Understanding Cryptocurrency

Definition

Well you got this far, so we assume you know what Bitcoin is, along with other coins such as Ethereum, Litecoin, Dogecoin. But what is a cryptocurrency?

Bitcoin and Cryptocurrency is a form of digital currency, created and held electronically. No one controls it. Bitcoins aren’t printed, like dollars or euros via the Federal Reserve – they’re produced by people, and increasingly businesses, running computers all around the world, using software that solves mathematical problems.

 

Everyday banking

Whether it be;
  • paying online,
  • transferring money,
  • or paid your weekly wage,
there are supercomputers that run the banking system. These systems tell Bank A to transfer money to Bank B. Various charges occur depending on the bank, the country, or the transfer. The time taken as well is dependent on this.
 
For eg. Transferring money from Australia to England. These transactions typically take 3days+ to reach its destination. On top of that, banks will charge you an International Transfer fee ranging from $10 – $30.

 

Crypto World

With cryptocurrency, there are also those supercomputers, but the supercomputers are created by the combination of smaller computers by everyday people. These people are called “Miners”. Using special software or purposely built mining rigs, these computers are what creates the cryptocurrency network for the specified coin. When you transfer your cryptocurrency from one wallet to another, these computers are computing that information, entering it into the Blockchain, and for a small fee, complete the transaction autonomously.

The Blockchain is a digital ledger. Every transaction made with cryptocurrency is recorded in their own Blockchain. There are talks of anonymity with Bitcoin and other cryptocurrencies, but at the end of the day the coin can be traced back through all the transactions made from the very beginning.

If you would like to see what a Blockchain is and live stream of transactions, check out the Bitcoin Block Explorer.

 

COINS, MARKETCAPS, COIN SUPPLY?

When trading, you will find yourself looking at every detail of a coin, from past history, current supply, total supply, is it a Proof of Work(POW) or Proof of Stake(POS) coin, or both, what is its current market cap?

Here we see an example of a market cap from CoinMarketCap, which gives you everything you need and more to research a coin.

CoinMarketCap Cryptocurrencies by Market Capitalization

 

Understanding it all

Along the top you can see the current amount of currencies, total market cap of all markets, and 24 hour volume of all the coins traded. It also shows you the current Bitcoin Dominance over all coins.

  • # – the coin ranking
  • Name – Name of the coin
  • Marketcap – what the current market is valued at. This is worked out by the following formula. So for eg. Bitcoin;

(Price x Circulation Supply) = Market Cap

(6559.75 x 17,326,437) =  $114,003,662,480

  • Price – Current Price of an Individual coin
  • Circulating Supply – Current total supply of coins in circulation
  • Volume – Amount traded through exchanges during a 24hr period
  • Change – % that the coin has gone up or down during a 24hr period
  • Price Graph – Gives you a line bar chart of the price over last 7 days

 

Coinmarketcap Coin Details

If you are to click on the any of the coins, it will take you to another page with further information about the coin like the example below, Bitcoin.

CoinMarketCap Cryptocurrencies Coin Details

So here you can see an overview of the coin, with links to its main websites, block explorers, message boards(Bitcointalk), rankings and what type of coin it is. Search around, familiarise yourself with this as it is a great starting point to discovering a new coin to trade. The extra added piece of information here that is critical is the MAX SUPPLY of the coin.

So there is the Circulating supply which is currently available, then you have the Max Supply. So if it is a mineable coin such as Bitcoin, the current supply is 17,326,437 which are in circulation and this is capped once it reaches 21,000,000. This means that there will never be any more than 21,000,000 Bitcoins in existence ever. You should always take note of the Coin Supply, as this will determine the oversupply or over demand of the coin.

The tabs also give you current average charts derived from all markets, different market’s the coin are traded on, social media links, and tools to analyse the coin.

Are you ready to get dirty? Let’s move onto Why Trade Cryptocurrency?

 

GUIDE: Essential Cryptocurrency Trading Tools