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Ultimate glossary of crypto currency terms, acronyms and abbreviations
Blockchain Wallet API | How to Manage Your Crypto Wallet - Tokenview
What is a Crypto Wallet?
Cryptocurrency is a digital currency based on blockchain technology, and a cryptocurrency wallet is an application specifically used to manage these assets. The cryptocurrency wallet provides basic financial functions such as the creation of a wallet address, the transfer of cryptocurrency, and the query of the transaction history of each wallet address. Common digital currency wallets include Binance, Cobo and other functions with different functions. Tokenview's application ViewToken has the above-mentioned digital currency wallet function, and can predict the market of virtual currency, and can also help users earn more digital assets through financial management.
Blockchain Digital Currency wallet Classification
Hot wallet: Hot wallet, also known as online wallet, includes light wallet and heavy wallet (full node wallet). You need to keep the wallet connected to the Internet and you can directly perform transaction operations.
Light wallet: It does not store the complete blockchain, only the data related to itself. It is small in size and can run on mobile phones, computers, web pages, etc. The light wallet does not occupy memory, supports multiple digital assets, and has a good user experience. Common digital currency light wallets include: viewtoken, cobo, etc.
It maintains all blockchain data, is completely decentralized, and synchronizes all data. It has better privacy and can verify the validity of transaction data locally. But every time you use it, you need to synchronize data, which takes up a lot of hard disk space and does not support multiple digital currency transactions.
Cold wallet: A cold wallet is a wallet that is not connected to the Internet, also called an offline wallet; such as professional hardware equipment, or write the private key (mnemonic phrase) on paper.
Hardware wallet: The hardware wallet uses professional hardware to store digital currency, and stores the digital asset private key separately in a chip, which is isolated from the Internet and plug and play.
Paper wallet: Write the private key on paper and store it before deleting it.
Blockchain Wallet API Helps to Manage Your Crypto Wallet
In the development of blockchain digital currency applications, a common question is how to query the balance information of this wallet address? Or in a similar way, how to query the balance information of a specified Bitcoin address? The good news is that many third-party organizations have solved these problems and provided them in the form of wallet balance API, which can be used directly. Tokenview blockchain API data interface is one of the largest and most popular third-party blockchain digital currency APIs. Provides functions such as broadcast transactions, token information query, wallet service and transaction information. It also provides data on more than 100 mainstream cryptocurrencies such as Bitcoin, Litecoin, Dogecoin, and Ethereum. Easy to use, and there are Chinese API documentation information. Refer to: https://services.tokenview.com
Bitcoin (BTC) is a peer-to-peer cryptocurrency that aims to function as a means of exchange that is independent of any central authority. BTC can be transferred electronically in a secure, verifiable, and immutable way.
Launched in 2009, BTC is the first virtual currency to solve the double-spending issue by timestamping transactions before broadcasting them to all of the nodes in the Bitcoin network. The Bitcoin Protocol offered a solution to the Byzantine Generals’ Problem with ablockchainnetwork structure, a notion first created byStuart Haber and W. Scott Stornetta in 1991.
Bitcoin’s whitepaper was published pseudonymously in 2008 by an individual, or a group, with the pseudonym “Satoshi Nakamoto”, whose underlying identity has still not been verified.
The Bitcoin protocol uses an SHA-256d-based Proof-of-Work (PoW) algorithm to reach network consensus. Its network has a target block time of 10 minutes and a maximum supply of 21 million tokens, with a decaying token emission rate. To prevent fluctuation of the block time, the network’s block difficulty is re-adjusted through an algorithm based on the past 2016 block times.
With a block size limit capped at 1 megabyte, the Bitcoin Protocol has supported both the Lightning Network, a second-layer infrastructure for payment channels, and Segregated Witness, a soft-fork to increase the number of transactions on a block, as solutions to network scalability.
Bitcoin is a peer-to-peer cryptocurrency that aims to function as a means of exchange and is independent of any central authority. Bitcoins are transferred electronically in a secure, verifiable, and immutable way.
Network validators, whom are often referred to as miners, participate in the SHA-256d-based Proof-of-Work consensus mechanism to determine the next global state of the blockchain.
The Bitcoin protocol has a target block time of 10 minutes, and a maximum supply of 21 million tokens. The only way new bitcoins can be produced is when a block producer generates a new valid block.
The protocol has a token emission rate that halves every 210,000 blocks, or approximately every 4 years.
Unlike public blockchain infrastructures supporting the development of decentralized applications (Ethereum), the Bitcoin protocol is primarily used only for payments, and has only very limited support for smart contract-like functionalities (Bitcoin “Script” is mostly used to create certain conditions before bitcoins are used to be spent).
In the Bitcoin network, anyone can join the network and become a bookkeeping service provider i.e., a validator. All validators are allowed in the race to become the block producer for the next block, yet only the first to complete a computationally heavy task will win. This feature is called Proof of Work (PoW). The probability of any single validator to finish the task first is equal to the percentage of the total network computation power, or hash power, the validator has. For instance, a validator with 5% of the total network computation power will have a 5% chance of completing the task first, and therefore becoming the next block producer. Since anyone can join the race, competition is prone to increase. In the early days, Bitcoin mining was mostly done by personal computer CPUs. As of today, Bitcoin validators, or miners, have opted for dedicated and more powerful devices such as machines based on Application-Specific Integrated Circuit (“ASIC”). Proof of Work secures the network as block producers must have spent resources external to the network (i.e., money to pay electricity), and can provide proof to other participants that they did so. With various miners competing for block rewards, it becomes difficult for one single malicious party to gain network majority (defined as more than 51% of the network’s hash power in the Nakamoto consensus mechanism). The ability to rearrange transactions via 51% attacks indicates another feature of the Nakamoto consensus: the finality of transactions is only probabilistic. Once a block is produced, it is then propagated by the block producer to all other validators to check on the validity of all transactions in that block. The block producer will receive rewards in the network’s native currency (i.e., bitcoin) as all validators approve the block and update their ledgers.
The Bitcoin protocol utilizes the Merkle tree data structure in order to organize hashes of numerous individual transactions into each block. This concept is named after Ralph Merkle, who patented it in 1979. With the use of a Merkle tree, though each block might contain thousands of transactions, it will have the ability to combine all of their hashes and condense them into one, allowing efficient and secure verification of this group of transactions. This single hash called is a Merkle root, which is stored in the Block Header of a block. The Block Header also stores other meta information of a block, such as a hash of the previous Block Header, which enables blocks to be associated in a chain-like structure (hence the name “blockchain”). An illustration of block production in the Bitcoin Protocol is demonstrated below. https://preview.redd.it/m6texxicf3151.png?width=1591&format=png&auto=webp&s=f4253304912ed8370948b9c524e08fef28f1c78d
Block time and mining difficulty
Block time is the period required to create the next block in a network. As mentioned above, the node who solves the computationally intensive task will be allowed to produce the next block. Therefore, block time is directly correlated to the amount of time it takes for a node to find a solution to the task. The Bitcoin protocol sets a target block time of 10 minutes, and attempts to achieve this by introducing a variable named mining difficulty. Mining difficulty refers to how difficult it is for the node to solve the computationally intensive task. If the network sets a high difficulty for the task, while miners have low computational power, which is often referred to as “hashrate”, it would statistically take longer for the nodes to get an answer for the task. If the difficulty is low, but miners have rather strong computational power, statistically, some nodes will be able to solve the task quickly. Therefore, the 10 minute target block time is achieved by constantly and automatically adjusting the mining difficulty according to how much computational power there is amongst the nodes. The average block time of the network is evaluated after a certain number of blocks, and if it is greater than the expected block time, the difficulty level will decrease; if it is less than the expected block time, the difficulty level will increase.
What are orphan blocks?
In a PoW blockchain network, if the block time is too low, it would increase the likelihood of nodes producingorphan blocks, for which they would receive no reward. Orphan blocks are produced by nodes who solved the task but did not broadcast their results to the whole network the quickest due to network latency. It takes time for a message to travel through a network, and it is entirely possible for 2 nodes to complete the task and start to broadcast their results to the network at roughly the same time, while one’s messages are received by all other nodes earlier as the node has low latency. Imagine there is a network latency of 1 minute and a target block time of 2 minutes. A node could solve the task in around 1 minute but his message would take 1 minute to reach the rest of the nodes that are still working on the solution. While his message travels through the network, all the work done by all other nodes during that 1 minute, even if these nodes also complete the task, would go to waste. In this case, 50% of the computational power contributed to the network is wasted. The percentage of wasted computational power would proportionally decrease if the mining difficulty were higher, as it would statistically take longer for miners to complete the task. In other words, if the mining difficulty, and therefore targeted block time is low, miners with powerful and often centralized mining facilities would get a higher chance of becoming the block producer, while the participation of weaker miners would become in vain. This introduces possible centralization and weakens the overall security of the network. However, given a limited amount of transactions that can be stored in a block, making the block time too longwould decrease the number of transactions the network can process per second, negatively affecting network scalability.
3. Bitcoin’s additional features
Segregated Witness (SegWit)
Segregated Witness, often abbreviated as SegWit, is a protocol upgrade proposal that went live in August 2017. SegWit separates witness signatures from transaction-related data. Witness signatures in legacy Bitcoin blocks often take more than 50% of the block size. By removing witness signatures from the transaction block, this protocol upgrade effectively increases the number of transactions that can be stored in a single block, enabling the network to handle more transactions per second. As a result, SegWit increases the scalability of Nakamoto consensus-based blockchain networks like Bitcoin and Litecoin. SegWit also makes transactions cheaper. Since transaction fees are derived from how much data is being processed by the block producer, the more transactions that can be stored in a 1MB block, the cheaper individual transactions become. https://preview.redd.it/depya70mf3151.png?width=1601&format=png&auto=webp&s=a6499aa2131fbf347f8ffd812930b2f7d66be48e The legacy Bitcoin block has a block size limit of 1 megabyte, and any change on the block size would require a network hard-fork. On August 1st 2017, the first hard-fork occurred, leading to the creation of Bitcoin Cash (“BCH”), which introduced an 8 megabyte block size limit. Conversely, Segregated Witness was a soft-fork: it never changed the transaction block size limit of the network. Instead, it added an extended block with an upper limit of 3 megabytes, which contains solely witness signatures, to the 1 megabyte block that contains only transaction data. This new block type can be processed even by nodes that have not completed the SegWit protocol upgrade. Furthermore, the separation of witness signatures from transaction data solves the malleability issue with the original Bitcoin protocol. Without Segregated Witness, these signatures could be altered before the block is validated by miners. Indeed, alterations can be done in such a way that if the system does a mathematical check, the signature would still be valid. However, since the values in the signature are changed, the two signatures would create vastly different hash values. For instance, if a witness signature states “6,” it has a mathematical value of 6, and would create a hash value of 12345. However, if the witness signature were changed to “06”, it would maintain a mathematical value of 6 while creating a (faulty) hash value of 67890. Since the mathematical values are the same, the altered signature remains a valid signature. This would create a bookkeeping issue, as transactions in Nakamoto consensus-based blockchain networks are documented with these hash values, or transaction IDs. Effectively, one can alter a transaction ID to a new one, and the new ID can still be valid. This can create many issues, as illustrated in the below example:
Alice sends Bob 1 BTC, and Bob sends Merchant Carol this 1 BTC for some goods.
Bob sends Carols this 1 BTC, while the transaction from Alice to Bob is not yet validated. Carol sees this incoming transaction of 1 BTC to him, and immediately ships goods to B.
At the moment, the transaction from Alice to Bob is still not confirmed by the network, and Bob can change the witness signature, therefore changing this transaction ID from 12345 to 67890.
Now Carol will not receive his 1 BTC, as the network looks for transaction 12345 to ensure that Bob’s wallet balance is valid.
As this particular transaction ID changed from 12345 to 67890, the transaction from Bob to Carol will fail, and Bob will get his goods while still holding his BTC.
With the Segregated Witness upgrade, such instances can not happen again. This is because the witness signatures are moved outside of the transaction block into an extended block, and altering the witness signature won’t affect the transaction ID. Since the transaction malleability issue is fixed, Segregated Witness also enables the proper functioning of second-layer scalability solutions on the Bitcoin protocol, such as the Lightning Network.
