What is blockchain technology and how does it work?

The emergence and rise of cryptocurrencies and blockchains has gone hand in hand with the digitalization of our society.

In 2009, a person (or group) known as Satoshi Nakamoto has devised the blockchain. A blockchain is a software that stores information across a network of personal computers.

blockchain

As its name suggests, it represents a chain of information-containing blocks. Each block includes three components. The data, the hash and the previous block’s hash. This last feature is what gives the system its security and stability. Namely, if someone would tamper with one of the blocks, this would automatically invalidate all subsequent blocks. That is, except for the first one, the so-called genesis block. In such a concept, the hash serves as the data’s fingerprint or signature.

Applied to cryptocurrency, for example, the bitcoin blockchain stores the data of sender, receiver and the amount of coins.

A major feature of the technology – and the cryptocurrencies which derive from it – is its decentralized nature. There is no central entity that manages this chronological chain, but rather a peer-to-peer network. Upon joining it, one gets a full copy of the chain. The record of every transaction ever made is called the ledger. Thus, each link verifies the validity of the entire chain.

The full potential of the blockchain technology was utilized in 2009 for the creation of the first cryptocurrency in the world – the bitcoin.

What is a cryptocurrency?

The original idea of a cryptocurrency was to exclude the middleman. With all the commodities we have with today’s financial transactions, each of them still goes through a bank.

cryptocurrency

People frequently describe cryptocurrency as “virtual money”. Hence, cryptocurrency is a digital currency with no government issuing it. Also, there is no bank managing and administering it. What does that mean in practice? Well, most importantly, that there is no central organization deciding on adding more currency to the market. This is in stark contrast with traditional currency.

We could describe a bitcoin as a digital file containing information on transactions. Or an addition to a blockchain, monitored by each member of the network. When making a transaction, a cryptocurrency user will announce doing so to everyone else. They will provide several pieces of information to the entire network. Their account number, the account number of the person they’re sending currency to, and the amount of currency. So, everyone else will then record this data.

bitcoin

But how are bitcoins, or any other digital currency, generated? And how does monetary value come into this equation? You have probably heard of bitcoin mining. Mining entails using special software to solve complex mathematical problems, with a certain amount of bitcoins received as a reward. That is how more currency is issued. Also, it is how all members of the network are motivated to take part and control the validity of transactions.

One bitcoin is divisible in 100,000,000 units. Thereby, each unit is identifiable and programmable. Features assigned to each unit do not only imply monetary value. They can represent shares in a company or digital ownership certificates, among others.

In late 2016, the total size of bitcoin’s blockchain ledger has surpassed 100 GB of data. The overall value of the bitcoin in mid-December 2017 was estimated at almost 250 billion dollars. However, there are thousands of other cryptocurrency platforms – Ripple, Ethereum and Litecoin, to name just a few.

What does the future hold for cryptocurrencies?

The future is difficult to predict, as expert opinions vary on this subject. They range from those who describe it as an economic bubble destined to crumble. Many are also voicing concern that cryptocurrencies could irreparably damage global economy. On the other hand, there are those who believe cryptocurrencies will steadily be incorporated into traditional ways of handling our finances.

Day-Trading

Day trading refers to the practice of buying and selling financial instruments such as stocks, bonds, currencies, futures, options, and commodities, during the day with the aim of making profit from the volatility on the market. Day traders may deal with thousands of shares in a single day, often with leverage, and seek small-percentage profits from their trades. A trader takes a specific position depending on their analysis of a stock’s probable price direction within the trading period.

day-trading-computers

In order to succeed in day trading, you are expected to be knowledgeable, disciplined, and patient to wait for the right trade.

There is a difference between day traders and investors in that day traders hold their securities for only one day. Day traders close out their positions at the end of the day and then start over again the next day. Conversely, swing traders hold their securities for a couple of days, sometimes it can be even months, while investors may hold their securities for several years.
Originally, day trading was done by financial companies only as they had access to the exchanges and market data. But with the swift advancement of technology, today individual traders can directly access to the same exchanges and market data, and can make the same trades at very low cost.

What are some of the benefits of day trading?

The major advantage of day trading is the potential to earn huge profits. There are many other benefits you can reap from day trading if you can effectively manage your emotions and cope with the inherent pressures.

Be your own boss

A day trader is simply self-employed, working by themselves and answerable to no one. Being professional day trader means you are a true entrepreneur living by your wits to reap the benefits of your own decisions.

Day-Trading

Expensive education is not a requirement in day trading

Unlike jobs in the corporate market, day trading doesn’t require an expensive education. Basically, there are no formal educational requirements for becoming a day trader.
Another good thing about day trading is that you can do it from anywhere provided you have access to a computer and a reliable internet connection.

Day trading requirements

Knowledge

Knowledge and experience in the marketplace is essential for one to succeed in the stock market. The latest stock market news and events that affect stocks will help you reap huge profits. Attempting to day trade without an understanding of the market fundamentals is a ticket to losing your money.

Sufficient Capital

A substantial amount of capital is required to capitalize effectively on intra-day price movements.

Infrastructure

A modern day trader must rely on a combination of computers, routers, internet connection, and specialized software in order to keep track of the market all day round. Besides, an active day trader needs to use an electronic communication network to avoid paying a commission to a broker for each trade.

Discipline

A profitable strategy may not yield good results if you are not disciplined. Many traders end up losing their hard earned money because they fail to stick to their trading plan. Therefore, you need to develop a set of strict rules that take the emotion out of a trade.

Day trading is very prevalent especially in this digital era. Day trading, both institutional and individual, play a vital role in the marketplace by keeping the markets efficient and liquid. Day trading takes time to master. With proper techniques and guidelines, one can make huge profit from day trading.