Research Tutorials | Coin Tutor https://cointutor.org Crypto News and Discussion: Bitcoin and More! Thu, 18 Nov 2021 07:25:52 +0000 en-US hourly 1 https://wordpress.org/?v=6.8.3 https://cointutor.org/wp-content/uploads/2021/04/icon.jpg Research Tutorials | Coin Tutor https://cointutor.org 32 32 Understanding What an NFT Is – A Beginner’s Guide https://cointutor.org/understanding-what-an-nft-is-a-beginners-guide https://cointutor.org/understanding-what-an-nft-is-a-beginners-guide#respond Thu, 18 Nov 2021 07:07:08 +0000 https://cointutor.org/?p=31517

Non-Fungible Tokens (NFTs) pose a novel way for artists and creatives alike to mass distribute their material, but what exactly is it and how does it work?

Non-fungible Tokens (NFTs) create an interesting and novel way for artists and entrepreneurs to make large sums of money. Anything from a house to a single pixel can be and has been, sold as an NFT and can generate millions of indirect revenue.

So what exactly is an NFT and how does one go about minting and selling one?

To understand NFTs, it’s important to know the basics of cryptocurrency. Bitcoin is the leading digital currency with a current equivalence to $55,000 USD. Satoshi Nakamoto came up with the theory of Bitcoin in 2009, and set a supply limit of 21 million bitcoin, meaning only 21 million Bitcoin can ever exist. However, this amount was not, and is still not, fully public to the market.

Bitcoins are found by a process called mining, where people solve advanced online algorithms in order to bring more Bitcoin on the market. Since the supply is limited, the market for Bitcoin increases as demand increases.

Ethereum is the second-in-command cryptocurrency used to power the market and run apps on a decentralized blockchain, similar to a personalized cloud, which documents everything you own and keeps it safe.

Non-fungible tokens are mainly run on Ethereum’s blockchain. NFTs are essentially an access code to purchasing distributed art. Once you acquire an NFT, you gain access to whatever was being sold in a file attached with your personal information and protected within the blockchain.

Unlike Bitcoin and Ethereum, NFTs are purchased at a value set by their owner. They are not cryptocurrencies that are exchangeable within the crypto market, but a means of distribution amongst several different artistic mediums, such as digital artwork. These mediums are purchasable as an NFT, mainly using Ether (ETH) as its mode of currency.

Minting and selling NFTs also requires a minimal background of crypto itself. According to Coindesk, Ethereum’s blockchain currently leads the NFT minting market. By choosing their blockchain, a user would need at least $50 – $100 in ether (ETH) and a wallet that uses ERC-721 which is the NFT standard. From there, one would use online NFT marketplaces, such as OpenSea, Superfarm, or Rarible to upload their artwork and mint their NFT to distribute amongst the masses.

The highly volatile nature of cryptocurrency’s value is likely to drive the value of NFTs, which raises questions about its longevity. However, the vast majority of vendors who sell items as NFTs are artists who, after a year of drought from direct revenue, are seeking any opportunity possible to increase their assets.

Similar to Tesla’s Bitcoin investment, NFTs have the potential to put large corporations in a confusing situation. The increase in popularity is likely to drive artists and creatives to push their artwork and merchandise out on this cryptic platform.

Time will tell if this new technology inspires more artists in the future to release their material independently rather than acquiring funding from large corporations. These industries could be faced with a difficult decision whether or not they want to put their time and energy into supporting this newfound technology.

Since this form of distribution interacts with its consumers directly on a peer-to-peer platform, it could be a significant contributor in independently distributing art, if it is mass adopted.

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]]> https://cointutor.org/understanding-what-an-nft-is-a-beginners-guide/feed 0 A Simple Guide to Dollar-Cost Averaging (DCA) & Buying Crypto https://cointutor.org/a-simple-guide-to-dollar-cost-averaging-dca-buying-crypto https://cointutor.org/a-simple-guide-to-dollar-cost-averaging-dca-buying-crypto#respond Thu, 11 Nov 2021 03:53:18 +0000 https://cointutor.org/?p=31163 What Is Dollar-Cost Averaging?

Dollar-cost averaging (DCA) is a strategy for reducing the risk of purchasing a cryptocurrency with large price volatility. It works by investing a predetermined amount and spreading purchases at regular intervals, regardless of the asset price at each interval.

For example, instead of buying $10,000 of Bitcoin in one purchase today, one might spread the lump sum into buying $100 of Bitcoin weekly, regardless of the cost on the day. Sometimes you will be able to purchase more crypto, other times less. Regardless of the price, the same amount is used to purchase each time.

Over time, this method can lower the average purchase price per coin while still exposing you to market fluctuations.

It also means that you don’t need a lot of money to start investing this way.

Why is Dollar-Cost Averaging Useful in Crypto Investing?

This strategy is especially useful when you have a long-term focus for your investment portfolio, and you have crypto assets that are fundamentally solid value and you want to hold for the long term.

DCA is good for:

    • Removing the stress and difficulty of ‘timing the market.’

It gives investors a way to build savings and grow the wealth that they already have, while also introducing a good habit of regular investment savings that add up over time.