Lightning Network is a second-layer micropayment solution for scalability. Specifically, Lightning Network aims to enable near-instant and low-cost payments between merchants and customers that wish to use bitcoins. Lightning Network was conceptualized in a whitepaper by Joseph Poon and Thaddeus Dryja in 2015. Since then, it has been implemented by multiple companies. The most prominent of them include Blockstream, Lightning Labs, and ACINQ. A list of curated resources relevant to Lightning Network can be found here. In the Lightning Network, if a customer wishes to transact with a merchant, both of them need to open a payment channel, which operates off the Bitcoin blockchain (i.e., off-chain vs. on-chain). None of the transaction details from this payment channel are recorded on the blockchain, and only when the channel is closed will the end result of both party’s wallet balances be updated to the blockchain. The blockchain only serves as a settlement layer for Lightning transactions. Since all transactions done via the payment channel are conducted independently of the Nakamoto consensus, both parties involved in transactions do not need to wait for network confirmation on transactions. Instead, transacting parties would pay transaction fees to Bitcoin miners only when they decide to close the channel. https://preview.redd.it/cy56icarf3151.png?width=1601&format=png&auto=webp&s=b239a63c6a87ec6cc1b18ce2cbd0355f8831c3a8 One limitation to the Lightning Network is that it requires a person to be online to receive transactions attributing towards him. Another limitation in user experience could be that one needs to lock up some funds every time he wishes to open a payment channel, and is only able to use that fund within the channel. However, this does not mean he needs to create new channels every time he wishes to transact with a different person on the Lightning Network. If Alice wants to send money to Carol, but they do not have a payment channel open, they can ask Bob, who has payment channels open to both Alice and Carol, to help make that transaction. Alice will be able to send funds to Bob, and Bob to Carol. Hence, the number of “payment hubs” (i.e., Bob in the previous example) correlates with both the convenience and the usability of the Lightning Network for real-world applications.
Schnorr Signature upgrade proposal
Elliptic Curve Digital Signature Algorithm (“ECDSA”) signatures are used to sign transactions on the Bitcoin blockchain. https://preview.redd.it/hjeqe4l7g3151.png?width=1601&format=png&auto=webp&s=8014fb08fe62ac4d91645499bc0c7e1c04c5d7c4 However, many developers now advocate for replacing ECDSA with Schnorr Signature. Once Schnorr Signatures are implemented, multiple parties can collaborate in producing a signature that is valid for the sum of their public keys. This would primarily be beneficial for network scalability. When multiple addresses were to conduct transactions to a single address, each transaction would require their own signature. With Schnorr Signature, all these signatures would be combined into one. As a result, the network would be able to store more transactions in a single block. https://preview.redd.it/axg3wayag3151.png?width=1601&format=png&auto=webp&s=93d958fa6b0e623caa82ca71fe457b4daa88c71e The reduced size in signatures implies a reduced cost on transaction fees. The group of senders can split the transaction fees for that one group signature, instead of paying for one personal signature individually. Schnorr Signature also improves network privacy and token fungibility. A third-party observer will not be able to detect if a user is sending a multi-signature transaction, since the signature will be in the same format as a single-signature transaction.
4. Economics and supply distribution
The Bitcoin protocol utilizes the Nakamoto consensus, and nodes validate blocks via Proof-of-Work mining. The bitcoin token was not pre-mined, and has a maximum supply of 21 million. The initial reward for a block was 50 BTC per block. Block mining rewards halve every 210,000 blocks. Since the average time for block production on the blockchain is 10 minutes, it implies that the block reward halving events will approximately take place every 4 years. As of May 12th 2020, the block mining rewards are 6.25 BTC per block. Transaction fees also represent a minor revenue stream for miners.
In order to create an account on BitMEX, users first have to register with the website. Registration only requires an email address, the email address must be a genuine address as users will receive an email to confirm registration in order to verify the account. Once users are registered, there are no trading limits. Traders must be at least 18 years of age to sign up. https://preview.redd.it/0v13qoil3cc41.jpg?width=808&format=pjpg&auto=webp&s=e6134bc089c4e352dce10d754dc84ff11a4c7994 However, it should be noted that BitMEX does not accept any US-based traders and will use IP checks to verify that users are not in the US. While some US users have bypassed this with the use of a VPN, it is not recommended that US individuals sign up to the BitMEX service, especially given the fact that alternative exchanges are available to service US customers that function within the US legal framework. How to Use BitMEX BitMEX allows users to trade cryptocurrencies against a number of fiat currencies, namely the US Dollar, the Japanese Yen and the Chinese Yuan. BitMEX allows users to trade a number of different cryptocurrencies, namely Bitcoin, Bitcoin Cash, Dash, Ethereum, Ethereum Classic, Litecoin, Monero, Ripple, Tezos and Zcash. The trading platform on BitMEX is very intuitive and easy to use for those familiar with similar markets. However, it is not for the beginner. The interface does look a little dated when compared to newer exchanges like Binance and Kucoin’s. Once users have signed up to the platform, they should click on Trade, and all the trading instruments will be displayed beneath. Clicking on the particular instrument opens the orderbook, recent trades, and the order slip on the left. The order book shows three columns – the bid value for the underlying asset, the quantity of the order, and the total USD value of all orders, both short and long. The widgets on the trading platform can be changed according to the user’s viewing preferences, allowing users to have full control on what is displayed. It also has a built in feature that provides for TradingView charting. This offers a wide range of charting tool and is considered to be an improvement on many of the offering available from many of its competitors. https://preview.redd.it/fabg1nxo3cc41.jpg?width=808&format=pjpg&auto=webp&s=6d939889c3eac15ab1e78ec37a8ccd13fc5e0573 Once trades are made, all orders can be easily viewed in the trading platform interface. There are tabs where users can select their Active Orders, see the Stops that are in place, check the Orders Filled (total or partially) and the trade history. On the Active Orders and Stops tabs, traders can cancel any order, by clicking the “Cancel” button. Users also see all currently open positions, with an analysis if it is in the black or red. BitMEX uses a method called auto-deleveraging which BitMEX uses to ensure that liquidated positions are able to be closed even in a volatile market. Auto-deleveraging means that if a position bankrupts without available liquidity, the positive side of the position deleverages, in order of profitability and leverage, the highest leveraged position first in queue. Traders are always shown where they sit in the auto-deleveraging queue, if such is needed. Although the BitMEX platform is optimized for mobile, it only has an Android app (which is not official). There is no iOS app available at present. However, it is recommended that users use it on the desktop if possible. BitMEX offers a variety of order types for users:
Limit Order (the order is fulfilled if the given price is achieved);
Market Order (the order is executed at current market price);
Stop Limit Order (like a stop order, but allows users to set the price of the Order once the Stop Price is triggered);
Stop Market Order (this is a stop order that does not enter the order book, remain unseen until the market reaches the trigger);
Trailing Stop Order (it is similar to a Stop Market order, but here users set a trailing value that is used to place the market order);
Take Profit Limit Order (this can be used, similarly to a Stop Order, to set a target price on a position. In this case, it is in respect of making gains, rather than cutting losses);
Take Profit Market Order (same as the previous type, but in this case, the order triggered will be a market order, and not a limit one)
The exchange offers margin trading in all of the cryptocurrencies displayed on the website. It also offers to trade with futures and derivatives – swaps.
Futures and Swaps
A futures contract is an agreement to buy or sell a given asset in the future at a predetermined price. On BitMEX, users can leverage up to 100x on certain contracts. Perpetual swaps are similar to futures, except that there is no expiry date for them and no settlement. Additionally, they trade close to the underlying reference Index Price, unlike futures, which may diverge substantially from the Index Price. BitMEX also offers Binary series contracts, which are prediction-based contracts which can only settle at either 0 or 100. In essence, the Binary series contracts are a more complicated way of making a bet on a given event. The only Binary series betting instrument currently available is related to the next 1mb block on the Bitcoin blockchain. Binary series contracts are traded with no leverage, a 0% maker fee, a 0.25% taker fee and 0.25% settlement fee.
BitMEX allows its traders to leverage their position on the platform. Leverage is the ability to place orders that are bigger than the users’ existing balance. This could lead to a higher profit in comparison when placing an order with only the wallet balance. Trading in such conditions is called “Margin Trading.” There are two types of Margin Trading: Isolated and Cross-Margin. The former allows the user to select the amount of money in their wallet that should be used to hold their position after an order is placed. However, the latter provides that all of the money in the users’ wallet can be used to hold their position, and therefore should be treated with extreme caution. https://preview.redd.it/eg4qk9qr3cc41.jpg?width=808&format=pjpg&auto=webp&s=c3ca8cdf654330ce53e8138d774e72155acf0e7e The BitMEX platform allows users to set their leverage level by using the leverage slider. A maximum leverage of 1:100 is available (on Bitcoin and Bitcoin Cash). This is quite a high level of leverage for cryptocurrencies, with the average offered by other exchanges rarely exceeding 1:20.
BitMEX does not charge fees on deposits or withdrawals. However, when withdrawing Bitcoin, the minimum Network fee is based on blockchain load. The only costs therefore are those of the banks or the cryptocurrency networks. As noted previously, BitMEX only accepts deposits in Bitcoin and therefore Bitcoin serves as collateral on trading contracts, regardless of whether or not the trade involves Bitcoin. The minimum deposit is 0.001 BTC. There are no limits on withdrawals, but withdrawals can also be in Bitcoin only. To make a withdrawal, all that users need to do is insert the amount to withdraw and the wallet address to complete the transfer. https://preview.redd.it/xj1kbuew3cc41.jpg?width=808&format=pjpg&auto=webp&s=68056f2247001c63e89c880cfbb75b2f3616e8fe Deposits can be made 24/7 but withdrawals are processed by hand at a recurring time once per day. The hand processed withdrawals are intended to increase the security levels of users’ funds by providing extra time (and email notice) to cancel any fraudulent withdrawal requests, as well as bypassing the use of automated systems & hot wallets which may be more prone to compromise.
BitMEX operates as a crypto to crypto exchange and makes use of a Bitcoin-in/Bitcoin-out structure. Therefore, platform users are currently unable to use fiat currencies for any payments or transfers, however, a plus side of this is that there are no limits for trading and the exchange incorporates trading pairs linked to the US Dollar (XBT), Japanese Yen (XBJ), and Chinese Yuan (XBC). BitMEX supports the following cryptocurrencies:
Bitcoin Cash (BCH)
Ethereum Classic (ETC)
Ripple Token (XRP)
EOS Token (EOS)
BitMEX also offers leverage options on the following coins:
5x: Zcash (ZEC)
20x : Ripple (XRP),Bitcoin Cash (BCH), Cardano (ADA), EOS Token (EOS), Tron (TRX)
HDR Global Trading, the company which owns BitMEX, has recently announced a partnership with Trading Technologies International, Inc. (TT), a leading international high-performance trading software provider. The TT platform is designed specifically for professional traders, brokers, and market-access providers, and incorporates a wide variety of trading tools and analytical indicators that allow even the most advanced traders to customize the software to suit their unique trading styles. The TT platform also provides traders with global market access and trade execution through its privately managed infrastructure and the partnership will see BitMEX users gaining access to the trading tools on all BitMEX products, including the popular XBT/USD Perpetual Swap pairing. https://preview.redd.it/qcqunaby3cc41.png?width=672&format=png&auto=webp&s=b77b45ac2b44a9af30a4985e3d9dbafc9bbdb77c
The BitMEX Insurance Fund
The ability to trade on leverage is one of the exchange’s main selling points and offering leverage and providing the opportunity for traders to trade against each other may result in a situation where the winners do not receive all of their expected profits. As a result of the amounts of leverage involved, it’s possible that the losers may not have enough margin in their positions to pay the winners. Traditional exchanges like the Chicago Mercantile Exchange (CME) offset this problem by utilizing multiple layers of protection and cryptocurrency trading platforms offering leverage cannot currently match the levels of protection provided to winning traders. In addition, cryptocurrency exchanges offering leveraged trades propose a capped downside and unlimited upside on a highly volatile asset with the caveat being that on occasion, there may not be enough funds in the system to pay out the winners. To help solve this problem, BitMEX has developed an insurance fund system, and when a trader has an open leveraged position, their position is forcefully closed or liquidated when their maintenance margin is too low. Here, a trader’s profit and loss does not reflect the actual price their position was closed on the market, and with BitMEX when a trader is liquidated, their equity associated with the position drops down to zero. In the following example, the trader has taken a 100x long position. In the event that the mark price of Bitcoin falls to $3,980 (by 0.5%), then the position gets liquidated with the 100 Bitcoin position needing to be sold on the market. This means that it does not matter what price this trade executes at, namely if it’s $3,995 or $3,000, as from the view of the liquidated trader, regardless of the price, they lose all the equity they had in their position, and lose the entire one Bitcoin. https://preview.redd.it/wel3rka04cc41.png?width=669&format=png&auto=webp&s=3f93dac2d3b40aa842d281384113d2e26f25947e Assuming there is a fully liquid market, the bid/ask spread should be tighter than the maintenance margin. Here, liquidations manifest as contributions to the insurance fund (e.g. if the maintenance margin is 50bps, but the market is 1bp wide), and the insurance fund should rise by close to the same amount as the maintenance margin when a position is liquidated. In this scenario, as long as healthy liquid markets persist, the insurance fund should continue its steady growth. The following graphs further illustrate the example, and in the first chart, market conditions are healthy with a narrow bid/ask spread (just $2) at the time of liquidation. Here, the closing trade occurs at a higher price than the bankruptcy price (the price where the margin balance is zero) and the insurance fund benefits. Illustrative example of an insurance contribution – Long 100x with 1 BTC collateral https://preview.redd.it/is89ep924cc41.png?width=699&format=png&auto=webp&s=f0419c68fe88703e594c121b5b742c963c7e2229 (Note: The above illustration is based on opening a 100x long position at $4,000 per BTC and 1 Bitcoin of collateral. The illustration is an oversimplification and ignores factors such as fees and other adjustments. The bid and offer prices represent the state of the order book at the time of liquidation. The closing trade price is $3,978, representing $1 of slippage compared to the $3,979 bid price at the time of liquidation.) The second chart shows a wide bid/ask spread at the time of liquidation, here, the closing trade takes place at a lower price than the bankruptcy price, and the insurance fund is used to make sure that winning traders receive their expected profits. This works to stabilize the potential for returns as there is no guarantee that healthy market conditions can continue, especially during periods of heightened price volatility. During these periods, it’s actually possible that the insurance fund can be used up than it is built up. Illustrative example of an insurance depletion – Long 100x with 1 BTC collateral https://preview.redd.it/vb4mj3n54cc41.png?width=707&format=png&auto=webp&s=0c63b7c99ae1c114d8e3b947fb490e9144dfe61b (Notes: The above illustration is based on opening a 100x long position at $4,000 per BTC and 1 Bitcoin of collateral. The illustration is an oversimplification and ignores factors such as fees and other adjustments. The bid and offer prices represent the state of the order book at the time of liquidation. The closing trade price is $3,800, representing $20 of slippage compared to the $3,820 bid price at the time of liquidation.) The exchange declared in February 2019, that the BitMEX insurance fund retained close to 21,000 Bitcoin (around $70 million based on Bitcoin spot prices at the time). This figure represents just 0.007% of BitMEX’s notional annual trading volume, which has been quoted as being approximately $1 trillion. This is higher than the insurance funds as a proportion of trading volume of the CME, and therefore, winning traders on BitMEX are exposed to much larger risks than CME traders as:
BitMEX does not have clearing members with large balance sheets and traders are directly exposed to each other.
