What is Cryptocurrency
Welcome to the cryptocurrency education centre of the site, in this section you will find all the information you will need on trading cryptocurrencies CFDs including,
What is a Cryptocurrency?
What is an Exchange?
Cryptocurrency: What is a Cryptocurrency?
A Cryptocurrency is a digital asset in the form of virtual money that is transferable between two or more parties over an electronic network. Cryptocurrencies can be used as a medium of exchange just as money is used or otherwise kept as an investment vehicle to be traded in a Cryptocurrency CFD exchange. Transactions that are carried out using a cryptocurrency CFD are secured by means of cryptography as the name suggests such that the identities of the sender/buyer and the receiver/seller are kept anonymous.
What is a Cryptocurrency CFD exchange?
A cryptocurrency CFD exchange is a platform that allows different parties to buy and sell cryptocurrencies CFDs in exchange for other digital assets or fiat money. Buying of cryptocurrency CFDs is a simple procedure although one needs to make sure that the platform is credible and secure. It takes place in the following steps:
· Buyer researches on credible cryptocurrency CFD exchange platform (Examples of exchange platforms include coinbase, kraken, cex.io, poloniex, et cetera.)
· Open an account (which will be your digital wallet) that you will link to your bank account, online wallet or credit/debit card
· Identify the cryptocurrency CFD you wish to buy and make sure you have enough funds/digital assets to buy it based on the present exchange rate
· Deposit your digital asset or fiat money into the account
· Select the amount you wish to buy and complete the transaction. The amount of cryptocurrency purchased will be debited from your account.
· Use the cryptocurrency to buy items or trade in a crypto exchange market.
Cryptocurrency mining is one of the ways to make money in a cryptocurrency network.
It can be defined as the process of authenticating transactions that have been carried out by other cryptocurrency merchants. This authentication process is, in fact, the process by which an accurate public ledger (also known as a blockchain) is maintained therefore preventing the ‘double spending’ problem as well as theft from occurring and also keeping any form of cryptocurrency fraud at bay. It is also referred to as the proof-of-work system.
Since there is no central authority that checks each transaction, the cryptocurrency network incorporates a self-checking mechanism where anybody can attempt to ‘solve the puzzle’ that indicates a transaction was actually carried out as long as they have the necessary resourced to do so. The first person to solve this puzzle is rewarded with a certain value of the cryptocurrency and the results of the puzzle (blockchain) – which point to an actual transaction are added to the public ledger for all miners to update the public ledger.
In essence, the miners are considered one of the most important players in the cryptocurrency industry since they maintain ‘security’ in the cryptocurrency network.
Cryptocurrency CFD markets are just like securities markets but instead of listing publicly traded stocks, they list all publicly traded cryptocurrencies CFDs in their equivalent values in fiat currency.
In a cryptocurrency CFD market, traders/investors are provided with the tools to buy (take long positions) and sell (take short positions) cryptocurrencies CFDs with the aim of making profits. In these markets, buyers can either purchase these digital assets using market orders that are executed instantly or using buy/sell limits that are executed only if the predetermined prices are reached.
In these uncertain times that we are living in, lots of cryptocurrencies are being introduced into the markets every so often. While it would be ideal to invest way before the whole world gets in and the virtual asset becomes overpriced, it is important to be careful. Nobody wants to invest a chunk of their hard-earned money in a cryptocurrency and end up holding a virtual asset that is worthless.
In the securities, derivatives and forex markets, one of the major factors that influence the value of the underlying assets is the news. This is because some of these assets are highly susceptible to speculation which could either lead to an exponential increase in value or a drastic slump. Either way, this makes cryptocurrencies CFDs one of the most volatile investment vehicles. For example in the case where a government is considering adopting a cryptocurrency, there might be an increase in value as people will have more confidence in it. Conversely, if a government takes a stand that is unfavorable for the cryptocurrencies, then its value is likely to drop.
In most cases, the prices of most cryptocurrencies are expressed as an exchange rate against another major currency, for example, the U.S dollar. As such, news about the cryptocurrency as well as news about the currency against which the cryptocurrency is compared will definitely end up affecting the price of the cryptocurrency.
Owing to the fact that most (if not all) cryptocurrencies are decentralized i.e. not controlled by any government they are not affected as much as fiat currencies would be affected in the event that a country decides to change their interest rate or devalue their currency.