The succinct lifespan of cryptocurrency from its origination to date would make you think how quickly it has evolved surmounting several ups and downs. The success of Bitcoin hasn’t been done overnight and its success inspired other currencies to maintain equal footing in the space. This article will debunk every single aspect of crypto to you that will leave no room of confusion in you as we covered all in all about the space. No matter you have questions about crypto; this writing is going to quench your enthusiasm.
Illustration of Crypto and its History
Cryptocurrency is floating outside the bounds of state monetary policy as these virtual currencies have been created and used by private individuals and groups. Among hundreds of cryptocurrencies, Bitcoin is the first-rate and widely used indeed.
Cryptocurrencies was developed thinking the matter of security. So, to secure sensitive data transfers, cryptocurrencies run on extremely complex code system that encrypts data of user. You can call this sophisticated coding system as cryptographic protocol.
Counterfeiting the protected currencies tends to be highly impossible as these protocols are made with advanced mathematics and computer engineering principles. Users remain under veil because of the nature of these protocols.
Cutting off centralization
Unlike fiat currencies, cryptocurrencies are decentralized, which is the focal point. Supply and value of cryptocurrencies are controlled by the activities of users. Central banks and other authorities have no control over these currencies. The activities of miners, new bitcoin are generated by a competitive and decentralized process called mining, are critical to currencies’ stability and smooth function.
Exchange with Fiat Currencies
Cryptocurrencies have exchange rate like other currencies so it can be exchanged for fiat currencies in online markets. But the problem that cryptocurrency have is these currencies are prone to be hacked.
It is a character of cryptocurrencies that makes them inherently deflationary. There is instruction inside the source codes illustrating the brief number of units that can and will ever exist. On the off chance the demand for coin doesn’t grow with supply than price can actually shrink when coil reaches its maximum supply.
Conveniences and drawbacks
People maintaining a bank account are not safe because anytime government can seize a bank account but it is safer when the funds held in cryptocurrency. The system of cryptocurrency cuts off third party and as a result of this the full control relies on the holder.
Cryptocurrency has some drawbacks among them notable one is liquidity and value volatility unlike fiat currencies. Gray and black markets are in some cases benefited from cryptocurrencies. Think tanks around the world have different jurisdictions over cryptocurrencies.
Working process of cryptocurrencies
The working process of cryptocurrency is sophisticated because of its source codes and technical codes. There are several concepts that govern cryptocurrency’s values, security and integrity.
It is a ledger that records and stores all prior transactions and activity done in cryptocurrency. A blockchain has a finite length of recording transactions and the length gets increased over time. Identical copies of the blockchain are stored in every node of the cryptocurrency’s software network.
A transaction in crypto without being added to the blockchain is not finalized and after the finalization process done once, it’s unchangeable. Some newly cryptocurrencies have rudimentary refund features. The blockchain prevents double-spending as during the lag time between the transaction’s initiation and finalization, the units aren’t available for use by either party.
Private Key works as a safety that every cryptocurrency holder has. Using these private keys they can exchange units. A holder has full control on his cryptocurrency when he has private keys. Private keys are formatted as whole numbers between 1 and 78 digits long.
Your store of cryptocurrency is safe from unauthorized use because of this security feature. But one brings ill fate to him when he loses the private keys. In that case you can set another private key but can’t recover the holdings protected by your old.
A cryptocurrency wallet is a device, program or a service which stores the public or private keys and can be used to track ownership, receive or spend currencies. Wallets deduct the risk of theft for units confirming the authenticity of a cryptocurrency transaction. Wallets that are used by cryptocurrency exchanges are somewhat prone to hacking.
Storing of wallet can be done on the cloud, an internal hard drive, or an external storage device but keep a backup of it.
Miners record every transaction to the blockchain. Cryptocurrency mining includes two functions one is adding transactions to the blockchain and another one is releasing new currency. Miners maintain technical methods for verifying the completeness, accuracy, and security of currencies’ blockchains.
Reforming unverified transactions and adding newly transactions, miners periodically create new copies of blockchain and each addition is known as a block. Every newly created blockchain copy comes with a two-part monetary reward among them one is a fix number of newly-minted cryptocurrency units and a variable number of existing units collected from optional transaction fees.
Cryptocurrency mining was lucrative to those who had resources to invest in power and hardware-intensive mining operations once upon a time but now the situation isn’t like this. Now miners are permitted to prioritize fee-loaded transactions ahead of fee-free transactions when creating new blockchains as transaction fees don’t come as an increment to sellers. It’s fairly common for transactions to come with fees.
Copies become hard to be created as mining power increases and easier to create as mining power decreases as automatically cryptocurrencies adjust to the amount of mining power working to create as mining power decreases.
Most cryptocurrencies are designed to have finite supply. New cryptocurrency units are produced on a periodical basis and miners receive transaction fees for their work. Due to this inborn quality of finite supply, cryptocurrencies are thus akin to precious metal.
Exchanges of Cryptocurrency
Cryptocurrencies which are more popular like Bitcoin and Ripple are traded on secondary exchanges. Unlikely to that lesser –used cryptocurrencies can only be exchanged through private, peer-to-peer transfers. Exchanging of these cryptocurrencies is done for major fiat currencies. For acting like an intermediary, these exchanges take a small cut of each transaction’s value.
In setting cryptocurrency’s value relative to traditional currencies, the role of cryptocurrency exchanges is really high. Exchange pricing can still be highly volatile. Trading of cryptocurrency derivatives can be possible on certain crypto exchanges.
History of Cryptocurrency
Satoshi Nakamoto is the anonymous inventor of Bitcoin, the first and still most important cryptocurrency. In late 2008, Satoshi announced Bitcoin saying ‘’A Peer-to-Peer Electronic Cash System.’’ The concept of cryptocurrency had long been in mind as a concept before these digital currencies debuted.
In early 1980s, David Chaum, American cryptoghrapher, came up with ‘’blinding’’ algorithm allowing for secure, undistorted information exchanges between parties remaining central to modern web-based encryption. This was known as ‘’blinded money.’’ Chaum established Digicash in Netherland with the intention to producing units of currency based on the blinding algorithm to commercialize the concept of blinded money.
DigiCash having a monopoly on supply chain likely to central banks was centralized. As DigiCash was dealing directly with individuals, the central bank of Netherland revoked the idea. DigiCash also wanted to make a lucrative partnership with Microsoft but couldn’t. In the ultimate, DigiCash was bankrupted in the late 1990s.
Including all the components of modern currency like anonymity protections and decentralization, Wei Dai, a software engineer, published a white paper on b-money, virtual currency architecture, around the same time. B-money got familiar to many exchanges. Then an associate of Chaum namely Nick Szabo introduced and released a currency called Bit Gold which also got no traction.
Digital Currencies before Bitcoin
After the termination of DigiCash, passion-lovers of digital currency kept their research running. In the late 1990s and 2000s, e-gold, a company, introduced e-gold as the most notable virtual currency. Its customers used to send their old jewelry, trinkets, and coins to e-gold’s warehouse for receiving digital e-gold. The system enabled e-gold users to trade their holdings with other users, cash out for physical gold or exchange their e-gold for U.S. dollar.
The popularity of e-gold went peak in the mid-2000s. But hackers had their eyes on e-gold’s lax security protocols leaving their users at stake causing financial loss. The platform needed to face several legal pressures because of their dubiousness and money laundering issue. Being unable to fight these emerging issues, they got ceased to operate in 2009.
Advent of Bitcoin and other modern Cryptocurrencies
Bitcoin being published first in 2008 by Satoshi Nakamoto fulfilled all the conditions of decentralization like anonymity, built-in scarcity, record-keeping via a blockchain etc. A number of similar cryptocurrencies appeared right after Bitcoin was released to public in early 2009 and mining as well as exchanging have got started from that time.