BitMEX does not demand payments from traders with negative account balances.
The underlying instruments on BitMEX are more volatile than the more traditional instruments available on CME.
Therefore, with the insurance fund remaining capitalized, the system effectively with participants who get liquidated paying for liquidations, or a losers pay for losers mechanism. This system may appear controversial as first, though some may argue that there is a degree of uniformity to it. It’s also worth noting that the exchange also makes use of Auto Deleveraging which means that on occasion, leveraged positions in profit can still be reduced during certain time periods if a liquidated order cannot be executed in the market. More adventurous traders should note that while the insurance fund holds 21,000 Bitcoin, worth approximately 0.1% of the total Bitcoin supply, BitMEX still doesn’t offer the same level of guarantees to winning traders that are provided by more traditional leveraged trading platforms. Given the inherent volatility of the cryptocurrency market, there remains some possibility that the fund gets drained down to zero despite its current size. This may result in more successful traders lacking confidence in the platform and choosing to limit their exposure in the event of BitMEX being unable to compensate winning traders.
How suitable is BitMEX for Beginners?
BitMEX generates high Bitcoin trading levels, and also attracts good levels of volume across other crypto-to-crypto transfers. This helps to maintain a buzz around the exchange, and BitMEX also employs relatively low trading fees, and is available round the world (except to US inhabitants). This helps to attract the attention of people new to the process of trading on leverage and when getting started on the platform there are 5 main navigation Tabs to get used to:
**Trade:**The trading dashboard of BitMEX. This tab allows you to select your preferred trading instrument, and choose leverage, as well as place and cancel orders. You can also see your position information and view key information in the contract details.
**Account:**Here, all your account information is displayed including available Bitcoin margin balances, deposits and withdrawals, and trade history.
**Contracts:**This tab covers further instrument information including funding history, contract sizes; leverage offered expiry, underlying reference Price Index data, and other key features.
**References:**This resource centre allows you to learn about futures, perpetual contracts, position marking, and liquidation.
**API:**From here you can set up an API connection with BitMEX, and utilize the REST API and WebSocket API.
BitMEX also employs 24/7 customer support and the team can also be contacted on their Twitter and Reddit accounts. In addition, BitMEX provides a variety of educational resources including an FAQ section, Futures guides, Perpetual Contracts guides, and further resources in the “References” account tab. For users looking for more in depth analysis, the BitMEX blog produces high level descriptions of a number of subjects and has garnered a good reputation among the cryptocurrency community. Most importantly, the exchange also maintains a testnet platform, built on top of testnet Bitcoin, which allows anyone to try out programs and strategies before moving on to the live exchange. This is crucial as despite the wealth of resources available, BitMEX is not really suitable for beginners, and margin trading, futures contracts and swaps are best left to experienced, professional or institutional traders. Margin trading and choosing to engage in leveraged activity are risky processes and even more advanced traders can describe the process as a high risk and high reward “game”. New entrants to the sector should spend a considerable amount of time learning about margin trading and testing out strategies before considering whether to open a live account.
Is BitMEX Safe?
BitMEX is widely considered to have strong levels of security. The platform uses multi-signature deposits and withdrawal schemes which can only be used by BitMEX partners. BitMEX also utilises Amazon Web Services to protect the servers with text messages and two-factor authentication, as well as hardware tokens. BitMEX also has a system for risk checks, which requires that the sum of all account holdings on the website must be zero. If it’s not, all trading is immediately halted. As noted previously, withdrawals are all individually hand-checked by employees, and private keys are never stored in the cloud. Deposit addresses are externally verified to make sure that they contain matching keys. If they do not, there is an immediate system shutdown. https://preview.redd.it/t04qs3484cc41.jpg?width=808&format=pjpg&auto=webp&s=a3b106cbc9116713dcdd5e908c00b555fd704ee6 In addition, the BitMEX trading platform is written in kdb+, a database and toolset popular amongst major banks in high frequency trading applications. The BitMEX engine appears to be faster and more reliable than some of its competitors, such as Poloniex and Bittrex. They have email notifications, and PGP encryption is used for all communication. The exchange hasn’t been hacked in the past.
How Secure is the platform?
As previously mentioned, BitMEX is considered to be a safe exchange and incorporates a number of security protocols that are becoming standard among the sector’s leading exchanges. In addition to making use of Amazon Web Services’ cloud security, all the exchange’s systems can only be accessed after passing through multiple forms of authentication, and individual systems are only able to communicate with each other across approved and monitored channels. Communication is also further secured as the exchange provides optional PGP encryption for all automated emails, and users can insert their PGP public key into the form inside their accounts. Once set up, BitMEX will encrypt and sign all the automated emails sent by you or to your account by the [[email protected]](mailto:[email protected]) email address. Users can also initiate secure conversations with the support team by using the email address and public key on the Technical Contact, and the team have made their automated system’s PGP key available for verification in their Security Section. The platform’s trading engine is written in kdb+, a database and toolset used by leading financial institutions in high-frequency trading applications, and the speed and reliability of the engine is also used to perform a full risk check after every order placement, trade, settlement, deposit, and withdrawal. All accounts in the system must consistently sum to zero, and if this does not happen then trading on the platform is immediately halted for all users. With regards to wallet security, BitMEX makes use of a multisignature deposit and withdrawal scheme, and all exchange addresses are multisignature by default with all storage being kept offline. Private keys are not stored on any cloud servers and deep cold storage is used for the majority of funds. Furthermore, all deposit addresses sent by the BitMEX system are verified by an external service that works to ensure that they contain the keys controlled by the founders, and in the event that the public keys differ, the system is immediately shut down and trading halted. The exchange’s security practices also see that every withdrawal is audited by hand by a minimum of two employees before being sent out.
BitMEX Customer Support
The trading platform has a 24/7 support on multiple channels, including email, ticket systems and social media. The typical response time from the customer support team is about one hour, and feedback on the customer support generally suggest that the customer service responses are helpful and are not restricted to automated responses. https://preview.redd.it/8k81zl0a4cc41.jpg?width=808&format=pjpg&auto=webp&s=e30e5b7ca93d2931f49e2dc84025f2fda386eab1 The BitMEX also offers a knowledge base and FAQs which, although they are not necessarily always helpful, may assist and direct users towards the necessary channels to obtain assistance. BitMEX also offers trading guides which can be accessed here
There would appear to be few complaints online about BitMEX, with most issues relating to technical matters or about the complexities of using the website. Older complaints also appeared to include issues relating to low liquidity, but this no longer appears to be an issue. BitMEX is clearly not a platform that is not intended for the amateur investor. The interface is complex and therefore it can be very difficult for users to get used to the platform and to even navigate the website. However, the platform does provide a wide range of tools and once users have experience of the platform they will appreciate the wide range of information that the platform provides. Visit BitMEX
Daily analysis of cryptocurrencies 20191011(Market index 39 — Fear state)
US Department Of Homeland Security Underlines Importance Of Blockchain Implementation William Bryan, acting undersecretary for science and technology at the Department of Homeland Security, has said that his office is working with DHS components to implement blockchain to ensure system interoperability and mitigate vendor lock-in. According to Bryan, letting government and industry continue implementing closed digital platforms would limit the growth of new technologies like blockchain, which can help increase visibility in supply chain operations, automate paper-based procedures. and prevent cases of fraud. Thailand’s First Regulated ICO Portal Targets $98M Token Offering SE Digital, a subsidiary of major financial services firm Seamico Securities, has been confirmed as the first initial coin offering (ICO) portal operator to be approved by Thailand’s securities regulator. According to an Oct. 11 report from The Bangkok Post, SE Digital plans to launch Thailand’s first investment token, with a target transaction size of 2–3 billion baht or roughly $65,800,000-$98,700,000. Moreover, Seamico Securities’ strategic investor, Elevated Returns, has reportedly applied to the Thai Securities and Exchange Commission (SEC) for a Digital Assets Exchange License to launch a new trading venue that would provide a secondary market for such tokens by 2020. “Erasing” ETC At Any Point In Future Is Highly Destructive, Says Ethereum Co-Founder Vitalik Buterin Vitalik Buterin, the co-founder of Ethereum, tweeted: “ETC people seem to think that PoS and sharding are net detriments. So I don’t see how that constituency can be served by ETH 2.0, hence ‘erasing’ ETC at any point in the future seems like a highly destructive move on all fronts.” Tether Has Newly Issued 20 Million USDT Citing information from DAppTotal.com, at 20:07 UTC on Oct 10, Tether issued 20 million USDT on the Ethereum network at block height 8716062. The transaction hash is: 0x753af2551367b905a4bcf115c7042c2c8641f85669cff9db6f0e62da55c6d0e1. As of now, Tether has totally issued 2,023,993,042 ERC-20 USDT tokens on the Ethereum network.
Encrypted project calendar（October 11, 2019）
OKB/OKB:OKB (OKB) OKEx series of talks will be held in Istanbul on October 11th to discuss “the rise of the Turkish blockchain.”Aragon (ANT):11 October 2019 Osaka DAO Party “We are excited to invite you to our@EFDevconAragon Dream DAO Party — DAICO Edition in Osaka on the evening of October 11th!”BitTorrent (BTT)and 1 othe: 11 October 2019 Airdrop “On October 11th 00:00 UTC we will initiate our ninth $BTT airdrop and reward TRON $TRX holders with 990,000,000 #BTT!”Zilliqa (ZIL):11 October 2019 Dev Call “The Aztec Protocol team will be joining our 4th Dev Call this Friday at 2pm EST. We will be having interesting conversations aboutFOAM (FOAM):11 October 2019 Osaka Happy Hour “Join FOAM and@3boxdbfor a #DevCon Happy Hour in Osaka this Friday at Runway lounge.”
