What is a cryptocurrency? What’s the point ? How are they made? What makes them valuable? What are the different types of cryptocurrencies? How to invest in cryptocurrencies when crashes follow one another in a bear market that tests the nerves of investors, followed by rises that restore hope to investors?
What trends for cryptos in 2023? Our Top 10 virtual currencies in circulation as well as the price of the main cryptocurrencies of the day.
Operation, uses and recommendations, taxation, discover everything you need to know before investing in digital currencies such as Bitcoin, Ethereum, Dogecoin, Binance Coin, Ripple… which are no longer virtual.
Definition of a cryptocurrency
Cryptocurrency refers to both a cryptographic currency and a peer-to-peer payment system. These digital currencies are therefore virtual currencies in the sense that they are characterized by an absence of physical support: neither coins nor banknotes, and payments by check or bank card are not possible either.
These are alternative currencies that are not legal tender in any country in the world, with a few rare exceptions. Their value is not indexed to the price of gold or to that of conventional currencies, nor are they regulated by a central body or financial institutions.
There are no central banks at their head. And yet, security and transparency are their main assets! Indeed, cryptography secures transactions which are all verified and recorded in a public domain, ensuring both confidentiality and authenticity thanks to Blockchain technology.
The Blockchain: basic technology of cryptocurrency
Crypto currencies are all based on the same principle: the Blockchain. Cryptocurrencies are a series of numbers stored on a computer in the form of blockchains. The principle is actually quite simple and particularly well explained in the article published in Les Échos Bitcoin and crypto currencies, new digital coins: “
Take a database. Allow anyone to make changes to this database, on the sole condition of declaring themselves a “member”. Set up a very long and very complex control procedure that must be operated each time a certain number (“block”) of changes is requested.
This procedure is carried out not by a single controller, but by all the voluntary “members”. The procedure can also be validated by a single member or only part of the members, drawn by lot. Once validated, the “block” of changes is dated and added to the others in the register.
This open register, the reading of which is accessible to everyone, constitutes a database in block chain or blockchain. Thus, it is up to the network to validate and confirm each transaction.
NFTs: what are they?
NFTs are making a lot of noise and are exciting cryptocurrency investors. What is it about ? First, remember that NFTs are tokens or tokens that are also based on blockchain technology. However, they are not cryptocurrencies as they are non-fungible, unlike virtual currencies.
If 1 BTC = 1 BTC, 1 NFT is not equal to another NFT because an NFT displays unique properties and shows certain proofs of authenticity and signatures such as a unique identifier, a unique creator or even unique content.
nevertheless acts as digital assets with a pecuniary value on which it is possible to invest in order to hope to realize a capital gain. However, their use is not restricted to the sphere of investment, far from it. They find applications in the field of art, gaming, and many other sectors.
How is cryptocurrency made?
People who make cryptocurrency are called miners. They are also said to be mining a crypto-currency. Minors are an integral part of the process. Without them, the Blockchain would be frozen. A minor indeed confirms the transactions that take place on the Blockchain.
For example, imagine that Peter gives 3 Bitcoins to Paul. The transaction will be immediately broadcast on the network, in peer-to-peer, made up of computers called nodes.
However, it is only after a certain period of time that the transaction will be confirmed by the computers belonging to the network using the algorithms specific to said Blockchain. Once committed, the transaction now forms a new block of data for the ledger. It is added to the others in the existing Blockchain, permanently and immutably.
Behind these network computers are miners who validate the transactions. To confirm a transaction, a miner must find the product of a cryptographic function that connects the new block to its predecessor.
This is called proof of work. In exchange for their services (and the computing power mobilized for this purpose), they obtain a reward in the form of tokens or tokens.
How to mine a cryptocurrency?
To mine a cryptocurrency, it is usually sufficient to install software on your computer using the processor or the graphics card, or even both, in order to be able to solve the cryptographic problem requiring a relatively large computing power, which will allow you to touch new units of the crypto-currency in question.
Be careful though, the main cryptocurrencies have become too difficult to mine for individuals alone. The mining of many of them has become largely professional and takes place partly in farms, buildings of several thousand m2 where tens of thousands of servers are running day and night to mine cryptocurrencies (Bitcoin, Litecoin, etc.).
China once occupied a prominent place in cryptocurrency mining, but this industry no longer exists in the Middle Kingdom since the Chinese state banned mining or using crypto assets.
Thus, in September 2019, 76% of the energy used for Bitcoin mining in the world came from virtual currency miners based in China, a share which has today collapsed to 0. But the US share has jumped , from 4% in September 2019 to 35% in August 2021.
Another beneficiary of China’s withdrawal from this sector: Kazakhstan, with a share of energy dedicated to Bitcoin mining of 1.4% in September 2019 and which rises in August 2021 to 35%. Faced with this competition from farms, cloud mining type solutions have been developed.
No investment in specific hardware is required. You just have to get in touch with a company that has invested in the necessary equipment and “rent” your computing power. But beware, there are many scams!
Bitcoin, the first crypto-currency
The Bitcoin cryptocurrency, created in 2008 by Satoshi Nakamoto (without knowing who he is, whether he is a man or a woman, or even a single person or several) is the first of the crypto-currencies. It is a bit like the digital gold standard of the crypto-currency sector, the reference in the field.