It’s important to note that DCA doesn’t eliminate the possibility of investment risk or loss if the crypto asset goes down indefinitely (not just with a bear cycle) or the project fails. DCA helps to reduce risk but can make it less likely to generate large profits (when compared to strategies of timing the market cycles or trading).

However, for time-conscious investors, it provides more options to buy at different prices without being bound by FUD (Fear, Uncertainty, Doubt) and FOMO (Fear Of Missing Out).

Crypto-Cost Averaging

There is a lot more volatility in the crypto market right now than there is in regular markets. As a result, digital assets appear to be even better suited to dollar-cost averaging than traditional stocks and funds.

The more severe the highs and lows, the more likely traders are to be influenced by and act on emotions. All the more incentive to consider a crypto-cost averaging strategy.

Consider the benefit and crypto portfolio you would have today if you had been investing $50 in Bitcoin every week for the past 5 years: You would have invested $13,050 but be holding $177,000 in Bitcoin today.

And, if you had been investing $50 in Ethereum every week for the past 5 years? You would have invested $13,050 but be holding $570,000 in Ethereum today.

Without spending any time trying to choose what time to buy!

Check out this calculator to see how much you may earn through long-term DCA with crypto.

 

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]]> https://cointutor.org/a-simple-guide-to-dollar-cost-averaging-dca-buying-crypto/feed 0 Understanding Privacy-Focused Altcoins Zcash (ZEC) & Monero (XMR) https://cointutor.org/understanding-privacy-focused-altcoins-zcash-zec-and-monero-xmr-2 https://cointutor.org/understanding-privacy-focused-altcoins-zcash-zec-and-monero-xmr-2#respond Wed, 04 Aug 2021 05:07:16 +0000 https://cointutor.org/?p=18237 If you know a thing or two about anonymous transactions, you’ve likely come across these two networks. Here, we’re exploring the differences and similarities between these two well-known privacy-focused altcoins.

Where Did They Come From?

Zcash (ZEC)

Zcash originated from the workings of a professor and students at the John Hopkins University in 2013. The “original three” team wanted to create a privacy-focused extension to Bitcoin, initially called Zerocoin. In 2015, with the addition of other scientists, they formed the Zerocoin Electric Coin Company (now Electric Coin Company), and two years later (in 2017) the Zcash Foundation was launched. ZEC was first mined in 2016.

The seven founding members are Matthew Green, Ian Miers and Christina Garman (of John Hopkins), Alessandro Chiesa, Eli Ben-Sasson, Eran Tromer, and Madars Virza.

Monero (XMR)

Monero’s origins can be traced back to Bytecoin, a privacy-focused cryptocurrency launched in 2012. Two years later the Bytecoin network was hard forked and Monero was created. Monero was created to provide “the greatest level of decentralization possible” prioritizing privacy and security at the forefront, with ease of use and efficiency following closely behind.

It is believed that seven founders were involved in the launch, however, many chose to remain anonymous. To this day hundreds of developers have contributed to the cryptocurrency.

Where Are They Now?

Zcash

Zcash currently sits just outside of the top 60 biggest cryptocurrencies by market cap and is trading around $110 (at the time of writing). Based off of Bitcoin’s codebase, the network opted to stay with a maximum supply of 21 million coins, of which 58% (12,189,000) are in circulation. In the last 24 hours roughly $517.5 million worth of ZEC has been traded, indicating a healthy network.

Monero

Monero at the time of writing has 17,950,000 XMR in circulation. While no coins were pre-mined, the maximum supply of XMR is 18.4 million, expected to be reached in May 2022. Trading just over the $200 mark with a market cap of $3.8 billion, Monero is currently positioned within the top 30 cryptocurrencies according to market cap.

How Do They Differ?

Technology

When comparing Zcash vs Monero one of the most important aspects to look at is how they maintain their privacy when it comes to executing transactions. While the Monero network exclusively deals with private transactions, the Zcash network allows users to choose between transparent and shielded transactions.

Zcash uses zk-SNARK zero-knowledge proof technology that ensures when transactions are executed by nodes on the network that they can be verified without revealing any sensitive information. This cryptographic proof was designed in the 1980s and allows parties to prove that it processes definite information without revealing the information in question. “In the case of Zcash, zk-SNARKs can be verified nearly instantly, and the protocol does not require any interaction between the prover and the verifier.”

Monero’s protocol on the other hand was developed by professional cryptographers and involves highly sophisticated cryptographic schemes involving ring signatures and stealth addresses. Ring signatures allow the sender to hide their identity by combining the sender’s account keys with other public keys on the blockchain. Once verified, the verifier does not either need to reveal their identity, with the ring signature acting as an anonymous digital signature.

Stealth addresses hide the identity of the recipient and are randomly generated addresses created for each transaction, for one-time use only. Ring Confidential Transactions, or RingCT, is then used to hide the amount of the transaction when registered on the blockchain. The platform also makes use of a unique Proof-of-Work consensus algorithm called RandomX.

Primary Use Cases

While both cryptocurrencies offer users access to anonymous transactions, Zcash also provides “regular” crypto transactions. For whatever reason someone might like to send an anonymous transaction, both networks facilitate this service effectively.

