Azernews.Az

By Leman Mammadova

Cryptocurrencies do not have any government or control mechanisms, which requires to address security and risks associated with the use of digital currencies. Azerbaijan tries to carefully establish frameworks to ensure fair and reasonable cryptocurrency classification and taxation due to the anonymity and decentralized nature of crypto transactions.

Interest in cryptocurrencies has grown in Azerbaijan due to the increase in the cost of Bitcoin, a cryptocurrency expert Omar Gurbanali said.

The expert noted that judging by the correspondence and activity in various groups, there are about 5,000 cryptocurrency users in Azerbaijan.

In his words, there is interest in the exchange rate of Bitcoin, the general process of its mining, and Internet search engines are used for this purpose. However, there is no big consumer mass of cryptocurrencies in Azerbaijan, he added.

Gurbanali stressed that fluctuations in the exchange rate of cryptocurrency should be important for those who are interested in this subject.

“That is because the market is controlled by artificial manipulations in this area,” he noted. “But when cryptocurrency was created, the goals were different. It was assumed that it would facilitate the buying and selling process. However, it turned out the opposite. It came to the point that cryptocurrencies started to be treated as an investment instrument. Cryptocurrency turned into a commodity. The price increase registered last year was associated with the flow of news. This trend lasted until December.”

Currently, observing the processes, we see that there is no serious flow of news that may cause growth, but despite this, prices are rising. In December last year, the price of Bitcoin reached $7,500, added the expert.

In his words, the reason for the rise in prices is the activity of the black market. “There is also a black market along with the normal cryptocurrency market and stock exchanges. Operations in this black market are carried out through devices without access to the Internet. Bitcoins are stored on memory cards, and then they are transferred offline and people receive cash in exchange. This activity is not noticeable in the market. Therefore, major brokers who form the market rates for cryptocurrency raise prices.”

The expert noted that the cost of Bitcoin (the cost of its mining) is about $3,000, adding that the price increase will last for some time.

“It is too early to talk about the soon decrease of prices for Bitcoin,” he said. “The price growth rates are determined at major cryptocurrency stock exchanges, and for now we observe a tendency of increase. If the price exceeds $10,000, the growth will continue. Bitcoin may rise to $20,000. Prices for all other cryptocurrencies depend on Bitcoin; with its growth, rates of other similar currencies increase.”

The concept of cryptocurrency refers to digital currency types. It is created and transmitted using cryptographic methods, mainly based on the blockchain technology. Bitcoins are produced initially in electronic form literally by performing mathematical calculations. In simple terms, a cryptocurrency is an artificial payment system, equivalent to real money, with an official rate.

Unlike other electronic payment systems, cryptocurrency initially appears without real money. In order to become the owner of a certain amount of Bitcoins, it is quite enough to connect to the service of their creation, to become a member of a single mining network and wait for earnings.

Any type of cryptocurrency has no official status as a means of payment. But typical properties like decentralization are attractive to users. Thus, the owner of any existing cryptocurrency is not tied to any geographical point, state or political order. Despite linking the exchange rate to real money like the U.S. dollar or the euro, digital money is valuable in itself.

Virtual money gained popularity due to the high prevalence, versatility. It is easy to create a wallet on any computer, smartphone or tablet on various operating systems. In addition, another reason is simplicity, openness of settlement operations. The full history of incoming and outgoing transactions is stored without time limits.

Moreover, each node of the cryptocurrency generation system is equal, there is no single center, which excludes the possibility of blocking wallets, canceling and controlling payments. At the same time, maximum anonymity increases the independence of the payment system. When making payments, you can specify the address, account number at the request of the wallet owner from which the payment is made.

When use cryptocurrency it is important to pay attention to the safety issues. They are common to most online resources and can be easily managed with due attention to the security of your computer.

The profitability of the purchase depends on the current rate and changes in the near future. While there is a tendency of its constant growth, temporary adjustments in the direction of decreasing cryptocurrency prices are insignificant, Bitcoins and analogues remain an attractive investment tool.

The practical use of cryptocurrency as money largely depends on state policy. The European Union regards Bitcoins as a universal contractual instrument, and in a number of Asian countries they have officially accepted it (Japan) or restricted their use to the point of a total ban on the possession of Bitcoins (China).

Despite the increase in cryptocurrency demand, this particular market is not regulated in Azerbaijan yet.

Yet, the Center for the Study and Development of the Market for Cryptocurrency and Blockchain Technology was established in 2018, aimed at awareness-raising, preparation of proposals on the regulation of the cryptocurrency market and blockchain, as well as the provision of consulting services in this area.

Blockchain is a way of storing data, or a digital registry of transactions, deals, and contracts. Its main difference and undeniable advantage is that this registry is not stored in one place, but distributed among several thousand computers around the world.

The principle of operation of the blockchain is quite simple - digital records are combined into "blocks", which are then linked cryptologically and chronologically into a "chain" with the help of complex mathematical algorithms. Each block is linked to the previous one and contains a set of records. New blocks are always added at the end of the chain.

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Leman Mammadova is AzerNews’ staff journalist, follow her on Twitter: @leman_888

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