Understanding cryptocurrency charts

Understanding cryptocurrency charts

If you’re considering becoming an active cryptocurrency trader, you’ll most certainly want to keep an eye on some sort of price chart. Like traditional stocks and shares investing, it’s important to keep an eye on prices to determine the best times to buy and sell.

It’s a good idea to start understanding cryptocurrency charts by knowing what the most common ones are, what they represent and how to read them, so that you can start using them to your advantage.

1. Line charts

Line charts are designed to provide a quick and simple overview of cryptocurrency pricing, and so are best suited for beginners and less active traders. They work in a similar fashion to the simple line charts that you can create in Excel, and typically show how the price of a certain cryptocurrency changes over a specific time frame (this can range from hours and days to months or even a year at a time).

Line charts will typically show the price of the cryptocurrency (e.g. Bitcoin) vs. another cryptocurrency (e.g. Ethereum) or a fiat currency (e.g. GBP).

Line charts tend to only give one price value: the closing price. You can’t see the opening price, the high price and the low price, which are important factors for investors who try to predict where prices will go next. These are covered in the more complex charts.

2. Bar chart

A cryptocurrency bar chart includes four important values that are useful for traders: high price (the highest price it achieves), low price (the lowest price it achieves), opening price (the price at which the currency starts, at the beginning of a selected time frame) and closing price (the price it finishes at, in a time frame). When combined, these values show the ‘trading range’ for a cryptocurrency across any given time.

Cryptocurrency bar charts look different to the type you typically see in Excel, or perhaps worked with while at school. The highest and lowest points of the vertical line represent the highest and lowest price of a cryptocurrency during a specific time frame. The horizontal dashes at the left and right represent the opening and closing prices respectively, during that same timeframe.

Bar charts are certainly a step up in complexity from line charts but are a step down from candlestick charts, which we’ll cover next.

3. Candlestick charts

Candlestick charts are arguably the most important type of chart for any active and committed trader. It shows you everything that a line and a bar chart can show you combined, but with more depth.

These charts display bars that are known as ‘candlesticks’. Like the bar chart, each end of the candle body indicates the opening and closing price of the cryptocurrency in that time interval. The wick, which can appear on either side of the candle (or indeed both sides), shows fluctuations above and below the opening and closing price. The ends of the wicks therefore represent the highs and lows of price for that cryptocurrency.

You will notice that candlesticks appear in different colours. In the world of cryptocurrency, they are most commonly either red or green. If the candlestick is red, the closing price was lower than the opening price (indicating a ‘bearish’ trend). If the candlestick is green, the closing price was higher than the opening price (indicating a ‘bullish’ trend).

If the candle is shorter, it indicates a smaller difference between the opening and closing prices. If the wicks are shorter, it indicates that the highs and lows were not as far away from the opening and closing prices. This type of chart is more useful for traders because it helps them to do more technical analysis, which in turn helps to predict where the price will go next.

Taking the time to understand cryptocurrency charts will help you to understand how the markets behave and thus, enabling you to make more informed decisions.

The post Understanding cryptocurrency charts appeared first on Netcurrencyindex.

source https://netcurrencyindex.com/college/understanding-cryptocurrency-charts/

Cryptocurrency volatility

Cryptocurrency volatility explained

Volatility is about change and fluctuation. The fact that assets go up and down in value is the very essence of trading, and trading becomes very interesting when markets fluctuate dramatically. Knowing when to make the right trading decisions can result in some considerable profits.

Of course, part and parcel of volatility is that uneducated trading decisions s may lead to large losses. This is something traders in the traditional stock and commodities markets are aware of.

So why is cryptocurrency volatility such a big deal?

Essentially, because it’s very pronounced. With a commodity such as gold, you can reasonably expect volatility levels of around 1 to 1.5%. Major currencies are less volatile, with a standard deviation of daily returns of between 0.5 to 1%.

Cryptocurrencies are well known for their volatility ranges which are upwards of 10% – Nonetheless, there are trading periods, where technical and fundamental market catalysts can trigger fluctuations of 20-70% or more. Upwards and downwards fluctuations as such, hardly go unnoticed.

What makes cryptocurrency so volatile?