Monero, however, is more widely used and has a higher 24-hour transaction volume. The network has also grown a name for itself for being used in illicit online transactions, mostly attached to dark web marketplaces.

Zcash vs Monero

While both networks deliver on their privacy promises, it’s up to the user to decide which network they wish to transact on. While privacy coins might face some regulatory challenges going forward, in the meantime both networks are “legal” and safe to use.

 

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]]> https://cointutor.org/understanding-privacy-focused-altcoins-zcash-zec-and-monero-xmr-2/feed 0 A Fundamental Way of Understanding the Value of Cryptocurrency & Blockchain https://cointutor.org/a-fundamental-way-of-understanding-the-value-of-cryptocurrency-blockchain https://cointutor.org/a-fundamental-way-of-understanding-the-value-of-cryptocurrency-blockchain#respond Tue, 15 Jun 2021 07:36:53 +0000 https://cointutor.org/?p=10560 The fundamental concept of money is lost on most people, as most people unconsciously accept the fact that they can spend a dollar on something and it just works, and inflation happens but they don’t really quite get it, they can invest in a stock and it magically goes up or down, and so on.

So this is the real problem actually. Crypto/Bitcoin is not confusing at all if you understand that money is simply social recordkeeping as to how much work you did vs how much the world owes you for it.

We use numbers to count stuff and relate that to our work. We don’t need anything except for numbers; we don’t need gold, we don’t need coins, we don’t need a physical “backing” for the money. A “dollar” or a “bitcoin” just symbolizes which recordkeeping system we’re using.

We just need to socially keep track of the transaction that relates work that you did at some point (or work that you will do) to the goods or services you are buying. Otherwise, we have to barter for everything.

In society, we equally accept digital dollars (verified by a large payment system ie. Banks, VISA, etc.) and physical dollars because people from these parties are manually tracking the whole thing along with the digital records.

We trust the complex recordkeeping system which is the intercommunication between the US government, banks, and private payment networks. They all talk to each other and keep the books straight.

Money is record keeping/accounting for the work you’ve done. Blockchain is a reliable, digital (often monetary) record-keeping system.

Bitcoins are part of a record-keeping system that requires no single party to trust the records to. The system is self-regulating by a clever method of programming. You essentially can’t trick the system into thinking you have more money than you really do, which is the fundamental requirement for money.

Some confusion may come from the fact that Bitcoins can’t enter the physical world as paper money or coins. That is because this would require one trusted party to manufacture and count the coins, and there is no single trusted party that can do this – the whole network itself is the trusted party, and there’s no way to “manually enter” a physical transaction onto the blockchain.

I think it is important to understand the main utility of blockchain, which is reliable bookkeeping. Often, when blockchain is being explained, it is a technical explanation, which leaves many people confused as to how it can be used to make payments.

Broken down simply, blockchain is nothing more than a clever system of programming that creates a reliable way to store information. It can be used as a payment system simply because of how trustworthy the records are.

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]]> https://cointutor.org/a-fundamental-way-of-understanding-the-value-of-cryptocurrency-blockchain/feed 0 What Is The Bitcoin Lightning Network? A Primer. https://cointutor.org/what-is-the-bitcoin-lightning-network-a-primer https://cointutor.org/what-is-the-bitcoin-lightning-network-a-primer#respond Wed, 09 Jun 2021 06:36:30 +0000 https://cointutor.org/?p=9807 One of the biggest “flaws” with Bitcoin is that it has relatively high transaction fees and can take a long time for confirmations.

This scalability issue has plagued blockchains ever since it exploded into mainstream awareness in the past 5-6 years.

In the case of Bitcoin, transactions are recorded onto a ledger called a blockchain, and the ledger or record of historical transactions is what prevents malicious actors from coming in to steal funds.

Because the ledger effectively tracks the exact virtual location of every Bitcoin in existence, and this information is communicated and interlinked with every other Bitcoin and transaction ever made, a hacker looking to move Bitcoin by hijacking the system would need to find a way to edit the transaction history of hundreds and thousands of other transactions in order to move even one Bitcoin away from the wallet it resides in, an operation that would be essentially impossible to complete.

However, this interlinking of data, while secure and acts as a fantastic global transaction network on the internet, does not fare well in terms of throughput or amount of transactions it can handle per second (“TPS”).

Additionally, confirmation on transactions also takes a long time, much longer than is suitable for day-to-day use in payments and the spontaneity of today’s transaction formats.

What’s interesting is that solutions that address the problem are being developed, some already actively running on top of the blockchain. These implementations, sometimes called layer two solutions, interact with the blockchain to introduce mechanisms that address specific issues that Bitcoin’s primary protocol is unable to solve.

The Lightning Network is one such solution – although it is not restricted to Bitcoin and can operate on other blockchains, it is well known as a primary off-chain transaction network for Bitcoin.

How does the Lightning Network work?

The Lightning Network works by creating multiple secondary, tiny ledgers known as “channels” off the primary blockchain network, and recording transactions separately from the main blockchain.

