The Total Guide for Cryptovalute (Bitcoin, Ethereum and others)
The criptovalute , all of Bitcoin, have in recent years attracted the attention of experts and investors. The reason lies not only in the novelty of the instrument, however decidedly notable, but also in the incredible rise of which they are protagonists. Bitcoin, after a period of sharp decline, is beating a record after another - see Bitcoin listing . This has helped to bring out cryptocurrency as an asset to be considered. But if in reference to traditional assets there is a rich literature, such as to allow the trader to master the matter, the cryptocurrencies are in part an unknown object , whose dynamics are not totally similar to those of traditional currencies.
Here is a "profane" guide on cryptocurrencies.
Image The Total Guide for Cryptovalute (Bitcoin, Ethereum and others)
What is a Cryptocurrency
Cryptocurrency is defined as a digital currency that responds to specific characteristics: it is decentralized (it does not have a central bank that regulates the issue or that manipulates the price), it is based on cryptographic techniques to realize transactions, allows (obviously) to carry out payments, buy goods and trade with other currencies.
Each cryptocurrency is based on certain software, which helps to ensure the security of transactions and protect against the risk of digital counterfeiting. It should be specified that there is generally no authority in charge of monitoring (rather than monitoring), but it is all managed automatically. If some isolated cases are excluded, the cryptocurrency mechanism holds up rather well.
The absence of an authority acting as a central bank does not mean that the "crypto" currencies are prey to anarchy. From the creators, systems have been put in place to prevent and prevent anomalies, such as the inflating spirals. The most used systems are those that limit the creation of new money.
Some question whether cryptocurrencies are real coins, in the sense that in everyday life it is almost impossible to pay in Bitcoin rather than in Ethereum etc. This is an injury: firstly, many purchasing platforms accept cryptocurrencies, secondly it is possible to exchange with current currencies. However, there are still obstacles to spendability, for this reason cryptocurrencies are considered more like an asset on which to invest than a real currency.
Risks of cryptocurrency trading
There are risks in using cryptocurrencies, both as a current currency and as an investment asset. The biggest source of risk concerns the technological question. Cryptocurrencies are essentially software, and sometimes software, at least theoretically, undergo real "fail" . Actually, it happened very rarely, but the theoretical possibility is there and must be taken into consideration.
Another risk concerns skills needs. Unless cryptocurrencies are used at an elementary level, a profitable investment activity presupposes the possession of specific skills. And we're not talking about trading knowledge, but technology. To invest, or better to say exploit, at a higher level the cryptocurrencies it is necessary to master the mechanisms that underlie it.
A huge risk is related to the behavior of the brokers. Brokers keep tightening trading conditions if the asset is risky. Well, cryptocurrencies are risky per se, but also because the knowledge about it is not so widespread. From this it is clear that cryptocurrency brokers can be more "strict" than the average and put some limitations on those that would otherwise be normal trading activities.
The question of blockchains
The term criptovalute is often associated with the term blockchain . The latter in fact represent an essential element, a fundamental ingredient. What are blockchains and what are they for?
Essentially, a blockchain is a database. Their functioning, however, goes beyond what ordinary people think of databases. In fact, traditional databases are housed in a computer or on multiple computers. Even databases on servers need "computers", or rather, workstations, which, even in the most redundant cases, can be counted on the fingers of one hand.
The blockchains, however, rely on a number of abnormal computers, which easily reaches the thousands. This on the one hand reduces costs and on the other hand offers security guarantees, which must necessarily be higher than those of any database.
If an attacker attacks a blockchain database, the others compensate for the damage and the system can continue to "live" undisturbed.
Let's take an example: a hacker violates your computer and transfers all the money into his account, then erases the tracks. Well, the process is blocked in the bud, because the hacker should also violate the other thousands of computers scattered around the world.
The characteristics of a cryptocurrency to be taken into consideration
All cryptocurrencies share the basic mechanisms, but the variability within the categories is high. Here are the elements that may differ from one cryptocurrency and the other.
The speed of transitions
The money supply (how much money is present in the system)
Any limits established in the offer
Ability to penetrate the real world (is cryptocurrency widespread? Is it used for payments?)
Any investment projects by important companies (synonymous with credibility)
Reputation of the creators
Regarding the speed of transactions, the first place is the prerogative of Ethereum, while for what concerns the money supply is Bitcoin to play the lion's share. It must be specified, however, that the Bitcoin will face a decrease in supply in the coming years, as it was established by its creators in order to avoid hyper-inflationary processes.
The uses of cryptocurrencies
The cryptocurrencies have been created for different purposes, which is not only to replace traditional currencies or offer a freer variant and not subject to central bank decisions. We can group cryptocurrencies based on the following purposes.
International financial transactions: Bitcoin, Litecoin, Tether, Ripple, Stellar Lumens.
Software support for creating smart contracts: Ethereum, Strrj, Siacoin, MaidSafe.
Private transactions: Monero, Dash, ZCash.
Specialized transactions in certain assets: GameCredits, ReddCoin.
Knowing the true purpose of cryptocurrency is useful for making a conscious choice, whether you intend to use the currency as an investment, or for a more concrete use.
How cryptocurrencies are stored
For traditional currencies it does not arise: the deposit of money can take place on a bank account, cash etc. But for cryptocurrencies? It is a problem to ask, also because security guarantees depend on this.
On the contrary, it arises in a certain sense, since there is only one alternative, however rich in variant. It is the "wallet", which in turn is nothing more than an address registered in the blockchain. It can be compared to an internet address.
Each address has a public part version and a private version . The public version is used as an IBAN code, so to receive transactions. The private version is used to access their funds and make payments.
The private version can be considered as if it were the set of access data, a kind of PIN. It is essential to never reveal it to anyone.
Here are the various types of wallet.
Wallet online. The "deposit" is totally online. It is the easiest variant to use, but also the potentially more risky one. The account could be hacked.
Mobile wallet . It is a safer variant of the online Wallet, although theoretically attackable. It is based on the app, the most famous of which is Mycelium. Obviously it is essential not to lose the phone.
Desktop wallet . Similar to the mobile Wallet, with the only difference that it is located in the PC and not in the mobile phone.
Paper wallet . It is the "on paper" Wallet. Hacker-proof, of course.
The cryptocurrency trading
Some brokers offer occasionally the possibility of trading with cryptocurrencies, integrating the platforms already in use. For a more precise trading, or even just to exchange cryptocurrencies with traditional currencies, it is good to refer to ad hoc platforms. The most famous are
Poloniex
Kraken
Coinbase
Bitfinex
shapeshift
They all act as if they were normal brokers. Bitfinex, for example, even allows marginalization. Great is, of course, the supply of tools for technical analysis, graphic, fundamental. In short, they work like the variants used for Forex trading, raw materials etc.
We then report a whole series of utilities that allow the monitoring of quotes via mobile phones. The reference is to Blackfolio and Coincap.
Blackfolio is a very intuitive app that allows you to create a watch list and monitor the quotes of each individual currency.
Coinmarketcap is a more complex app that allows you to view currencies based on certain criteria: capitalization, volume and other elements. Obviously, it allows you to view prices in real time.