How to Trade Cryptocurrencies
Cryptocurrencies are now the most volatile and talked-about instrument on the market.
In this article, we’ll investigate what cryptocurrencies are, their origins and specifications, as well as how to trade crypto.
Bitcoin, despite being the world’s first cryptocurrency, didn’t aim to become one in the beginning. The initial and core idea was to create a decentralized peer-to-peer network that would solve the problem of so-called ‘double-spending’ – the ability to send one amount to two different people, hence committing fraud. Apart from that security measure, that network also has such features as anonymity, high speed, and global scale.
How does the decentralized network work?
In a decentralized network, such as blockchain technology, every participant in that system can become not only the recipient or sender but also a validator. Validation of each and every transaction is the main characteristic of the network. Before the transaction can actually be made, it has to be validated to avoid double-spending. There are many validators, and until every single one of them approves the transaction, it will remain pending. If even one validator fails to approve it, the transaction is canceled. A consensus must be reached to provide a secure transaction. The validation process is also called ‘mining’. For this miners get paid in cryptocurrency, which can later be used to purchase things on the internet or buy smart contracts, depending on the type of cryptocurrency.
Bitcoin – the Digital Gold
Bitcoin is the first digital currency, created back in 2009. The main difference from traditional currencies (EUR, USD, JPY, etc) is that transactions are decentralized, highly secure, and what’s more, completely private. Digital currencies use encryption technology to regulate the generation of units of currency and verify the transfer of funds. No bank or government can interfere in the rate of a currency or in transactions made with it.
So what can influence the rate of Bitcoin then? Mainly, society – the wider spread of acceptance of the currency, sudden major purchases of it by people, compatibility with household-name payment systems like Paypal – all of this can cause the price of Bitcoin to rise.
Litecoin – Crypto Silver
Litecoin was first issued in 2011 and is quite similar to Bitcoin. If Bitcoin can be defined as the ‘gold’ of today’s cryptocurrencies, this makes Litecoin the ‘silver’.
Litecoin provides secure and fast transactions inside the blockchain, with the ability to purchase goods on the internet. The main difference from Bitcoin (and the central benefit of Litecoin) is the capability of processing much higher volumes in one transaction. While Bitcoin can have only up to 21 million coins, Litecoin offers four times as many as 84 million.
Ripple – Transfer it All
Ripple is not just the name of another cryptocurrency – it’s also the name of a system capable of processing a wide range of transactions. Ripple has the same goal as Bitcoin – to grant users all over the world access to quick and secure transactions. However what differentiates Ripple from other cryptocurrencies is that it allows users to transfer not just one currency – Ripple – but any other currency as well, including both cryptocurrencies and traditional ones such as USD, EUR, and so on.
Ethereum – Invest in the Future
Ethereum is a digital currency created in 2015. It is both similar to Bitcoin and completely different, at the same time. Similarities include that it’s a digital currency, uses a blockchain for transactions and costs a lot now. However at heart Etherium is very different- it isn’t a crypto coin for purchases of simple items on the internet at all, but a system to support smart contract technologies to invest in the ICOs of new start-up companies.
There’s currently a lot of talk around cryptocurrencies – some predict a fast rise and a dramatic fall, while others are confident that they are the currency of the future. We recommend you pay close attention to news about cryptocurrencies, so you’re always up to date with how they’re doing. For now, at least, cryptocurrencies are considered a good trading choice.
OctaFX provides its clients with the most convenient conditions to trade cryptocurrencies.