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What is a ‘Cryptocurrency’
A cryptocurrency is a medium of exchange like normal currencies such as USD GBP. In other words, Cryptocurrency is a digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of this security feature. A defining feature of a cryptocurrency and arguably its most endearing allure is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation. Today cryptocurrencies have become a global phenomenon known to most people. While still somehow geeky and not understood by most people, banks, governments and many companies are aware of its importance.
Each Bitcoin has a complicated ID, known as a hexadecimal code, that is many times more difficult to steal than someone’s credit-card information. And since there is a finite number to be accounted for, there is less of a chance bitcoin or fractions of a bitcoin will go missing. Most cryptocurrencies are designed to decrease in production over time like Bitcoin, which creates a market cap on them. That’s different from fiat currencies where financial institutions can always create more, hence inflation. Bitcoin will never have more than 21 million coins in circulation. The technical system on which all cryptocurrencies are based on was created by Satoshi Nakamoto.
What is Cryptocurrency trading?
What are the Benefits of Cryptocurrency Trading vs Forex Currency Trading
One comes to Cryptocurrency trading, the main benefit of owning a cryptocurrency is using it as a store of wealth because the fiat money suppliers which can use their purchasing power quite dramatically. What cryptocurrencies like Bitcoin, Ethereum, Ripple and other coins give us is a secondary choice, which actually solves the problem of inflation at the same time.
Unlike traditional forex currency trading, there is no central bank to manipulate the Bitcoin prices the same way Central banks manipulate the exchange rates. Also, Bitcoin trading is free from taxes and broker fees.
In essence, Bitcoin is a digital currency or a virtual currency created, stored and exchanged on the Bitcoin network, unlike currency trading which is traded over the counter. Bitcoins can’t be debased or devalued by more money printed through quantitative easing programs because the total number of Bitcoins is limited to 21 million.
Cryptocurrency Trading has High Volatility Which Creates More Trading Opportunities
The FX volatility has fallen near record-lows in the past 10 years being less than 1%, while on the other side; we have Bitcoin which had extreme volatility readings of 30% with an average volatility reading of 10%. More volatility means more trading opportunities and bigger profits, but at the same time, it also increases the sizes of the losses. Because of this larger volatility, you will find that cryptocurrency brokers offer much lower maximum leverage for these trades.
Analyzing Bitcoin is easier because you don’t have fundamental data like GDP, CPI Inflation, unemployment rate or the business cycle. All cryptocurrencies are not influenced by these macro fundamental data which in essence will make the price action much easier to be read.
History of Cryptocurrency
The first known (to me) attempt at cryptocurrencies occurred in the Netherlands, in the late 1980s, which makes it around 25 years ago or 20BBTC. In the middle of the night, the petrol stations in the remoter areas were being raided for cash, and the operators were unhappy putting guards at risk there. In 1998, Wei Dai published a description of “b-money”, an anonymous, distributed electronic cash system. Shortly thereafter, Nick Szabo created “Bit Gold” Like bitcoin and other cryptocurrencies that would follow it, Bit Gold was an electronic currency system which required users to complete a proof of work function with solutions being cryptographically put together and published. A currency system based on a reusable proof of work was later created by Hal Finney who followed the work of Dai and Szabo.
The first decentralized cryptocurrency, bitcoin, was created in 2009 by pseudonymous developer Satoshi Nakamoto. It used SHA-256, a cryptographic hash function, as its proof-of-work scheme. In April 2011, Namecoin was created as an attempt at forming a decentralized DNS, which would make internet censorship very difficult. Soon after, in October 2011, Litecoin was released. It was the first successful cryptocurrency to use scrypt as its hash function instead of SHA-256. Another notable cryptocurrency, Peercoin was the first to use a proof-of-work/proof-of-stake hybrid. IOTA was the first cryptocurrency not based on a block chain, and instead uses the Tangle.Many other cryptocurrencies have been created though few have been successful, as they have brought little in the way of technical innovation.On 6 August 2014, the UK announced its Treasury had been commissioned to do a study of cryptocurrencies, and what role, if any, they can play in the UK economy. The study was also to report on whether regulation should be considered.
List of cryptocurrencies
There were more than 900 cryptocurrencies available over the internet and growing. New cryptocurrency can be created anytime.