The main cryptocurrency experienced a “fork” in August 2017. A disagreement in the Bitcoin community over the speed of transactions resulted in the birth of a new currency: Bitcoin Cash, which then immediately rose to third position in the Top 10 cryptocurrencies and has remained since then. around the Top 10 virtual currencies without ever managing to compete with Bitcoin.
Remember that the price of Bitcoin is correlated only in part to the global economic situation and rather obeys a momentum effect and that most of the other virtual currencies are correlated to the price of the first crypto currency.
But this is less and less true and challengers manage to make remarkable breakthroughs and in particular Ethereum.
Ethereum, the Bitcoin challenger should benefit from the Shanghai update
The other benchmark cryptocurrency is Ethereum, which also underwent a “fork” in the summer of 2016. Ethereum, more complete than Bitcoin, relies on all Blockchain applications since it can not only process transactions but also complex contracts and programs.
Indeed, technically more advanced and more efficient than Bitcoin, Ethereum is both a decentralized exchange protocol that allows users to set up smart contracts as well as a cryptocurrency based on the Ethereum network, more commonly known as Ether.
The assets of this cryptographic network have participated in the spectacular rise recorded by Ethereum since 2020. The second active crypto would see itself on the first step of the podium.
Its market capitalization on May 2, 2023 was around 224.054 billion euros and over one year it recorded a drop of nearly 35%, when the BTC fell in slightly smaller proportions (- 26% in 1 year). Bitcoin and Ether together account for nearly 65% of the total cryptocurrency market capitalization.
The dominance or dominance of Bitcoin reaches 47% and that of Ether 19%. The evolution of the dominance of BTC and ETH helps to determine if other cryptos are up against these two heavyweights. The crypto market tends to rise when BTC prices remain stable but its dominance drops. This means that the price of altcoins is climbing significantly.
Electronic money and virtual money: what is the difference?
In January 2013, France transposed the European directive known as the “electronic money directive” (EMD), which aims to support the development of alternative means of payment, in particular on the Internet and via a mobile.
While online commerce has become one of the major players in the economy, making purchases there still poses as many security problems, in particular the theft of bank data, hacking or fraud. Electronic currencies, in the form of electronic wallets or prepaid cards, partly meet these challenges.
On the other hand, virtual currencies offer a new way to invest money, make or accept payments, or even invest. While they share common characteristics – dematerialized form and electronic storage – electronic currencies and virtual currencies are quite distinct. In this article we will explain the differences.
Electronic money and virtual money definition
The Monetary and Financial Code gives the following definition of electronic money: “monetary value which is stored in an electronic form, including magnetic…” It is therefore in a way a digital equivalent of fiduciary money, that is- i.e. cash.
It can be stored on an electronic medium (the chip of a mobile phone) or remotely on a server (an online account). This electronic medium directly stores the sum of money and is not linked to a bank account. It can be for example an electronic purse, a gift card from a commercial brand, a prepaid bank card.
Virtual currency is a digital currency intended to make payments without the intervention of banks or states. This type of currency uses the “peer to peer” protocol, i.e. records a direct and decentralized exchange between Internet users, in encrypted form. Transactions are validated by computers connected to the network.
The fundamental difference
While electronic money is a monetary value and retains a link with traditional currencies, virtual currency is a unit of account that has no legal status. It is not regulated by a central bank and is not issued by a financial institution.
The 3 types of virtual currency
Virtual currency is not directly related to official currency which is legal tender. There are three types of virtual
currency:
Closed virtual currency
This form is used for example in video games. The currency is “closed” because it is distributed only in a well-defined virtual community and allows players to acquire virtual goods or services, for example weapons, vehicles, items or land.
Virtual currency with one-way flow
This currency can be purchased directly with legal currency, at a set exchange rate, and used to purchase virtual goods and services and real goods or services (e.g. NikeFuel, AmazonCoin). It is unidirectional, as it cannot be converted back into legal tender.
Virtual currency with a two-way flow
In this scheme, users can convert their virtual currency into legal tender, and vice versa, for purchase and resale. Bitcoin is a good example of this type of virtual currency.
While it arises from a complex algorithm (mining), Bitcoin can be exchanged against traditional currencies and benefits from an official variable price on the stock exchange. However, the value of Bitcoin is supported by purely speculative logic, which is not based on any underlying ass
GoCardless – an alternative payment method to limit fraud and facilitate conversion
The use of electronic money can have certain advantages: speed of execution and reduced costs compared to the use of bank cards. Virtual currency, on the other hand, is safe because transactions are encrypted and validated by a decentralized system.
Also, the transaction costs are almost zero. However, virtual currency is extremely volatile, and since its value is not backed by a real asset, there is no guarantee of convertibility into sovereign currency and its devaluation provides no competitive advantage.
Its security and discretion can also be a source of mafia behavior and cybercrime. An online merchant needs reliable and secure means to avoid being the victim of fraud in the same way as a consumer
. A company like GoCardless does not offer a dedicated payment portal, but positions itself as a reliable intermediary to collect customer banking data in order to facilitate the payment process and limit online fraud, for example credit card fraud. .
Compatible with WooCommerce – a module for online stores – the solution is flexible and can be adapted to many contexts. GoCardless offers competitive rates at 2% + EUR 0.20 for each transaction.
With GoCardless you can combine direct debit payment with other options to create the highest quality payment experience. The company provides high-converting pages during the checkout process, available in a variety of formats to fit your checkout flow, including hosted pages, integrated modules, and custom options.