Encrypted project calendar（October 12, 2019）
BTC/Bitcoin:The 2019 Global Mining Leaders Summit will be held in Chengdu, China from October 12th to 14th.BLAST (BLAST):12 October 2019 (or earlier) Masternode & Assets “Masternode functionality and versionbits signalling for Assets will become active on the BLAST network at block height 1710000.”
Encrypted project calendar（October 13, 2019）
LINK/ChainLink:ChainLink (LINK) will be held in Tokyo on October 13th by a collaboration between QuarkChain, bitgrit, Chainlink and Vechain.Veros (VRS):14 October 2019 Launch of News Service “Launch of the VEROS NEWS service.”
Encrypted project calendar（October 14, 2019）
BCH/Bitcoin Cash:The ChainPoint 19 conference will be held in Armenia from October 14th to 15th.
Encrypted project calendar（October 15, 2019）
RUFF/RUFF Token:Ruff will end the three-month early bird program on October 15thKAT/Kambria:Kambria (KAT) exchanges ERC20 KAT for a 10% bonus on BEP2 KAT-7BB, and the token exchange reward will end on October 15.BTC/Bitcoin:The Blockchain Technology Investment Summit (CIS) will be held in Los Angeles from October 15th to 16th.OTOCASH (OTO):15 October 2019 Escodex Shutdown “ All OTO HOLDERs who have assets on ESCODEX EXCHANGE to immediately withdraw your assets before October 15th, 2019 4:00 PM”(CRYPTO):15 October 2019 Hard Fork Summit Hard Fork Summit 2019 by TNW . “Where finance and business meets tech.” Amsterdam, October 15–17.
Encrypted project calendar（October 16, 2019）
BTC/Bitcoin:The 2019 Blockchain Life Summit will be held in Moscow, Russia from October 16th to 17th.MIOTA/IOTA:IOTA (MIOTA) IOTA will host a community event on the theme of “Technology Problem Solving and Testing IoT Devices” at the University of Southern California in Los Angeles on October 16.ETH/Ethereum:Ethereum launches Istanbul (Istanbul) main network upgrade, this main network upgrade involves 6 code upgrades.QTUM/Qtum:Qtum (QTUM) Qtum main network hard fork is scheduled for October 16.(CRYPTO): and 1 other 16 October 2019 Supply Chains Unblocked Supply Chains Unblocked in London from 9:30 AM — 6 PM.Binance Coin (BNB):16 October 2019 Singapore Meetup “Bring your friends to come along with, & it will be FUN! With snacks and drinks.”
Encrypted project calendar（October 17, 2019）
Holo (HOT):17 October 2019 Redgrid AMA “Join us for the AMA with RedGrid on October 17th. Submit your questions before the AMA on our Holochain Dev Forum.”IOST (IOST):17 October 2019 Breeding Competition Ends “Join IOST 2nd Breeding Competition by@FishChainGamenow! The competition only lasts till 17 Oct”Aragon (ANT):17 October 2019 Seoul Meetup “You are invited to join@licuendefor a meetup and presentation on ‘Aragon and DAOs: What’s next after ICOs and DeFi?’”Skycoin (SKY):17 October 2019 NYC Skywire Meetup NYC Skywire Mainnet Meetup in NYC from 6–8 PM.
Encrypted project calendar（October 18, 2019）
BTC/Bitcoin:The SEC will give a pass on the VanEck/SolidX ETF on October 18th and make a final decisionHB/HeartBout:HeartBout (HB) will officially release the Android version of the HeartBout app on October 18.OKB (OKB):18 October 2019 Rotterdam Meetup “Meet us in Rotterdam on 18 Oct as we partner up with Crypto010 Meetup to bring you a talk on ‘Decentralized Finance’.”HeartBout (HB):18 October 2019 Android Version “18th of October 2019 will be officially released Android version of HeartBout app.”BTU Protocol (BTU):and 2 others 18 October 2019 Paris Blockchain Summit The event will gather major international key players of the Blockchain ecosystem including well-known influencers, investors, government…
Encrypted project calendar（October 19, 2019）
PI/PCHAIN Network:The PCHAIN (PI) backbone (Phase 5, 82 nodes, 164, 023, 802 $ PI, 7 candidates) will begin on October 19.LINK/ChainLink:Diffusion 2019 will be held in Berlin, Germany from October 19th to 20thDeepBrain Chain (DBC):19 October 2019 (or earlier) Deploy Main Chain “Deploy Main Chain,” during the third week of October.General Event (CRYPTO):and 1 other 19 October 2019Free State Blockchain “This “unconference” style event brings together some of the top financial tech innovators, researchers, company leaders, and other…”PCHAIN (PI):19 October 2019 Main Chain Voting “Main chain: Epoch 5, 82 nodes, 164,023,802 $PI, 7 Candidates, voting will start on Oct. 19th.”Nash Exchange (NEX):19 October 2019 Nash Anniversary Nash will present their work from the third quarter of 2019. Team members will be present and to answer your questions in person.
Encrypted project calendar（October 20, 2019）
GameCredits (GAME):20 October 2019 (or earlier) Mining Reward Drop GameCredits mining reward will be cut in half at block 2519999 (~October 20). This will be the 4th halvening of the GAME mining reward!
Encrypted project calendar（October 21, 2019）
KNC/Kyber Network:The official online hackathon of the Kyber Network (KNC) project will end on October 21st, with more than $42,000 in prize money.
Encrypted project calendar（October 22, 2019）
ZRX/0x:The 0x protocol (ZRX) Pantera blockchain summit will be held on October 22.
Encrypted project calendar（October 23, 2019）
MIOTA/IOTA:IOTA (MIOTA) IOTA will host a community event on October 23rd at the University of Southern California in Los Angeles with the theme “Connecting the I3 Market and Experiencing Purchase and Sales Data.”BTC/Bitcoin:The WBS World Blockchain Summit (Middle East) will be held in Dubai from October 23rd to 24th.
Encrypted project calendar（October 24, 2019）
BCN/Bytecoin:Bytecoin (BCN) released the hidden amount of the Bytecoin block network on October 24.
Encrypted project calendar（October 25, 2019）
ADA/Cardano:Cardano (ADA) The Ada community will host a community gathering in the Dominican Republic for the first time on October 25.
Encrypted project calendar（October 26, 2019）
KAT/Kambria:Kambria (KAT) Kambria will host the 2019 Southern California Artificial Intelligence and Data Science Conference in Los Angeles on October 26th with IDEAS.BTC/Bitcoin:CoinAgenda Global Summit will be held in Las Vegas from October 26th to 28th
Encrypted project calendar（October 28, 2019）
LTC/Litecoin:Litecoin (LTC) 2019 Litecoin Summit will be held from October 28th to October 29th in Las Vegas, USABTC/Bitcoin:Mt.Gox changes the debt compensation plan submission deadline to October 28ZEC/Zcash:Zcash (ZEC) will activate the Blossom Agreement on October 28th
Encrypted project calendar（October 29, 2019）
BTC/Bitcoin:The 2nd World Encryption Conference (WCC) will be held in Las Vegas from October 29th to 31st.
Encrypted project calendar（October 30, 2019）
MIOTA/IOTA:IOTA (MIOTA) IOTA will host a community event on October 30th at the University of Southern California in Los Angeles on the topic “How to store data on IOTA Tangle.”
Encrypted project calendar（November 1, 2019）
INS/Insolar:The Insolar (INS) Insolar wallet and the redesigned Insolar Block Explorer will be operational on November 1, 2019.
Encrypted project calendar（November 6, 2019）
STEEM/Steem:The Steem (STEEM) SteemFest 4 conference will be held in Bangkok from November 6th to 10th.
Encrypted project calendar（November 8, 2019）
BTC/Bitcoin:The 2nd Global Digital Mining Summit will be held in Frankfurt, Germany from October 8th to 10th.
Encrypted project calendar（November 9, 2019）
CENNZ/Centrality:Centrality (CENNZ) will meet in InsurTechNZ Connect — Insurance and Blockchain on October 9th in Auckland.
BTC — The BTC continues to oscillate slightly from yesterday to today and is currently hovering around $8,300. In the past 24 hours, the net inflow of BT funds is close to US$200 million, and the market inflow is gradually shrinking. BTC tried to keep going up after breaking through $8,500 yesterday, but failed to keep its volume steady at $8,600. It rebounded slightly after pulling back to $8,500 last night, but the overall risk of diversion remained high, with the focus on the second support around $8,400 below. In the medium-term trend, BTC has successfully broken through the bottom shock range, and the subsequent market continues to be bullish. Operational aspects, short-term should not catch up with high, investors who have not had time to enter the temporary patience to wait, withdrawal near the support level can be considered to continue to build warehouses. Review previous articles:https://firstname.lastname@example.org Telegram： https://t.me/Lay126 Twitter：https://twitter.com/mianhuai8 Facebook：https://www.facebook.com/profile.php?id=100022246432745 Reddi：https://www.reddit.com/useliuidaxmn LinkedIn：https://www.linkedin.com/in/liu-wei-294a12176/
A Beginners Guide to Bitcoin, Blockchain & Cryptocurrency
As cryptocurrency, and blockchain technology become more abundant throughout our society, it’s important to understand the inner workings of this technology, especially if you plan to use cryptocurrency as an investment vehicle. If you’re new to the crypto-sphere, learning about Bitcoin makes it much easier to understand other cryptocurrencies as many other altcoins' technologies are borrowed directly from Bitcoin. Bitcoin is one of those things that you look into only to discover you have more questions than answers, and right as you’re starting to wrap your head around the technology; you discover the fact that Bitcoin has six other variants (forks), the amount of politics at hand, or that there are over a thousand different cryptocurrencies just as complex if not even more complex than Bitcoin. We are currently in the infancy of blockchain technology and the effects of this technology will be as profound as the internet. This isn’t something that’s just going to fade away into history as you may have been led to believe. I believe this is something that will become an integral part of our society, eventually embedded within our technology. If you’re a crypto-newbie, be glad that you're relatively early to the industry. I hope this post will put you on the fast-track to understanding Bitcoin, blockchain, and how a large percentage of cryptocurrencies work.
Altcoin: Short for alternative coin. There are over 1,000 different cryptocurrencies. You’re probably most familiar with Bitcoin. Anything that isn’t Bitcoin is generally referred to as an altcoin. HODL: Misspelling of hold. Dank meme accidentally started by this dude. Hodlers are much more interested in long term gains rather than playing the risky game of trying to time the market. TO THE MOON: When a cryptocurrency’s price rapidly increases. A major price spike of over 1,000% can look like it’s blasting off to the moon. Just be sure you’re wearing your seatbelt when it comes crashing down. FUD: Fear. Uncertainty. Doubt. FOMO: Fear of missing out. Bull Run: Financial term used to describe a rising market. Bear Run: Financial term used to describe a falling market.
What Is Bitcoin?
Bitcoin (BTC) is a decentralized digital currency that uses cryptography to secure and ensure validity of transactions within the network. Hence the term crypto-currency. Decentralization is a key aspect of Bitcoin. There is no CEO of Bitcoin or central authoritative government in control of the currency. The currency is ran and operated by the people, for the people. One of the main development teams behind Bitcoin is blockstream. Bitcoin is a product of blockchain technology. Blockchain is what allows for the security and decentralization of Bitcoin. To understand Bitcoin and other cryptocurrencies, you must understand to some degree, blockchain. This can get extremely technical the further down the rabbit hole you go, and because this is technically a beginners guide, I’m going to try and simplify to the best of my ability and provide resources for further technical reading.
A Brief History
Bitcoin was created by Satoshi Nakamoto. The identity of Nakamoto is unknown. The idea of Bitcoin was first introduced in 2008 when Nakamoto released the Bitcoin white paper - Bitcoin: A Peer-to-Peer Electronic Cash System. Later, in January 2009, Nakamoto announced the Bitcoin software and the Bitcoin network officially began. I should also mention that the smallest unit of a Bitcoin is called a Satoshi. 1 BTC = 100,000,000 Satoshis. When purchasing Bitcoin, you don’t actually need to purchase an entire coin. Bitcoin is divisible, so you can purchase any amount greater than 1 Satoshi (0.00000001 BTC).
What Is Blockchain?