One analogy that can be used to describe the Lightning Network is by describing the accounting systems of a massive company. In a massive super-company such as the likes of Amazon, Google or Apple, there are simply too many transactions, deals, sales, costs, and operations happening to be tracked by a single accountant; if every single person reported to a single accountant, they would be overwhelmed.

This is what is happening with Bitcoin as it grows larger; the accountant, or even a team of accountants, would be unable to address the entire company’s transactions if everyone was reporting directly to them.

Instead, most accounts are kept within departments and segregated at multiple layers:

At the Top, There is a Core Finance Team Overseeing Finances.

Each country of the business operation would have one accounting team that is in charge of the accounts of that country.

The accounting team would have further smaller teams handling individual product lines or operations.

Lightning Network channels represent the smallest teams in “3”. Above that, the Lightning network also has nodes, which are similar to “2”. And they report back to the primary blockchain (Bitcoin in our example) similarly to “1”.

Because the end-users and transactions are now settled by reporting via small channels, the transaction times are almost instantaneous as there is no need for the participants in the entire blockchain to validate the transaction; the layers of trust are simplified in favor of transaction times and lower fees.

Enabling a Strong Degree of Security Without Compromise

The Lightning network is still able to secure transactions made on it by implementing Multisignature and Hash Timelock Contract (HTLC) mechanisms. Each channel involved in a Lightning network transaction enforces certain rules and has certain functions:

    • Multisignature – A shared wallet between multiple parties that requires the cooperative signing of the parties involved in order for transactions to be made.
    • A Hashlock – the sender creates a “password” or more commonly known as a secret, that is sent together with his transaction to the recipient. In order for the recipient to receive and use the Bitcoins, they must know this secret.
    • A Timelock – the funds associated in the transaction cannot be spent before a certain time.
    • A Commitment Transaction – a function similar to a pre-signed cheque that allows each party a remedy in event of a hostage situation in the multi-signature setup.

By combining all of these functions together, the channel can behave in a secure manner enforced only by the intention of the two parties, without the need for a trusted third party.

Additionally, by connecting these channels across a large network and system, and requiring that participants in the network “lock” their Bitcoin in these mini-ledgers in order to use the lightning network, it is possible to route a transaction across to parties that aren’t directly connected to each other in a channel.

This means that participants in the Lightning network can send payments and initiate transactions with each other outside of the two participant system, and the only limitation would be the liquidity available in the network itself (a large amount of Bitcoin would be difficult to transact as there may not be enough liquidity to route the payment across the network)

Enabling Micropayments

One powerful feature that the Bitcoin Lightning Network brings to the table is micropayments. Because of the extremely low (or even zero) transaction fees involved in sending Bitcoin within a Lightning Network channel, tiny payments of as low as one-hundredth of a cent are now possible.

The enabling of micropayments has many use cases in the business world, from replacing existing advertising-driven businesses to allowing fairer content distribution and consumption across the internet.

Privacy

The Lightning Network’s channels are private by nature; parties can open a channel with each other and transact without the specific transactions brought to the primary blockchain.

With Bitcoin’s native setup, all transactions are recorded onto the blockchain and have to be validated, meaning that there is little privacy beyond the anonymity of the Bitcoin wallets involved, whereas Lightning channels would allow the specific transactions happening between different parties in a channel to be hidden (as it is able to enforce the transactions without broadcasting them to the entire network).

Only the final state after the closure of the channel is broadcasted to the main Bitcoin blockchain.

Lightning Network Implementations

Currently, three parties are independently developing lightning network nodes based on a standardized implementation protocol, which allows the three to communicate with each other.

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]]> https://cointutor.org/what-is-the-bitcoin-lightning-network-a-primer/feed 0 What Are Wrapped Tokens in the World of Crypto? https://cointutor.org/what-are-wrapped-tokens-in-the-world-of-crypto https://cointutor.org/what-are-wrapped-tokens-in-the-world-of-crypto#respond Mon, 07 Jun 2021 07:26:59 +0000 https://cointutor.org/?p=9415 Short and Sweet

A wrapped token is a cryptocurrency token pegged to the value of another crypto. It’s called a wrapped token because the original asset is put in a wrapper, a kind of digital vault that allows the wrapped version to be created on another blockchain.

What’s the point? Well, different blockchains offer different functionality. And they can’t talk to each other. The Bitcoin blockchain doesn’t know what’s happening on the Ethereum blockchain. However, with wrapped tokens, there can be more bridges between different blockchains.

Introduction

Ever found it frustrating that you can’t use BTC on Ethereum? ETH on Binance Smart Chain? Coins that exist on a given blockchain can’t be simply transferred to another.

Wrapped tokens are a way to circumvent this limitation and use non-native assets on a blockchain.

What is a Wrapped Token?

A wrapped token is a tokenized version of another cryptocurrency. It’s pegged to the value of the asset it represents and typically can be redeemed for it (unwrapped) at any point. It usually represents an asset that doesn’t natively live on the blockchain that it’s issued on.

You could think of a wrapped token as being similar to a stablecoin in that it derives its value from another asset. In a stablecoin’s case, that’s usually fiat currency. In a wrapped token’s case, it’s usually an asset natively living on another blockchain.