There’s no one answer to this question. Volatility is affected by many different factors, including:

Basic supply and demand: As with other assets, interest is not always aligned with availability. When a specific cryptocurrency has more demand by traders or investors than the current supply, due to perhaps market sentiment, anticipation and fundamentals, the price is likely to move upwards. Conversely, when there is more available supply of a cryptocurrency than current demand, the price will result in a downtrend.

Public sentiment and perception: Volatility is affected by how people perceive cryptocurrency: media buzz and fawning editorials in the mainstream press might make interest in a coin go up; criticism and condemnation might make it go down.

For example, when JP Morgan CEO Jamie Dimon criticised Bitcoin in September 2017, we saw a temporary downturn in price. But global interest in Bitcoin soared towards the end of the year, and this contributed towards a massive upswing and an all-time high valuation.

Smaller market size: Put simply, the cryptocurrency market is significantly smaller than the foreign exchange market. To put it into perspective, the size of the foreign exchange market is approximately 5.3 trillion, whereas, cryptocurrency is 370 billion (at the time of writing). Circulation is restricted in many cases: for example, there are only 21 million bitcoins in to be mined, where 16,909,325 are in circulation; and 84 million litecoins where 55,552,031 circulating respectively. Some aren’t finite, but crypto market sizes remain small compared to major fiat currency markets.

This means that wealth distribution is invariably skewed, and that ‘whales’ – individuals who own a large amount of the cryptocurrency – can have a significant influence over the coin value. It also means that smaller market movements can have a bigger impact on the price than might be the case in major fiat currency markets.

Varying perceptions of the intrinsic value of the cryptocurrency: people all agree on what cryptocurrency’s ‘true’ worth is. Some are probably buying it without really believing that it can function as a store of value or wealth, while maintaining a belief in its underlying technology – and its transformative potential.

Is volatility good or bad?

Well, that depends on where you’ve put your money. Investments are all about risk: if you’re unwilling to shoulder any at all, you should probably consider other means of making money. Some bets will come off; some won’t. It’s all part of the excitement, and the frustration.

But volatility is ultimately a more important consideration for short-term traders, who take advantage of price changes to make a profit. If you’re going to ‘hodl’ your crypto for the long-term, then it’s probably less important.

Nonetheless, it would be a huge mistake to ignore volatility. It can change your plans for good or ill.

The post Cryptocurrency volatility appeared first on Netcurrencyindex.

source https://netcurrencyindex.com/college/cryptocurrency-volatility/

The importance of Do your own research (DYOR)

The importance of Do Your Own Research (DYOR)

“Do Your Own Research” (DYOR) is a popular term within the cryptocurrency, blockchain and trading communities. It’s a gentle reminder to take charge of your own investment knowledge and decision-making.

This is especially important for newcomers, who are more prone to making mistakes – or being misled. Luckily, when it comes to cryptocurrency, there are plenty of resources to help you.

The top mistakes crypto newcomers make

Newcomers often rely on other people for advice, but investing is ultimately a personal decision.

Newcomers are often disappointed if they don’t suddenly make big gains overnight. In the world of cryptocurrency, it pays to be patient – it takes time to build your knowledge and some coins can take time to build up momentum.

Lots of beginners in this space also make the mistake of skipping over learning about security measures. This includes reading about things like digital wallets, and public and public keys, but these are crucial to understand, to avoid theft and unauthorised access to funds.

Challenges you may encounter when learning

Concrete information on certain subjects can be hard to find or may not exist yet. For some new coins, this can lead you to jump on the hype bandwagon before doing your own research. The fear of missing out (FOMO) is a very real phenomenon within the world of cryptocurrency. That said, it is also fairly common to encounter unduly negative opinions of other cryptocurrencies, which can lead to you genuinely miss out on a sound investment.

Verifying and understanding information can also be challenging. Similar to any other new and complex topic, all it takes is time to read, understand, question and assimilate the information at hand. Remember, patience is a virtue.

Useful research for DYOR

Below are some resources that allow you to gain some wisdom prior to deciding what cryptocurrencies you would like to invest in:

Market capitalisation databases: Coin Market Cap is perhaps the most popular cryptocurrency price and market capitalisation website.

