Topic: What is cryptocurrency?How miners create coins and confirm transactions?What are (Read 113 times)
May 23, 2018, 10:47:44 AM
Cryptocurrency is a trading medium that uses cryptographic principles to secure transactions and control the creation of trading units. The cryptocurrency is a kind of digital currency (or virtual currency). Bitcoin became the first decentralized cryptocurrency in 2009, after which the term cryptocurrency was mostly referring to such designs. Since then, several similar cryptocurrencies have been created. They are often called altcoins.
May 22, 2018, 02:14:03 PM
really thank for this information,this post is very help full for new for this market like me
May 20, 2018, 01:59:57 AM
i know some people know about this topics but who is new to this market and who don't know about this topics i hope these topic useful for them.
What are cryptocurrencies really?
If you take away all the noise around cryptocurrencies and reduce it to a simple definition, you find it to be just limited entries in a database no one can change without fulfilling specific conditions. This may seem ordinary, but, believe it or not: this is exactly how you can define a currency.
Take the money on your bank account: What is it more than entries in a database that can only be changed under specific conditions? You can even take physical coins and notes: What are they else than limited entries in a public physical database that can only be changed if you match the condition than you physically own the coins and notes? Money is all about a verified entry in some kind of database of accounts, balances, and transactions.
How miners create coins and confirm transactions
Let‘s have a look at the mechanism ruling the databases of cryptocurrencies. A cryptocurrency like Bitcoin consists of a network of peers. Every peer has a record of the complete history of all transactions and thus of the balance of every account.
A transaction is a file that says, “Bob gives X Bitcoin to Alice“ and is signed by Bob‘s private key. It‘s basic public key cryptography, nothing special at all. After signed, a transaction is broadcasted in the network, sent from one peer to every other peer. This is basic p2p-technology. Nothing special at all, again.
https://blockgeeks.com/wp-content/uploads/2016/11/image-1-1024x936.png
The transaction is known almost immediately by the whole network. But only after a specific amount of time it gets confirmed.
Confirmation is a critical concept in cryptocurrencies. You could say that cryptocurrencies are all about confirmation.
As long as a transaction is unconfirmed, it is pending and can be forged. When a transaction is confirmed, it is set in stone. It is no longer forgeable, it can‘t be reversed, it is part of an immutable record of historical transactions: of the so-called blockchain.
Only miners can confirm transactions. This is their job in a cryptocurrency-network. They take transactions, stamp them as legit and spread them in the network. After a transaction is confirmed by a miner, every node has to add it to its database. It has become part of the blockchain.
For this job, the miners get rewarded with a token of the cryptocurrency, for example with Bitcoins. Since the miner‘s activity is the single most important part of cryptocurrency-system we should stay for a moment and take a deeper look on it.
What are miners doing?
Principally everybody can be a miner. Since a decentralized network has no authority to delegate this task, a cryptocurrency needs some kind of mechanism to prevent one ruling party from abusing it. Imagine someone creates thousands of peers and spreads forged transactions. The system would break immediately.
So, Satoshi set the rule that the miners need to invest some work of their computers to qualify for this task. In fact, they have to find a hash – a product of a cryptographic function – that connects the new block with its predecessor. This is called the Proof-of-Work. In Bitcoin, it is based on the SHA 256 Hash algorithm.
You don‘t need to understand details about SHA 256. It‘s only important you know that it can be the basis of a cryptologic puzzle the miners compete to solve. After finding a solution, a miner can build a block and add it to the blockchain. As an incentive, he has the right to add a so-called coinbase transaction that gives him a specific number of Bitcoins. This is the only way to create valid Bitcoins.
Bitcoins can only be created if miners solve a cryptographic puzzle. Since the difficulty of this puzzle increases the amount of computer power the whole miner’s invest, there is only a specific amount of cryptocurrency token that can be created in a given amount of time. This is part of the consensus no peer in the network can break.
What is the future of Cryptocurrency?
