Frequently Asked Questions when Trading Bitcoin or other Cryptocurrencies

basic questions and answers regarding cryptocurrency trading..

These are some basic questions and answers regarding cryptocurrency trading.

  1. What are Cryptocurrencies?
  2. What is Bitcoin?
  3. What are Altcoins?
  4. What are Tokens?
  5. What is Cryptography?
  6. What is an ICO?
  7. How does a Cryptocurrency Transaction work?
  8. What is Bitcoin Mining?
  9. What is a Bitcoin Wallet?
  10. What is a Public Key and a Private Key?
  11. Who Controls Bitcoin?
  12. How Are New Bitcoins Generated?
  13. How Can a Trader Buy Cryptocurrencies?
  14. What are the Transfer Fees of Bitcoin?
  15. What are Full Nodes?
  16. Is Bitcoin Anonymous?
  17. What Influences The Price Of Bitcoins?
  18. Can Traders buy Bitcoins via Cards, Bank Wire, and Online Wallets?
  19. How to Choose a Cryptocurrency Exchange?
  20. Which are Some Popular Cryptocurrency Exchanges?

What are Cryptocurrencies?

Cryptocurrencies are virtual (digital) currencies that operate as a decentralized network using cryptography to secure all transactions and a public ledger called the Blockchain. The Blockchain is a database that records all coin transfers. The ecosystem of cryptocurrencies includes coins and tokens.

What is Bitcoin?

Bitcoin is the first decentralized peer-to-peer payment network. The first-ever Bitcoin was published in 2009 in a cryptography mailing list by Satoshi Nakamoto.

What are Altcoins?

Alternative cryptocurrency coins or Altcoins are coins that are an alternative to Bitcoin. Most altcoins are Forks of Bitcoin. A Bitcoin Fork is a crypto-coin built on Bitcoin’s open-sourced protocol (i.e. Litecoin). Cryptocurrencies that have built their own protocols include Ethereum, Ripple, and Waves.

What are Tokens?

Tokens are digital projects created through an Initial Coin Offering (ICO). Tokens differ from coins is in their structure. Tokens operate on top of a blockchain in order to create of decentralized applications and can be traded on a Cryptocurrency Exchange like common altcoins.

What is Cryptography?

Cryptography is an encryption method that uses advanced techniques to verify and secure any cryptocurrency transaction.

 

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What is an ICO?

ICO means Initial Coin Offering and refers to the offering of a new cryptocurrency or crypto-token. Investors can trade Bitcoin or Ethereum for some units of this new coin or token. An ICO is basically the same as an IPO for stocks.

How does a Cryptocurrency Transaction Works?

Everyone can send or receive cryptocurrency from his wallet. Every transaction is publicly shared on the cryptocurrency’s network on a public ledger. This ledger is called a Blockchain. A digital signature is linked to each transaction.

What is Bitcoin Mining?

Bitcoin mining refers to the process of verifying all Bitcoin transactions and include them in the public ledger (blockchain). Miners get new Bitcoins as a reward for their efforts. The whole process is fully decentralized with miners operating in all countries. As more miners join a network, mining becomes increasingly less profitable.

What is a Bitcoin Wallet?

A Bitcoin wallet is a software used to store, manage, and transfer Bitcoins and other crypto-coins. Actually, Bitcoins are stored as private keys (secret numbers).

There are different types of wallets:

(i)  Smartphone-based wallets (use the phone’s camera to scan QR codes)

(ii) PC-Based wallets

(iii) Wallets in Central Servers (requires the creation of an online account)

(iv) Specialized hardware wallets (for example, Trezor or Ledger)

What is a Public Key and a Private Key?

Every Bitcoin address includes a public key and a private key. The private key allows the owner to ‘unlock’ and use a bitcoin. Private keys sign all transaction so they can be properly recorded and verified by the Bitcoin network. The public key allows 3rd parties to send bitcoins at a particular address.

→ Private Key (secret, used for transferring coins)

→ Public Key (not-secret, used for receiving coins)

Who Controls Bitcoin?

No one controls or owns the Bitcoin network. Bitcoin users are free to choose what software they use in order to maintain their compatibility with other users.

How Are New Bitcoins Generated?

The Bitcoin project is designed to issue a fixed amount of coins when a certain amount of mining calculations is completed. More precisely, every time 210,000 blocks are calculated. The total number of Bitcoins is fixed at 21 million Bitcoins. Once there are no more rewards for block calculations, additional fees will emerge.

How Can a Trader Buy Cryptocurrencies?

Traders can buy cryptocurrencies via various methods. Cryptocurrencies can be bought online via an exchange or locally using Bitcoin Teller Machines or LocalBitcoins:

Visit LocalBitcoins Website 

What are the Transfer Fees of Bitcoin?

There are some minor fees involved when sending Bitcoins, these fees as called the “Miner’s fees”.

What are Full Nodes?

Full nodes create a 2nd security layer for every Bitcoin transaction. Full nodes broadcast all the messages within the Bitcoin protocol.

Is Bitcoin Anonymous?

Bitcoin is not anonymous as each transaction is recorded in a public ledger. There are anonymous crypto-coins such as Monero, Z.cash, Dash, Komodo, Zcoin, ZenCash, PIVX, and Verge.

 

 

What Influences The Price Of Bitcoins?

The price of Bitcoin is determined by Demand/Supply. Many factors can affect the demand and the supply for Bitcoin:

  • Phycology of the Market
  • Legislative Changes (New Regulation)
  • New Technological Practices
  • And many more

Can Traders buy Bitcoins via Cards, Bank Wire, and Online Wallets?

Yes, most cryptocurrency exchanges offer Bank Wire. Other exchanges also offer Credit/Debit Cards, Neteller, Paypal, Neteller, etc. Be very careful with the funding fees (deposits and withdrawals).

How to Choose a Cryptocurrency Exchange?

Cryptocurrency exchanges are common places to buy or to sell Bitcoins and other digital coins. These are some key issues for choosing an exchange:

-Safety of money (headquarters base, years in the market)

-Available deposit and withdrawal methods (coins, cards, bank wire, Neteller, Paypal, Neteller, etc.)

-Fees and Spreads between Ask/Bid

-Responsiveness of the Customer Service

-Online Reviews for this exchange (caution, 50% of all reviews are fake)

Which are Some Popular Cryptocurrency Exchanges?

Here is a list of popular cryptocurrency exchanges:

LiveCoin (London, UK) | Cex.io (USA) | EXMO (UK)

 

 

Bitcoin and Cryptocurrency FAQ

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