ICO calendars: ICO calendars are curated calendars of new token sales. With Tokenmarket, for example, you can register to be alerted before a token sale commences.

Block Explorers: Block Explorers can help you check address balances, track coin transfer histories, keep an eye on transaction acceptance and monitor other statistics and variables. You can read more on Block Explorers here.

Forums: Reddit is probably the biggest community in the blockchain space, but it can be the root cause of FOMO-driven purchases. Make sure to use it to do your own research and make your own decision. A popular reddit thread is r/cryptocurrency. Medium is also popular for independent commentary.

Various types of price charts: Including line charts, bar charts, and candlestick charts. You’ll learn about these in the next module.

News outlets: Make sure to read a variety of news outlets – not just cryptocurrency-focused publications, but national news outlets too, so you get a balanced view.

Whitepapers: If you’re looking for a deeper dive into cryptocurrency, it’s worth looking at some of the original whitepapers published on Bitcoin and others.

Questions to ask before you invest

Here is a handy checklist of the basic questions that you should ask before investing in cryptocurrency:

• What are the key features of the cryptocurrency’s blockchain?
• How did the cryptocurrency develop and what are the plans for future development?
• Is the cryptocurrency truly ‘decentralised’?
• Which exchanges offer your chosen cryptocurrency/cryptocurrencies?
• Does it solve a problem?
• How different is the cryptocurrency to its closest competitor?
• Any legal barriers to entry?
• How big is the target market?
• How is their marketing and social media presence?
• How reputable is the history of the team?
• How concrete is their roadmap?
• Look for any red flags – Google is your best friend!

Whilst there is a lot of excitement around cryptocurrency, knowledge is power. Invest the time in doing your own research before investing your money, and you’ll be more likely to achieve success within the cryptocurrency world in the long run.

The post The importance of Do your own research (DYOR) appeared first on Netcurrencyindex.

source https://netcurrencyindex.com/college/the-importance-of-do-your-own-research-dyor/

Cryptocurrency transaction speeds

Understanding cryptocurrency transaction speeds

When it comes to processing transactions, intermediaries such as banks have been traditionally seen as a necessary nuisance: in reviewing and authorising payments, they have provided a vital service. But depending on where payments are made, where they’re being sent, and the amount being sent, this can take some time: international transactions in particular can take up to three to five days.

It’s a real pain point for consumers, and one that – you guessed it – blockchain technology can help alleviate. This decentralised, digital distributed ledger technology can log any payments made without the need for an intermediary. This means faster transaction processing and lower transaction fees.

Accordingly, blockchain isn’t just interesting to crypto-enthusiasts. Traditional financial institutions, within sectors such as banking and insurance, are actively experimenting with it too. Additionally, there has been a number of financial institutions developing proof of concepts to facilitate more transparent and secure transactions.

Comparing transaction speeds

That said, we’re not yet at the point where blockchain renders banks completely redundant – as How much.net’s analysis of transaction speeds reveals:

Transaction type	Transactions per second
Visa	24,000
Ripple	1,500
PayPal	193
Bitcoin Cash	60
Litecoin	56
Dash	48
Ethereum	20
Bitcoin	7

We can see here that Visa is clearly in the lead. It’s not altogether surprising that a 60-year old company that’s had decades to improve its transaction infrastructure would have an advantage when it comes to payment processing.

Where blockchain-based cryptocurrency networks are concerned, Ripple registers the best performance: with 1,500 transactions processed per second, it’s almost eight times faster than PayPal. Bitcoin Cash has the third-fastest speed (and the second-fastest among cryptos), but as it’s only able to process 60 transactions per second, there’s a considerable gulf between it and Ripple. Litecoin (56) and Dash (48) are somewhat comparable, while Ethereum (20) and Bitcoin (7) bring up the rear – their escalating popularity seems to be outpacing network processing capabilities and causing delays. (Comment (Jacob) – Ripple doesn’t use an adversarial method (proof of work) for deciding which transactions get processed but rather uses a cooperative one (distributed agreement).

The network will not slow down due to transaction volume. Instead, the transaction fees will increase to keep the transaction demand at a level that the system can handle. So right now, you can get a transaction fully-confirmed in about 10 seconds for a hundredth of a penny. In the future, that cost might go up).