Blockchain is a distributed ledger, a distributed collection of accounts. What is being accounted for depends on the use-case of the blockchain itself. In the case of Bitcoin, what is being accounted for is financial transactions. The first block in a blockchain is referred to as the genesis block. A block is an aggregate of data. Blocks are also discovered through a process known as mining (more on this later). Each block is cryptographically signed by the previous block in the chain and visualizing this would look something akin to a chain of blocks, hence the term, blockchain. For more information regarding blockchain I’ve provided more resouces below:
Bitcoin mining is one solution to the double spend problem. Bitcoin mining is how transactions are placed into blocks and added onto the blockchain. This is done to ensure proof of work, where computational power is staked in order to solve what is essentially a puzzle. If you solve the puzzle correctly, you are rewarded Bitcoin in the form of transaction fees, and the predetermined block reward. The Bitcoin given during a block reward is also the only way new Bitcoin can be introduced into the economy. With a halving event occurring roughly every 4 years, it is estimated that the last Bitcoin block will be mined in the year 2,140. (See What is Block Reward below for more info). Mining is one of those aspects of Bitcoin that can get extremely technical and more complicated the further down the rabbit hole you go. An entire website could be created (and many have) dedicated solely to information regarding Bitcoin mining. The small paragraph above is meant to briefly expose you to the function of mining and the role it plays within the ecosystem. It doesn’t even scratch the surface regarding the topic.
How do you Purchase Bitcoin?
The most popular way to purchase Bitcoin through is through an online exchange where you trade fiat (your national currency) for Bitcoin. Popular exchanges include:
There’s tons of different exchanges. Just make sure you find one that supports your national currency.
Bitcoin and cryptocurrencies are EXTREMELY volatile. Swings of 30% or more within a few days is not unheard of. Understand that there is always inherent risks with any investment. Cryptocurrencies especially. Only invest what you’re willing to lose.
Transaction & Network Fees
Transacting on the Bitcoin network is not free. Every purchase or transfer of Bitcoin will cost X amount of BTC depending on how congested the network is. These fees are given to miners as apart of the block reward. Late 2017 when Bitcoin got up to $20,000USD, the average network fee was ~$50. Currently, at the time of writing this, the average network fee is $1.46. This data is available in real-time on BitInfoCharts.
In this new era of money, there is no central bank or government you can go to in need of assistance. This means the responsibility of your money falls 100% into your hands. That being said, the security regarding your cryptocurrency should be impeccable. The anonymity provided by cryptocurrencies alone makes you a valuable target to hackers and scammers. Below I’ve detailed out best practices regarding securing your cryptocurrency.
Two-Factor Authentication (2FA)
Two-factor authentication is a second way of authenticating your identity upon signing in to an account. Most cryptocurrency related software/websites will offer or require some form of 2FA. Upon creation of any crypto-related account find the Security section and enable 2FA.
The most basic form of 2FA which you are probably most familiar with. This form of authentication sends a text message to your smartphone with a special code that will allow access to your account upon entry. Note that this is not the safest form of 2FA as you may still be vulnerable to what is known as a SIM swap attack. SIM swapping is a social engineering method in which an attacker will call up your phone carrier, impersonating you, in attempt to re-activate your SIM card on his/her device. Once the attacker has access to your SIM card he/she now has access to your text messages which can then be used to access your online accounts. You can prevent this by using an authenticator such as Google Authenticator.
The use of an authenticator is the safest form of 2FA. An authenticator is installed on a seperate device and enabling it requires you input an ever changing six digit code in order to access your account. I recommend using Google Authenticator. If a website has the option to enable an authenticator, it will give you a QR code and secret key. Use Google Authenticator to scan the QR code. The secret key consists of a random string of numbers and letters. Write this down on a seperate sheet of paper and do not store it on a digital device. Once Google Authenticator has been enabled, every time you sign into your account, you will have to input a six-digit code that looks similar to this. If you happen to lose or damage the device you have Google Authenticator installed on, you will be locked out of your account UNLESS you have access to the secret key (which you should have written down).
A wallet is what you store Bitcoin and cryptocurrency on. I’ll provide resources on the different type of wallets later but I want to emphasize the use of a hardware wallet (aka cold storage). Hardware wallets are the safest way of storing cryptocurrency because it allows for your crypto to be kept offline in a physical device. After purchasing crypto via an exchange, I recommend transferring it to cold storage. The most popular hardware wallets include the Ledger Nano S, and Trezor. Hardware wallets come with a special key so that if it gets lost or damaged, you can recover your crypto. I recommend keeping your recovery key as well as any other sensitive information in a safety deposit box. I know this all may seem a bit manic, but it is important you take the necessary security precautions in order to ensure the safety & longevity of your cryptocurrency.
Technical Aspects of Bitcoin
Address: What you send Bitcoin to.
Wallet: Where you store your Bitcoin
Max Supply: 21 million
Block Time: ~10 minutes
Block Size: 1-2 MB
Block Reward: BTC reward received from mining.
What is a Bitcoin Address?
A Bitcoin address is what you send Bitcoin to. If you want to receive Bitcoin you’d give someone your Bitcoin address. Think of a Bitcoin address as an email address for money.
What is a Bitcoin Wallet?
As the title implies, a Bitcoin wallet is anything that can store Bitcoin. There are many different types of wallets including paper wallets, software wallets and hardware wallets. It is generally advised NOT to keep cryptocurrency on an exchange, as exchanges are prone to hacks (see Mt. Gox hack). My preferred method of storing cryptocurrency is using a hardware wallet such as the Ledger Nano S or Trezor. These allow you to keep your crypto offline in physical form and as a result, much more safe from hacks. Paper wallets also allow for this but have less functionality in my opinion. After I make crypto purchases, I transfer it to my Ledger Nano S and keep that in a safe at home. Hardware wallets also come with a special key so that if it gets lost or damaged, you can recover your crypto. I recommend keeping your recovery key in a safety deposit box.
What is Bitcoins Max Supply?
The max supply of Bitcoin is 21 million. The only way new Bitcoins can be introduced into the economy are through block rewards which are given after successfully mining a block (more on this later).
What is Bitcoins Block Time?
The average time in which blocks are created is called block time. For Bitcoin, the block time is ~10 minutes, meaning, 10 minutes is the minimum amount of time it will take for a Bitcoin transaction to be processed. Note that transactions on the Bitcoin network can take much longer depending on how congested the network is. Having to wait a few hours or even a few days in some instances for a transaction to clear is not unheard of. Other cryptocurrencies will have different block times. For example, Ethereum has a block time of ~15 seconds. For more information on how block time works, Prabath Siriwardena has a good block post on this subject which can be found here.
What is Bitcoins Block Size?
There is a limit to how large blocks can be. In the early days of Bitcoin, the block size was 36MB, but in 2010 this was reduced to 1 MB in order to prevent distributed denial of service attacks (DDoS), spam, and other malicious use on the blockchain. Nowadays, blocks are routinely in excess of 1MB, with the largest to date being somewhere around 2.1 MB. There is much debate amongst the community on whether or not to increase Bitcoin’s block size limit to account for ever-increasing network demand. A larger block size would allow for more transactions to be processed. The con argument to this is that decentralization would be at risk as mining would become more centralized. As a result of this debate, on August 1, 2017, Bitcoin underwent a hard-fork and Bitcoin Cash was created which has a block size limit of 8 MB. Note that these are two completely different blockchains and sending Bitcoin to a Bitcoin Cash wallet (or vice versa) will result in a failed transaction. Update: As of May 15th, 2018 Bitcoin Cash underwent another hard fork and the block size has increased to 32 MB. On the topic of Bitcoin vs Bitcoin Cash and which cryptocurrency is better, I’ll let you do your own research and make that decision for yourself. It is good to know that this is a debated topic within the community and example of the politics that manifest within the space. Now if you see community members arguing about this topic, you’ll at least have a bit of background to the issue.
What is Block Reward?
Block reward is the BTC you receive after discovering a block. Blocks are discovered through a process called mining. The only way new BTC can be added to the economy is through block rewards and the block reward is halved every 210,000 blocks (approximately every 4 years). Halving events are done to limit the supply of Bitcoin. At the inception of Bitcoin, the block reward was 50BTC. At the time of writing this, the block reward is 12.5BTC. Halving events will continue to occur until the amount of new Bitcoin introduced into the economy becomes less than 1 Satoshi. This is expected to happen around the year 2,140. All 21 million Bitcoins will have been mined. Once all Bitcoins have been mined, the block reward will only consist of transaction fees.
Any computer that connects to the Bitcoin network is called a node. Nodes that fully verify all of the rules of Bitcoin are called full nodes.
In other words, full nodes are what verify the Bitcoin blockchain and they play a crucial role in maintaining the decentralized network. Full nodes store the entirety of the blockchain and validate transactions. Anyone can participate in the Bitcoin network and run a full node. Bitcoin.org has information on how to set up a full node. Running a full node also gives you wallet capabilities and the ability to query the blockchain. For more information on Bitcoin nodes, see Andreas Antonopoulos’s Q&A on the role of nodes.
What is a Fork?
A fork is a divergence in a blockchain. Since Bitcoin is a peer-to-peer network, there’s an overall set of rules (protocol) in which participants within the network must abide by. These rules are put in place to form network consensus. Forks occur when implementations must be made to the blockchain or if there is disagreement amongst the network on how consensus should be achieved.
Soft Fork vs Hard Fork
The difference between soft and hard forks lies in compatibility. Soft forks are backwards compatible, hard forks are not. Think of soft forks as software upgrades to the blockchain, whereas hard forks are a software upgrade that warrant a completely new blockchain. During a soft fork, miners and nodes upgrade their software to support new consensus rules. Nodes that do not upgrade will still accept the new blockchain. Examples of Bitcoin soft forks include:
A hard fork can be thought of as the creation of a new blockchain that X percentage of the community decides to migrate too. During a hard fork, miners and nodes upgrade their software to support new consensus rules, Nodes that do not upgrade are invalid and cannot accept the new blockchain. Examples of Bitcoin hard forks include:
Note that these are completely different blockchains and independent from the Bitcoin blockchain. If you try to send Bitcoin to one of these blockchains, the transaction will fail.
A Case For Bitcoin in a World of Centralization
Our current financial system is centralized, which means the ledger(s) that operate within this centralized system are subjugated to control, manipulation, fraud, and many other negative aspects that come with this system. There are also pros that come with a centralized system, such as the ability to swiftly make decisions. However, at some point, the cons outweigh the pros, and change is needed. What makes Bitcoin so special as opposed to our current financial system is that Bitcoin allows for the decentralized transfer of money. Not one person owns the Bitcoin network, everybody does. Not one person controls Bitcoin, everybody does. A decentralized system in theory removes much of the baggage that comes with a centralized system. Not to say the Bitcoin network doesn’t have its problems (wink wink it does), and there’s much debate amongst the community as to how to go about solving these issues. But even tiny steps are significant steps in the world of blockchain, and I believe Bitcoin will ultimately help to democratize our financial system, whether or not you believe it is here to stay for good.
Well that was a lot of words… Anyways I hope this guide was beneficial, especially to you crypto newbies out there. You may have come into this realm not expecting there to be an abundance of information to learn about. I know I didn’t. Bitcoin is only the tip of the iceberg, but now that you have a fundamental understanding of Bitcoin, learning about other cryptocurrencies such as Litecoin, and Ethereum will come more naturally. Feel free to ask questions below! I’m sure either the community or myself would be happy to answer your questions. Thanks for reading!