WordPress became the first major merchant to accept payment in Bitcoin in late 2012 followed by Newegg.com, Expedia and Microsoft. Being inspired by Bitcoin, a number of new cryptocurrencies started taking root.
Presently, a number of exchanges are letting their merchants exchange Bitcoin and few other cryptocurrencies for fiats around the world. Big business and tech giants have started catching sight of crypto for example Facebook’s Libra project.
Advantages of Cryptocurrency
1: Strong Privacy Protections: Many pre-Bitcoin cryptocurrencies have lost their way just because of privacy issue, a major concern. But Today’s cryptocrrencues maintain the condition of anonymity un-connecting to any information, accounts or stored data that could identify them. So it works as an additional protection.
2: Out of Government’s control: If you particularly consider the situation of autocratic countries, you can see if citizens of that country run afoul of their governments, then their governments can seize up their domestic bank balance. State control is entirely impractical on cryptocurrency as it is immune from authoritarian caprice and its transactions are stored in numerous locations around the world. Decentralization is problematic for governments.
3: Cheaper than traditional electronic transactions: With cryptocurrency, there is no double-spending problem and no third party payment processor is needed with cryptocurrency to authenticate and verify every electronic financial transaction. So no extra fees are needed to pay. Cryptocurrency transaction fees are generally less than 1% of the transaction value.
4: Self-interested, Self-Policing Communities: Miners being for their effort have a financial stake in keeping accurate and up-to-date transaction records. Mining is a built-in quality control and policing mechanism for cryptocurrencies.
5: Reduction in Government Currency Monopolies: There is no control of national banks on cryptocurrency transactions. People worrying about quantitative easing are impressed with it. If world’s governments co-opt cryptocurrency, then this could satisfy some cryptocurrency proponents’ worries about the inflationary nature of fiat currencies.
6: Built-in Scarcity supporting value: As cryptocurrencies are hardwired for scarcity, cryptocurrencies are more like precious metals than fiat currencies.
Disadvantages of Cryptocurrency
1: High price volatility: As some cryptocurrencies with outstanding units concentrated in a handful of individuals’ who control these currencies’ supplies leading to wild value swings and outright manipulation. Widely traded cryptocurrencies are subject to price volatility.
2: Lack of Regulation: Many grey and black markets are being facilitated by Bitcoin and other cryptocurrencies. Cryptocurremcies are increasingly popular tools for money laundering. But it keeps governments away from intervention on cryptocurrencies.
3: Potential Tax Evasion: Cryptocurrencies not being regulated by national governments attract tax evaders. The U.S. government applies the same taxation guidelines to all cryptocurrency payments by and to U.S. persons and businesses. The anonymity of cryptocurrency helps in tax violations.
4: Financial loss because of data loss: Usually users store their private keys on single physical storage devices which keep them at stake. It is because once they lose they key, they will never have their fund returned.
5: Often can’t be exchanged for fiat: Exchanges mostly allow cryptocurrencies with highest market capitalization in dollar terms to be exchanged for fiat currencies. But those cryptocurrencies which are not significant can’t be exchanged for fiat. So converting them into more commonly used cryptocurrencies is only option to them.
6: Unfavorable Environmental Impacts on Cryptocurrency Mining: As it always known that cryptocurrency mining is very energy-intensive but a survey shows that Bitcoin mining consumes more electricity than the entire network of Denmark and some of the world’s largest Bitcoin mines are located in coal-laden countries.
It is claimed by experts that mining conveys a serious environmental threat at current rates of growth. Possible solutions can be:
-Reducing the price of Bitcoin to render mining less lucrative.
-Cutting the mining reward faster than the currently scheduled rate.
-Switching to a less power-hungry algorithm.
Examples of some Cryptocurrencies
After the Bitcoin has got introduced, the usage of cryptocurrency accelerated. As there are so many digital currencies with different market value, the overall market value of cryptocurrencies is trending upward. Based on robust user activity, high market capitalization and stable adoption we are describing some cryptocurrencies below:
Bitcoin with programmed supply limit of 21 billion Bitcoin is the most widely used cryptocurrency. The currency is widely taken as legitimate as means of exchange. Many companies are accepting Bitcoin, which has the largest market cap and individual unit value, as payment.
The only different between Bitcoin and Litecoin, which was released in 2011, is Litecoin has a higher programmed supply limit of 84 million units and a shorter target blockchain creation time. The position of Litecoin varies between two to three.
It is really easy to convert Ripple, which was released in 2012, than other currencies. Ripple is known for a ‘’consensus ledger’’ system that dramatically speeds up transaction confirmation and blockchain creation times. As per critics, Ripple’s network is more prone to hacker’s attack.
Ethereum being launched in 2005 utilizes ‘’smart contracts’’ that enforce the performance of a given transaction, force parties not to renege on their agreements and contain mechanism for refunds should one party violate the agreement. Ethereum makes some improvements on Bitcoin’s basic architecture.
Dogecoin was introduced as a ‘’joke currency’’ on 6 December 2013. The currency quickly developed its own online community and reached a capitalization of US$60 million in January 2014. Dogecoin had a fast initial coin production schedule: 100 billion coins were in circulation by mid 2015, with an additional 5.256 billion coins every year thereafter. Dogecoin is notable as an experiment in ‘’inflationary cryptocurrency.’’
What is Bitcoin (in detail)?
With the intention of complete decentralization, Bitcoin was brought to light in January 2009 by a pseudonymous creator namely Satoshi Nakamoto. Bitcoin aimed at lowering transaction fees than other traditional online payment mechanisms.
All Bitcoin transactions are verified by a massive amount of computing power. Balances of Bitcoin are kept on a public ledger which is known as blockchain accessible to all. Bitcoin being the most popular currency has triggered the launch of hundreds of other virtual currencies collectively referred to as Altcoins.
Bitcoin is a collection of nodes that run Bitcoin’s code and store its blockchain, which is consisted of a number of blocks where each block is a collection of transaction. There is no possibility of cheating because all computers running the blockchain have the same list of blocks and transactions.
Bitcoin has more than 10,000 nodes presently and this is growing. Balances of Bitcoin tokens are kept using public or private keys, which are a part of encryption that encodes the information. Private Key is a guarded secret and only used to authorize Bitcoin transmission. On the contrary to that public key is an address where others send Bitcoin.
But in that case wallet is a different topic. The wallets of Bitcoin retain a secret piece of data called a private key, which is used to sign transactions, providing a mathematical proof that they have come from the owner of the wallet.
Working process of Bitcoin
Instant payments system of Bitcoin has become possible because of its peer-to-peer technology. Bitcoin mining is done by specialized computers and miners do the work of processing Bitcoin transaction. Miners perform their job in return of reward which is paid in Bitcoin.
Bitcoin was designed with a highest supply of 21 million and when the supply reaches at that point, a cut in supply takes place which is known as halving. This way of Bitcoin’s working differs from fiat. Halving helps bitcoin maintain price stability.
The security of Bitcoin transaction is ensured by miners and Bitcoin mining is the backbone of the Bitcoin network. The core works of Bitcoin mining are issuance of new Bitcoin, confirming transactions and ensuring security.
Bitcoin miners are rewarded new bitcoins every 10 minutes. Miners are unable to deceive the system as the issuance rate is set in the code. When a transaction is included in a block, it is taken as secure and complete that is done by miners. It is said that the more miners that mine, the more the secure the network.
There is only way to reverse Bitcoin transaction is to have more than 51% of the network hash power that is quite impossible.
How Bitcoin Began
The domain name bitcoin.org has gotten registered back in Aug 18, 2008 and this domain is ‘’WhoisGuard Protected.’’ A person or group using an pseudonymous name called Satoshi Nakamoto made an announcement on The Cryptography Mailing list at metzdowd.com that they were to an electronic cash system which is peer-to-peer with no trusted third party on Oct. 31, 2008.