What determines transaction speed?

As detailed in the previous lesson, transaction fees and transaction speeds are closely intertwined. If the user has paid a larger fee, crypto miners will prioritise their payment over others. Accordingly, high-value transactions are typically the quickest.

Speed is also impacted by the popularity of a particular coin. Bitcoin, for example, has placed considerable pressure on the network – which has in turn caused considerable delays and considerable criticism. As a result, two hard forks have emerged: Bitcoin Cash in August 2017, and Bitcoin Gold in October 2017.

Improving transaction speeds

Speeding up the payment process will be essential to the future of blockchain and cryptocurrency alike. But how can it be done?

SegWit, as we’ve discussed previously, may provide one method. As a soft fork change in cryptocurrency’s transaction format, it’s already been implemented by some coins – including Litecoin. It frees up more space in each block, making room for more transactions to be processed at a faster rate. Popular adoption remains elusive, but it has paved the way for other technologies that might improve the pace of payments.

The Lightning network theoretically allows Bitcoin transactions and micro transactions to occur instantaneously: no delay necessary. Where the current process relies on mining rigs, in which computers solve complex math problems before payments can be recorded on the ledger, the Lightning Network instead requires participants to agree to conduct a transaction via a separate offline channel. The blockchain would then update to reflect this external transaction. This is much quicker and may even help cryptocurrency compete with other instant payment platforms.

The Lightning Network entered alpha testing in January 2018. They are aiming to make cryptocurrency faster and more convenient. As of early 2018, blockchain’s future of high-speed payment processing has begun to be taken into consideration.

The post Cryptocurrency transaction speeds appeared first on Netcurrencyindex.

source https://netcurrencyindex.com/college/cryptocurrency-transaction-speeds/

Introduction to cryptocurrency transaction fees

Introduction to cryptocurrency transaction fees

Like most things in life, there’s a fee attached to cryptocurrency transactions. Every time you send any cryptocurrency, from your address to another, you incur a network transaction fee.

This fee is either added on top of the value of crypto you are sending, or deducted from the end cryptocurrency, depending on the wallet or exchange you are using.

The actual fee you pay will vary according to the network you use. A Bitcoin transaction will warrant a different fee to transactions placed on the Bitcoin Cash, Ethereum or Litecoin network – and so on and so forth.

Crucially, the fee you pay is not a consistent figure – it can fluctuate depending on market demand and network capacity for confirmations. Average transaction fees on the Bitcoin network, have been progressively increasing since the cryptocurrency’s inception in 2009 due to transaction capacity becoming an artificially scarce resource.

Why are there fees? Who benefits?

The fees are received by miners. More specifically, the fee is received by the miner who verifies the block on the network which contains your particular transaction.

Miners receive the fees because they use their computing power to verify transactions and uphold the security of the network. Miners receive these fees in addition to the new cryptocurrency that is released when a new block is mined. In other words, they are doubly incentivised to do the work they do because they receive both fees and the ‘block reward’.

How are fees calculated?

The amount you pay per transaction is determined by how much you’re willing to spend. There is often a degree of outbidding involved – the more you pay, the more people you outbid and the faster your transaction is processed. The transactions of those people you’ve outbid are deprioritised.

Outbidding makes sense for larger transactions that are worth thousands or even millions of pounds worth of Bitcoin. Most people who are sending transactions of this size won’t mind paying a fee which is minimal by comparison. Of course, there is no point paying a fee of five pounds worth of Bitcoin if your transaction involves buying a coffee that amounts to two pounds worth of Bitcoin!

This isn’t to say smaller transactions aren’t processed at all – however, they’re likely to be processed slower, should the network be congested, as people are less likely to pay higher fees on them.

Sometimes the digital wallet software that you use will give you a suggested bid – but it’s worth doing your own research instead of simply going along with what you are told. There are resources available that allow you to track the average fees that are being paid for transactions of different sizes (in bytes). Brushing up on this information may save you money in fees.

Why have fees increased?

Fees typically increase in accordance with the growing usage and popularity of cryptocurrency networks. Bitcoin is the best example of this. As Bitcoin has surged in popularity, more people are seeking to place transactions within the network, and the pressure on the network is increasing as resource is scarce.