The market of cryptocurrencies is fast and wild. Nearly every day new cryptocurrencies emerge, old die, early adopters get wealthy and investors lose money. Every cryptocurrency comes with a promise, mostly a big story to turn the world around. Few survive the first months, and most are pumped and dumped by speculators and live on as zombie coins until the last bagholder loses hope ever to see a return on his investment.
Markets are dirty. But this doesn‘t change the fact that cryptocurrencies are here to stay – and here to change the world. This is already happening. People all over the world buy Bitcoin to protect themselves against the devaluation of their national currency. Mostly in Asia, a vivid market for Bitcoin remittance has emerged, and the Bitcoin using darknets of cybercrime are flourishing. More and more companies discover the power of Smart Contracts or token on Ethereum, the first real-world application of blockchain technologies emerge.
The revolution is already happening. Institutional investors start to buy cryptocurrencies. Banks and governments realize that this invention has the potential to draw their control away. Cryptocurrencies change the world. Step by step. You can either stand beside and observe – or you can become part of history in the making
Logic buy and seel
Buy low price sell high price, better to buy when market is very low price graph and sell once you receive the profit,
Five important mistakes
Mistake 1: buying on peak
There are two general feelings moving people on crypto market: fear and greed. If the coin has already reached its heights, you can suffer the feeling of missed opportunity (so-called FOMO). Greed and wish to get at least small part of the profit make unexperienced players to buy currency at the moment when experienced traders are already thinking of selling it.
How to avoid this situation?
Don’t buy any coin is there is not objective reason for it to continue the growth, and when several prolonged green candles have already taken place (have a look at the chart below).
Pay attention to resistance levels, and never buy currency when its price approach them. If you want to buy certain coin, wait until it breaks the resistance level.
Always check trading volumes of any currency you want to invest in.
Mistake 2: selling a currency after its lost of a market value
That’s a typical mistake made by every trader at least once – but in this case the main feeling moving the trader is fear to lose. Panic among the community and negative news only aggravate the situation. Suffering mental pressure, unexperienced trader sells all his assets in hope to keep at least small part of his investments. What happens later? … The panic seller finds out, that the rate has stabilized and that the lack of patience has led him to significant financial losses.
How to avoid this situation?
Fix your losses by setting Stop Loss order right after purchasing. If the positive forecast happens to be wrong, you will lose only a small part of your assets (not more than 10%).
Don’t sell your currencies if there are not objective reasons for the total crash down. If you have already lost a lot – just hold it till the rate drops to its bottom and wait for a turnaround.
Remember: experienced traders are waiting for you to sell at a loss – that will allow them to by currencies for cheap.
Mistake 3: exiting the position because of the small correction.
The market is cyclical. The growth can’t be eternal as there will be always people who want to sell. If the coin sinks for a little bit or remains flat, that doesn’t mean that the trend is going to turn into descending one, and that everyone are going to sell. Before buying a currency, you should consider the investment horizon. If you’ve provided careful analyze and selected a reliable coin for long-term investments, you shouldn’t care about any price corrections.
How to avoid this situation?
Always follow the news concerning the currency you’ve invested in.
Set a take-profit order on a mark a little bit under resistance levels.
Close the position parts by parts.
Mistake 4: investing into currencies which don’t have real value
This mistake is the result of a greed. Unexperienced players, who can’t detect pumps, purchase coins which were artificially overrated whith no having any significant value which makes it attractive for mid- and long-term investments.
How to avoid this situation?
Always analyze any project you want to invest in. Evaluate its importance, developers team, trading volumes, news background.
Never invest in pumps – especially is pump has already happened.
Never invest in suspicious coins, which are not listed on authoritative resources like CoinMarketCap or Investing.com.
Purchase coins with daily trading volumes no lower than $1 million and market cap above $10 millions.
Invest only in coins listed on major crypto exchanges.
Mistake 5: the lack of strategy
Most of beginners don’t follow any certain trading strategy; they don’t diversify their risk and often invest in scam projects.
How to avoid this situation?
Don’t invest more than you are ready to lose.
Don’t invest in one currency; choose several projects.
Don’t invest in ICO promising suspiciously huge profit.