The first block was mined; Block 0 was on Jan 3, 2009. The first version of the Bitcoin software was announced on the Cryptography mailing list on Jan. 8, 2009. Block 1 was mined on Jan 9, 2009.
Who Introduced Bitcoin?
A person or group naming Satoshi Nakamoto which is a pseudonym released the original Bitcoin white paper in 2008 and worked on the original Bitcoin software that was released in 2009. After that took place many individuals tried to entitle them as Satoshi but still now the real inventor is in dark.
The Bitcoin whitepaper itself cites Hashcash and b-money as well as various other works spanning several research fields. There are many precursors to Bitcoin.
Why Satoshi is under the name of anonymity?
Privacy can be issue behind being under anonymity as Bitcoin has gained much popularity. Another reason can be Bitcoin can be a cause to make disruption to the current banking and monetary system. On the off chance Bitcoin could be a threat to country’s sovereignty which can lead the government to take legal action. Bitcoin can be a target of criminal so safety can be an easy for being anonymous.
Bitcoin as payment
Bitcoin is accepted as a means of payment for products sold or services provided. Trnsactions in Bitcoin is done with the requisite hardware terminal or wallet address through QR codes and touch screen apps.
Working for Bitcoins
There are a number of websites/Job boards dedicated to digital currency including Cryptogrind, brings together work seekers and prospective employees, Coinality, Jobs4Bitcoins, part of reddit.com, BitGigs and Bitwage.
Investment in Bitcoin
Supporters of Bitcoin say it is faster and low-fee payment system for transactions across the globe and they see the bright future of it. Bitcoin can be exchanged for traditional currencies and out of the necessity of any third party. Bitcoin is taken as a strong alternative to fiat money.
IRS has entitled cryptocurrencies including Bitcoin as taxable and gains and losses from Bitcoin held as capital will be realized as capital gains or losses. Transactions of Bitcoin will be counted as taxable.
Risks of Bitcoin Investment
Maximum of the investors purchase bitcoin not as a medium of exchange but as an investment value. Use of bitcoin poses inherent risks because of lack of guaranteed value and digital nature. Bitcoin yet doesn’t have much of a long-term track record of credibility to back it. Still Bitcoins are consistently developing even though it has earned much traction. The possible return can be the highest-risk or highest-return.
Regulatory Risks of Bitcoin
As Bitcoin is an enemy to government currency, many use it as means of black market transactions, money laundering, illegal activities. So any adverse government decision can highly affect the currency. In 2015, the New York State Department of Financial Services provides regulations over this digital currency dealing.
Is Bitcoin secure?
People buy and sell BItcoin through online exchanges but they haven’t acquired their tokens through mining operations. As Bitcoin exchanges are digital, they have become the center point of attraction of hackers and malware. Once the private key is lost or stolen, the savings of Bitcoin will not be recovered. By targeting exchanges, hackers can easily make access to thousands of accounts. Transaction which is carried out by Bitcoin can only be reversed if the person who has received them refunds them.
Bitcoin exchanges and accounts are not insured by any type of federal or government program. A cryptocurrency prime dealer and trading platform SFOX announced back in 2019 that it would provide Bitcoin investors with FDIC insurance, but only for the portion of transactions involving cash.
Holdings or savings of Bitcoins are secured by private keys that belong to a cryptocurrency holder. But fraudulence risk is that fraudsters and scammers may attempt to sell false Bitcoins. Such documemented cases have been seen in previous years.
Considering the market condition of Bitcoin over the last few years, it is seen that the value of Bitcoin has seen a wild swings in price over its short existence. Bitcoin has a high sensitivity to ‘’news’’ and that’s why the value of Bitcoin can fluctuate.
The digital units can lose its value upon the acceptance by fewer people. Bitcoin bubble had a burst when the price declined from its all time high during the cryptocurrency rush in late 2017 and early 2018 indeed. But Bitcoin has a lead over other digital currencies.
Risk originating from tax
Bitcoin hasn’t yet gone under tax requirement is a matter of thought because legal options to shield investment from taxation.
In the history of Bitcoin there are several precedents of disagreements between factions of miners and developers prompted large scale splits of the cryptocurrency community. Changing the protocol of Bitcoin network by groups of Bitcoin users and miners is known to be ‘’forking.’’ The split cam be ‘’hard fork’’ or ‘’soft fork.’’ Cryptocurrencies created by hard fork are Bitcoin Cash, Bitcoin Gold, Bitcoin SV.
Blockchain in detail
With the intention to changing the IT as open-source software, Blockchain started emerging as a real-world tech option in 2016 and 2017. It s expected that soon blockchain will prove itself to be a lower cost, more efficient way to share information and data between open and private business networks. Blockchain is a distributed ledger based on peer-to-peer technology. One user can’t gain control of the network.
Blockchain saw several hacking issues over the last five years. Blockchains with fewer nodes are also not free from hacking issue. However, blockchain being secure is famed for transparency in transactions and data sharing around the globe.
Evolution in this sector is exponential if you look at how DLT, Distributed Ledger Technology, helps in sharing information. Many a companies have already launched and some other are planning to launch, pilot programs and real-world projects across a variety of industries like from healthcare to mobile payments and global shipping etc.
Blockchain has come and establishing itself as a strong alternative storage of transactional data inside and outside of global enterprises. A report debunks that Blockchain may earn revenue of more than $10.6 billion by 2023 as it has seen a mass adoption for application development and pilot tests in a many industries.
Blockchain cuts the costs of financial transactions and cross-border payments as it is the TCP/IP which allows users all the modern functionality that they take for granted on the web. As such initiative like DLT takes long time to introduce itself, disappointment is a very common here.
Working procedure of Blockchain
Data enters blockchain gets saved eternally meaning it can never be erased. A set of transactions is added every time in blockchain and that data becomes another block in the chain. Blockchain can only be updated by consensus between participants. Having so many potentials, Blockchain developments is still at its early stage. And it’s not yet solution-driven to all companies.
Several companies are working toward standardizing versions of blockchain software for example the Hyperledger Project of Linux Foundation has developed modular tools for building out blockchain collaboration networks but many others are working on their own versions of blockchain.
Bitcoin, which is the most popular cryptocurrency got introduced in 2009, has made the blockchain so popular. Ethereum, which was introduced in 2013, just come after Bitcoin according to traction-earning ability. Bitcoin is out of the baking of government or any institution.
Blockchain is being used around the world for digitizing other assets.
Difference between private and public blockchains
Over a private blockchain technology only a single organization has authority over its network. As blockchain users are administrators, it voids the need of other administrator. Private blockchain allows companies to centrally administer their own transactional networks. Blockchain networks can also be used for smart contracts, which are lines of code that are stored on a blockchain and automatically execute when predetermined terms and conditions are met, too.
Smart contracts are effective in approving the transfer of assets. Selling of properties through DLT is done once conditions are met between buyers, sellers and their financial institutions.
Is blockchain secure?
Every system is breakable by hackers so does blockchain but blockchain’s simple topology is the most secure today. But hacking will be possible only when every single computer on the network can be hacked. So it makes complexity to a hacker in a word. The computing resources needed for most blockchains are terrible.
But in some cases larger scale is failure to prevent hacks. A bad actor needs to gain control of 51 percent of CPUs to hack it. Even though blockchain networks are secure, the application running on them may not be as safe.
Blockchain’s advances rely on scalability
The scalability problem refers to the limited rate at which the bitcoin network can process transactions. Ether and Bitcoin have been facing the scalability issue more. Distributed ledger needs hundred times faster payment network to be adopted by financial technology (FinTech) companies.
Developers are exploring Sharding, a method which partitions to spread out the computational and storage workload across a P2P network, to bring an increment in transactional throughput. Each node maintains information related to its shard.