Making matters worse is Bitcoin’s scalability problem. Its block sizes are limited to 1MB each, which restricts the number of transactions Bitcoin can process to approximately 7 per second. . More and more transactions are occurring, due to increased demand, yet the block size remains the same. The result is that transactions are taking more time to process, and people are paying higher fees to get their transactions processed first.

Solutions to the problem of increased fees

The simplest way to tackle the problem of increased fees on the Bitcoin network (and other networks for that matter) is to make it possible for more transactions to be processed faster. Solutions are currently in the works to address these scalability issues – the SegWit soft fork (we covered soft forks and hard forks in a previous lesson) is a good example. In short, SegWit aims to free up more space in the block for transactions by removing signature data and moving it elsewhere.

Another example of a solution is the Bitcoin Cash hard fork. This has increased the block size to 8MB, and in doing so, has created its own separate blockchain and corresponding cryptocurrency. As solutions are being worked on, newcomers in the cryptoverse should be made aware of transaction fees. Before initiating a transaction, consider the fees as well as the time involved to process your transfer. If you’re diligent and dedicate the right time and effort to doing the necessary research, you can be more cost-efficient with regards to the fees you pay on your crypto transactions – and save money in the process.

The post Introduction to cryptocurrency transaction fees appeared first on Netcurrencyindex.

source https://netcurrencyindex.com/college/introduction-to-cryptocurrency-transaction-fees/

Know your bulls, whales and bears

‘Bears’, ‘Bulls’, and ‘Whales’ explained

If you’re involved in the traditional stock market – or have some knowledge of it – you’re probably familiar with the terms ‘bull’ and ‘bear’ used when describing markets.

In fact, you may have heard of many different types of trading ‘beasts’ – all of which are used to indicate specific market outlooks and behaviours.

The world of cryptocurrency is, in many ways, radically different to the traditional stock market. However, the terms ‘bull’, ‘bear’ and even ‘whale’ are commonly used by crypto traders and investors alike.

To help you develop from cryptocurrency market beginner to expert, this lesson will focus on the key terms you need to be familiar with in order to understand market sentiment.

1. ‘Bulls’ and ‘bull markets’

In the traditional world of stock trading, a bull market is one defined by optimism. To be ‘bullish’ means to have a positive outlook – and people who are overly optimistic are commonly referred to as ‘bulls’. Depending on your personal outlook, you might see this as a positive label or, quite possibly, as a sign of derision.

In any event, bull traders are typically more optimistic about the direction of market prices. When it comes to the prices themselves in a bull market, you can expect higher highs and higher lows and buying is generally encouraged. A good example of a ‘bull run’ is Bitcoin’s huge surge towards the end of 2017.

2. ‘Bears’ and ‘bear markets’

Contrary to a bull market, a bear market is defined by caution and pessimism. In a bear market, you can expect lower highs and lower lows – a good example is Bitcoin’s downturn at the start of 2018.

A bear market is generally an environment in which people are more likely to sell than buy.

Be careful not to confuse a bear market with a price correction though. The former is a sustained period of downward price trends; while the latter occurs as a measure to,as the name implies, ‘correct’ the price of an overvalued commodity or currency.

3. ‘Whales’

‘Whales’ are most simply described as individuals who hold a significant amount of a certain cryptocurrency. So much so, in fact, that when they buy or sell, they don’t just make a splash in the market – they make waves! These waves can be large enough to have a major impact on the whole market. An example of a whale could be someone like Vitalik Buterin, who naturally holds a lot of ether.

Thanks to their digital wealth, and in part due to the unregulated nature of the markets, a whale has the power to move prices in their preferred direction. Many cryptocurrency traders pay close attention to whales (whale-watching, anyone?) and watch how, when and where they trade. This way, they can go along for the ride and profit alongside the whale – or, alternatively, simply avoid going against y the whale, as that would result in losses.

It’s not all that easy or straightforward to spot a whale. You need to look out for abnormal changes in prices and volatility during periods which are expected to be quiet and stable.

Why do these terms matter?

If you’re looking to become a successful cryptocurrency trader, you need to be able to react to bear and bull markets and, if you can, align your trading activity with those of whales.

