answers to understand the world of cryptocurrencies - investment

 Answer the most frequently asked questions on the topic of cryptocurrency and bitcoin.

Who has not heard about cryptocurrencies? Investment in this type of asset is booming and doubts about the subject proliferate every time there is new news. At EF we present the special Cripto+, which aims to address different aspects of this topic and its possible uses in the market.

answers to understand the world of cryptocurrencies

As part of the special, we asked the followers of this media about the doubts they had regarding the subject and in this article in question and answer format we will address the 10 most consulted things:

How to invest in cryptocurrencies and how to monetize them?

To invest in a cryptocurrency, each person must first do an investigation of what type of cryptocurrencies are the most suitable for their objectives. In this link you can find a list of the main cryptocurrencies and their respective volatility.

To invest in cryptocurrencies, you must remember that it requires time, an initial investment and a predisposition to risk. Daniel Rojas, a consultant on this matter, explained that one of the main challenges for people who want to invest in bitcoin, for example, is to follow a safe method, but which may not be as exciting, which involves buying and storing the cryptocurrency. , so that the person can get a kind of 'mini pension' of bitcoin.

In other words, to invest it is not necessary to have the entire amount that a bitcoin is worth, but people can buy what the market calls 'fractions', with small investments so that their money moves according to the fluctuation of the market.

The goal is that if you bought several fractions of bitcoin during a certain period, later you will have the opportunity to acquire crypto assets or cash (depending on your purpose) with the digital currency, this under the hypothetical case that the cryptocurrency in which you are investing will appreciate. But it can also happen that the currency depreciates and results in loss of your initial investment.

For example, under the assumption that you entered the bitcoin market three years ago and bought a $5 fraction of bitcoin every week for a year, you would have turned $265 into $568, that is, a 114% profit. It would be the figure according to the dcaBCT digital calculator. However, remember that this profit would be conditional on the fact that in the period that you established you do not spend the money that you enter and every week without fail you buy the fraction of $5 in bitcoin.

What are digital wallets? What is the best wallet in Costa Rica?

Digital wallets or wallets are where cryptocurrency users can manage their bitcoins or the digital asset they use. They are also known as wallets and can be both software and hardware devices. In addition to storing cryptocurrencies through blockchain technology.

Worldwide there are several digital wallets with a good reputation, but the choice is left to the discretion of the users.

There is a frequent confusion between 'wallets' and 'exchanges'. Wallets or wallets are a free application that anyone can download on their cell phone, but their only function is to save or store coins, that is, it is not possible to buy or sell crypto assets. The line of business in this currency is affiliate marketing through the app to an exchange house.

An exchange or exchange house gives users the ability to buy and sell cryptocurrencies. In Costa Rica there are two local exchanges, one is Omni where you can buy or sell by making bank transfers and communicating with the company through their whatsapp line, but they only accept bitcoin and are not compatible with other cryptocurrencies, the other exchange is Coinbasecr which It has been in the market for four years and they accept transfers and cards.

In the world, the most used exchanges are Binance, which despite only being in the market for four years, accounts for a large part of the international movements, and Coinmoni, which is widely accepted.

"Although there are people who buy and sell cryptocurrencies, it is always advisable to go through the safest paths such as exchanges," Rojas added.

How much do you have to invest at the beginning to see profit?

Otto Mora, a blockchain expert, explained that the recommendation for a person looking to invest in cryptocurrencies for the first time is to do so with a small amount and with money that does not depend on their livelihood. This, because all speculative investment is subject to risk and there are no guaranteed profits.

"As the person understands bitcoin and educates himself from various sources, he will be able to make larger investments," Mora advised.

Whoever wants to invest in cryptocurrency should investigate its value behavior and volatility.

How is bitcoin exchanged for dollars?

To make the change to dollars and later to colons, you can use national exchanges (coinbase and omni) or ATMs in the case of bitcoin. The user asks for money, agrees to the payment method and the transaction is executed.

If you want to make this transaction but using different cryptocurrencies, you will have to do it through more informal markets or with traders directly.

Can cryptocurrencies be backed by physical assets?

Despite the fact that it is digital technology, the price of cryptocurrencies could be backed by physical assets or other currencies. This generates greater stability in its price.

The economist Douglas Montero explained that these types of cryptocurrencies are "fixed" to the value of a known physical asset and became popular as "stablecoins". They could be linked to fiat money, that is, money issued by a central bank, such as the dollar.

The best known currency of this type is the Tehter (USDT), which tries to maintain parity with the price of the US dollar.

On the other hand, Rojas explained that there are also cryptocurrencies backed by the price of gold. An example of this is the Digix Gold, based on Ethereum but with its price linked to the metal.

Are cryptocurrencies considered money?

Technically, not in Costa Rica. On this, Aguilar explained that cryptocurrencies cannot be considered money because they do not fulfill functions such as being a generally accepted means of payment, a unit of account and a reserve of value.

For their part, Carlos Valverde and Fabio Salas, partners at Deloitte, explained that, currently, any transaction in an unofficial currency, without an established exchange rate that gives referential security to the parties regarding the amount of the transaction, must be considered a swap or barter of assets and not a monetary activity.

From a strictly legal point of view, in our country there is no legal or regulatory standard that defines the legal nature of cryptocurrencies.

What can be bought with cryptocurrencies in Costa Rica?

In Costa Rica there is no cryptocurrency that is adopted as legal tender, so people can exchange, buy or sell services according to their availability.

Any non-governmental product or service can be paid with cryptocurrencies in Costa Rica, if the lender or supplier so offers, but each user must verify whether or not the company has the availability of an exchange to execute the purchase or sale of products and if you accept a certain cryptocurrency.

How is the price of cryptocurrencies defined?

Being decentralized digital assets, the value of most cryptocurrencies moves by supply and demand, without intervention of any kind. This generates high volatility and uncertainty about the future of the price.

The value of cryptocurrencies has been influenced in recent months by Chinese regulatory measures and even comments or tweets from figures such as Elon Musk. So volatile.

What does it mean to mine cryptocurrencies?

Mining consists of solving a series of mathematical problems using computer equipment that makes random calculations. Its job is to record and verify new transactions on the blockchain, using hardware that provides its power to validate these transactions, which are grouped into blocks.

If your intention is to venture into the cryptocurrency mining area, you should consider that as a first step it is necessary to make a significant investment in terms of equipment, payment of electricity service and connectivity.

Mining in Costa Rica has a high cost mainly due to the high prices of electricity and the internet. The price of mining is measured according to an energy charge for each kilowatt hour (kWh).

In Costa Rica, the kWh cost of a period of high demand is $0.120, in a 'valley' period (moderate use) it is $0.040 while in a night period it is $0.030 in the case of residential electricity (which most people have); to this cost must be added the expenses of monthly Internet and cooling system. You should also consider that a connection speed of 100 Mppbs or more is not available throughout the country.

That is to say, that the investment only in equipment and services is important, the return could not be in the short term and probably will not reach what was initially expected.

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