Sharing the information conveyed in a shard can be shared among other nodes and it keeps the ledger decentralized and thus secure. In today’s blockchains, each node records all the data on the electronic ledger and is part of the consensus process. But it case of Bitcoin, blockchains takes time because majority of participating nodes need to authenticate new transactions and record that information if they are to be added to the ledger. And that is why every transaction can take 10 minutes to be finalized. On the other hand Ethereum can process from 12 to 30 transactions every second.
Bitcoin mining in detail
Bitcoin mining is performed by high-powered computers that solve complex computational math problems and solving of complex math problems by those computers end up producing new bitcoin. Another function of bitcoin miners is that it helps make bitcoin payment network trustworthy and secure indeed.
What alienates Bitcoin from traditional currencies?
Consumers have faith in U.S. dollar is it is backed by Federal Reserve, which regulates the production of new money and bans the use of counterfeit money. The field of digital payments is also occupied by U.S. dollar as while purchasing with debit or credit card, transaction is processed by a payment processor company such as Mastercard or Visa.
Here is the cardinal difference between traditional currencies and Bitcoin that Bitcoin is not regulated by a central authority. Bitcoin is backed by millions of computers across the globe. Here the same role of Federal Reserve is played by these computers which in other word known as nodes, which record transaction data in a public list.
What is Cryptocurrency mining?
Bitcoin miners receive transactions together in ‘’blocks’’ unlikely to fiat and add them to a public record called the blockchain. Then nodes maintain records of those blocks. Bitcoin miners justify whether the new block of transactions they have added are accurate. They look into the issue of duplicity while adding transactions thus miners help destroy the problem of double-spending.
Another advantage of digital currencies is that digital information can be reproduced easily. But printed currencies can be counterfeited by crook and can be easily exchanged. If someone wants to double-spend their Bitcoin, they have to take over 51% of the mining power in the network.
What miners get in return of their effort? Miners are awarded Bitcoin whenever they add a new block of transactions to the blockchain. Block reward refers to the amount of new bitcoin released with each mined block. Block reward is halved once every four years. Bitcoin halving has been done very recently on May 11, 2020 for third time.
The system will continue until around 2140 where miners will be rewarded with fees for processing transactions that network users will pay. These fees are incentives that miners will receive for their effort and the competition for these fees will cause them to remain low after halving are over. Halving lowers the available supply reducing the rate at which new coins are created.
Bitcoin Miner’s working procedure
Bitcoin miners receive Bitcoin from verifying transactions under two conditions, one is they must verify 1 megabyte (MB) worth of transactions and the remaining one is miners must solve a complex computational math problem which is also known as ‘’proof of work.’’ But they are trying to come up with a 64-digit hexadecimal number, which is less than the target hash. But miner’s computer spits out hashes depending on the units assuming all possible 64-digit numbers until they arrive at a solution.
The difficulty level of the most recent block at the time of writing is more than 13 trillion. Mining for bitcoin requires massive amounts of energy and sophisticated computing rigs. Adjustment of difficulty level is done every 2 weeks which keeps the rate of mining constant. Difficulty arises when more miners compete for a solution the opposite is also can be seen.
Techniques of competing with millions of miners
In recent times, Bitcoin mining works have started been done on high performing desktops. Bitcoin mining is a kind of guesswork where one miner needs to arrive at the authentic answer prior to another miner has almost everything to do with how fast your computer can generate hashes.
The work is tough for Bitcoin miners because they not only need to come up with the right hash but also need to be the first to do it. Miners put their glance on graphics cards which were used in video games. Bitcoin miners started using computers specifically designed for mining works in 2013 keeping their eyes on efficiency level.
Today Bitcoin miners are using most up-to-date ASICs, Application-Specific Integrated Circuits, keeping older models of ASICs aside. One computer is barely enough to compete with miners pool, a group of miners who combine their computing power and split the mined bitcoin between participants, when the newest unit at your disposal.
Sustainability of Bitcoin mining
Scalability is intricate at the difficulty level, between 1 in 13 trillion, because one block of transactions is verified roughly every 10 minutes but it’s not a rule. Let’s put one thing in perspective, Visa can process somewhere around 24,000 transactions per second, Bitcoin can only seven transactions. Maybe in very near future, Bitcoin transactions will take a high root so in that case it’s so intricate. So, bitcoin protocol needs a quick change.
The problem being known as scaling, it gathered some amount of indictment from miners. Two major solutions had been in discussion with an eye to fix the issue one is to create a secondary ‘’off chain’’ layer to Bitcoin that would allow for faster transactions that can be verified by the blockchain later and another is increasing the number of transactions that each block can store.
Previously Bitcoin miners and mining companies voted to include a program that would decrease the amount of data needed to verify each block in 2017 that was known as segregated witness or SegWit meaning to separate. Realizing the limitations of SegWit, a group of miners and developers introduced a hard fork just less than a month later in the same year leaving the bitcoin network to create a new currency using the same codebase as bitcoin.
What is Ethereum?
Being out of the reach of any third party, Ethereum is a decentralized and autonomous system. It never goes offline as it is being run from thousands of volunteer’s computers around the globe. Personal information of a user remains in his own hand meaning in his computer. Ethereum took Blockchain behind Bitcoin and sustainability expanded its capabilities.
The Ethereum network, which utilizes peer-to-peer approach, with its own Internet Browser, coding language and payment system enables users to create decentralized applications on Ethereum’s Blockchain. Though there is no involvement of any third party, there is no extra cost. Both the artists and the audience would receive awards for positive communication and support in the Ethereum version of such social network.
The function of nodes is to volunteer who download the entire Ethereum’s Blockchain to their desktops and fully enforce all the consensus rules of the system and the Ethereum system is supported by nodes. Smart contracts, which increase security reducing the need of any third party deducting transaction costs, have been designed to automatically perform transactions and consensus rules are commanded by smart contracts, where many people have a belief that it will be the future.
Inclusion of Ethereum Virtual Machine (EVM), which is isolated from the main Ethereum network, provides users with security to execute an untrusted code while ensuring that the programs don’t interfere with each other.
So in the end it can be said that Ethrereum is a public, open-source, Blockchain-based distributed software platform allowing developers to build and deploy decentralized applications indeed.
Creator of Ethereum
A person namely Vitalik Buterin made a plan which he described through a white paper back in 2013. The man shared the idea with his friends at first and further sent it to others. Vitalik wanted to see whether people finds out any fault to his idea and he found 30 people to discuss the concept with him.
With the team members Vitalik Buterin, Mihai Alisie, Anthony Di Iorio, Charles Hoskinson, Joe Lubin and Gavin wood, the project was publicly announced on stage at a Bitcoin conference in Miami in 2014.
Whether it is a cryptocurrency?
Ether doesn’t need any third to process its payment because Ethereum is a software platform aiming to act as a decentralized internet and a decentralized app store. Due to the functionality of Ethereum, it needs a currency to pay for the computational resources required to run an application.
It not only fuel for the decentralized apps within the network but also operates as a digital currency. Users need to pay transaction fee in case they want to change something in one of the apps within Ethereum.
What alienates Ethereum from Bitcoin?
The goals of Ethereum and Bitcoin are different but they can be somehow similar while considering about cryptocurrency aspects. Unlikely to Bitcoin, Ethereum is a multipurpose platform with its digital currency Ether which being a components of its smart contract applications.
While considering aspects like hard cap and average block mining time, there also remain vast differences. Ethereum’s proof-of-stake algorithm encourages decentralized mining by individuals whereas Bitcoin mining requires huge amounts of computing power and electricity and is only possible if using industrial-scale mining farms.
Ethereum’s internal code is turning complete meaning everything can be calculated as long as there is enough computing power and time to do so which provides users with limitless possibilities. On the other hand, Bitcoin doesn’t have this capability.
Working procedure of Ethereum
The blockchain system of Ethereum is so complex compared to Bitcoin. Ethereum runs on the same protocol of Bitcoin and its Blockchain design. The blockchain of Bitcoin stores entire transaction histories so does Ethereum blockchain but Ethereum’s Blockchain does more than the former. Every node of Ethereum also needs to download the most recent information.