Hello! My name is Slava Mikhalkin, I am a Project Owner of Crowdsale platform at Platinum, the company that knows how to start any ICO or STO in 2019. If you want to avoid headaches with launching process, we can help you with ICO and STO advertising and promotion. See the full list of our services: Platinum.fund I am also happy to be a part of the UBAI, the first educational institution providing the most effective online education on blockchain! We can teach you how to do ICO/STO in 2019. Today I want to tell you how to sell and transfer cryptocurrencies. Major Exchanges In finance, an exchange is a forum or platform for trading commodities, derivatives, securities or other financial instruments. The principle concern of an exchange is to allow trading between parties to take place in a fair and legally compliant manner, as well as to ensure that pricing information for any instrument traded on the exchange is reliable and coherently delivered to exchange participants. In the cryptocurrency space exchanges are online platforms that allow users to trade cryptocurrencies or digital currencies for fiat money or other cryptocurrencies. They can be centralized exchanges such a Binance, or decentralized exchanges such as IDEX. Most cryptocurrency exchanges allow users to trade different crypto assets with BTC or ETH after having already exchanged fiat currency for one of those cryptocurrencies. Coinbase and Kraken are the main avenue for fiat money to enter into the cryptocurrency ecosystem. Function and History Crypto exchanges can be market-makers that take bid/ask spreads as a commission on the transaction for facilitating the trade, or more often charge a small percentage fee for operating the forum in which the trade was made. Most crypto exchanges operate outside of Western countries, enabling them to avoid stringent financial regulations and the potential for costly and lengthy legal proceedings. These entities will often maintain bank accounts in multiple jurisdictions, allowing the exchange to accept fiat currency and process transactions from customers all over the globe. The concept of a digital asset exchange has been around since the late 2000s and the following initial attempts at running digital asset exchanges foreshadows the trouble involved in attempting to disrupt the operation of the fiat currency baking system. The trading of digital or electronic assets predate Bitcoin’s creation by several years, with the first electronic trading entities running afoul of the Australian Securities and Investments Commission (ASIC) in late 2004. Companies such as Goldex, SydneyGoldSales, and Ozzigold, shut down voluntarily after ASIC found that they were operating without an Australian Financial Services License. E-Gold, which exchanged fiat USD for grams of precious metals in digital form, was possibly the first digital currency exchange as we know it, allowing users to make instant transfers to the accounts of other E-Gold members. At its peak in 2006 E-Gold processed $2 billion worth of transactions and boasted a user base of over 5 million people. Popular Exchanges Here we will give a brief overview of the features and operational history of the more popular and higher volume exchanges because these are the platforms to which newer traders will be exposed. These exchanges are recommended to use because they are the industry standard and they inspire the most confidence. Bitfinex Owned and operated by iFinex Inc, the cryptocurrency trading platform Bitfinex was the largest Bitcoin exchange on the planet until late 2017. Headquartered in Hong Kong and based in the US Virgin Island, Bitfinex was one of the first exchanges to offer leveraged trading (“Margin trading allows a trader to open a position with leverage. For example — we opened a margin position with 2X leverage. Our base assets had increased by 10%. Our position yielded 20% because of the 2X leverage. Standard trades are traded with leverage of 1:1”) and also pioneered the use of the somewhat controversial, so-called “stable coin” Tether (USDT). Binance Binance is an international multi-language cryptocurrency exchange that rose from the mid-rank of cryptocurrency exchanges to become the market dominating behemoth we see today. At the height of the late 2017/early 2018 bull run, Binance was adding around 2 million new users per week! The exchange had to temporarily disallow new registrations because its servers simply could not keep up with that volume of business. After the temporary ban on new users was lifted the exchange added 240,000 new accounts within two hours. Have you ever thought whats the role of the cypto exchanges? The answer is simple! There are several different types of exchanges that cater to different needs within the ecosystem, but their functions can be described by one or more of the following: To allow users to convert fiat currency into cryptocurrency. To trade BTC or ETH for alt coins. To facilitate the setting of prices for all crypto assets through an auction market mechanism. Simply put, you can either mine cryptocurrencies or purchase them, and seeing as the mining process requires the purchase of expensive mining equipment, Cryptocurrency exchanges can be loosely grouped into one of the 3 following exchange types, each with a slightly different role or combination of roles. Have you ever thought about what are the types of Crypto exchanges?
Traditional Cryptocurrency Exchange: These are the type that most closely mimic traditional stock exchanges where buyers and sellers trade at the current market price of whichever asset they want, with the exchange acting as the intermediary and charging a small fee for facilitating the trade. Kraken and GDAX are examples of this kind of cryptocurrency exchange. Fully peer-to-peer exchanges that operate without a middleman include EtherDelta, and IDEX, which are also examples of decentralized exchanges.
Cryptocurrency Brokers: These are website or app based exchanges that act like a Travelex or other bureau-de-change. They allow customers to buy or sell crypto assets at a price set by the broker (usually market price plus a small premium). Coinbase is an example of this kind of exchange.
Direct Trading Platform: These platforms offer direct peer-to-peer trading between buyers and sellers, but don’t use an exchange platform in doing so. These types of exchanges do not use a set market rate; rather, sellers set their own rates. This is a highly risky form of trading, from which new users should shy away.
To understand how an exchange functions we need only look as far as a traditional stock exchange. Most all the features of a cryptocurrency exchange are analogous to features of trading on a traditional stock exchange. In the simplest terms, the exchanges fulfil their role as the main marketplace for crypto assets of all kinds by catering to buyers or sellers. These are some definitions for the basic functions and features to know: Market Orders: Orders that are executed instantly at the current market price. Limit Order: This is an order that will only be executed if and when the price has risen to or dropped to that price specified by the trader and is also within the specified period of time. Transaction fees: Exchanges will charge transactions fees, usually levied on both the buyer and the seller, but sometimes only the seller is charged a fee. Fees vary on different exchanges though the norm is usually below 0.75%. Transfer charges: The exchange is in effect acting as a sort of escrow agent, to ensure there is no foul play, so it might also charge a small fee when you want to withdraw cryptocurrency to your own wallet. Regulatory Environment and Evolution Cryptocurrency has come a long way since the closing down of the Silk Road darknet market. The idea of crypto currency being primarily for criminals, has largely been seen as totally inaccurate and outdated. In this section we focus on the developing regulations surrounding the cryptocurrency asset class by region, and we also look at what the future may hold. The United States of America A coherent uniform approach at Federal or State level has yet to be implemented in the United States. The Financial Crimes Enforcement Network published guidelines as early as 2013 suggesting that BTC and other cryptos may fall under the label of “money transmitters” and thus would be required to take part in the same Anti-money Laundering (AML) and Know your Client (KYC) procedures as other money service businesses. At the state level, Texas applies its existing finance laws. And New York has instituted an entirely new licensing system. The European Union The EU’s approach to cryptocurrency has generally been far more accommodating overall than the United States, partly due to the adaptable nature of pre-existing laws governing electronic money that predated the creation of Bitcoin. As with the USA, the EU’s main fear is money laundering and criminality. The European Central Bank (ECB) categorized BTC as a “convertible decentralized currency” and advised all central banks in the EU to refrain from trading any cryptocurrencies until the proper regulatory framework was put in place. A task force was then set up by the European Parliament in order to prevent and investigate any potential money laundering that was making use of the new technology. Likely future regulations for cryptocurrency traders within the European Union and North America will probably consist of the following proposals: The initiation of full KYC procedures so that users cannot remain fully anonymous, in order to prevent tax evasion and curtail money laundering. Caps on payments that can be made in cryptocurrency, similar to caps on traditional cash transactions. A set of rules governing tax obligations regarding cryptocurrencies Regulation by the ECB of any companies that offer exchanges between cryptocurrencies and fiat currencies It is less likely for other countries to follow the Chinese approach and completely ban certain aspects of cryptocurrency trading. It is widely considered more progressive and wiser to allow the technology to grow within a balanced accommodative regulatory framework that takes all interests and factors into consideration. It is probable that the most severe form of regulation will be the formation of new governmental bodies specifically to form laws and exercise regulatory control over the cryptocurrency space. But perhaps that is easier said than done. It may, in certain cases, be incredibly difficult to implement particular regulations due to the anonymous and decentralized nature of crypto. Behavior of Cryptocurrency Investors by Demographic Due to the fact that cryptocurrency has its roots firmly planted in the cryptography community, the vast majority of early adopters are representative of that group. In this section we cover the basic structure of the cryptocurrency market cycle and the makeup of the community at large, as well as the reasons behind different trading decisions. The Cryptocurrency Market Cycle Bitcoin leads the bull rally. FOMO (Fear of missing out) occurs, the price surge is a constant topic of mainstream news, business programs cover the story, and social media is abuzz with cryptocurrency chatter. Bitcoin reaches new All Timehigh (ATH) Market euphoria is fueled with even more hype and the cycle is in full force. There is a constant stream of news articles and commentary on the meteoric, seemingly unstoppable rise of Bitcoin. Bitcoin’s price “stabilizes”, In the 2017 bull run this was at or around $14,000. A number of solid, large market cap altcoins rise along with Bitcoin; ETH & LTC leading the altcoins at this time. FOMO comes into play, as the new ATH in market cap is reached by pumping of a huge number of alt coins. Top altcoins “somewhat” stabilize, after reaching new all-time highs. The frenzy continues with crypto success stories, notable figures and famous people in the news. A majority of lesser known cryptocurrencies follow along on the upward momentum. Newcomers are drawn deeper into crypto and sign up for exchanges other than the main entry points like Coinbase and Kraken. In 2017 this saw Binance inundated with new registrations. Some of the cheapest coins are subject to massive pumping, such as Tron TRX which saw a rise in market cap from $150 million at the start of December 2017 to a peak of $16 billion! At this stage, even dead coins or known scams will get pumped. The price of the majority of cryptocurrencies stabilize, and some begin to retract. When the hype is subsiding after a huge crypto bull run, it is a massive sell signal. Traditional investors will begin to give interviews about how people need to be careful putting money into such a highly volatile asset class. Massive violent correction begins and the market starts to collapse. BTC begins to fall consistently on a daily basis, wiping out the insane gains of many medium to small cap cryptos with it. Panic selling sweeps through the market. Depression sets in, both in the markets, and in the minds of individual investors who failed to take profits, or heed the signs of imminent collapse. The price stagnation can last for months, or even years. The Influence of Age upon Trading Did you know? Cryptocurrencies have been called “stocks for millennials” According to a survey conducted by the Global Blockchain Business Council, only 5% of the American public own any bitcoin, but of those that do, an overwhelming majority of 71% are men, 58% of them are between the ages of 18 and 35, and over half of them are minorities. The same survey gauged public attitude toward the high risk/high return nature of cryptocurrency, in comparison to more secure guaranteed small percentage gains offered by government bonds or stocks, and found that 30% would rather invest $1,000 in crypto. Over 42% of millennials were aware of cryptocurrencies as opposed to only 15% of those ages 65 and over. In George M. Korniotis and Alok Kumar’s study into the effects of aging on portfolio management and the quality of decisions made by older investors, they found “that older and experienced investors are more likely to follow “rules of thumb” that reflect greater investment knowledge. However, older investors are less effective in applying their investment knowledge and exhibit worse investment skill, especially if they are less educated and earn lower income.” Geographic Influence upon Trading One of the main drivers of the apparent seasonal ebb and flow of cryptocurrency prices is the tax situation in the various territories that have the highest concentrations of cryptocurrency holders. Every year we see an overall market pull back beginning in mid to late January, with a recovery beginning usually after April. This is because “Tax Season” is roughly the same across Europe and the United States, with the deadline for Income tax returns being April 15th in the United States, and the tax year officially ending the UK on the 6th of April. All capital gains must be declared before the window closes or an American trader will face the powerful and long arm of the IRS with the consequent legal proceedings and possible jail time. Capital gains taxes around the world vary from jurisdiction to jurisdiction but there are often incentives for cryptocurrency holders to refrain from trading for over a year to qualify their profits as long term gain when they finally sell. In the US and Australia, for example, capital gains are reduced if you bought cryptocurrency for investment purposes and held it for over a year. In Germany if crypto assets are held for over a year then the gains derived from their sale are not taxed. Advantages like this apply to individual tax returns, on a case by case basis, and it is up to the investor to keep up to date with the tax codes of the territory in which they reside. 