Cryptocurrencies and the Blockchain Technology have taken the world by storm in the last 6 months. Unprecedented market gains and returns on the side of the cryptocurrencies market have stunned investors. The blockchain technology behind many of them has given hope of changing the precept of the financial system and the way society interacts. Both of these notions sound like an exciting new technological development and means of payment between people and everyone should be looking forward to what they have to offer in the near future. In this article, we are going to look at the basics of Blockchain, Cryptocurrencies, ICOs and what drives their prices and development.
Let’s start with digging deeper into the blockchain as this is the foundation technology of cryptocurrencies. The blockchain is a public database of all transactions that ever happened on a peer-to-peer network.This database is constructed of blocks that are cryptographically linked together forming a chain, therefore the name “blockchain”. Everybody in the blockchain network has a copy of the transactions and accounts in each block from the chain which prevents any other parties from altering information within the blocks. This is protected by a cryptographic layer or in other words hardcore mathematics that can’t be broken.
Cryptocurrencies are a natural progression of the means of payments between people based on the development of new technology and the blockchain. Throughout the year’s people have used many different means of paying each other and the items we used to give value to in order to transact with would be money, coins, cattle, silk, credit cards, etc. The onset of the digital age and the development of blockchain marks the end of physical money and cryptocurrencies would be the next stepping stone of the payment and transactional system. By definition cryptocurrencies are defined as:
A cryptocurrency (also called a crypto-asset or crypto money) is a medium of exchange like government-issued currencies, that uses cryptography to secure the exchange of digital information and control the creation of new units.
Bitcoin is the first decentralized cryptocurrency. Decentralized means that no single person controls and regulates the supply and prices of this cryptocurrency. This means that it uses a peer-to-peer technology which operates with no central authority or banks. Bitcoin is decentralised which means that no single entity controls the money flow and supply. The network is also trustless which means that no need to trust any other peers that participate. Bitcoin is Internet money, anyone in the world can open an account and start sending and receiving funds. The only thing you need in order to open an account is a computer or mobile phone and an Internet connection. The Bitcoin network is operating 24/7, enabling everyone to send and receive funds all the time. Although bitcoin is not only one type of digital currency but a brand that is being recognized more and more as the representation of the whole asset class. There is a limit of 21,000,000 total Bitcoins that can be mined and circulated among the peers of the network.
Ethereum and Altcoins
Ethereum is an open software platform based on blockchain technology that enables developers to build and deploy decentralized applications. The Ethereum platform is built upon the Bitcoin Blockchain infrastructure adding additional functionality or sometimes referred to as Blockchain 2.0. The ability to write smart contracts on the Ethereum network gives its’ peers the power to decentralised any application, not only payments such as on the Bitcoin blockchain. While Ethereum is the second most widely used blockchain platform there are dozens of other once with modified functionality and applications called altcoins. These altcoins are usually derived from the technicalities of Bitcoin or Ethereum. Some of the most notable are Ripple, LiteCoin, Neo, Monero, etc.
ICOs or Initial Coin Offerings have reached astronomical hype around cryptocurrencies and many investors are lured in to invest in these public offers to raise capital. ICOs are similar to IPOs (Initial Public Offerings). An unregulated means by which funds are raised for a new cryptocurrency venture or any other start-up idea, be it good, bad or even ridiculous. An Initial Coin Offering (ICO) is used by startups to bypass the rigorous and regulated intermediation capital-raising process required by venture capitalists or banks. A website you can refer to recent and upcoming ICOs is icoalert. No matter how good an ICO looks or sounds you should always do your own research and due diligence.
How do you keep on top of all this new information and technological developments that come out on a daily if not intra-daily frequency? There are a number of news providers that cover these crypto markets the same way FT and Reuters cover the traditional Financial markets. Below is a short list of some of the most popular and trustworthy providers:
Exchanges & Wallets
Once we have some idea of what blockchain and cryptocurrencies are and where we can learn about them on a daily basis, the question of how do we handle and interact with each other with this currencies comes up. The cryptocurrencies are kept in wallets which can be digital or physical. Although, what really means is keeping your cryptocurrencies is simply keeping your keys which are lines of text and numbers. These keys are used to unlock the value of the cryptocurrencies you possess that is being kept on the blockchain network. Everyone can see the money, although only the key holders can access them. The physical wallets can be a sheet of paper with your key on it or high tech cryptographically secured USB sticks such as Trezor or Nano Ledger S. Digitally, you can store your cryptos on cryptographically secured software applications be it on the cloud or on your desktop or server. Applications such as Jaxx and Exodus.
Trading cryptocurrencies between other people can be done through exchanges or OTC directly exchanging keys between peers. Below is a list of some of the most popular and safe crypto exchanges:
Now, you have the tools and knowledge to use and trade cryptocurrencies between one another. Although before you head off to start making the big money, make sure you invest more of your time in education and further research on cryptos from podcasts and following telegram groups and Twitter accounts:
Telegram Groups: @whaleclub.io @whalepoolbtc @badcryptoeducation @crypto @thecoinfarm @trollbox @UKcrypto
In addition to keeping on top of Twitter Accounts to Follow:
Investing and Trading
Finally, I would like to put forward a few investing and trading strategies you can implement with particular crypto pairs or ICOs:
- Momentum Long Trend Following – the trend is your friend, research and find crypto to invest in the long-term. Don’t get sidetracked by the news and media.
- Short News-based Corrections – On the opposite side, constantly monitor Twitter, telegram, and the news providers for short-term corrections based on the information.
- Exchanges Arbitrage Opportunities – monitor for price differences between currency pairs on the different exchanges and take advantage of it.
- ICO pump and dumps – similar to penny stock pump and dumps finding ICOs before they get listed on exchanges and explode to trade long/short speculative bursts of volatility.
- Volume Day Trading – OBV(On Balance Volume). Trading on the basis of massive amounts of volume that direct particular movements of the cryptos markets.
Anything could happen in the crypto market and no one is saved from wild volatile swings at the early stage of creation of this asset class. None of the information above is to be considered as an investment or trading advice rather than my personal research and observations to help in your journey to the world of crypto. The blockchain technology behind bitcoin and other cryptocurrencies could be perceived as the equivalent of the Internet in the 90s as this may prove to have such an impact on society. Position yourself so that you don’t miss all of the fun and the excitement of the technological developments of our generation.