Transactions of Ethereum come in the form of ‘’blocks’’ and each and every block is chained together with its previous blocks. After the mining, which is a process when a group of nodes apply their computing power to completing a ‘proof of stake’ challenge, a transaction is added to the ledger. In creating and validating a block, a lot of miners around the globe are trying. Because of the efforts of miners dedicated to Ethereum network, they are called the backbone of Ethereum network.
Use of Ethereum
Ethereum has a high potentiality in a number of fields like it allows developers to build and deploy decentralized applications. Ethereum extends the opportunity of decentralizing any centralized service. Through Ethereum blockchain, customers can trace the origins of product they intend to buy. Safe and fast trading for both parties without any intermediary will be ensured once the smart contracts are implemented.
With the help of smart contracts, clients can easily submit their insurance claims online and receive an instant automatic payout. As reported, Ethereum blockchain will ensure trust, transparency, security and efficiency into any service, business or an industry.
Ethereum can used to create Decentralized Autonomous Organizations (DAO), which is an organization that is governed by computer code and programs has the ability to function autonomously. DAOs are run by programming code and a collection of smart contracts written on the Blockchain. Those people own DAOs who purchase tokens.
Amenities of Ethereum
The Ethereum platform takes advantage from all the properties of the Blockchain technology that it runs on and it is free from the intervention of any third party. Any Blockchain being formed around principles of consensus eliminates possibilities of fraud, corruption and makes the network tamper-proof. There is no point of failure as the platform being fully decentralized. Cryptographic security and decentralization keep Ethereum protected from hacking attacks and fraudulent activities.
Smart contracts may keep the fault-proof and the system code is prone to human error which may lead to easy entrance of hacker attack. If such mistake takes place they only way to get rid of it is rewriting the underlying code which is against the essence of the Blockchain. Such an attack was taken place to the DAO on April 30, 2016.
Apps developed on Ethereum
Ethereum can be a cause of revolution of Blockchain as it has a potential of opening up the world of decentralized apps. The Ethereum network can be accessed through its native Mist browser and also can be through a MetaMask extension for Google Chrome and Firefox. A number of industries running on centralized control have been disrupted by the Ethereum platform. We are mentioning some decentralized apps built on Ethereum platform:
Gnosis– It is an open-source and decentralized prediction market built using the Ethereum blockchain. It enables users to vote on anything from the weather to election results.
EtherTweet– EtherTweet is a blockchain alternative to Twitter. The cardinal alienation is that EtherTweet is a censorship free because all messages are stored on the Ethereum blockchain.
Etheria– It’s like Minecraft exists fully on the Ethereum Blockchain.
Weifund– It is an open platform for crowdfunding campaigns so you can launch a campaign using one of Weifund’s contract templates or integrate your own smart contract.
Uport– Uport provides open protocols for decentralized identity and interoperable messaging that enable trusted source attribution for all web communication. Uport’s open identity network allows users to register their own identity on Ethereum independent from any centralized authority.
Provenance– Provenance is a platform that empowers brands to take steps toward greater transparency. With this technology, businesses make the origin, journey, and impact behind products transparent to the millions of shoppers that want to know more.
Augur– Augur is a decentralized prediction market platform built on the Ethereum blockchain and the first decentralized application running on Ethereum to make headlines.
Alice-Alice is a network built on the Ethererum blockchain that brings together social organizations, donors, grant-makers and impact investors to identify and scale effective social projects.
Bitnation– Bitnation is a voluntary nation that records vital records, identity and other legal events using blockchain technology.
Ethlance– Ethlance is a first of its kind job market platform, built entirely on blockchain and using only cryptocurrency for payments.
Getting of Ether
Through buying and mining, we can get Ether. Several exchanges allow buyers with the opportunity to buy Ether from their platform. An exchange operating within your jurisdiction will let you buy Ether and you can do that through setting up an account or with your bank accounts, wire transfers etc. After buying Ether, it needs to be stored in a wallet which is provided by exchange.
If buyers are not comfortable with it then they can have Ether through peer-to-peer trading, paying for it with any agreed upon currency and the process can be done online and in-person.
Mining is another way to get Ether tokens because miners receive a reward for every block mining.
Ethereum down the road
Ethereum is the second most popular currency right after Bitcoin, and it is getting mainstream adoption on gradual basis overtime. Experts think the technology to revolutionize services and industries. Vitalik Buterin wants to take his Ethereum Blockchain-related platform to the perch bolstering its technical infrastructure and security improvements down the road.
Mentioning the Ethereum platform having a very strong shot at overhauling title insurance, founder of Blockchain, Peter Smith, said the platform to be fascinating. Expert’s views circulating around Ethereum is really positive. But some other old-school experts are doubtful about the technology.
Difference between Proof of Work and Proof of Stake
Proof of Work and Proof of Stake being known as ‘consensus mechanism’ is a current requirement to confirm transactions taking place on a blockchain.
Proof of Work system actually annihilates third party basically. It is based on an advanced form of mathematics called ‘cryptography.’ Powerful computers are used to solve those difficult mathematical equations. The network gets aware of the transaction to be valid once the equation is solved. The invention consumes a significant amount of electricity and limited in the number of transactions it can process at the same time.
That is why other consensus mechanisms have been created, with one of the most popular being the Proof of Stake model, which was introduced in 2012. The first ever blockchain project to use the Proof of Stake model was Peercoin. The system provided it more scalable transactions, more equal mining system and less reliance on electricity. Ethereum will soon move from Proof of Work to Proof of Stake. The Ethereum team is working hard for the shifting.
Eying on PoW Adoption and PoS adoption
With Proof-of Work, Bitcoin blockchain can only handle about 7 transactions per second leading the transaction fees to increase. Having these fees once reduced, it is yet high that is losing suitability as a global payment system are lacking of Proof-of Work.
Even though Ethereum also uses Proof-of Work, but it is comparatively faster than Bitcoin because developers of Ethereum made a few changes to the original code. As a result of these changes, Ethereum network can process transactions in just 16 seconds. The maximum amount of transactions that the Ethereum blockchain can process is 15 isn’t enough according to the need of the network.
Proof-of-Stake is hoped to bring an increment from this number to thousands per second, but it is not yet official. Other blockchains are also walking the same way as Ethereum changing the using a variation of Proof of Work by changing the type of algorithm.
Proof of Stake is also in use by some other popular cryptocurrencies among them one is Dash. NEO, the Chinese smart contract protocol was launched in 2016, also use Proof of Stake model.
Transaction verifying process of Proof of Work
Take the example of Bitcoin, as 10 minutes are taken to confirm Bitcoin transactions as valid, a new ‘’block’’ is created in each 10-minute interval. Every single block is consists of different transactions. Miners need to use their computational power to solve a cryptographic algorithm for the Bitcoin network to achieve this.
Once the process is done the transaction will be marked as valid and will be posted to the public blockchain so that everyone can see. Miners do this because they are rewarded with additional Bitcoin for their effort they provide.
Thousands of individual devices compete for solving the cryptographic algorithm, only the winner gets the reward. Miners with powerful hardware devices will have the greatest chance to be winner.
Transaction verifying process of Proof of Stake
Proof of Stake rewards the individual that creates the next block is based on how much they have staked. Basically, the stake is based on the number of coins the person has for the particular blockchain they are trying to mine and this makes the process easy.
Unlikely to Proof of Work, those who contribute to the Proof of Stake system simply earn the transaction fee. Individuals who are doing the work are known as ‘forgers.’
Once the user put their coins into a specific wallet, the opportunity of validating transactions unwinds. After that this freezes the coin. There are so many Proofs of Stake blockchains having a minimum requirement of coins required to start staking.
