Stock Market

Legal regulations of stock investments and the importance of markets for the global economy

Stock markets are the foundation upon which the safest institutions invest their money and drive the global economy.

The Stock Exchange is the financial center where assets such as stocks, derivatives, and ETFs, like the SP500, are traded. Its history is that of a solid and stable market that has existed for centuries, evolving over time to become the engine of the global economy.

The history of the Stock Exchange dates back centuries, where merchants and entrepreneurs gathered to exchange parts of businesses. Wall Street, in New York, has become the symbol of this financial world.

Wall Street is a term associated with the financial district in New York, which has been a financial epicenter since the 19th century. It is known for hosting important financial institutions and for being a symbol of the American stock market.

Functioning of Financial Assets

Stocks represent partial ownership of a company, while derivative contracts are financial instruments based on the value of an underlying asset, such as stocks, oil, gold, among others. These derivatives determine the fate of an asset, as they show the interest or disinterest of capital, the center of money, which moves the entire global economy.

Legal Regulations

Legal regulations are essential to maintain the integrity of the market. Entities like the SEC in the U.S. establish rules to ensure transparency, protect investors, and prevent unfair practices.

Role of the Investor

Investors play a crucial role in stock markets. By buying stocks, ETFs, or participating in derivatives, they are backing companies, helping to finance their growth, and at the same time seeking to generate profits for themselves.

Legitimate Investments

The Stock Exchange and other stock markets with their different financial instruments offer exceptional and highly profitable investment opportunities, but it is essential to understand their operation and regulations to invest in an informed and safe manner.

The Cryptocurrency Market and Bitcoin

Cryptocurrencies are a step towards a decentralized financial system, but they have been subject to scams due to their lack of central regulation and have been used by certain groups with illegal intentions. However, their conception was as a means to detach from corrupt governments and eliminate intermediary banks.

Centralized Exchanges (CEX): The Cryptocurrency Stock Exchange

The existence of centralized cryptocurrency exchanges that facilitate the trading of cryptocurrencies and are fully regulated in specific jurisdictions.

Similar to the traditional Stock Exchange, these exchanges provide a regulated and secure environment for trading a variety of crypto assets, as well as financial instruments such as derivative contracts or shares of tokenized companies on a blockchain.

Advantages of Cryptocurrency Exchanges:

A key advantage is that, although cryptocurrencies are not considered legal tender in many jurisdictions, they are recognized as assets and legally protected goods. This exempts them from numerous taxes applied to traditional banking. In addition, transaction commission rates are usually considerably lower than in conventional banking, as intermediaries are eliminated, significantly reducing costs. The speed of transactions also makes them ideal for order execution on an exchange.

Legal Framework of Centralized Exchanges (CEX):

Centralized cryptocurrency exchanges are subject to a series of regulations due to their centralized nature and must be headquartered in specific jurisdictions and approved to operate in any country that requires regulations designed for stock trading. These exchanges are legal entities that must comply with the laws corresponding to corporate law for their formation and exercise.

By being subject to regulations, centralized cryptocurrency exchanges offer a degree of security and trust similar to that provided by a fiat money broker. The executives of these exchanges are under the supervision of competent regulatory entities, such as the SEC, for example.

Origin and Initial Purpose of Bitcoin

Satoshi Nakamoto, a pseudonym used by the creator of Bitcoin, introduced this cryptocurrency in 2009 as an alternative to the traditional financial system. The main purpose was to create a secure and digital exchange method that did not depend on corrupt governments, financial institutions, or central banks, inflation. Nakamoto devised Bitcoin as a response to the global financial crisis and as a means to eliminate intermediaries and corruption in financial transactions.

Operation of Bitcoin and Underlying Technology

Bitcoin, the first cryptocurrency, operates as a decentralized and transparent system, backed by blockchain technology. Each block in this chain, operates through cryptographic algorithms like the hash function, records transactions in an encrypted manner, ensuring the security and integrity of the process. This intrinsically cryptographic system is unhackable and transparent, allowing any individual to verify transactions without revealing their identity. It also grants absolute control to each user over their money through a private key, eliminating the need for intermediaries and ensuring the financial independence of those participating in this decentralized network.

Advantages and Future of Cryptocurrencies

Cryptocurrencies offer a series of significant advantages. They allow fast and global transactions, independent of borders and geographical limits. Additionally, they usually have almost zero costs, unlike traditional bank transfers. Furthermore, the future of cryptocurrencies presents the possibility of eliminating dependence on banks, allowing people to have more control over their money and eliminating unnecessary intermediaries in financial transactions. This also has the potential to reduce corruption by ensuring transparency and traceability in transactions, with funding to these intermediary institutions being an unnecessary global expense.

Expansion to Decentralized Contracts and Companies

Blockchain technology has evolved beyond cryptocurrencies. It now allows the creation of smart contracts, originating in the Ethereum network, which are self-executing digital agreements without the need for intermediaries. These contracts can automate processes and ensure that certain conditions are met transparently and reliably. This evolution has led to the creation of systems run by smart contracts, such as applications or even decentralized companies. These autonomous entities, funded by investors through methods similar to those of the stock market but without intermediaries, are governed by smart contracts. This advancement suggests a future where autonomous companies, governed by these contracts, could redefine the norms of the business world, bringing autonomy to an unprecedented level and transforming traditional business dynamics.

Cryptocurrency vs Conventional Fiat Money

Learning to use cryptocurrencies can not only be secure but also offers a level of security that surpasses traditional fiat money. With cryptocurrencies, you gain full control of assets, without government control, bank bans, account freezes, etc.