And the last one recommendation. Before taking a decision always consider all the factors which can affect coin’s price in the future. That can be:
1)Fundamental analysis
2)Technical analysis
3) Statements of developers
4)Changings in developer’s team
5)Trading volume and current situation on the market
6)Public opinion (forums, social media, Github etc.).
Invest safely with CryptoCurrencyUnivers!
Thank you
What are cryptocurrencies really?
If you take away all the noise around cryptocurrencies and reduce it to a simple definition, you find it to be just limited entries in a database no one can change without fulfilling specific conditions. This may seem ordinary, but, believe it or not: this is exactly how you can define a currency.
Take the money on your bank account: What is it more than entries in a database that can only be changed under specific conditions? You can even take physical coins and notes: What are they else than limited entries in a public physical database that can only be changed if you match the condition than you physically own the coins and notes? Money is all about a verified entry in some kind of database of accounts, balances, and transactions.
How miners create coins and confirm transactions
Let‘s have a look at the mechanism ruling the databases of cryptocurrencies. A cryptocurrency like Bitcoin consists of a network of peers. Every peer has a record of the complete history of all transactions and thus of the balance of every account.
A transaction is a file that says, “Bob gives X Bitcoin to Alice“ and is signed by Bob‘s private key. It‘s basic public key cryptography, nothing special at all. After signed, a transaction is broadcasted in the network, sent from one peer to every other peer. This is basic p2p-technology. Nothing special at all, again.
https://blockgeeks.com/wp-content/uploads/2016/11/image-1-1024x936.png
The transaction is known almost immediately by the whole network. But only after a specific amount of time it gets confirmed.
Confirmation is a critical concept in cryptocurrencies. You could say that cryptocurrencies are all about confirmation.
As long as a transaction is unconfirmed, it is pending and can be forged. When a transaction is confirmed, it is set in stone. It is no longer forgeable, it can‘t be reversed, it is part of an immutable record of historical transactions: of the so-called blockchain.
Only miners can confirm transactions. This is their job in a cryptocurrency-network. They take transactions, stamp them as legit and spread them in the network. After a transaction is confirmed by a miner, every node has to add it to its database. It has become part of the blockchain.
For this job, the miners get rewarded with a token of the cryptocurrency, for example with Bitcoins. Since the miner‘s activity is the single most important part of cryptocurrency-system we should stay for a moment and take a deeper look on it.
What are miners doing?
Principally everybody can be a miner. Since a decentralized network has no authority to delegate this task, a cryptocurrency needs some kind of mechanism to prevent one ruling party from abusing it. Imagine someone creates thousands of peers and spreads forged transactions. The system would break immediately.
So, Satoshi set the rule that the miners need to invest some work of their computers to qualify for this task. In fact, they have to find a hash – a product of a cryptographic function – that connects the new block with its predecessor. This is called the Proof-of-Work. In Bitcoin, it is based on the SHA 256 Hash algorithm.
You don‘t need to understand details about SHA 256. It‘s only important you know that it can be the basis of a cryptologic puzzle the miners compete to solve. After finding a solution, a miner can build a block and add it to the blockchain. As an incentive, he has the right to add a so-called coinbase transaction that gives him a specific number of Bitcoins. This is the only way to create valid Bitcoins.
Bitcoins can only be created if miners solve a cryptographic puzzle. Since the difficulty of this puzzle increases the amount of computer power the whole miner’s invest, there is only a specific amount of cryptocurrency token that can be created in a given amount of time. This is part of the consensus no peer in the network can break.
What is the future of Cryptocurrency?
The market of cryptocurrencies is fast and wild. Nearly every day new cryptocurrencies emerge, old die, early adopters get wealthy and investors lose money. Every cryptocurrency comes with a promise, mostly a big story to turn the world around. Few survive the first months, and most are pumped and dumped by speculators and live on as zombie coins until the last bagholder loses hope ever to see a return on his investment.