If someone assumes that he has staked the required minimum, the chances of his winning the reward is linked to the total percentage of coins he holds. So briefly to say that Proof of Stake model randomly chooses winners according to the amount they have staked.
If a forger wants to process malicious transactions, he will lose his entire stake. One’s earning in this model depends of staking. Consensus mechanism is an important theory of Proof of Stake.
Why Proof of Stake is better than Proof of Work?
There are some issues that leave Proof of Stake better than the other and we are going to discuss over these issues:
Consumption of Electricity
Some Proof of Work blockchains like Bitcoin require such amount of electricity which exceeds the amount used by more than 159 individual countries. But in the case of Proof of Stake, the electricity costs to verify transactions are substantially lower.
As said before people with power hardware devices are much capable of winning. This led centralized organizations to buy thousands on devices which produce the highest mining power. This operation is known as a ‘mining pool’ and four mining pools control more than 50% of the total Bitcoin mining power.
With that system, average people remain out of expectation. But Proof of Stake has come out such unfair system. In Proof of Stake system those who contribute to the network by freezing their coins are awarded proportionately to the amount they have invested.
On the off chance a person gains more than 50% of the total mining in the Proof of Work system, he can easily make changes to a particular block and altering of can also be done because of extra gain.
But if a bad actor wants to do the same with Proof of Stake system, he needs to stake at least 51% of the total amount of cryptocurrency in circulation. They have only one way left to do that and that is to purchase the coins on the open market which will lead the real-world value of the coin increase along the way.
The bad actor would lose all of their stakes in case the rest of the network get realized what has happened.
Demerits of Proof of Stake model
With Proof of Stake, the more coins you can afford to buy, the more coins you can stake and earn leading the rich to get richer. A good return on investment is desirable when one can meet the minimum staking requirement with enough money. People with most money have the highest winning possibility this is where Proof of Stake has a similarity with Proof of Work.
Proof of Stake allows people to verify transactions on multiple chains which slightly leave a room to hackers to perform a double-spend attack. If such scenario catches sight of all the miners, this attempt will be prevented. But in the case of Proof-of-Work a dishonest chain will be rejected simply as it allows devices to mine on one chain.
What is Vechain
Vechain, which has been in place since 2015, is a major step in the way to digitalization and Vechain has been designed with an eye to enhancing supply chain management and business processes. Vechain is a smart contract blockchain platform which is focused on enterprise adoption, Internet of Things (IoT), and mass adoption via Toolchain. With vechain, through creating decentralized applications following problems can be solved-
-Vechain with a partnership with Bayer China will use blockchain to solve problems of digitalized clinical trial traceability.
-With a view to preventing duplication, Vechain tracks each individual item through using smart chips.
-Vechain confirms a buyer of a product’s record from manufacturing to storing through using smart IoT sensors.
-Keeps a temper-proof record of vehicle data.
-Vechain tracks carbon contributions of a particular company to reduce carbon emissions.
Key Features of Vechain
Public Blockchain- VeChainThor blockchain is a public blockchain allows anyone to read, write and deploy decentralized applications and smart contracts onto it.
In-house IOT and supply chain management technology- Vechain uses propriety IoT sensors to track key metrics such as temperature, humidity and location information throughout the supply chain journey.
Native Fee Delegation- Because of this feature of vechain, dApp users do not need to hold VET or VTHO to write transactions if associated gas costs are specified by the developers to be sponsored.
Vechain’s powerful blockchain-enabled enterprise software platform enables manufacturers to assign products with unique identities, which then allow manufacturers, supply chain partners and even consumers to interact with the product through the platform.
Blockchain technology is here to ensure people of the security of collected data. So that people can know about a product, products are assigned a unique ID then it is stored on the blockchain and attributed to the product with an NDC chip, RFID tag.
Considering issues of food safety, anti-counterfeit and brand protection, the company has come up with a number of applications. Vechain started with private and consortium blockchain when then they transformed into public VeChainThor blockchain which allows any third party to develop and write applications on the platform.
Vechain Token Economics
The Vechain model comprises two tokens one is VET, a smart currency which is used to settle smart contracts, and another one is VTHO. As a monetary medium, VET can be used to invest in ICOs. On the other hand, VTHO, which is a ‘’gas’’ currency, is generated through holding VET and it is a unit consumed when writing data to the blockchain. So it is clear that Vechain uses a dual-token economic model. As VTHO automatically get generated depending on the proportion to the amount of VET held, there is no worry about separately buying VTHO for regular network users.
70% of VTHO gets permanently burned at the execution of a transaction and the remaining 30% is given as a reward to Authority node holders. The model was designed to help developers on the network and to improve network economics.
Vechain can be stored safely on the VeChain Thor wallet which is available on smartphones.
Authority (Thrudheim) Nodes:
The 101 Authority nodes of Vechain validate, process all blockchain transactions, govern the network, and go through full application and KYC procedure. Vechain Foundation selects these nodes for performing these functions. Holders of authority node receive the highest VTHO production rate and voting rights as a reward. You will receive little identity of authority token holders because of security factor and authority nodes are owned by large enterprises and trusted individuals for the intention to ensure decentralized trust.
The cardinal function of economic nodes is that they keep the Vechain ecosystem stable by keeping a certain amount of VET tokens in their VeChain Thor mobile wallet. The more VET tokens staked for a longer period of time, the higher the rewards.
With different characteristics and benefits, the Economic nodes and the X-nodes are two different staking node types. As VeChain’s X node program offers more rewards, more dedicated node holders can join. Depending on the type of node held, there are 4 types of rewards.
VeChain was founded by Sunny Lu, former CIO of Louis Vuitton China, in 2015. Initially, the company started with its private blockchain focusing on enterprise solutions but overtime VeChain migrated to a consortium blockchain prior to establishing the VeChain Foundation and begun their final migration to Proof-of-Authority (PoA)-based public blockchain platform.
With the intension to create greater market transparency and provide consumers with access to more detailed information about the products they buy, sell, VeChain has come in this space. This makes a person well aware of the quality of the product they are interacting with.
Among some partners of VeChain DNV GL, PwC, Deloitte, Walmart China, BMW, BYD Auto, Bayer China, H&M, LVMH, ENN, AWS, PICC, ASI Group, etc is notable.
Bitcoin Trading Guide for Beginners
With being traded on all the exchanges and also being lucrative, Bitcoin has a huge market and one of the time-tested cryptocurrencies. Bitcoin has taken it to such a perch that people immediately call Bitcoin as soon as they think about cryptocurrency. This digital currency is famous for its volatility and bubbles. Bitcoin very often records the highest trading volumes in almost all exchanges. Today’s guide will help those who are seeking to trade Bitcoin, but don’t know how they will.
We are discussing about some reasons Bitcoin trading is important for.
Unlikely to stock market, from any place where you are can operate trading Bitcoin at any time regardless of the day. In that can, trading can be done online which requires no physical visit.
Global existence of Bitcoin
Anyone around the globe can invest in Bitcoin as it operates in more than 90% of countries. Some countries have also accepted as a medium of exchange in various establishments.
Bitcoin is thought to be a great investment for speculative purposes as the price pattern of Bitcoin is volatile. The currency has undergone some of the major shifts in its prices in 2018.
Selecting a Bitcoin Trading Exchange
Exchanges allow traders with a trading platform, so an investor seeking to invest must find out an exchange. Sometimes it seems difficult to an investor to identify the right platform for trading Bitcoin as there is no official exchange. So, there are issues to be looked out for before selecting a right Bitcoin trading platform, and these issues are:
Payment Methods: Check the payment method that the exchange is offering to you is supported in your locality. Make sure you can transact with this payment service anytime. Another thing to oversee is the time and resources used to access such payment services will be eating into your profit margins.
Security: Cryptocurrency space is in reality just because of trust and safety issue. Go through reviews to make a judgment over the exchange to make sure whether it has committed any security breach in recent time. Consider the exchange’s privacy policies and whether the exchange is victim of hacking or system failure.