It’s not the terms themselves that matter – it’s about understanding different crypto markets and the various players within them. Knowing what a bull or bear market means for prices could be the difference between making significant profits or significant losses.

It’s also important that you grow familiar with the terms commonly used by the crypto community. This will allow you to keep up with more in-depth analysis of behavioural trends and price fluctuations. You could say that if you can tell a ‘bear’ from a ‘bull’ and a ‘minnow’ from a ‘whale’, you’re one step closer ‘to the moon’.

We will be covering more crypto slang in a later lesson.

The post Know your bulls, whales and bears appeared first on Netcurrencyindex.

source https://netcurrencyindex.com/college/know-your-bulls-whales-and-bears/

Introduction to cryptocurrency trading pairs

Introduction to cryptocurrency trading pairs

Cryptocurrency may be the entry point into the world of trading for many enterprising newcomers. This is by no means a bad thing, but it does raise two obstacles. The first is that they have to get to grips with the world of cryptocurrency. The second is that they have to get to grips with the art of trading.

Because we believe that cryptocurrency is going to change the world, and when it comes to the exchanges, many of the most important concepts carry straight over from conventional stock or forex investment communities. ‘Trading pairs’ is just one example.

If you’re new to the crypto exchanges, you might be wondering what they are – and, moreover, why they matter.

Pair necessities

Pairs trading is what happens when you take a ‘long’ position in one stock – and a ‘short’ position in another. These stocks can be positively correlated and moving in broadly the same direction, which can mean investing in relatively similar companies: going long on Coke (KO) and going short on Pepsi (PEP); going short on Ford (F), go long on General Motors (GM), or vice versa. However, trading pairs can also be negatively or non-correlated – it really depends on the assets you are interested in.

Once you’ve established your trading pair of choice, you’ve got to monitor the markets closely. If one stock starts moving in a different direction from its counterpart, you buy the one that’s underperforming and short-sell the one that’s overperforming. Through the magic of trading, you then make a profit.

Trading pairs in cryptocurrency

When it comes to cryptocurrency, it all works in pretty much the same way – just with Bitcoin, Litecoin, Ethereum, Ripple, et. al, or a fiat currency. One long, one short, short the one that’s doing well, buy the one that’s doing poorly, rinse, lather, apply moisturising hand cream and repeat.

Okay, it’s not quite as simple as that. But we’ll cover trading strategies in more depth in later modules.

For now, the only real difference between traditional stock trading pairs and cryptocurrency trading pairs you should be aware of is that – cryptocurrency being a relatively new phenomenon – it can often be difficult to find your exact pair on a single exchange. Accordingly, most pairs will involve a major coin like Bitcoin or Ethereum.

Pairing is caring

So how do you know which coins to pair? On most exchanges, when you see two different currency symbols next to each other, it means you can buy and sell them against each other. The first trading pair you encounter in this manner will likely be your native fiat against Bitcoin, and it should display thusly: GBP/BTC; EUR/BTC; USD/BTC. Most exchanges will offer simple pairings of Bitcoin, Ether, or Litecoin with GBP, EUR or USD.

More complicated pairs and more advanced trading will require delving into the altcoin market, which typically doesn’t accept fiat currency – though it varies based on what a specific exchange has to offer.

Some exchanges, for example, might offer USD/XRP (the pairing of the US dollar and Ripple), but others may not. More commonly, major coins such as BTC and ETH are used as the gateway to a wider selection of trading pairs.

Pairing it down

So which currency combinations are the most lucrative?

Well, that’s a question for a later module: we’ll be covering specific strategies further down the line. But, generally speaking, it varies based on your objectives and on current market conditions.

The post Introduction to cryptocurrency trading pairs appeared first on Netcurrencyindex.

source https://netcurrencyindex.com/college/introduction-to-cryptocurrency-trading-pairs/

What is a cryptocurrency exchange?

What is a cryptocurrency exchange?

A cryptocurrency exchange is essentially exactly what it sounds like – a website or app where you can trade Bitcoin and other digital currencies between each other and for traditional currencies, such as sterling.