By market capitalization, Bitcoin is currently (2017-08-19) the largest blockchain network, followed by Ethereum, Bitcoin Cash, Ripple and Litecoin
Bitcoin is most famous out of all cryptocurrencies are used. Each Bitcoin has a complicated ID, known as a hexadecimal code, that is many times more difficult to steal than someone’s credit-card information. And since there is a finite number to be accounted for, there is less of a chance bitcoin or fractions of a bitcoin will go missing. Most cryptocurrencies are designed to decrease in production over time like Bitcoin, which creates a market cap on them. That’s different from fiat currencies where financial institutions can always create more, hence inflation. Bitcoin will never have more than 21 million coins in circulation. The technical system on which all cryptocurrencies are based on was created by Satoshi Nakamoto.
Here is the list of cryptocurrencies widely used
The one and only, the first and most famous cryptocurrency. Bitcoin serves as a digital gold standard in the whole cryptocurrency-industry, is used as a global means of payment and is the de-facto currency of cyber-crime like darknet markets or ransomware. After seven years in existence, Bitcoin‘s price has increased from zero to more than 650 Dollar, and it‘s transaction volume reached more than 200.000 daily transactions and now you can buy bitcoin with paypl buy bitcoin with paypal easily
The brainchild of young crypto-genius Vitalik Buterin has ascended to the second place in the hierarchy of cryptocurrencies. Other than Bitcoin its blockchain does not only validate a set of accounts and balances but of so-called states. This means that Ethereum can not only process transactions but complex contracts and programs.
This flexibility makes Ethereum the perfect instrument for blockchain -application. But it comes at a cost. After the Hack of the DAO – an Ethereum based smart contract – the developers decided to do a hard fork without consensus, which resulted in the emerge of Ethereum Classic. Besides this, there are several clones of Ethereum, and Ethereum itself is a host of several Tokens like DigixDAO and Augur. This makes Ethereum more a family of cryptocurrencies than a single currency.
Maybe the less popular – or most hated – project in the cryptocurrency community is Ripple. While Ripple has a native cryptocurrency – XRP – it is more about a network to process IOUs than the cryptocurrency itself. XRP, the currency, doesn‘t serve as a medium to store and exchange value, but more as a token to protect the network against spam.
Ripple Labs created every XRP-token, the company running the Ripple network, and is distributed by them on will. For this reason, Ripple is often called pre-mined in the community and dissed as no real cryptocurrency, and XRP is not considered as a good store of value.
Banks, however, seem to like Ripple. At least they adopt the system at an increasing pace.
Litecoin was one of the first cryptocurrencies after Bitcoin and tagged as the silver to the digital gold bitcoin. Faster than bitcoin, with a larger amount of token and a new mining algorithm, Litecoin was a real innovation, perfectly tailored to be the smaller brother of bitcoin. “It facilitated the emergence of several other cryptocurrencies which used its codebase but made it, even more, lighter“. Examples are Dogecoin or Feathercoin.
While Litecoin failed to find a real use case and lost its second place after bitcoin, it is still actively developed and traded and is hoarded as a backup if Bitcoin fails.
Monero is the most prominent example of the cryptonite algorithm. This algorithm was invented to add the privacy features Bitcoin is missing. If you use Bitcoin, every transaction is documented in the blockchain and the trail of transactions can be followed. With the introduction of a concept called ring-signatures, the cryptonite algorithm was able to cut through that trail.
The first implementation of cryptonite, Bytecoin, was heavily premined and thus rejected by the community. Monero was the first non-pre mined clone of bytecoin and raised a lot of awareness. There are several other incarnations of cryptonote with their own little improvements, but none of it did ever achieve the same popularity as Monero.
Monero‘s popularity peaked in summer 2016 when some darknetmarkets decided to accept it as a currency. This resulted in a steady increase in the price, while the actual usage of Monero seems to remain disappointingly small.
Besides those, there are hundreds of cryptocurrencies of several families. Most of them are nothing more than attempts to reach investors and quickly make money, but a lot of them promise playgrounds to test innovations in cryptocurrency-technology.
How Do You Store Cryptocurrency?
With fiat currency like US Dollars, you can store them at the bank or in your wallet. It’s pretty straightforward.
But with digital currencies, there are a few wrinkles that you need to get your head around, but the idea is similar. Let’s take a look at how cryptocurrency storage works.
You store your cryptocurrencies on the blockchain in a “wallet.” This is simply an address on the blockchain. It’s like how the website address tradingheroes.com directs you to my website, on the internet.
Each crypto wallet has a public address and a private address. The public address is the address that people send funds to. The private address is the “password” that you use to access and send your funds.
