At the beginning of March 2024, the price of Bitcoin reached a historic high, exceeding $70,000. In the days that followed, a market correction led to a 12% drop in the value of Bitcoin in one week. This episode is symptomatic of the excitement that has surrounded Bitcoin for several years, and cryptocurrencies in general. But what is a cryptocurrency really? Here are some answers.
The principle of cryptocurrency
A project born at the end of the 20th century
The concept of cryptocurrencies emerged in the late 1980s, initially with the aim of offering digital currencies secured by cryptography, in order to allow secure and anonymous transactions on the Internet. One of the first notable projects was “DigiCash”, developed by David Chaum during the 1990s, and which ended less than 10 years later. Other initiatives emerged during this period, such as B-Money and Bit Gold, but without being fully developed.
It is Bitcoin, created in 2008 by a cryptographer using the pseudonym “Satoshi Nakamoto” – but whose real identity we do not know – which will allow the cryptocurrency project to come to fruition. Its white paper, entitled Bitcoin: A Peer-to-Peer Electronic Cash Systemconstitutes a major innovation by introducing the concept of blockchain.
What is blockchain?
After the creation of Bitcoin, the vast majority of cryptocurrencies used a blockchain. This information storage and transmission technology is transparent, secure, and operates without a central control body. It allows you to keep a list of data (such as transactions) in blocks linked together and secured by cryptography. Each new block added to the chain is validated by a decentralized network of computers, making the data immutable and traceable.
Blockchain has several advantages: it allows rapid transactions to be carried out, more secure than a traditional exchange, and more efficient, given that the management of exchanges is operated by a computer protocol. To date, there are multiple blockchains, each with their own characteristics. Some are designed to be interoperable with others.
The main cryptocurrencies
Since 2008, many cryptocurrencies have emerged. Here are some of the most popular cryptocurrencies:
- Bitcoin (BTC): when it was first traded, Bitcoin was valued at around $0.001. A figure far from the current price, which exceeds $60,000,
- Ethereum (ETH): Ethereum executes smart contracts, allowing the creation of decentralized applications (dApps) and NFTs (non-fungible tokens),
- Tether (USDT): this stablecoin is pegged to the US dollar and aims to combine monetary stability with blockchain technology,
- Solana (SOL): Solana, with its cryptocurrency SOL, is a powerful blockchain for decentralized applications and other cryptocurrencies,
- Binance Coin (BNB): Binance Exchange’s cryptocurrency, BNB is used for transaction fees on the platform and supports various blockchain ecosystems,
- Dogecoin (DOGE): initially intended as a joke, Dogecoin has won over a large community. It is used for online payments and tipping.
Cryptocurrency vs cryptoasset: what are the differences?
If the term “cryptocurrency” is often used to designate Bitcoin and its ilk, the Bank of France rejects this qualification, preferring the term “cryptoactive”. Depending on the institution, a cryptoasset is “a digital (or digital) asset created through the use of cryptographic technologies. They are so named because they are similar to financial assets, and are created and used via encryption technologies.. The Banque de France considers that these assets cannot be considered currencies, because they do not meet the following three criteria:
- To be an instrument of exchange, usable in everyday life,
- Be a unit of account allowing prices to be compared,
- Be a store of value.
Cryptocurrencies are mainly used for speculative purposes, and little as a means of payment. However, certain products can be purchased with cryptocurrencies, including luxury products. Some e-commerce platforms also accept Bitcoin.
How to buy Bitcoin and other cryptocurrencies?
Invest on an online platform
To buy cryptocurrencies, you will need to go through a specialized online platform. There are many, more or less reliable. Secure platforms include eToro, Binance, BitPanda and Trade Republic. Some online banks, with investment features such as Revolut or N26, also allow you to build a cryptocurrency portfolio.
Each platform has its own characteristics to consider before getting started, such as accessibility for beginners, market depth, sophistication of features, transaction costs, and more.
Cryptocurrencies: a risky investment
Investing in cryptocurrencies, although it can be very lucrative, remains particularly risky. As recent fluctuations in the price of Bitcoin show, cryptoassets are volatile and can result in significant losses in a short period of time.
It is also essential, before investing, to be extremely careful about the reliability of the chosen platform. Indeed, many scams have developed recently, taking advantage of the growing interest in cryptocurrencies. These scams can take various forms, such as identity theft, with scammers pretending to be banks or traders, or even Ponzi schemes, like what happened with OneCoin. .
Cryptoassets: dangers linked to decentralization
The risk of losses for investors is not the only danger linked to cryptocurrencies. The General Directorate of Internal Security (DGSI) warns of two risks inherent to the decentralization of cryptocurrencies, which are not under the aegis of any institution. The DGSI identifies two main threats in particular:
- Money laundering: Thanks to their high level of anonymity, cryptocurrencies can hide the origin of funds, thus facilitating money laundering. According to the company Chainalysis, money laundering via cryptocurrencies, after having increased significantly in 2022, saw a notable decline in 2023.
- Financing of terrorism: on this point, Tracfin (Intelligence processing and action against clandestine financial circuits, an organization which depends on the Ministry of the Economy) reported, in October 2023, cases of financing of jihadist terrorism via cryptoassets in the Turkish-Syrian zone .
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