As blockchains are distinct systems, there isn’t a good way to move information between them. Wrapped tokens increase interoperability between different blockchains – the underlying tokens can, in essence, go cross-chain.

It’s worth noting that if you’re an ordinary user, you don’t have to worry about the wrapping and unwrapping process; you can just trade these wrapped tokens like any other cryptocurrency. For example, this is the WBTC/BTC market on Binance.

How Do Wrapped Tokens Work?

Let’s use Wrapped Bitcoin (WBTC) as our example, a tokenized version of Bitcoin on Ethereum. WBTC is an ERC-20 token that’s supposed to hold a one-to-one peg to the value of Bitcoin, allowing you to effectively use BTC on the Ethereum network.

Wrapped tokens typically require a custodian – an entity that holds an equivalent amount of the asset as the wrapped amount. This custodian can be a merchant, a multisig wallet, a DAO, or even a smart contract. So, in WBTC’s case, the custodian needs to hold 1 BTC for each 1 WBTC that is minted. Proof of this reserve exists on-chain.

But how does the wrapping process work? A merchant sends BTC for the custodian to mint. The custodian then mints WBTC on Ethereum according to the amount of BTC sent. When the WBTC needs to be exchanged back to BTC, the merchant puts in a burn request to the custodian, and the BTC is released from the reserves. You can think of the custodian as the wrapper and unwrapper. In WBTC’s case, adding and removing custodians and merchants is performed by a DAO.

While some in the community may refer to Tether (USDT) as a wrapped token, this isn’t exactly the case. While USDT generally trades one-for-one with USD, Tether does not hold the exact amount of physical USD for each USDT circulating in their reserves. Instead, this reserve is made up of cash and other real-world cash equivalents, assets, and receivables from loans. However, the idea is very similar.

Each USDT token acts as a kind of wrapped version of a fiat USD.

Wrapped Tokens on Ethereum

Wrapped tokens on Ethereum are tokens from other blockchains that are made to be compliant with the ERC-20 standard. This means that you can use assets that are not native to Ethereum on Ethereum. As you’d expect, wrapping and unwrapping tokens on Ethereum costs gas.

The implementations of these tokens can be very different. We wrote about them in more detail in our tokenized Bitcoin article.
An interesting example of a wrapped token on Ethereum is wrapped ether (WETH). A quick recap – ETH (ether) is required to pay for transactions on the Ethereum network, while ERC-20 is a technical standard for issuing tokens on Ethereum. For example, Basic Attention Token (BAT) and OmiseGO (OMG) are ERC-20 tokens.

However, since ETH was developed before the ERC-20 standard, it isn’t compliant with it. This creates a problem, as many DApps require you to convert between ether and an ERC-20 token. This is why wrapped ether (WETH) was created. It’s a wrapped version of ether that is compliant with the ERC-20 standard. It’s basically a tokenized version of ether on Ethereum!

Wrapped Tokens on Binance Smart Chain (BSC)

Just like wrapped tokens on Ethereum, you can wrap Bitcoin and many other cryptos for use on the Binance Smart Chain (BSC).

The Binance Bridge allows you to wrap your crypto assets (BTC, ETH, XRP, USDT, BCH, DOT, and many more) for use on the Binance Smart Chain in the form of BEP-20 tokens. Once you’ve brought your assets to BSC, you can trade them or use them in various yield farming applications.

The wrapping and unwrapping cost gas; however, as far as BSC is concerned, you can expect significantly lower gas costs than other blockchains. You can read more about Binance Bridge in our detailed article.

Benefits of Using Wrapped Tokens

Even though many blockchains have their own token standards (ERC-20 for Ethereum or BEP-20 for BSC), these standards can’t be used across multiple chains. Wrapped tokens allow non-native tokens to be used on a given blockchain.

In addition, wrapped tokens can increase liquidity and capital efficiency both for centralized and decentralized exchanges. The ability to wrap idle assets and use them on another chain can create more connection between otherwise isolated liquidity.

And lastly, a great benefit is transaction times and fees. While Bitcoin has some fantastic properties, it isn’t the fastest and can sometimes be expensive to use. While that’s fine for what it is, it can cause some headaches sometimes. These issues can be mitigated by using a wrapped version on a blockchain with faster transaction times and lower fees.

Limitations of Using Wrapped Tokens

Most of the current implementations of wrapped tokens require trust in the custodian holding the funds. As for the currently available technology, wrapped tokens can’t be used for true cross-chain transactions – they usually need to go through a custodian.

However, some more decentralized options are in the works and may be available in the future for completely trustless wrapped token minting and redemption.

The minting process can also be relatively costly thanks to high gas fees and can incur some slippage.

In Closing. . .

Wrapped tokens help with creating more bridges between different blockchains. A wrapped token is a tokenized form of an asset that natively lives on another blockchain.

This helps interoperability in the cryptocurrency and Decentralized Finance (DeFi) ecosystem. Wrapped tokens open up a world where capital is more efficient, and applications can easily share liquidity with each other.

