Even with the growth of the digital asset market in recent years, many people still have doubts related to the definitions of cryptocurrencies and their applications. Generally, digital currencies and cryptocurrencies are used synonymously. However, not every digital currency is a cryptocurrency.
Cryptocurrencies are crypto-based digital assets. That is, they are established based on a security technology that encodes the codes. It is like regular money with the difference that it is fully digital, in addition, it is not issued by any government entity. In this sense, its issuance is decentralized.
Transactions related to cryptocurrencies are carried out through a data system, known as Blockchain. It contains the entire transaction history.
Digital currencies refer to all types of electronic currency. Unlike cryptocurrencies, digital currencies are controlled by financial institutions such as central banks, so issuance is centralized. Any balance available in digital form can be considered such a currency.
The most popular cryptocurrency is Bitcoin (BTC), developed in 2008. But currently, there are several types. Check out the main ones.
- Ethereum (ETH)
- Tether (USDT)
- Ripple (XRP)
- Litecoin (LTC)
Investing in cryptocurrencies is considered risky as these digital assets have high volatility. They are also not recommended for short-term investments.
Recently, the crypto market has seen negative results. Bitcoin, for example, has shown a sharp drop in market value in recent months. The cryptocurrency has already reached $69,000 at its all-time high and is now trading for $20,000.
Terra (Luna), another cryptocurrency, has collapsed. And Ethereum, the second best-known crypto, is worth around $1,000.
This year alone, losses in this market reached almost US$ 300 million.
The scenario can be explained through the analysis of the global economy. Faced with high interest rates and the risk of a recession, investors tend to migrate their assets to more stable means in order to avoid losses.
In addition to, of course, the internal aspects of this type of market that fluctuate frequently.
Since 2020, the Central Bank has been talking about the creation of a digital currency for the real, but there is still no forecast for the launch. The digital Real could facilitate financial transitions and include the population that is not yet served by banks’ digital services.
Digital currencies issued by central banks are known as CBDC (Central Bank Digital Currency), in translation, Central Bank Digital Currency.
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