Distrust increases the value of cryptocurrencies

In recent months, cryptocurrencies have been heard more than ever, especially due to the prohibition of this type of digital currency in China, one of its most dynamic markets to date. The Asian country thus joins the list of countries in which cryptocurrencies are illegal, which also includes Algeria, Bolivia, Colombia, Egypt, Indonesia, Iran, Iraq, Nepal or the only European country where you cannot operate. with them, North Macedonia. On the other hand, you will find The Savior, that has already used bitcoin as its official currency since June, a step that other Latin American countries such as Panama, Argentina, Brazil or Paraguay seem to want to take.

In Europe, according to a study carried out by Euronews in August among 31,000 people, it seems that citizens prefer a national regulation with the aim of gaining some independence from the European Central Bank, although a vast majority admit to having little knowledge on this matter.

But, let us start at the beginning. What is a cryptocurrency? A cryptocurrency is a digital asset that uses cryptographic encryption to guarantee ownership and ensure the integrity of transactions. It also allows you to control the creation of additional units, that is, prevent someone from making copies as we would, for example, with a photo. These coins do not exist in physical form: they are stored in a digital wallet.

Cryptocurrencies have several differentiating characteristics compared to traditional systems: they are not regulated or controlled by any institution and they do not require intermediaries in transactions. A decentralized database, blockchain, is used to control these transactions. According to the list published by CoinMarketCap, as of today there are 4,187 cryptocurrencies, Of which, the pioneer and best known is bitcoin.

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Security is one of the basic principles of cryptocurrencies. In the banking system, custody is unique; among cryptocurrencies there is talk of “Distributed custody”, a method in which trust is generated from mistrust. In other words, the custodians do not trust each other because each one has their own interests and that, precisely, reinforces credibility.

Volatility and risk are also factors that cause concern among citizens. For example, on September 14 there was a hoax that claimed that the US distribution giant Walmart would admit the cryptocurrency Litecoin as a means of payment in its supermarkets. In minutes, the value of the cryptocurrency doubled, despite the fact that the announcement did not come from official sources. As soon as Walmart denied the news, the value of Litecoin plunged. A situation like this in regulated markets is punishable, but since there are no control bodies for cryptocurrencies, it is difficult for this action to have consequences.

Slight increase in investments

In September 2021, crypto investors put an average of $ 263 in accounts related to cryptocurrencies, compared to the 250 dollars on average that they have dedicated to traditional investments, according to a study by the Cardify platform. In fact, according to that study, last year almost a quarter of investments were dedicated to cryptocurrencies, compared to 5% that was dedicated in 2020.

And novice investors are the most interested in this phenomenon: 70% of those who have invested in cryptocurrencies, according to that study, have been investing less than a year and they do not consider themselves experts in digital assets nor do they have a clear knowledge of what cryptocurrencies are.

And, precisely for this type of market to be successful, it is essential that there is an organism that is capable not only of controlling what happens, but to pursue embezzlement or crime that is done through cryptocurrencies, not just money laundering, but tax evasion or even crypto mining malware, a type of malicious code designed to hijack the idle processing of a victim’s device and use it to mine cryptocurrencies.

But you should also cater to environmental issues. In fact, one of the reasons China is supposed to have banned cryptocurrencies is because of the intensive use of electricity needed to mine them. And according to a report on electronic waste, bitcoin produces the same electronic waste as a complete computer equipment, half an iPad or 1.5 iPhones and to carry out a transaction with that cryptocurrency the electricity consumption equivalent to a house is needed for two months.

Juan Quintanilla, CEO of Syntonize.

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