Never expose your private key until you are ready to spend your funds, otherwise, you will probably lose all the money in your wallet.
Basically, cryptocurrencies are entries about token in decentralized consensus-databases. They are called CRYPTO Currencies because the consensus-keeping process is secured by strong cryptography. Cryptocurrencies are built on cryptography. They are not secured by people or by trust, but by math. Describing the properties of cryptocurrencies we need to separate between transactional and monetary properties. While most cryptocurrencies share a common set of properties, they are not carved in stone.
Cryptocurrency Transactional properties:
1.) Irreversible: After confirmation, a transaction can‘t be reversed. By nobody. And nobody means nobody. Not you, not your bank, not the president of the United States, not Satoshi, not your miner. Nobody. If you send money, you send it. Period. No one can help you, if you sent your funds to a scammer or if a hacker stole them from your computer. There is no safety net.
2.) Pseudonymous: Neither transactions nor accounts are connected to real-world identities. You receive Bitcoins on so-called addresses, which are randomly seeming chains of around 30 characters. While it is usually possible to analyze the transaction flow, it is not necessarily possible to connect the real world identity of users with those addresses.
3.) Fast and global: Transaction is propagated nearly instantly in the network and is confirmed in a couple of minutes. Since they happen in a global network of computers they are completely indifferent to your physical location. It doesn‘t matter if I send Bitcoin to my neighbour or to someone on the other side of the world.
4.) Secure: Cryptocurrency funds are locked in a public key cryptography system. Only the owner of the private key can send cryptocurrency. Strong cryptography and the magic of big numbers makes it impossible to break this scheme. A Bitcoin address is more secure than Fort Knox.
5.) Permissionless: You don‘t have to ask anybody to use cryptocurrency. It‘s just a software that everybody can download for free. After you installed it, you can receive and send Bitcoins or other cryptocurrencies. No one can prevent you. There is no gatekeeper
1.) Controlled supply: Most cryptocurrencies limit the supply of the tokens. In Bitcoin, the supply decreases in time and will reach its final number somewhere at around 2140. All cryptocurrencies control the supply of the token by a schedule written in the code. This means the money supply of a cryptocurrency in every given moment in the future can roughly be calculated today. There is no surprise.
2.) No debt but bearer: The Fiat-money on your bank account is created by debt, and the numbers, you see on your ledger represent nothing but debts. It‘s a system of IOU. Cryptocurrencies don‘t represent debts. They just represent themselves. They are money as hard as coins of gold.
To understand the revolutionary impact of cryptocurrencies you need to consider both properties. Bitcoin as a permissionless, irreversible and pseudonymous means of payment is an attack on the control of banks and governments over the monetary transactions of their citizens. You can‘t hinder someone to use Bitcoin, you can‘t prohibit someone to accept a payment, you can‘t undo a transaction.
As money with a limited, controlled supply that is not changeable by a government, a bank or any other central institution, cryptocurrencies attack the scope of the monetary policy. They take away the control central banks take on inflation or deflation by manipulating the monetary supply.
Cryptocurrencies & Market Capitalization
Bitcoin is the largest cryptocurrency in both market capitalization, volume, acceptance and notoriety, but it’s not the most valuable coin. NEMstake, while only having a market cap of $1,116,720, trades at $1,117 a coin. Looking at the market cap, Litecoin takes second place after Bitcoin Ripple close behind.
One coin that you are more than likely familiar with is Dogecoin. Dogecoin ranks, on average, thirds in trading volume, but has a relatively low market cap – ranking number six in the largest cryptocurrency.
There is a host of services offering information and monitoring of cryptocurrencies. CoinMarketcap is an excellent way check on the market cap, price, available supply and volume of cryptocurrencies. Reddit is a great way to stay in touch with the community and follow trends and CryptoCoinCharts is full of information ranging from a list of crytocoins, exchanges, information on arbitrage opportunities and more. Our very own site offers a list of cryptocurrencies and their change in value in the last 24hrs, week or month.
Liteshack allows visitors to view the network hash rate of many different coins across six different hashing algorithms. They even provided a graph of the network hash rate so you can detect trends or signs that the general public is either gaining or losing interest in a particular coin.
A hand website for miner is CoinWarz. This site can help miners determine which coin is most profitable to mine given their hash rate, power consumption, and the going rate of the coins when sold for bitcoins. You can even view each coins current and past difficulty.