Cryptocurrencies: from the blockchain to the pilot to trade them

Cryptocurrencies: from the blockchain to the pilot to trade them

The birth of cryptocurrencies was made possible by technological advances that allowed the establishment of a decentralized and intangible digital medium of exchange, which, unlike traditional currencies, is not regulated by any central bank and is not materialized in paper or savings, debit or credit cards. 

Virtual currencies use technological tools for the creation of units and cryptography to control their creation, secure transactions and verify the transfer of assets between users. This is possible thanks to a non-centralized database, conceived from blockchain technology. 

Approach to blockchain technology

It is a system that allows maintaining a single, consensual, distributed and synchronized record of the information that computers or other devices work in digital operations. It is also a mechanism that enables transactions to be carried out securely and without the need for intermediaries. 

The technology works as follows: each block stores a number of valid records or transactions, information specific to it, its linkage to the previous block, its connection to the next block and a unique code or fingerprint. In short, each block contains the encrypted data of a transaction. 

Each new record must be verified and validated by the nodes or users of the network. Once approved, it is added to a new block, which acquires a specific and immovable place within the entire chain. 

Blockchain in cryptocurrencies

In this case, the technology operates like this: "A" wants to send money to "B". The transaction is represented in the network as a block. The latter is transmitted to all parties in the network, nodes or users, who check that the transaction is valid, e.g., that it has sufficient resources. Once verified and approved, the block is added to the chain, providing a record of the transaction. With registration, money can be moved from "A" to "B". 

The blockchain offers several advantages to digital currencies, such as the fact that it does not require intermediaries for its operation, the impossibility of counterfeiting and the detailed record of each transaction, characterized by being irreversible, indelible and irrevocable. 

However, virtual currencies have disadvantages in that they are not backed by any entity and, therefore, are not considered a currency or a universal means of payment. In addition, in several countries there are no regulations for transactions with this means of electronic exchange.  

Pilot for cryptocurrency trading 

In Colombia, cryptocurrencies do not have a legal framework, but it is a market that moves around $70 billion monthly. For this reason, the Financial Superintendency will start a pilot test that will allow cash-in (deposit), transfers and cash-out (withdrawal of resources) operations in financial products on behalf of virtual currency trading platforms. 

Thus, through an alliance between a financial entity and a cryptocurrency exchange platform, interested parties will be able to buy, sell or carry out transactions with virtual currencies. 

According to Portafolio, the pilot seeks to counteract some of the risks associated with cryptocurrencies, such as money laundering and the lack of responsibility in the face of possible acts of hacking. Although cryptocurrencies are not regulated and do not have the backing of any central bank or physical asset, they are a means of exchange that moves a large amount of money and is gaining more and more followers every day. Virtual currencies were made possible thanks to digitization and blockchain technology, which, among other things, makes it possible to carry out and record transactions.