2013 Bull run vs 2017 Bull run price Analysis In late 2016 cryptocurrency traders were faced with the task of distinguishing between the beginnings of a genuine bull run and what might colorfully be called a “dead cat bounce” (in traditional market terminology). Stagnation had gripped the market since the pull-back of early 2014. The meteoric rise of Bitcoin’s price in 2013 peaked with a price of $1,100 in November 2013, after a year of fantastic news on the adoption front with both Microsoft and PayPal offering BTC payment options. It is easy to look at a line going up on a chart and speak after the fact, but at the time, it is exceeding difficult to say whether the cat is actually climbing up the wall, or just bouncing off the ground. Here, we will discuss the factors that gave savvy investors clues as to why the 2017 bull run was going to outstrip the 2013 rally. Hopefully this will help give insight into how to differentiate between the signs of a small price increase and the start of a full scale bull run. Most importantly, Volume was far higher in 2017. As we can see in the graphic below, the 2017 volume far exceeds the volume of BTC trading during the 2013 price increase. The stranglehold MtGox held on trading made a huge bull run very difficult and unlikely. Fraud & Immoral Activity in the Private Market Ponzi Schemes Cryptocurrency Ponzi schemes will be covered in greater detail in Lesson 7, but we need to get a quick overview of the main features of Ponzi schemes and how to spot them at this point in our discussion. Here are some key indicators of a Ponzi scheme, both in cryptocurrencies and traditional investments: A guaranteed promise of high returns with little risk. Consistentflow of returns regardless of market conditions. Investments that have not been registered with the Securities and Exchange Commission (SEC). Investment strategies that are a secret, or described as too complex. Clients not allowed to view official paperwork for their investment. Clients have difficulties trying to get their money back. The initial members of the scheme, most likely unbeknownst to the later investors, are paid their “dividends” or “profits” with new investor cash. The most famous modern-day example of a Ponzi scheme in the traditional world, is Bernie Madoff’s $100 billion fraudulent enterprise, officially titled Bernard L. Madoff Investment Securities LLC. And in the crypto world, BitConnect is the most infamous case of an entirely fraudulent project which boasted a market cap of $2 billion at its peak. What are the Exchange Hacks? The history of cryptocurrency is littered with examples of hacked exchanges, some of them so severe that the operation had to be wound up forever. As we have already discussed, incredibly tech savvy and intelligent computer hackers led by Alexander Vinnik stole 850000 BTC from the MtGox exchange over a period from 2012–2014 resulting in the collapse of the exchange and a near-crippling hammer blow to the emerging asset class that is still being felt to this day. The BitGrail exchange suffered a similar style of attack in late 2017 and early 2018, in which Nano (XRB) was stolen that was at one point was worth almost $195 million. Even Bitfinex, one of the most famous and prestigious exchanges, has suffered a hack in 2016 where $72 million worth of BTC was stolen directly from customer accounts. Hardware Wallet Scam Case Study In late 2017, an unfortunate character on Reddit, going by the name of “moody rocket” relayed his story of an intricate scam in which his newly acquired hardware wallet was compromised, and his $34,000 life savings were stolen. He bought a second hand Nano ledger into which the scammers own recover seed had already been inserted. He began using the ledger without knowing that the default seed being used was not a randomly assigned seed. After a few weeks the scammer struck, and withdrew all the poor HODLer’s XRP, Dash and Litecoin into their own wallet (likely through a few intermediary wallets to lessen the very slim chances of being identified). Hardware Wallet Scam Case Study Social Media Fraud Many gullible and hapless twitter users have fallen victim to the recent phenomenon of scammers using a combination of convincing fake celebrity twitter profiles and numerous amounts of bots to swindle them of ETH or BTC. The scammers would set up a profile with a near identical handle to a famous figure in the tech sphere, such as Vitalik Buterin or Elon Musk. And then in the tweet, immediately following a genuine message, follow up with a variation of “Bonus give away for the next 100 lucky people, send me 0.1 ETH and I will send you 1 ETH back”, followed by the scammers ether wallet address. The next 20 or so responses will be so-called sockpuppet bots, thanking the fake account for their generosity. Thus, the pot is baited and the scammers can expect to receive potentially hundreds of donations of 0.1 Ether into their wallet. Many twitter users with a large follower base such as Vitalik Buterin have taken to adding “Not giving away ETH” to their username to save careless users from being scammed. Market Manipulation It also must be recognized that market manipulation is taking place in cryptocurrency. For those with the financial means i.e. whales, there are many ways in which to control the market in a totally immoral and underhanded way for your own profit. It is especially easy to manipulate cryptos that have a very low trading volume. The manipulator places large buy orders or sell walls to discourage price action in one way or the other. Insider trading is also a significant problem in cryptocurrency, as we saw with the example of blatant insider trading when Bitcoin Cash was listed on Coinbase. Examples of ICO Fraudulent Company Behavior In the past 2 years an astronomical amount of money has been lost in fraudulent Initial Coin Offerings. The utmost care and attention must be employed before you invest. We will cover this area in greater detail with a whole lesson devoted to the topic. However, at this point, it is useful to look at the main instances of ICO fraud. Among recent instances of fraudulent ICOs resulting in exit scams, 2 of the most infamous are the Benebit and PlexCoin ICOs which raised $4 million for the former and $15 million for the latter. Perhaps the most brazen and damaging ICO scam of all time was the Vietnamese Pincoin ICO operation, where $660million was raised from 32,000 investors before the scammer disappeared with the funds. In case of smaller ICO “exit scamming” there is usually zero chance of the scammers being found. Investors must just take the hit. We will cover these as well as others in Lesson 7 “Scam Projects”. Signposts of Fraudulent Actors The following factors are considered red flags when investigating a certain project or ICO, and all of them should be considered when deciding whether or not you want to invest. Whitepaper is a buzzword Salad: If the whitepaper is nothing more than a collection of buzzwords with little clarity of purpose and not much discussion of the tech involved, it is overwhelmingly likely you are reading a scam whitepaper. Signposts of Fraudulent Actors §2 No Code Repository: With the vast majority of cryptocurrency projects employing open source code, your due diligence investigation should start at GitHub or Sourceforge. If the project has no entries, or nothing but cloned code, you should avoid it at all costs. Anonymous Team: If the team members are hard to find, or if you see they are exaggerating or lying about their experience, you should steer clear. And do not forget, in addition to taking proper precautions when investing in ICOs, you must always make sure that you are visiting authentic web pages, especially for web wallets. If, for example, you are on a spoof MyEtherWallet web page you could divulge your private key without realizing it and have your entire portfolio of Ether and ERC-20 tokens cleaned out. Methods to Avoid falling Victim Avoiding scammers and the traps they set for you is all about asking yourself the right questions, starting with: Is there a need for a Blockchain solution for the particular problem that a particular ICO is attempting to solve? The existing solution may be less costly, less time consuming, and more effective than the proposals of a team attempting to fill up their soft cap in an ICO. The following quote from Mihai Ivascu, the CEO of Modex, should be kept in mind every time you are grading an ICO’s chances of success: “I’m pretty sure that 95% of ICOswill not last, and many will go bankrupt. ….. not everything needs to be decentralized and put on an open source ledger.” Methods to Avoid falling Victim §2 Do I Trust These People with My Money, or Not? If you continue to feel uneasy about investing in the project, more due diligence is needed. The developers must be qualified and competent enough to complete the objectives that they have set out in the whitepaper. Is this too good to be true? All victims of the well-known social media scams using fake profiles of Vitalik Buterin, or Bitconnect investors for that matter, should have asked themselves this simple question, and their investment would have been saved. In the case of Bitconnect, huge guaranteed gains proportional to the amount of people you can get to sign up was a blatant pyramid scheme, obviously too good to be true. The same goes for Fake Vitalik’s offer of 1 ether in exchange for 0.1 ETH. Selling Cryptocurrencies, Several reasons for selling with the appropriate actions to take: If you are selling to buy into an ICO, or maybe believe Ether is a safer currency to hold for a certain period of time, it is likely you will want to make use of the Ether pair and receive Ether in return. Obviously if the ICO is on the NEO or WANchain blockchain for example, you will use the appropriate pair. -Trading to buy into another promising project that is listing on the exchange on which you are selling (or you think the exchange will experience a large amount of volume and become a larger exchange), you may want to trade your cryptocurrency for that exchange token. -If you believe that BTC stands a good chance of experiencing a bull run then using the BTC trading pair is the suitable choice. -If you believe that the market is about to experience a correction but you do not want to take your gains out of the market yet, selling for Tether or “tethering up” is the best play. This allows you to keep your locked-in profits on the exchange, unaffected by the price movements in the cryptocurrency markets,so that you can buy back in at the most profitable moment. -If you wish to “cash out” i.e. sell your cryptocurrency for fiat currency and have those funds in your bank account, the best pair to use is ETH or BTC because you will likely have to transfer to an exchange like Kraken or Coinbase to convert them into fiat. If the exchange offers Litecoin or Bitcoin Cash pairs it could be a good idea to use these for their fast transaction time and low fees. Selling Cryptocurrencies Knowing when and how to sell, as well as strategies to inflate the value of your trade before sale, are important skills as a trader of any product or financial instrument. If you are satisfied that the sale itself of the particular amount of a token or coin you are trading away is the right one, then you must decide at what price you are going to sell. Exchanges exercise their own discretion as to which trading “pairs” they will offer, but the most common ones are BTC, ETH, BNB for Binance, BIX for Bibox etc., and sometimes Tether (USDT) or NEO. As a trader, you decide which particular cryptocurrency to exchange depending on your reason for making that specific trade at that time. Methods of Sale Market sell/Limit sell on exchange: A limit sell is an order placed on an exchange to sell as soon as (also specifically only if and when) the price you specified has been hit within the time limit you select. A market order executes the sale immediately at the best possible price offered by the market at that exact time. OTC (or Over the Counter) selling refers to sale of securities or cryptocurrencies in any method without using an exchange to intermediate the trade and set the price. The most common way of conducting sales in this manner is through LocalBitcoins.com. This method of cryptocurrency selling is far riskier than using an exchange, for obvious reasons. The influence and value of your Trade There are a number of strategies you can use to appreciate the value of your trade and thus increase the Bitcoin or Ether value of your portfolio. It is important to disassociate yourself from the dollar value of your portfolio early on in your cryptocurrency trading career simply because the crypto market is so volatile you will end up pulling your hair out in frustration following the real dollar money value of your holdings. Once your funds have been converted into BTC and ETH they are completely in the crypto sphere. (Some crypto investors find it more appropriate to monitor the value of their portfolio in satoshi or gwei.) Certainly not limited to, but especially good for beginners, the most reliable way to increase your trading profits, and thus the overall value and health of your portfolio, is to buy into promising projects, hold them for 6 months to a year, and then reevaluate. This is called Long term holding and is the tactic that served Bitcoin HODLers quite well, from 2013 to the present day. Obviously, if something comes to light about the project that indicates a lengthy set back is likely, it is often better to cut your losses and sell. You are better off starting over and researching other projects. Also, you should set initial Price Points at which you first take out your original investment, and then later, at which you take out all your profits and exit the project. That should be after you believe the potential for growth has been exhausted for that particular project. Another method of increasing the value of your trades is ICO flipping. This is the exact opposite of long term holding. This is a technique in which you aim for fast profits taking advantage of initial enthusiasm in the market that may double or triple the value of ICO projects when they first come to market. This method requires some experience using smaller exchanges like IDEX, on which project tokens can be bought and sold before listing on mainstream exchanges. “Tethering up” means to exchange tokens or coins for the USDT stable coin, the value of which is tethered to the US Dollar. If you learn, or know how to use, technical analysis, it is possible to predict when a market retreatment is likely by looking at the price movements of BTC. If you decide a market pull back is likely, you can tether up and maintain the dollar value of your portfolio in tether while other tokens and coins decrease in value. The you wait for an opportune moment to reenter the market. Market Behavior in Different Time Periods The main descriptors used for overall market sentiment are “Bull Market” and “Bear Market”. The former describes a market where people are buying on optimism. The latter describes a market where people are selling on pessimism. Fun (or maybe not) fact: The California grizzly bear was brought to extinction by the love of bear baiting as a sport in the mid 1800s. Bears were highly sought after for their intrinsic fighting qualities, and were forced into fighting bulls as Sunday morning entertainment for Californians. What has this got to do with trading and financial markets? The downward swipe of the bear’s paws gives a “Bear market” its name and the upward thrust of a Bull’s horns give the “Bull Market” its name. Most unfortunately for traders, the bear won over 80% of the bouts. During a Bull market, optimism can sometimes grow to be seemingly boundless, volume is rising, and prices are ascending. It can be a good idea to sell or rebalance your portfolio at such a time, especially if you have a particularly large position in one holding or another. This is especially applicable if you need to sell a large amount of a relatively low-volume holding, because you can then do so without dragging the price down by the large size of your own sell order. Learn more on common behavioral patterns observed so far in the cryptocurrency space for different coins and ICO tokens. Follow the link: UBAI.co If you want to know how do security tokens work, and become a professional in crypto world contact me via Facebook to get all the details: Facebook
Decentralized security token exchange, DSTOQ, has launched a platform called its minimum viable product (MVP). MVP allows people to invest in real assets such as stocks, bonds, and commodities using cryptocurrencies. This platform runs using Stellar’s blockchain testnet, and all transactions will happen completely on-chain.
Agricultural Bank of China (ABC), the world fourth largest bank by assets, announces it will making its first loan on a blockchain system. The loan, valued at USD$300k, is meant to support the local tea industry in the Guizhou province and is backed by a piece of agricultural land.
“Civilized blockchain”1 company Billon, has partnered with Fidelity National Information Services (FIS) to develop blockchain technology solutions. Billon implements blockchain solutions for the main purpose of processing fiat currencies. FIS will utilize Billon for document and identity management, the exploration of joint sales and product development opportunities, and smartphone micropayments among other services.