Reputation: By going through various forums like Quora, Reddit, Bitcoin Talk and many others, an investor can have an idea about user’s views over the exchange. Though learning about the exchange’s pros and cons, users experience and customer support, you can measure how reputed the exchange is. Nothing is perfect in the world; things that have pros have cons too. So the pros should be more than cons.
Transaction fees: It’s a factor to consider that what amount the exchange is charging you for deposits, withdrawls, and trading. In that case, some exchanges charge you nothing that means no fees for deposits, withdrawls and trading. A reputed exchange must charge you the lowest amount.
User Interface: User interface is one of the cardinal issues to consider before selecting an exchange for Bitcoin trading indeed. With a reliable user interface, traders will be easy to run trading from easy sign ups to navigations.
Top Exchanges for Bitcoin Trading
With quality and high security standards, Coinbase being founded in June of 2012 stands as one of the top-rated exchanges in the world. The exchange is consistently spreading its operations in countries. It is the first regulated exchange to start trading Bitcoin.
As of January 2018, Binance was the largest cryptocurrency exchanges in the world in terms of trading volume. Binance was found by Changpeng Zhao, a developer who had previously created high frequency trading software.
The platform being launched in 2017 quickly managed to match up to the safety, trading, and customer support standards that helped them to be a top-ranked exchange. The exchange originated in China but moved its headquarters to crypto-friendly country Malta.
Kriptomat, which was established in Estonia, serves users as a platform through which they can buy digital currencies. They received operating licenses from the Financial Intelligence Unit for providing services of exchanging a digital currency against a fiat currency and offer the facility of virtual currency wallet service.
People must go for their service because there is availability of 20 languages and exchanging of 17 cryptocurrencies and tokens to and from Euros is possible.
This old Bitcoin trading platform is operating in 99% of the countries around the globe including 44 states in the U.S. The exchange allows you to buy cryptocurrency using credit card, a wire transfer, a SEPA transfer.
Cex.io is considered to be the safest and trusted exchanges because of its KYC and AML policies. The exchange got established in 2013 and then got registered in FINCEN.
Bitstamp is a bitcoin exchange based in Luxembourg allows trading between USD currency and bitcoin cryptocurrency. After being launched in 2011, the operation of Bitstamp was confined to only Europe. But the exchange soon spread its operation in 78 countries around the globe. The platform has an average daily volume of $700 million which led it to be a highest trading exchange.
Kraken, a cryptocurrency exchange, based in Europe operates globally offering a variety of crypto-to-crypto trading pairs along with a range of fiat to Bitcoin trading pairs. Kraken is highly secure with some of the high-tech security controls such as two factor authentication and PGP/GPG encryption.
Bitcoin trading or investing
Investing is called when with the expectation of Bitcoin’s price to go up, one buys the coins and holds it for the long-term. Those who believe in the ideology, technology and the team steering it, tend to invest meaning holding coins.
On the other hand, trading refers when one purchases the coin and after a short period of time sells it. They do it with the intention that when price goes up after a slight market movement, they will sell it for some profit.
So, from the discussion above the one difference between investing and trading has been caught is the duration of holding your Bitcoin indeed.
Types of Traders
Profit making is the goal of every single trader. In cryptocurrency market, there are three types of traders including day traders, scalp traders and swing traders.
Day Traders: This type of traders executes several trades during the daytime and tends to make short profit in a short time.
Scalp Traders: They are akin to day traders, but their trading is not limited to day. They make a number of trades depending on the market movement with the intention to making short profit.
Swing Traders: These traders gain from the slight swing in the prices of assets and they study the trend of prices. Swing trading involves holding a position either long or short for more than one trading session, but usually not longer than several weeks or a couple of months.
Putting a 100% accurate guess over market’s movement is impossible but a set of rules, formulas, and predictions can help one trade profitably. Fundamental analysis and technical analysis are two sorts of analysis for trading. The fundamental point of view relies on a statistical approach to analyzing market prices. Analyzers go through news about the coin and latest technical development to put a right assumption over the price.
On the other hand, technical analysis is based on past data about Bitcoin and verifiable data to predict the price of an asset.
Some terms in Bitcoin Trading
Bitcoin price: There is no standard price for Bitcoin as a result prices of Bitcoin vary from exchange to exchange and in different countries. Bitcoin price is the price of the last trade that took place on a specific exchange.
The order book: Every single exchange maintains an order book to list the orders for different currencies and these orders can be both manual and electronic. Buy orders represent bids by the respective purchaser of coins on the other hand sell orders represent asks by the sellers.
Volume: The volume of a particular cryptocurrency is found on a Coin Prices Index page is simply the total amount of coins traded in the last 24 hours.
Limit Order: A limit order is a type of exchange order that allows traders to purchase or sell a cryptocurrency at a specified price or better and a limit order is executed at the limit price.
Stop loss order: A stop loss order is an order placed with a broker to buy or sell once the price reaches a certain point. A stop loss is designed to limit an investor’s loss on a security position.
Market Order: A market order guarantees that the order will be executed, but doesn’t guarantee the execution price. A market order is an order to buy or sell a security immediately.
Maker and Taker fees: A maker places an order and doesn’t trade immediately, and so the order stays in the order book and waits for someone else to match with it later. Exchanges charge lower fees to them.
On the other hand, a taker is someone who decides to place an order that is instantly matched with an existing order on the order book. Takers take away business from the market, paying more fees.
Candle sticks conduct a price analysis and reflect the opening, lowest, highest and closing price of an asset. Whether opening or the closing price was high or low that can be said seeing the color of a candle. For example, a green candle refers an opening price that was lower than the closing price while a red candle shows that the opening price was higher than the closing price.
Cryptocurrency Wallet Guide
A cryptocurrency wallet is a program, device or a service which stores the public or private keys and can be used to track ownership, receive or send cryptocurrencies. For using cryptocurrency, one need to have a digital wallet.
Working process of wallet
As cryptocurrency wallets interact with various blockchains, it enables users to monitor their balance and they can send money and run other operations. Actually, in digital wallets coins are not stored physically because cryptocurrencies do not exist in a physical form. Transactional records consists blockchain and those transactional records detail which private and the public key has control over the funds. A wallet address is like a bank account number and one can give the number to others, as people will need it in case they are to transfer your funds. No two wallet addresses are ever the same.
While sending Bitcoin to you, the sender is basically signing off ownership of the coins to your wallet’s address. To grab the funds, the private key stored in your wallet must match the public address the currency is assigned to. The balance will be added to your wallet in case the private key and public key matches.
Different types of Cryptocurrency wallets
Wallet can be of different categories-software, hardware and paper. Software wallets are desktop, mobile or online.
Desktop: Desktop wallets come with high security so one’s funding is less likely to be hacked or lost. These wallets are basically downloaded and installed on a PC. They are only accessible from that computer where it is installed.
Online: Online wallets are more prone to facing hacking issue because these wallets store your private keys online and controlled by third party. These are accessible from any computer device in any location as run on the cloud.
Mobile: By downloading a mobile app, you can access to your cryptocurrency wallet. Because of the limited space issue, mobile wallets are simpler and smaller compared to desktop wallets.
Hardware: Hardware wallets store the user’s private keys in a secure hardware device. There is high security because, hardware wallets accomplish transactions online, but they are stored offline. It can support different currencies from among you can choose anyone to use. Making transactions with hardware wallets are easy. Storing your money offline, hardware wallets keep you out of danger.
Paper: Generally a printed piece of paper containing keys and QR codes facilitate cryptocurrency transactions, is known as paper wallet. Compared to others forms of cryptocurrency storage, paper wallet is thought be the highly secure one.
Security of your cryptocurrency wallets
There are several degrees of security on wallet varying on what type of wallet you are using. Offline wallets are more secure compared to online wallets because offline wallets are not exposed to hackers and are independent of any third party.
