Even those who don’t closely follow the financial market have probably noticed the fluctuations in cryptocurrencies. But what constitutes a cryptocurrency? Where and in which would be the most advantageous to invest?
Because it’s a relatively new asset class, it generates a lot of uncertainty. With this in mind, we’ve created this guide to help those looking to enter the world of cryptocurrencies.
What are cryptocurrencies?
A cryptocurrency is, in practice, a type of digital money. But think of it as something more sophisticated. You know how the money we use every day has those security details, like watermarks or serial numbers? So, cryptocurrencies use a system called encryption to make all transactions much more secure.
And the most interesting thing is that, since everything happens online, they weren’t created by any government – unlike the Brazilian Real or the US Dollar, for example. Because they’re not tied to a country, they also don’t follow the rules of a Central Bank. It’s a world apart!
How does cryptocurrency work?
Behind cryptocurrencies is a technology called blockchain, which many call the “trust protocol.” Think of it as a large ledger shared by everyone, where information is decentralized, meaning it’s not stored in one place.
This trust arises because there’s no intermediary—like a bank, for example—controlling everything. The transaction happens directly between you and the other person.
To store your cryptocurrencies, you use a digital wallet, which can be a program on your computer or cell phone. And the coolest thing is that buying, selling, and even verifying the value of the coins happens anonymously online.
The people who record and validate transactions are called miners. They use their computer power to organize this information and ensure everything is in order with the coins. As a reward for this work, they receive new units of these cryptocurrencies. Sounds like a good deal, right?
What are cryptocurrencies for?
Cryptocurrencies perform functions similar to those of traditional money. Their main uses include facilitating the purchase and sale of goods and services, acting as a store of value and investment option, and serving as a unit of account for product pricing and economic calculations.
Some companies, such as Microsoft and Dell, already accept payments using cryptocurrencies.
How does cryptocurrency variation work?
The price of a cryptocurrency is essentially determined by the laws of supply and demand. When interest in a cryptocurrency grows and attracts more attention, the number of investors tends to increase, driving its value upward.
A notable example is Bitcoin, which reached its all-time high in 2021, surpassing US$61,000.
With a clearer understanding of what cryptocurrencies are and how they work, we’ve prepared a selection of the best investment options.
1. Bitcoin (BTC)
It’s impossible to discuss cryptocurrencies without mentioning Bitcoin, the most recognized digital currency on the market. Created in 2008 by a programmer under the pseudonym Satoshi Nakamoto, Bitcoin is considered the pioneer among cryptocurrencies.
2020 marked a significant period for Bitcoin, registering a valuation of nearly 300%.
2. Ethereum (ETH)
Ethereum stands out as one of the most important projects in the cryptocurrency landscape, with considerable potential for expansion. In 2016, a security incident allowed a hacker to exploit a vulnerability, resulting in the theft of approximately US$50 million worth of Ether.
In response to the uncertainty generated by this event, the community behind the project decided to establish a new network. Consequently, the original currency, Ether, became known as Ethereum Classic, while the new currency introduced to the network was named Ethereum.
3. Litecoin (LTC)
Created in 2011 by Charlie Lee, a former Google employee, Litecoin shares several similarities with Bitcoin. Its goal was to simplify the process of generating new Litecoins for individuals. The key difference lies in the mining time, which aims to speed up the confirmation of transactions made with the currency.
Due to this faster transaction process, Litecoin is seen as a more practical option for everyday transactions.
4. Ripple (XRP)
Launched in 2011, Ripple is a distributed payments protocol. While it includes a digital currency in its system, its network also supports other tokens capable of representing conventional currencies and other assets.
Unlike established cryptocurrencies like Bitcoin and Ethereum, XRP does not use a mining process. Its core purpose is to operate independently of the traditional financial system.
5. Cardano (ADA)
With an ambitious proposal, Cardano was conceived in 2015 by Charles Hoskinson, one of the co-founders of Ethereum. Its goal is to integrate the most effective functionalities and features of all existing cryptocurrencies worldwide.
Cardano is a forward-thinking cryptocurrency, notable for its long-standing use of a more sustainable consensus algorithm, such as Proof of Stake.
Additionally, a significant feature of this digital currency is its team, comprised of diverse experts in technology, engineering, and academic research.
6. Binance Coin (BNB)
The coin was developed by one of the leading cryptocurrency exchanges, Binance, to reduce trading fees.
Binance Coin (BNB) can be used to cover travel expenses, make credit card purchases, and access other services. Binance continually introduces new features that expand the token’s usefulness.
The asset’s remarkable performance and the company’s strategic business approach have been widely recognized in the financial market, driving the coin to become one of the most traded globally.
How to invest in cryptocurrencies?
There are different ways to invest in or acquire cryptocurrencies. You can purchase investment funds through specialized brokers (also called exchanges), through mining, or by accepting virtual currencies as payment for services.
After understanding and better understanding some of the cryptocurrencies available on the market, we present a list of brokers where you can acquire them.
1. Binance
Binance is the largest cryptocurrency exchange globally. Although originally from Asia, it allows the purchase of Bitcoin using the local currency, accepting transfers via PIX as a deposit method.
The platform is known for its robustness and for implementing a triple-layer of security, including email, a security authenticator, and SMS. Additionally, the exchange has its own token that offers fee discounts.
2. Bitcoin Market
Recognized as the largest Bitcoin brokerage in Brazil, with over one million clients nationwide, the platform stands out for its simplicity and ease of use, catering to both novice and experienced investors.
Market Bitcoin, as Brazil’s first Bitcoin brokerage, invests significantly in security and data encryption.
3. BitcoinTrade
BitcoinTrade stands out as one of the most popular and trusted brokers in the cryptocurrency market. Founded in 2017, the platform features a user-friendly interface that simplifies the user experience. Deposits are free, and the broker offers trading in several other cryptocurrencies.
It is the only broker to hold the PCI/DSS Compliant certification, an international standard that certifies companies’ compliance with global security standards and best practices in card transactions.
4. Foxbit
Foxbit is a direct platform for buying and selling cryptocurrencies, holding 43% of the Brazilian market in this segment. The broker offers the lowest fees compared to its competitors and has a user support center with email, chat, and phone support during business hours.
Is it safe to invest in Cryptocurrencies?
Investing in cryptocurrencies, like any other type of asset, carries risks. Careful selection of a cryptocurrency broker is essential, as is constant attention to digital security, which includes the use of strong passwords and two-factor authentication through apps like Google Authenticator and Authy.
However, the main advantage of cryptocurrencies lies in their inherent security. Virtual currencies represent a new approach to transactions and information storage, which drives the development of equally innovative security techniques.
Wirex, for example, provides a comprehensive platform for those looking to enter the cryptocurrency universe with confidence and ease. With support for established assets like Bitcoin and Ethereum, as well as emerging tokens from the DeFi ecosystem, portfolio diversification is possible without complexity.
Through Wirex, users enjoy enhanced security, enabling investment planning with cutting-edge technology and advanced authentication.
You can buy, exchange, and store cryptocurrencies directly in the app, quickly and intuitively, accessing multiple assets in a single location for personalized investment strategies.
Have you learned what cryptocurrency is?
It’s essential that you analyze all the information to ensure that cryptocurrencies align with your investment profile.
We hope this guide has contributed to a better understanding of what cryptocurrencies are, their types, how they work, and where to purchase them. Now you’re ready to begin your journey into the world of digital currencies.