SBI Group, a Japanese financial services company, has announced plans to develop a platform to trade cryptocurrency derivatives. The platform would help crypto investors hedge their risk by offering cryptocurrency credit default swap (CDS) trading. SBI will accomplish this through its recent 12% purchase of North Carolina-based digital marketplace developer Clear Markets.
Equity research provider Fundstrat Global Advisors has announced that it will begin accepting Bitcoin (BTC) as payment for accessing research reports. Fundstrat is using payment operator BitPay, which has processed over USD$1 billion in Bitcoin payments CY2017, to process their new BTC payments accepted from institutional investors, high net-worth clients, and financial advisors.
The most popular cryptocurrency markets tracking platform, CoinMarketCap (CMC), has added a professional-grade API, and support for derivatives markets to its services. The API provides developers with access to aggregated data packages, providing everything from price and market cap, to trading pair data and conversions. CMC is marketing this product to those who need to back-test trading strategies, and run simulations more accurately.
Logos Network, a decentralized payments platform, successfully raised USD$3mm in seed funding. Logos is hoping to build a quick and scalable P2P payments network on a new blockchain. The payments network plans to be quick, scalable, and secure.
The Stuggart Börse, Germany’s second largest stock exchange, has announced an initiative to construct a multilateral cryptocurrency trading platform, as well as an initial coin offering (ICO) platform. The exchange already launched in May a crypto trading app called Bison, which features zero-fee transactions.
Intercontinental Exchange (ICE), operator of the New York Stock Exchange (NYSE) and 22 others, will develop a Microsoft cloud-based digital asset ecosystem. ICE is creating a new company for this, called Bakkt, which will work closely with companies including Starbucks and BCG. The ecosystem is planned to be a one-stop-shop for all consumers, from retail to institutional, to buy, hold, sell, and spend cryptocurrencies on a communal network. ICE will also launch physically-delivered BTC futures contracts.
The Chamber of Digital Commerce, an American advocacy group promoting the blockchain industry, is producing new guidelines to aid the in the responsible growth of the initial coin offering (ICO) markets and cryptocurrency markets all together. These guidelines were released in a whitepaper detailing current and future regulations for investor reference, a set of principles for trading platforms and token sponsors to follow, and a general discussion about the growth of the cryptocurrency industry so far.
The South Korean government has proposed revisions to its tax law, affecting cryptocurrency exchanges. The proposition states that cryptocurrency exchanges will be exempt from the tax benefits given to startups and small-mid-sized businesses. It is important to note that new propositions might be made to change this before implementation, but the South Korean government doesn’t believe that crypto transaction companies do not generate added value like other companies do.
Indian cryptocurrency traders are finding ways to circumvent the India government’s decision to ban cryptocurrency trading. Traders are now making use of a Dabba trading which refers to making OTC trades that are off the books. Dabba traders execute trades through platforms at international banks in Dubbai, Europe and the UK. Indian stock traders have used this method for years, and has experienced an upsurge after the crypto ban.
The U.S. Consumer financial Protection Bureau (CFPB) has created an Office of Innovation. The Office of innovation is responsible for the development of a regulatory framework surrounding new products and services in the cryptocurrency, blockchain, and microlending fields. This regulatory sandbox could give some guidance on creation of regulatory frameworks around innovative fintech companies.
South Korea Financial Supervisory Service is advising local regulators to work towards creating an integrated blockchain system for stocks transactions. The group finds the use of a centralized ledger to be inefficient and vulnerable to hacks.
It was recently reported that HTC will be releasing a new mobile phone utilizing decentralized ledger technology, but Litecoin (LTC) founder Charlie Lee announced July 29th that he will be one of HTC’s advisors on the smartphone. The phone will be called Exodus and is expected to be the first blockchain phone. Exodus’s built-in cryptocurrency wallet will now natively support LTC and the Lightning Network (LN), in addition to Bitcoin (BTC) and Ethereum (ETH).
Cointelegraph.com reported that digital asset exchange Huobi will begin supporting trades in the Indian rupee (INR) on its over-the-counter (OTC) service. Huobi’s peer-to-peer (P2P) trading platform will allow INR users free trading in Bitcoin (BTC), Ethereum (ETH), and Tether (USDT). This comes at a good time for Indian cryptocurrency traders after the Reserve Bank of India banned banks from dealing with cryptocurrency-related companies in early July.
IOHK, the company behind the popular cryptocurrency Cardano (ADA), announced that it has launched the testnet for a new Cardano virtual machine. The virtual machine, called IELE, provides developers with a stronger and more reliable platform for developing smart contracts on Cardano’s blockchain.
IoT and blockchain platform Ambrosus has announced the launch of its mainnet, called AMB-NET 1.0. Ambrosus improves pharmaceutical and food supply chains by allowing companies to record private and public supply chain data on its blockchain. Organizations can work with the Ambrosus Network through its native AMB token.
San Francisco-based platform, DCEX, will begin accepting registration applications for its new cryptocurrency exchange. DCEX’s base currency, the currency participants use to exchange for other currencies, will be Ripple’s XRP. This is a change from the cryptocurrency exchange norm of using Bitcoin (BTC) and Ethereum (ETH) as base currencies. Not basing all transactions off of Bitcoin is a step in the right directions for pushing the market to be more independent from it.
Thomson Reuters, a Canadian mass-media and information company, has announced a partnership with CryptoCompare, a cryptocurrency data tracking resource. CryptoCompare will provide Thomson Reuters will trade and order book data on 50 cryptocurrencies.
Major Cineplex, the largest movie theater chain in Thailand, is integrating cryptocurrency payments to permits moviegoers to buy anything from tickets to popcorn. Major Cineplex is partnering with RapizPay to deploy the digital currency payment system. This comes a week after the Thai Securities and Exchange Commission began allowing cryptocurrency operators to file license applications.
Coinbase, one of the largest cryptocurrency services in the world, has announced in a blog post that Jeff Horowitz, an ex-Pershing exec, has joined as company’s new Chief Compliance Officer. Horowitz has ample background experience for this position, as he was Managing Director and Global Head of Compliance for Pershing, a banking regulator for the FDIC, and even led compliance and anti-money-laundering (AML) programs at Goldman Sachs, Citigroup, and Salomon Brothers.
Binance, the world’s most popular cryptocurrency exchange, has made its first-ever acquisition, purchasing crypto wallet provider Trust Wallet. This move appeals to cryptocurrency investors wary of keeping their coins on centralized custodial services as Trust Wallet now introduces Binance users to decentralized custody. The decentralized wallet will be offered on mobile platforms, and supports coins built off of Ethereum’s protocol. You can read more about decentralized exchanges in our latest Crypto Quant Shot: Atomic Swaps, Decentralized Exchanges, and the Future of Crypto Exchanges.
Google has announced that later this year, it will introduce open-source integrations of Ethereum and Hyperledger applications through its Google Cloud Product marketplace. This move pushes Google into the blockchain services industry, thereby joining others such as Amazon Web Services, IBM, Oracle, and Microsoft Azure.
U.S. lawmakers working with the Congressional Valley Fever Task Force are looking for blockchain applications to help fight infectious fungal diseases. The lawmakers have proposed a bill as a part of the FORWARD Act for the creation of a blockchain pilot hoping to improve the way doctors share information about endemic fungal diseases such as Valley Fever. If information could be exchanged between doctors quicker and more efficiently, they would be better equipped to treat these infectious diseases.
Mobile engagement firm MobileBridge, has launched a blockchain loyalty program called Momentum. Momentum will offer other companies many data-based insights, and consumers full custody of their earned cryptocurrency rewards. Consumers can earn loyalty cards and other rewards for simply shopping at their favorite stores. These rewards can be exchanged for Momentum tokens, and then other branded reward tokens to be used with other companies.
CoinMarketApp, a cryptocurrency news multi-use app, has released compatibility with iOS and Android smartphones. CoinMarketApp is not like typical cryptocurrency apps, in that it offers crypto historic data, prices, mining information, trustworthy news, and even portfolio services.
Northern Trust, an asset manager with USD$954bn in AUM announces plans to start a custody service for digital assets. Pete Cherecwich, Northern Trust’s head of corporate and institutional business, explained that the firm plans to offer custodial services similar to others, but with lower fees.
Swissquote, a Switzerland-based online banking firm which recently added cryptocurrency investing to its services, has seen a 44% profit increase in this C1H2018 relative to C1H2017. Throughout the second half of CY2017, Swiss quote has allowed trading in Bitcoin (BTC) with the EUR and USD, as well as Ethereum (ETH), Bitcoin Cash (BCH), Litecoin (LTC), and Ripple (XRP).
MINDOL is a blockchain platform aiming to disrupt the entertainment provider industry in Japan. MINDOL’s whitepaper states a growing demand for and heavy government investing in spreading Japanese culture throughout the world, including animations, games, music, and movies. MINDOL hopes to regularly produce programs on TV. MINDOL’s central network, called eMINDOL, lets consumers purchase products, watch content, and even invest in the projects and artists they like.
Telegram, a popular desktop and mobile app messenger, recently executed an ICO, raising USD$1.7 billion. However, US-based cybersecurity startup Virgil Security, praised the fact that Telegram published the application’s API on an open source platform for developers to review, but has uncovered several security flaws with Telegram’s ID verification app Passport. Virgil discovered issues with their encryption methods and the way they protect stored data. These issues are very important to fix if Telegram wishes to begin accepting payments on its platform.
Coinbase, one of the world’s largest cryptocurrency trading services, has now allowed users in the UK to purchase cryptocurrencies with the British Pound. Before this announcement, users in the UK would have had to acquire Euros in order to purchase cryptos on Coinbase, which sometimes took multiple days.
The government of Queensland, Australia is giving USD$8.3mm to a crypto start-up as part of the state’s innovation funding initiative. The start-up’s goal is to increase the number of tourists to Central Queensland through selling travel offers based in different cryptocurrencies.
RandomCrypto, a fintech firm working with cryptocurrencies has released a Bitcoin (BTC) mining calculator, which improves upon the details given by competing products. Random Crypto CEO Josh Metnick says he developed this product after “many years of getting screwed… by mining companies,” and that his goal is to “bring more truth, accuracy, and transparency to [proof-of-work] mining.”1 The calculator shows that at today’s current BTC prices, most bitcoin mining hardware on the markets is unprofitable.
Chinese company Seven Stars Cloud, has announced plans to build a USD$300 million crypto hub in Hartford, CT. Seven Stars Cloud is a fintech company hoping to create a community for itself and other fintech firms to collaborate on machine-learning, robotics, and crypto-related projects. The firm is also trying to launch a fintech college at schools near Hartford, CT such as Yale University, University of Hartford, University of New Haven, and University of Connecticut.
Canaan Creative, the world’s second largest provider of Bitcoin mining components has announced a new product called the AvalonMiner Inside. The Avalon Miner Inside is essentially a television with built-in Bitcoin (BTC) mining capabilities. The TV will be powered by artificial intelligence and will also enable voice dictation. The mining components possess a 2.8 trillion hashes-per-second hash rate, and even includes a profitability calculator to measure performance.
Bitfi, a cryptocurrency hardware wallet manufacturer claiming it is “unhackable”, denies claims that it was hacked. Bitfi and its official partner John McAfee offered a $100,000 bug bounty in July to try to get people to hack its wallet. But when one twitter user claimed to have done this, Bitfi CEO Daniel Khesin denied these claims amid no evidence of a hack, and because of the fact that the “hacker” refused the bounty reward.
Switzerland-based cryptocurrency platform MCO has added Litecoin (LTC) to its supported coins. MCO enables users to purchase, sell, and trade cryptocurrencies from its mobile app. Formerly known as Monaco, MCO has amassed over 180,000 downloads, and expects to widen its user base as it adds more coins to its platform. This app will soon integrate with a Visa card allowing international purchases.
Hong Kong cryptocurrency exchange OKEx says it will have to claw back millions in USD$ following a single user’s large bet on bitcoin futures (the user lost “the bet”). Each futures contract has a notional value of $100, and OKEx estimate the total value of the position was over $400 million. OKEx initiated a forced liquidation of the account but because of the size, the exchange has had to trigger “societal loss risk management” mechanisms because of the size of the order. After insurance coverage is considered, the aggregate loss to investors is around BTC$1,200 (USD$8.8mm), which will "split proportionately by all profited traders' realized + unrealized gains".
Coinbase Commerce, Coinbase’s non-custodial merchant payment service, has launched a product integrating with e-commerce company WooCommerce. WooCommercie is currently used by between 21% and 28% of all web stores, and affiliated stores will now accept cryptocurrency payments from Coinbase Commerce users.
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