Another issue is that once you lose your private keys, you will never be able to retrieve your money. And in the same you, you won’t be able to reclaim lost, once your wallet gets hacked. Some precautions can be taken to avoid such out of the blue situations and these are:
Backup your wallet: One can use offline storage options for backup issue. A technical can be followed which is keeping the vast majority of one’s fund in a high-security environment and store small amounts of currency for everyday use online, on your computer or mobile.
Update software: Regular updates will keep your security system flawless and more up-to-date.
Adding extra security layer: One should set up password for every step while withdrawing. Wallets with two-factor authentication and application pin code requirements should be used. A multi-currency wallet will enable you to use several currencies from the same wallet.
There are some types of transactions for which fees need to be paid to network miners as a processing fee but some don’t’ have any fee. The astonishing thing is that unlikely to bank fees, you can set your own fee for cryptocurrency transactions.
For example, the medium transaction size of 226 bytes could ask for a fee of 18,080 satoshis. If someone selects high fee, his transactions will get quick confirmation on the other hand selection of low fee will lead his transaction to be confirmed slowly even it can take days.
What about wallet’s anonymity?
Wallets are slightly anonymous but not fully as they are not affiliated with the actual identity of a user rather than that all transactions are stored publicly and permanently on the blockchain. Wallet address could be traced to your identity in a number of ways but personal information won’t be there. Hopefully, wallets will be completely anonymous after two or three years down the road.
Are you planning to use several currencies or single currency? Do you want to access to your wallet from anywhere in the world or only from home? Are you searching for a wallet for making investment or everyday purchases? These are the common things to take under consideration before choosing a wallet.
Among many wallets available in market Atomic wallet, Bread wallet, Mycelium, Exodus, Copay, Jaxx, Armory, Trezor, Ledger Nano, Green Address and Blockchain (dot) info are famous and well-established.
How to set up a Bitcoin Paper Wallet
Paper wallets have been in place since the earliest period of Bitcoin. As private wallets keeps private keys offline, they are taken as the most secure way to store bitcoin stash. A paper wallet, which is a cheap way of storing bitcoin savings, is a piece of paper containing private and public keys to a single bitcoin address.
One has to sweep the private key on it into a hot wallet for spending coins from a paper wallet. The cold storage security benefits are lost at the point of sweeping.
A popular BTC paper wallet generator is Bitaddress.org, which is an open-source engine available for generating paper wallets using one’s own browser. Bitcoin.com offers a paper wallet generator for BCH.
Steps to maintain for creating a Bitcoin Paper Wallet
Through maintaining following steps, a Bitcoin Paper Wallet can be easily generated. These steps are:
-Use high-quality antivirus and anti-malware tools, first of all to clean the computer before generating a paper wallet. The printer must be connected directly to the computer and make sure it can print while there is no internet connection. There are other advanced ways for cleaning the computer for advanced users.
-It is more secure to generate a paper wallet offline. For doing so, download a zip file that contains a copy of the website through visiting the generator’s website. After the downloading done, scan the zip file for malware before extracting.
-Disconnect the computer and printer from the internet prior to generating a paper wallet.
-Open the downloaded Bitaddress.org.html file from the list of extracted zip files in the internet browser with disabled add-ons and extensions. Then move the mouse around or type random characters into the text box on the screen in order to add randomness while generating a bitcoin address. Bitaddress.org offers the options of creating paper wallets, wallets in bulk, brain wallets, vanity addresses, and multi-signature split wallets. Different generators offer different styles of paper wallet artwork.
-Delete all downloaded files and clear caches after the paper wallets have been printed.
-Depending on your purposes, fund your wallets with large and small amounts of coins.
-Hide and protect the paper wallets physically to keep them secure. Try to secure them from natural disasters, theft and fire.
More about cryptocurrency exchanges
Generally cryptocurrency exchanges are online platforms where one can exchange one cryptocurrency for another cryptocurrency. Before choosing such an exchange, a user must eye on the terms and conditions of that exchange and check whether these suit him. Coin holders from around the world can use Bitcoin exchanges. If a user wants to keep him protected from hacking or from the actions of fraudsters, he better keep all Bitcoin assets online or in cold storing privacy places rather than storing in accounts on any of the exchanges.
Types of Crypto Exchanges existing today
According to the use, crypto exchanges fall into some groups that include:
Traditional cryptocurrency exchange: Basically these platforms earn commissions for conducting trade operations with Bitcoin. Sometimes they start dealing with buying and selling digital coins for fiat money. The type of exchange plays the role of exchange between buyer and seller. They allow holders with the opportunity to buy various coins at a market price.
Online guide on a cryptocurrency exchange: These brokers work as intermediary and their services are based on the cryptocurrerncy online transactions on specialized sites. Clients directly deal with this broker and the price is set by the broker. The price includes additional markup from the broker beyond its price. In that case, the buyer, the seller and the broker are participants in a transaction.
Online direct cryptocurrency exchange platform: Such platform offers its customers direct dealing between buyer and seller. Both buyer and seller can set their respective price at which they want to buy or sell.
Cryptocurrency exchange with the help of individual funds: In this case, coin holders have the opportunity to put money in a digital coin without the need to buy and store it. These funds are crypto-asset accounts which are managed by professional-level experts.
The Future of Cryptocurrency
The future of crypto is bright as assumed by some economists. Once crypto is floated on Nasdaq, it will reinforce credibility among users to blockchain. While some argue that a verified exchange traded fund (ETF) will make it easier for people to invest in Bitcoin. But the demand to invest in crypto is still needed. With the advanced encryption techniques known as cryptography, cryptocurrency has become able to capture significant investor and media attention.
Future of Bitcoin
What would be the future outlook of Bitcoin? It’s an apple of discord. ‘’Overwhelming sentiment’’ among crypto advocates is that the total ‘’market capitalization of cryptocurrencies could explode over the next five years, rising to $5-10 trillion’’ as thought by Harvard University Professor of Economics and Public Policy Kenneth Rogoff.
There is no panic when you see the historic volatility of the asset class. The use of Bitcoin is limited to transactions unlikely to physical gold. But the Bitcoin mining system is less efficient compared to central banking.
The feature of anonymity made Bitcoin a choice to fraudsters for performing their illegal activities. This issue has become so to the concerning regulatory and government agencies.
There are some currencies that are alternatives to Bitcoin, these are:
Litecoin: It is the cardinal rival of Bitcoin because whereas Bitcoin mining needs heavy computer horsepower, Litecoins can be mined by a normal desktop computer. Litecoin is designed for processing smaller transactions faster.
Ripple: Ripple is both a currency and a payment system which was launched by OpenCoin. The currency component is XRP and the payment system enables the transfer of funds in any currency to another user on the Ripple network within seconds.
Cryptocurrencies are yet to surmount virtual vault hacking issue and computer crash that takes away one’s digital fortune phenomena. Maybe overtime these issues will be fixed with the advancement of technology. Widespread acceptance by consumers is needed for crypto. Complexity in system may deter people from adoption and the issue needs quick fixing.
Cryptos need to maintain decentralization with adequate consumer safeguards and protection, and preserve user anonymity without being a conduit for tax evasion, money laundering and other nefarious activities. Regulation of some most popular cryptocurrencies can be as regulated as fiat over the next few coming years. But ultimately the success of Bitcoin depends on how it deals with the challenges.
Those who are thinking about investment in cryptocurrency, they should know one thing which is a cryptocurrency has no intrinsic value apart from what a buyer is willing to pay for it at a point in time, This makes it very susceptible to huge price swings, which in turn increases the risk for an investor. Despite several ups and downs, Bitcoin has proved itself in a different way since its origination in 2009 and it has taken itself to such an extent that aspires to become part of the mainstream financial system would have to content very divergent criteria.