What are cryptocurrencies?
Cryptocurrencies are virtual currencies, the most important feature of which is their decentralization - these currencies are not issued by any particular organization (such as the NBP in Poland, the Bank of England in the United Kingdom or the Fed in the United States).
The most popular cryptocurrencies, such as BitCoin and Ethereum, are based on a peer-to-peer network where all processes such as issuance, transaction processing or verification are managed collectively by the aforementioned. network. Transactions performed using cryptocurrencies are documented in a public database called the "block chain". The issue of a currency unit like 1 BTC or 1 ETH occurs when a complicated cryptographic algorithm is solved, as a result of which a further link will be added to the chain - people specializing in this activity are called "Miners"
How can you make money on cryptocurrencies?
First of all, in two ways: by digging cryptocurrencies and trading in cryptocurrencies.
Digging cryptocurrency
One of the ways to make money using cryptocurrencies is the above "Mining" or generating them. The solution of the algorithm allowing the emission of a new unit requires enormous computing power (the more the larger the number of units available in circulation), and for this purpose special farms are often created.
People involved in digging cryptocurrencies can earn from selling them or by providing computing power and servicing their machines to customers who decide to put units into circulation or keep them with them. This second activity can be compared to popular hosting services, where the server owner provides its space, but also technical support.
Trade in cryptocurrencies
To discuss trading in cryptocurrencies, we need to make sure that we use the same definition. Well, BitCoiny, Ethereum and other cryptocurrencies can be interpreted in two ways:
a kind of investment, where the owner of the currency counts on the fact that its price, and thus the purchasing power, will increase over time
convenient, anonymous means of payment
The use of cryptocurrencies as a means of payment is becoming more and more popular. They used to be limited only to transactions via the Internet, often even between entities with dubious reputation, but at the moment the number of enterprises accepting payment of cryptocurrencies is growing, transactions with their help are faster and if one could overlook the frequent fluctuations of prices, less expensive than transactions using traditional currencies and bank transfers.
Trade in cryptocurrencies for business purposes most often takes place through the intermediation of exchanges or online currency exchange offices, where they are exchanged for traditional currencies. The income is calculated here as a standard difference between the purchase and sale price, and although many people bet on the frequency of transactions, some people decide to keep them in the long term, hoping that their value will increase over time.