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]]> https://cointutor.org/what-are-wrapped-tokens-in-the-world-of-crypto/feed 0 What is Tether (USDT)? Is the Interest Rate Too Good To Be True? https://cointutor.org/what-is-tether-usdt-for-one-a-stablecoin-learn-more https://cointutor.org/what-is-tether-usdt-for-one-a-stablecoin-learn-more#respond Fri, 04 Jun 2021 06:30:40 +0000 https://cointutor.org/?p=8724 What Is Tether?

Tether is a blockchain-based cryptocurrency that is backed by the U.S. dollar. This means there are actual dollars kept in reserves at financial institutions serving as collateral. Stablecoins, when fully backed by the dollar, have a 1:1 relationship with USD.

You can expect stablecoins to stay stable, as the name suggests, unlike their popular cryptocurrency counterparts, Bitcoin and Ethereum.

Understanding Stablecoins

The stablecoin sector aims to avoid volatility and allow cryptocurrency to be a store of value rather than a risky investment. Stablecoins also provide liquidity in a volatile cryptocurrency market where it would be hard to convert back and forth between cash and a cryptocurrency like Bitcoin.

The most well-known stablecoins are the USD-backed cryptocurrencies like Tether, Gemini Dollar, and USD Coin. However, other stablecoins use other types of collateral. Some are backed using fiat currencies, like the euro or yen, and others are backed by commodities, such as gold and silver.

Good To Know

Despite the 1:1 ratio of the popular USD stablecoins, there are typically minor fluctuations in the price of stablecoins. Most of the time, you’ll find that stablecoin values can have a difference of 1 to 3 cents.

This is largely due to changes in liquidity and supply and demand, which are driven higher or lower by transactions, trading volume and market volatility.

It is important to keep in mind that some companies are less transparent than others about how much of their stablecoin is actually backed by fiat currency and commodities. Tether itself was embroiled in controversy over its false claims and lack of full backing.

History of Tether and Controversy

Tether began as Realcoin in 2014, and the first tokens were distributed in 2015 on the Bitcoin network. It was one of the earliest cryptocurrencies and one of the first successful stablecoins. Not only was it technologically revolutionary, but it also had a roster of reputable founders including Bitcoin Foundation director Brock Pierce.

However, as quickly as it rose to success, skepticism and controversy followed, which is unsurprising considering the amount of scrutiny the coin received as the first popular stablecoin. Tether has had to get past a few controversies to maintain its position at the top:

Key Events:

        • Bitfinex: Tether saw early success by being listed on the Bitfinex exchange, but further digging by researchers uncovered that the two companies had the same management — both companies had the same CEO and CFO — and identical executive structures.

       

        • Bitcoin Pump: It seemed that Tether was being artificially pumped into the cryptocurrency market to create liquidity and was a driving force behind Bitcoin’s bull run up to $20,000.

       

        • The 2017 Hack: About $31 million of Tether was stolen in the 2017 hack, forcing Tether to create a hard fork.

       

        • USD-Backing Controversy: An audit of its dollar reserves that was supposed to happen in 2017 never did. The audit was supposed to ensure its reserves were maintained, but Tether parted ways with the auditors instead.

       

      • Hiding Losses: In 2019, New York Attorney General Letitia James accused the parent company of Tether of hiding an $850 million loss by dipping into the Tether currency reserves. As of 2021, Tether has settled with James, agreeing to pay $85 million and cease trading operations with New Yorkers. Despite this, Tether does not admit fault and claims it simply wants to move on from the matter.

Tether’s new backing policy now includes loans as well as USD. Despite this change and the previous controversies, new Tether tokens continue being minted as demand continues to increase.

Consider Before Investing in Tether

Tether can be bought on most major cryptocurrency exchanges, but should you invest, considering its history and outlook? Tether, despite having many issues in the past, continues to be a very stable cryptocurrency that is stronger for having gotten past its problems mostly unscathed.

Although competitors have popped up over the years, Tether is still the most popular stablecoin and widely used for trading, loans and earning interest. Tether could potentially be viewed as one of the riskier cryptocurrencies due mainly to its issues with transparency, but it’s still very important in the cryptocurrency world and likely not going anywhere.

Where To Buy Tether and Earn High-Interest Rates

You can buy tether on many major cryptocurrency exchanges and lending platforms. Most will pay anywhere from 6% to 12% in interest just for storing Tether on their platform. Tether will typically earn more interest than other popular stablecoins like GUSD, USDC, and DAI because of its high demand in trading and cryptocurrency loans.

Likewise, you will be able to ask for higher interest rates for Tether on KuCoin, a cryptocurrency-based peer-to-peer lending platform. In fact, it is the cryptocurrency that commands the highest interest rates by far — at an average of 30% to 60% — compared against GUSD, USDC, Bitcoin, and Ethereum.

Whether or not you choose to invest, make sure you understand tax laws around cryptocurrency. Income in the form of cryptocurrency can be taxed, whether earned as interest or capital gains.

BlockFi pays around 9.3% and Binance pays around 6% APY.

Is Tether a Good Investment?

With the creation of Tether and other stablecoins, it is quick and easy to swap any cryptocurrency for Tether, while converting a cryptocurrency to cash would take days and cost transaction fees. This creates liquidity for exchange platforms, creates no-cost exit strategies for investors, and adds flexibility and stability to investors’ portfolios.