It effectively acts as an intermediary between buyers and sellers, allowing them to trade digital and fiat money for bitcoin, ether and Litecoin, amongst others. An exchange must therefore also serve as a cryptocurrency reserve.

To use most exchanges – including the  Colsio Crypto Exchange – you’ll be required to create and verify an account with supporting identification documents before you can start trading. You may not want to keep all of your cryptocurrency on these platforms for too long, so in this case it’s recommended that you also utilise a private wallet.

How cryptocurrency exchanges work

Cryptocurrency exchanges work in a similar way to traditional stock exchanges, to an extent:

1. You deposit an amount of money – usually over a predetermined minimum – in a fiat or digital currency supported by the exchange.
2. The software matches any buy orders (known as ‘bids’) to sell orders (known as ‘asks’).

3. Let’s say you’re interested in Bitcoin. If you’re the buyer, you offer a maximum price-per-bitcoin and, if you’re a seller, you offer a minimum price-per-bitcoin. If the bid exceeds the ask, the exchange matches them together and the transaction goes through.

Market orders and limit orders

There are two kinds of orders that you can make on cryptocurrency exchanges.

The first is a market order, where you effectively authorise the exchange to make a transaction as quickly as possible at the prevailing market price.

The second is a limit order, where the exchange only completes the transaction if it meets your maximum or minimum price limits.

We’ll explain these and other order types in more detail in a future lesson.

Different types of exchange

Cryptocurrency exchanges can be divided into four categories:

1. Traditional trading platforms

These exchanges are about as close as you can get to a traditional stock exchange while still trading cryptocurrencies. These are platforms like Colsio that facilitate trades by acting as the intermediary between parties.

2. Direct trading exchanges

Direct trading exchanges, also known as decentralized exchanges, are a little different, offering direct person-to-person trading for individuals without the need for a middleman. This is because they are operated and maintained exclusively by software.

3. Cryptocurrency brokers

These are websites where you can buy cryptocurrency directly from the brokers, who set their own exchange rates.

4. Cryptocurrency funds

More or less the crypto equivalent of an investment portfolio, these are essentially pools of professionally managed cryptocurrency assets which allow you to buy and hold cryptocurrency.

Choosing your cryptocurrency exchange

It’s hard to say that any one kind of cryptocurrency exchange is the ‘best’. Everyone has different requirements and some platforms will be better able to serve them than others.

Here are some factors that you should consider when making your decision:

Location: Many cryptocurrency exchanges have geographical limitations, so the first thing to do is check what’s actually available in your country.

Trading options: Which currencies are available on which exchanges? Most only offer a handful of different options.

Fees and charges: These vary between platforms, from 0.5% to 5% (ouch). They’re basically service charges for using the exchange.

Deposit and withdrawal limits: Some platforms can support larger volumes of capital than others – so find one that meets your ideal level of investment.

Reputation: Security, customer experience and accessibility are extremely important. It doesn’t matter if the fees are low and the withdrawal limits are high if it doesn’t work as intended.

Most importantly, don’t rely purely on word of mouth. What works for someone else might not work for you, so it’s worth doing some independent research to find your ideal crypto platform.

The post What is a cryptocurrency exchange? appeared first on Netcurrencyindex.

source https://netcurrencyindex.com/college/what-is-a-cryptocurrency-exchange/

Public and private keys

Public and private keys

What are public and private keys? More to the point, what do they do? It’s not a particularly simple topic, so let’s break it down into bite-sized chunks.

Public and private keys are a sophisticated form of cryptography that help to secure cryptocurrency transactions. Cryptography is an essential feature of cryptocurrency (hence the name).

Modern cryptography uses a combination of mathematics, computer science, electrical engineering, communication science and physics to create nearly uncrackable codes – or ‘keys’. These are used to prevent third parties from gaining illegitimate access to or knowledge of sensitive information.

So, what are these ‘keys’?

In cryptography, a ‘key’ is a string of data – alphanumeric characters to be precise – that is used to decrypt, or ‘unlock’, a block of encrypted text and turn it into plaintext (readable text). It also works the other way around – it can encrypt, or ‘lock’, plaintext.

There are many different variations of cryptographic keys, but in the world of cryptocurrency you just need to be aware of public and private keys.

