Understanding Cryptocurrencies: A Simple and Easy-to-Understand Guide Introduction

What are cryptocurrencies?

Cryptocurrencies are digital money that exists only on the internet. Unlike the real, the dollar, or the euro, you can’t hold a cryptocurrency in your hand—they don’t have physical coins or paper bills.

What makes cryptocurrencies special is that they don’t rely on banks or governments to function. Instead, they use a technology called "blockchain," which is like a giant digital ledger where all transactions are recorded and can be verified by anyone.

Imagine a notebook where everyone can see who transferred money to whom, but without revealing who those people are. It’s a system designed to be transparent and secure at the same time.

The main cryptocurrencies on the market
There are thousands of different cryptocurrencies today, but some stand out due to their size, popularity, and importance. Let’s take a look at the main ones:

Bitcoin

What it is: The first and most famous cryptocurrency in the world, created in 2009 by a person (or group) using the name Satoshi Nakamoto.

Purpose: It was created to be a digital currency that could be sent directly from one person to another without going through banks.

Fun fact: There’s a limit of 21 million Bitcoins that can ever be created. This makes many people see it as "digital gold"—something valuable because it’s limited.

Ethereum

What it is: Created in 2015, it’s the second-largest cryptocurrency. More than just a currency, it’s a platform that allows the creation of apps and digital contracts.

Purpose: Besides transferring value, it enables the creation of programs that run automatically when certain conditions are met (called "smart contracts").

Fun fact: Many games, digital artworks, and financial apps are built on the Ethereum network.

Binance Coin (BNB)

What it is: The currency of Binance, one of the largest cryptocurrency trading companies in the world.

Purpose: Mainly used to pay lower fees on transactions made on the Binance platform and to participate in new projects launched by them.

Fun fact: It started as a simple discount coupon and is now one of the largest cryptocurrencies in the world.

Solana

What it is: A platform created to process transactions very quickly and at a low cost.

Purpose: It’s used for applications that require high speed, such as online games and trading platforms.

Fun fact: It can process thousands of transactions per second, much more than Bitcoin and Ethereum in their original versions.

Cardano

What it is: Developed by one of the co-founders of Ethereum, it was created with a focus on scientific research and sustainability.

Purpose: It aims to provide solutions for digital identity, product traceability, and other real-world applications.

Fun fact: Its development follows a rigorous academic process, with peer review before implementing new features.

Tether and USD Coin

What they are: Called "stablecoins," they are cryptocurrencies designed to maintain a value equal to the US dollar.

Purpose: They serve as a "safe haven" in the cryptocurrency world, allowing people to protect themselves from large price fluctuations without leaving the market entirely.

Fun fact: For each of these digital coins, there should (in theory) be a real dollar held in reserve as collateral.

Pros of cryptocurrencies

Fast and cheap transfers
With cryptocurrencies, you can send money anywhere in the world in minutes or seconds, often paying much lower fees than banks charge for international transfers.

Control over your own money
You don’t need to trust banks to store or move your money. With cryptocurrencies, as long as you keep your passwords (called "private keys") safe, no one can block or take your money.

They work 24/7
There’s no "banking hours" or days off. The cryptocurrency system works all the time, allowing transactions at any moment.

Potential for appreciation
Some people invest in cryptocurrencies hoping they’ll increase in value over time. Indeed, those who bought Bitcoin or Ethereum in the early years saw huge gains, despite the significant drops that also occurred.

Technological innovation
Cryptocurrencies are bringing new possibilities to the digital world: contracts that fulfill themselves automatically, more transparent voting systems, ways to prove ownership of digital items, and much more.

Financial inclusion
In countries with problematic banking systems or high inflation, cryptocurrencies can offer an alternative for storing value and making transactions.

Cons of cryptocurrencies

High volatility
The price of cryptocurrencies can rise or fall drastically in a matter of hours. Bitcoin, for example, has lost more than 50% of its value in just a few months, more than once.

Risk of scams and fraud
Because it’s a new and largely unregulated market, there are many scammers trying to deceive inexperienced people. Fake projects, pyramid schemes, and hackers are real dangers.

Technical complexity
To use cryptocurrencies safely, you need to understand new and sometimes complicated concepts. Keeping passwords secure and making transactions safely can be challenging for many people.

Environmental concerns
Some cryptocurrencies, like Bitcoin, use a lot of electricity to function. This has raised concerns about the environmental impact of this technology.

Regulatory uncertainty
Many countries are still deciding how to regulate cryptocurrencies. This creates uncertainty about how they can be used in the future and how they’ll be taxed.

Irreversibility of transactions
If you send cryptocurrencies to the wrong address or fall for a scam, in most cases, there’s no way to recover your money. There’s no bank to complain to or request a refund from.

How to get started in the world of cryptocurrencies

If you’re curious and want to learn more about this universe, here are some tips to get started:

Study before investing
Before putting your money in, take time to learn. There are many free courses, videos, and articles that explain the basics.

Start small
Don’t invest all your money at once. Start with small amounts that you can afford to lose without affecting your budget.

Use trusted platforms
To buy your first cryptocurrencies, choose large and well-known companies. In Brazil, there are several regulated companies that allow you to buy cryptocurrencies using reais.

Diversify
Don’t put all your money into a single cryptocurrency. Spread it across different projects to reduce risks.

Be careful with passwords
If you decide to store your cryptocurrencies on your own (in "digital wallets"), be very careful with your passwords. If you lose them, you’ll lose access to your money forever.

Beware of miracle promises
Be wary of anyone promising quick and guaranteed profits. In the world of cryptocurrencies, as with any investment, higher risks can bring higher returns, but also greater losses.

Conclusion

Cryptocurrencies represent a revolution in how we think about money and digital transactions. Like any new technology, they bring opportunities and challenges. Some people see them as the future of the financial system; others see them as a speculative bubble.

The truth likely lies somewhere in between. The important thing is to stay informed, understand the risks and opportunities, and make conscious decisions if you decide to participate in this market.

What about you? Had you heard about these cryptocurrencies before? Do you have any questions about how they work?

Frequently Asked Questions

Are cryptocurrencies illegal?
No, in most countries they are legal, but with varying levels of regulation. In Brazil, for example, it’s allowed to buy, sell, and use cryptocurrencies, and transactions must be declared on income tax returns above certain amounts.

Do I need a lot of money to start?
No. You can buy tiny fractions of cryptocurrencies. It’s possible to start with R$ 50 or less on many platforms.

Will cryptocurrencies replace regular money?
It’s unlikely they’ll completely replace traditional currencies in the short term, but they are already complementing the current financial system and may gain even more ground.

How do I turn cryptocurrencies into real money?
You can sell your cryptocurrencies on companies that facilitate this exchange (called "brokers" or "exchanges") and transfer the money to your bank account.

Is it too late to invest in Bitcoin and other cryptocurrencies?
No one can predict future prices. Some people believe there’s still a lot of room for growth, while others think the best moments have already passed. The important thing is to study, understand the risks, and never invest money you can’t afford to lose.