Additionally, Tether can be sent anywhere globally much more quickly and with lower fees than transfers at traditional banks and financial institutions. While most people wouldn’t use Bitcoin or Ethereum for purchases and daily transactions due to their high volatility, it makes perfect sense to use Tether.

For these reasons and more, it is still worthwhile to invest in Tether. While Tether is not necessarily a long-term investment that will grow your money by itself, because it stays pegged to the U.S. dollar, there are lending platforms, exchanges, and wallets that will pay you high-interest rates to store USDT on their platform.

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]]> https://cointutor.org/what-is-tether-usdt-for-one-a-stablecoin-learn-more/feed 0 Ripple (XRP) What It Is, What It’s Worth & Should You Invest? https://cointutor.org/ripple-xrp-what-it-is-what-its-worth-should-you-be-investing https://cointutor.org/ripple-xrp-what-it-is-what-its-worth-should-you-be-investing#respond Tue, 01 Jun 2021 07:19:05 +0000 https://cointutor.org/?p=8166 What Is Ripple?

Ripple is not a cryptocurrency. It’s the company behind the XRP token. Ripple Labs, Inc. describes itself as a “payment solutions company.” Today, it is primarily focused on using cryptocurrency to facilitate cross-border payments between countries.

To accomplish this, Ripple calls its payment network RippleNet. That network consists of a collection of banks and payment providers who have signed on to use Ripple’s blockchain network for international payments.

Ripple also manages the XRP Ledger, a network that facilitates payments through its XRP digital currency.

What Is XRP?

XRP is a cryptocurrency designed to be used for international payments and currency exchange. When Ripple first launched, XRP powered its cross-border payment network. Ripple has since updated this so that you can use that network with currencies other than XRP.

XRP Transaction Speed

XRP’s main selling point has always been its speed. Unlike Bitcoin, which often requires extended periods of time to complete a transaction, XRP transactions settle in seconds. That’s because XRP does not utilize the “proof of work” algorithm used by other cryptocurrencies like Bitcoin and Ethereum for validating payments.

Infrastructure

XRP also works on a centralized infrastructure. Instead of being completely decentralized like many cryptocurrencies, XRP uses a network of validators to confirm transactions.

To be accepted as a validator for XRP payments, you have to be trusted enough to become part of Ripple’s Unique Node List. Currently, there are 36 active XRP validators. Ripple owns six of them outright.

This network of independent network operators — or nodes — agrees concerning all outstanding XRP transactions every three to five seconds. It then publishes an updated version of the XRP Ledger. Ripple calls this the Ripple Protocol Consensus Algorithm.

Ripple has marketed XRP’s swift transaction speed since the beginning, centering it as a means to establish a more efficient infrastructure for international payments. Conventional cross-border transactions can sometimes take days and incur steep fines. According to Ripple, XRP takes a fraction of the time, cost, and bureaucratic headache.

How Is XRP Used?

Currently, there are two main use cases for XRP.

XRP Uses

    • Low commission currency exchange: There are many cases where one currency can’t be directly exchanged for another and must be changed to an intermediary currency first. Usually, that currency is the U.S. dollar. XRP can serve as an intermediary currency in the same way, but for less cost per transaction.
    • International transactions: Ripple has long touted its XRP cryptocurrency’s high transaction speed as an alternative to conventional wire transfers, which can take days and incur high fees.

People can also use Ripple’s payment network, RippleNet, to mint and distribute their own digital currencies that aren’t XRP for fast, inexpensive transactions.

XRP vs. RippleNet

XRP’s relationship to RippleNet can be confusing.

RippleNet is Ripple’s cross-border payment network. It does not need XRP to function. RippleNet is a blockchain geared toward banking institutions that can be used to settle transactions like remittance payments, in addition to exchanging currencies.

Ripple claims that big banks like Santander use its service and that over 55 countries have signed on to use it. RippleNet also hosts over 120 currency pairs.

Liquidity Service

The only part of RippleNet that uses the XRP digital currency is its on-demand liquidity service. This service draws from a pool of digital assets to provide liquidity for transactions in lieu of pre-funding.

Australia, the Euro Zone, the United States, Mexico, and the Philippines can currently use Ripple’s on-demand liquidity service.

How Is XRP Different From Bitcoin?

There are a few major differences between XRP and Bitcoin.

For example, while new Bitcoins are continuously mined, XRP has limited the number of units that will be produced. A batch of 100 billion XRP was generated at the time of its launch, and 45 billion are currently in circulation.

XRP is also a centralized cryptocurrency, while Bitcoin is decentralized. The former’s centralization allows for quicker transaction processing because it doesn’t require proof of work. Rather, it relies on a small network of nodes to validate each transaction.

This can entail greater risk, though Ripple says it takes steps to keep its digital currency secure.

Pros and Cons For Ripple

The Good:

    • Ripple has been in the crypto game long enough to have gained the trust of several prominent financial institutions. That trust makes them a safer investment relative to other cryptocurrencies.
    • All the XRP tokens that ever will exist have already been created, and Ripple distributes them according to a predetermined schedule. That means no inflation.
    • As more financial institutions buy into Ripple and its products, the value of XRP could substantially increase.