These keys work together to help secure the cryptocurrency ecosystem. When you make your first cryptocurrency transaction, you will receive two unique keys for the wallet you utilise – one public and one private. This pairing of keys is also known as ‘asymmetrical cryptography’.

What is a private key?

Your private key is a 256-bit number that is 64 characters long. It’s essentially your unique digital ID that allows you carry out any kind of cryptocurrency transaction. You should never share this number with others, as otherwise you risk losing all your funds.

Each time you make a transaction on the network, the validity of that transaction needs to be confirmed by nodes. Nodes are basically the computers (and the people operating them) which validate cryptocurrency transactions and add them to the blockchain.

The transaction is signed off by you, using your private key – but that’s just the first step. To fully confirm the transaction, you also need a public key.

What is a public key?

A public key acts as your public address on the network. It’s a very long string of numbers compressed down into a much shorter version that you can share with others – like a bank account number. When someone wants to send you cryptocurrency, they need to know your public key to process the transaction.

A public key is created by applying a very clever algorithm to your private key. The two keys are closely connected so that during a transaction you can prove two things; namely that you are the owner of the private key and that you can receive funds to your public address.

To summarise – you use your public key to receive funds and your private key to transfer or spend your funds. If you lose your private key, your funds will be inaccessible forever. Your public key, however, can be recovered using your private key, so it doesn’t matter as much if you were to lose it.

Your private and public keys are stored in your digital wallet. We spoke about digital wallets in an earlier lesson, so have a quick revision if you need a refresher!

The post Public and private keys appeared first on Netcurrencyindex.

source https://netcurrencyindex.com/college/public-and-private-keys/

Introduction to Block Explorers

Nope, it’s not a Minecraft add-on.

A Block Explorer is an online blockchain browser – it registers and displays the contents of transactions, transaction histories and balances of public addresses. If you’re wondering what a public or private address is, we’re going to look into that in more detail later on in a dedicated lesson.

So, now you know what a Block Explorer is – but why does it matter?

Block Explorer 101

Block Explorers are examples of decentralised websites. That means that all information comes directly from the blockchain, as opposed to a centralised database. In fact, the only thing centralised parties control at all are the front-end aspects of the website! The open source nature of Block Explorers also means that if one is shut down, another can be built in its place with relative ease.

Block Explorers come in many different flavours. Most of the best known are powered by the Bitcoin and Ethereum blockchains – the former has many website options, including blockexplorer.com and blockchain.info; while the latter has websites such as etherscan.io.

What these sites have in common is the ability to view blocks as they are being mined in real-time. Every transaction can be viewed and all data relating to it is made accessible. For advanced users, who already know about these blocks and understand their full significance, this is extremely valuable.

The relevant data which can be accessed includes:

1. The block’s ‘reward’.
2. The device used to mine said block.
3. The ‘difficulty score’ of each block (how hard it was to mine).
4. The byte size of each block. This is capped at 1MB for Bitcoin, but it varies for other cryptocurrencies.
5. The constituent transactions of each block, which includes the amount sent and received, public addresses of senders and recipients, fees and confirmations – amongst other things.

What can a Block Explorer be used for?

Of course, knowing what a Block Explorer does isn’t the same as knowing why it’s important.

These websites have a variety of uses for the crypto-conscious user. By using a Block Explorer, you can:

1. Check address balances.
2. Track coin transfer histories.
3. Keep an eye on transaction acceptance.
4. Monitor other statistics and variables.

Decentralised websites also have other applications which are worth exploring.

Decentralisation in action

Block Explorers aren’t the only example of decentralised websites and applications (dApps). Other popular dApps include Steem (steem.io), a social media and blogging platform built on top of the Steem blockchain.

Contributing quality content to Steem and helping expand the community rewards you with a variable quantity of the platform’s cryptocurrency – the Steem dollar. If the server goes down, it won’t have too much impact – Steem’s open API means anyone can develop a new website or dApp on top of its blockchain.

Blockchain – as impressive as it is – may eventually simply be remembered for lighting the spark that led to mass decentralisation. Block Explorers are just one example of those sparks.

The post Introduction to Block Explorers appeared first on Netcurrencyindex.

source https://netcurrencyindex.com/college/introduction-to-block-explorers/