These days it seems that the world is becoming aware of the potential of the Blockchain.
Services to the BBC on Ethereum, new highs of Bitcoin, and rampant rush to buy most of the Altcoins. Are we in the dot? com-style bubble? Not yet, rest assured.
This significant increase in curiosity towards the world of cryptocurrencies also seems to be confirmed by the significant increase in visits to Business Talks. We have received many questions and requests for support. Given the importance of these questions, we thought it might be useful to try to summarize them and create a FAQ for Cryptocurrencies.
What's The Difference Between A Wallet And An Exchange?
The Wallet is the virtual wallet where you can keep your cryptocurrencies. There is no Wallet that can store all existing coins. The Exchange is the platform where you can trade your tokens. Generally, on exchanges, it is possible to exchange cryptocurrency for cryptocurrency or cryptocurrency for fiat currency.
The confusion can arise from the fact that all exchanges also have wallets for individual coins. However, this does not allow us to be able to call them wallets. Their primary function is another.
Why does the price of a cryptocurrency vary on each exchange?
The value of cryptocurrencies is not guaranteed by a central body as in the case of Borsa Italiana for the shares listed on the MIB. This means that on each exchange there may be a different quote due to the supply and demand for the single currency on that platform. Coinmarketcap offers a weighted average of the individual quotes of each Crypto across all platforms.
Generally, arbitrageurs manage to minimize these price differences by buying on exchanges where the price is lower and reselling where the price is higher. This activity in cases of incorrect functioning of exchanges (lately many were down due to high volumes) is much more difficult. The result is, as we have seen in recent days, a very high spread for the same currency between one exchange and another.
What is Mining?
This is one of the most common among the "cryptocurrency FAQs". Mining is an activity that is as important as it is mysterious to most. Are coins (and value) created out of thin air? No. Mining is, to date, the activity on which the concept of blockchain is based. Miners validate our transactions by downloading the "blocks" of the blockchain. For this work, which costs time, electricity, and PC power, they receive a reward for each downloaded and validated block.
This is also a recurring question. The simplest answer is to make your cryptocurrencies go the opposite way from the purchase path. Then send coins from the wallet to the exchange and sell them for Euros. Once the funds are available in Euros and dollars, you can transfer them to the current account that you have previously validated.
All exchanges have daily and monthly withdrawal limits. Before doing any operation, check carefully what are the thresholds related to your profile. Eventually request an upgrade to increase the thresholds. Only after this operation is it advisable to send the coins from the wallet to the exchange.
What is an ICO?
Translating it literally, the ICO is an Initial Coin Offering. It can be compared to an IPO on the stock exchange, but with substantial differences. On the stock exchange, the company pre-exists, you have tangible data (or you should have it) on which to evaluate the investment. In the world of cryptocurrencies, no. By joining an ICO, you are effectively funding an idea and often nothing more. It is common to ask for funds to create a service or application based on a pre-established road map.
Is It Risky To Leave Cryptocurrencies On Exchanges?
Here we are, this is by far the most requested of the “frequently asked questions about cryptocurrencies“. Maybe it will be laziness, little desire to get informed, or other, but if on the one hand, it seems that most people today have understood that buying cryptocurrencies could be an excellent investment opportunity on the other, after buying them, it turns off the brain and not wants to try harder.
Yes, keeping cryptocurrencies on an exchange is risky.
It is not up to us to judge how much but, being able to avoid this risk, why not do it?
The most important thing of all for a cryptocurrency holder is the Private Key. There is no private key on exchanges. This should be enough to give you the energy to create your wallet.
I Read What Ethereum Will Go To POS, What Does It Mean?
A little while ago we talked about mining and how it works. Ethereum has foreseen an important change in its next release. The transition from POW (proof of work) based on Mining to POS (proof of stake) based on the possession of Ether.
In this case, the Reward for the validation of the transactions will go directly to the holders of the tokens. This represents a sea change for the Blockchain.
How To Recognize The Best Blockchain Projects?
New projects are born every day and it is not always easy to understand the quality of the idea and its implementation. However, some essential to be able to recognize a good project:
Whitepaper - you have to know it like the Bible before investing. It is a sort of Business Plan of the project, with times and methods of implementation. It must be clear and easy to understand. A smoky and confused Whitepaper is already a good sign to stay away from the project;
Team - are they present on Linkedin? Have they already worked on other projects? What kind of skills do they have?
Competitors - are there already similar projects on Blockchain? If so, how are they doing and what are the competitive advantages over the ICO I am looking into? If there are no competitors, are we sure that this project is easy to implement?
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