Markets are dirty. But this doesn‘t change the fact that cryptocurrencies are here to stay – and here to change the world. This is already happening. People all over the world buy Bitcoin to protect themselves against the devaluation of their national currency. Mostly in Asia, a vivid market for Bitcoin remittance has emerged, and the Bitcoin using darknets of cybercrime are flourishing. More and more companies discover the power of Smart Contracts or token on Ethereum, the first real-world application of blockchain technologies emerge.
The revolution is already happening. Institutional investors start to buy cryptocurrencies. Banks and governments realize that this invention has the potential to draw their control away. Cryptocurrencies change the world. Step by step. You can either stand beside and observe – or you can become part of history in the making
Logic buy and seel
Buy low price sell high price, better to buy when market is very low price graph and sell once you receive the profit,
Five important mistakes
Mistake 1: buying on peak
There are two general feelings moving people on crypto market: fear and greed. If the coin has already reached its heights, you can suffer the feeling of missed opportunity (so-called FOMO). Greed and wish to get at least small part of the profit make unexperienced players to buy currency at the moment when experienced traders are already thinking of selling it.
How to avoid this situation?
Don’t buy any coin is there is not objective reason for it to continue the growth, and when several prolonged green candles have already taken place (have a look at the chart below).
Pay attention to resistance levels, and never buy currency when its price approach them. If you want to buy certain coin, wait until it breaks the resistance level.
Always check trading volumes of any currency you want to invest in.
Mistake 2: selling a currency after its lost of a market value
That’s a typical mistake made by every trader at least once – but in this case the main feeling moving the trader is fear to lose. Panic among the community and negative news only aggravate the situation. Suffering mental pressure, unexperienced trader sells all his assets in hope to keep at least small part of his investments. What happens later? … The panic seller finds out, that the rate has stabilized and that the lack of patience has led him to significant financial losses.
How to avoid this situation?
Fix your losses by setting Stop Loss order right after purchasing. If the positive forecast happens to be wrong, you will lose only a small part of your assets (not more than 10%).
Don’t sell your currencies if there are not objective reasons for the total crash down. If you have already lost a lot – just hold it till the rate drops to its bottom and wait for a turnaround.
Remember: experienced traders are waiting for you to sell at a loss – that will allow them to by currencies for cheap.
Mistake 3: exiting the position because of the small correction.
The market is cyclical. The growth can’t be eternal as there will be always people who want to sell. If the coin sinks for a little bit or remains flat, that doesn’t mean that the trend is going to turn into descending one, and that everyone are going to sell. Before buying a currency, you should consider the investment horizon. If you’ve provided careful analyze and selected a reliable coin for long-term investments, you shouldn’t care about any price corrections.
How to avoid this situation?
Always follow the news concerning the currency you’ve invested in.
Set a take-profit order on a mark a little bit under resistance levels.
Close the position parts by parts.
Mistake 4: investing into currencies which don’t have real value
This mistake is the result of a greed. Unexperienced players, who can’t detect pumps, purchase coins which were artificially overrated whith no having any significant value which makes it attractive for mid- and long-term investments.
How to avoid this situation?
Always analyze any project you want to invest in. Evaluate its importance, developers team, trading volumes, news background.
Never invest in pumps – especially is pump has already happened.
Never invest in suspicious coins, which are not listed on authoritative resources like CoinMarketCap or Investing.com.
Purchase coins with daily trading volumes no lower than $1 million and market cap above $10 millions.
Invest only in coins listed on major crypto exchanges.
Mistake 5: the lack of strategy
Most of beginners don’t follow any certain trading strategy; they don’t diversify their risk and often invest in scam projects.
How to avoid this situation?
Don’t invest more than you are ready to lose.
Don’t invest in one currency; choose several projects.
Don’t invest in ICO promising suspiciously huge profit.
And the last one recommendation. Before taking a decision always consider all the factors which can affect coin’s price in the future. That can be:
1)Fundamental analysis
2)Technical analysis
3) Statements of developers
4)Changings in developer’s team
5)Trading volume and current situation on the market
6)Public opinion (forums, social media, Github etc.).
Invest safely with CryptoCurrencyUnivers!
Thank you
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