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Cryptocurrencies: what they are and how they work

New technologies are constantly evolving. With them, the world of finance is also changing. It changes along with economic innovation, creating new ways and easy solutions for issuing and exchanging currencies.

Among these solutions is cryptocurrency, a digital currency that runs on the blockchain.

But what is cryptocurrency? When was cryptocurrency created? Is it safe?

Let’s find out in this new article by Moby Dick dedicated to the world of DeFi.

Cryptocurrencies, what are they?

The cryptocurrency term, or cryptomoney, is derived from the combination of cryptography and currency. In fact, cryptocurrencies are known to use encrypted security protocols to safeguard user’s operations.

A type of digital currency, therefore, that moves in a decentralised environment with peer-to-peer technology.

Unlike normal currency, which is exchanged in a centralised context, such as a bank, cryptocurrency is exchanged or owned via blockchain, where the nodes themselves act as guarantors in transactions and possess all the information on the crypto’s movements within the DeFi.

A blockchain with no central unit, but which decentralises the information into multiple blocks of the database, so that it is almost impossible to tamper with it.

To learn more about what the Blockchain is, read the dedicated article.

When was cryptocurrency born?

However, when was cryptocurrency born? The first cryptocurrency to be issued digitally was Bitcoin. It was thanks to this that blockchain technology was used again from 2009 onwards.

Subsequently, many more were minted. Today there are more than 2000, but not all of them are of great value. This is determined by the movements in DeFi and the validity of the designs with which the cryptocurrencies are conceived.

Each cryptocurrency moves on its own blockchain, unlike Fungible Tokens (FT), which use existing blockchains to register their smart contracts and movements between wallets.

Cryptocurrencies, are they limited?

Depending on the design and the devs who develop them, they have a limit, just like the raw materials that would be used to produce them if they were physical.

For example, Bitcoins have an availability set at 21 million units. This makes it possible for the value of the currency itself to fluctuate.

Currently, the most important cryptocurrencies include Ethereum, Cardano, LiteCoin, etc., which, like Bitcoin, have contributed to the spread and expansion of the use of blockchain.

Discover the Moby Dick project and Pequod online trading software.

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