.
Anonymity of payments.
Limited emission - no inflation.
High level of reliability and security thanks to the use of cryptography.
Low level of commissions for transactions.

The disadvantages of cryptocurrencies are:

High - even for Bitcoin on some days the price fluctuates +/- 10% (see).
The constantly growing level of complexity of mining the vast majority of cryptocurrencies requires constant improvement of technical means, which entails additional financial costs, incl. and due to increased electricity consumption. If earlier Bitcoin could be mined even on a home PC, now you need to assemble a whole “farm”.
The inability to use cryptocurrency if the wallet password is lost or the hard drive with the information on it is damaged. To avoid this, you should back up your data.
Lack of proper legal regulation. The government of the country can impose a ban or limit work with cryptocurrencies, establish additional taxation of income received, controversial transactions (given their anonymity) are unlikely to be challenged in court (for example, an advance payment for a product that the seller subsequently did not provide or did not provide in full) and so on.

How to make money on cryptocurrency?

We have discussed with you what cryptocurrencies are, their types, main advantages and disadvantages. Such a high popularity of cryptocurrencies is primarily due to the actively growing market, the rapid increase in its total capitalization, the influx of an increasing number of investors, which promises very good earning opportunities in a relatively short-term period (the cost of key cryptocurrencies over the past year has increased by 10-20 times or more) .

So, how to make money on cryptocurrency? There are several main ways to make money on cryptocurrencies:

Mining, i.e. coin mining. At the moment, its key disadvantage is the high cost of entering the business (costs of equipment and its maintenance), as well as the long estimated payback period (on average from 6 months to 1 year). Partially, the problem of large investments can be solved through the so-called cloud mining, in which you can rent computing power, but the profitability here will be lower and the risks will be higher.
Trading, the essence of which is to buy cryptocurrency on the exchange at a lower rate and sell at a higher one. There are a number of crypto exchanges; entry requires a minimum investment and a large number of tradable cryptocurrencies. But to make good money, you need to have technical analysis skills, and there is also a risk of bankruptcy of the exchange.
Purchasing cryptocurrency (on a stock exchange, in an exchanger, a cryptomat, etc.) and further storing it in your own electronic wallet. You can buy any cryptocurrency, in any volume, but, as a rule, for a long period (from 1 year). Startups demonstrate the highest profitability (although they have higher risks).
, the essence of which is to purchase one cryptocurrency on an exchange at a lower rate, followed by transfer and sale of this cryptocurrency on another exchange at a higher rate. The difference in rates should cover the commissions of both exchanges for depositing and withdrawing funds and buying and selling cryptocurrency. You need to be well versed in the operating conditions of exchanges, as well as quickly carry out transactions, because delay can level out the existing difference.
Transfer of funds to . For example, cryptocurrency can be transferred in trust to a broker who “plays” on the stock exchange. This method is distinguished by high profitability (from 100% per month), but the likelihood of complete loss of funds is also high.

Cryptocurrency is a digital asset whose accounting is decentralized. The functioning of these systems occurs using a peer-to-peer distributed computer network. In this case, information about transactions may not be encrypted and may be available in clear text. To guarantee immutability transaction database block chains(blockchain) uses cryptography.

The term “cryptocurrency” was established due to the 2011 article “Crypto currency” on Bitcoin, published in Forbes magazine. Himself author Bitcoin(Satoshi Nakamoto), like many others, used the term “electronic cash” (e-cash). The method of issuing cryptocurrencies may be mining, forging or IPO.

A key feature of cryptocurrencies is the absence of any internal or external administrator. Therefore, tax, judicial and other public or private authorities cannot influence the transactions of any participants in such payment system. All this ensures irreversibility of transactions- no one can cancel, block, challenge or force a transaction without access to the owner’s private key. However, parties to a transaction may voluntarily temporarily mutually block their collateral or establish that the consent of all parties is required to complete or cancel a transaction.

Blockchain is a chain of transaction blocks

Historical reference

Cryptography for confidential payments began to be used in 1990 in the centralized payment system DigiCash by David Chom, whose company went bankrupt in 1998.

The term “cryptocurrency” first began to be used after the advent of the Bitcoin payment system, which was developed in 2009 by a person or group of people under the pseudonym Satoshi Nakamoto. Later, forks (branches, followers) appeared:

Namecoin, NMC(decentralized DNS for registration within the .bit domain zone);
Litecoin (uses "ess crypt" hashing);
Peercoin, PPC (uses a hybrid PoW/PoS mechanism and has no upper limit on the emission volume);
Novacoin (similar to PPCoin, but uses scrypt);
and many other forks.

Until July 2013, the software of all cryptocurrencies, except Ripple, was based on the open source code of the Bitcoin system, but then independently developed platforms began to be released that, in addition to cryptocurrency, support various infrastructure - exchange trading, stores, instant messengers, etc. Such crypto platforms, for example, include: BitShares, Mastercoin, Nxt.

List of major cryptocurrencies

The total number of cryptocurrencies as of March 2015 exceeded a couple of thousand. List of the most popular cryptocurrencies (name,