The Bad:

    • Ripple’s centralized system does away with permissions and is more open to censorship than other cryptocurrency platforms. Since control rests in the hands of a small number of people, those people could potentially block transactions, similar to a regular bank.
    • Ripple Labs has a monopoly of ownership on the XRP token — it owns 61% of the available supply.
    • The code is open-source, whereby it’s freely available to the public. That’s good for developers but could pose a risk if anyone were to hack it.

Value and Market Cap

Good To Know

XRP has not entered mainstream use quite yet. The financial institutions that use Ripple’s network are still in the testing phase.

While XRP has potential in the international payment space, it has yet to be thoroughly tested by large, mainstream banks.

The Takeaway

XRP is an interesting cryptocurrency that’s been gaining momentum in the financial sector for its ability to facilitate cross-border payments and currency exchange.

It’s faster than Bitcoin — taking a few seconds per transaction as opposed to an hour or more — and has the potential to provide a better method for completing international payments.

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]]> https://cointutor.org/ripple-xrp-what-it-is-what-its-worth-should-you-be-investing/feed 0 What Is Cardano (ADA) and Is It Worth Investing In? https://cointutor.org/what-is-cardano-ada-and-is-it-worth-investing-in https://cointutor.org/what-is-cardano-ada-and-is-it-worth-investing-in#respond Mon, 31 May 2021 07:25:53 +0000 https://cointutor.org/?p=8046 What Makes Cardano Stand Out From the Pack?

Cardano is quickly making a name for itself in the competitive world of cryptocurrency, largely due to its unique process and technology.

Rooted in Academia

Cardano is the first peer-reviewed blockchain to appear on the cryptocurrency scene. Before rolling out its protocols, the nonprofit responsible for Cardano assembled a team of scientists and other academics from various esteemed universities to review them extensively.

A Problem-Solving Algorithm

Another feature that sets Cardano apart from its competitors is its proof-of-stake technology called Ouroboros. This algorithm grants miners more mining power according to the amount of coin they own. Created as a less risky alternative to the energy-sucking proof-of-work algorithm, POS is the original consensus algorithm for blockchain technology.

As a third-generation cryptocurrency, Cardano also aims to improve upon the mounting issues associated with the first-generation Bitcoin and the second-generation Ethereum, POW being one among many.

Technological Advancements

As a result of its speed and rapid technological advancements, Cardano will soon process up to a million transactions per second. Hence Cardano is not only considered one of the most technologically advanced cryptocurrencies available but is also now the third-largest cryptocurrency overall.

How Does Cardano Work?

To understand how Cardano works, it’s helpful to break it up into the blockchain’s individual layers. There are two components in any given transaction: the mechanism by which tokens are sent and the condition behind the moving tokens.

The first layer, called the settlement layer, allows users to send and receive ADA coins. The second, or computation, layer allows users to create and enter into smart contracts.

About Cardano

Highlighting this company’s distinctive approach, Cardano doesn’t just offer a few paragraphs of backstory on its website as most businesses do.

Instead, it categorizes its history into five different eras, each named after a different literary genius.

The Byron Era

The ideas behind Cardano were conceived by founder Charles Hoskinson in 2015, but the first version wasn’t shipped until September of 2017. It named its cryptocurrency ADA — after the programmer Ada Lovelace — and also launched its official desktop wallet.

The Shelley Era

This period focused on achieving growth, adding value, and optimizing decentralization in a smooth, low-risk, and interruption-free manner.

The Goguen Era

In this period, Cardano implemented a series of improvements. These included the integration of smart contracts, which made the cryptocurrency more accessible to wider audiences.

The Basho Era

This era centered on improving the underlying performance of Cardano’s network to better support high transaction volumes. As of March of 2021, this is the company’s current stage.

The Voltaire Era

Finally, in the Voltaire era, the Cardano team envisions the transformation of Cardano into a truly decentralized and self-sustaining system, put in the hands of its community. A treasury system will also fund all future development.

Is Cardano a Good Investment?

The short answer is yes, Cardano is shaping up to be a good investment. Here are the most significant factors that may influence your decision:

The Current Market Activity

These numbers speak for themselves:

At the end of February of 2021, Forbes reported that Cardano’s price surged 2,000% over the previous 12-month period. 300% occurred during February alone. As a result, its total value approached the $40 billion mark.

On March 1st, Cardano launched their “Mary” protocol update. This is designed to turn the company into a multi-asset network similar to Ethereum. Mary also allows users to create non-fungible tokens. These are increasingly popular and valuable digital representations that prove authenticity and ownership.

For the most part, Cardano’s upward trend has continued over the following weeks.

Where the Company Is Heading

Cardano has a bright future ahead.

As to the company’s price prediction, one forecasting service expects ADA to slide down to $1.16 in April before surpassing its all-time high by the end of the year, reaching $1.52 in December. The five-year forecast indicates an eventual price point of $4.11.

Regarding the company’s operational plans, its ADA team is currently formulating a blockchain solution to meet the needs of the millions of unbanked individuals in African countries. As previously mentioned, Cardano is also working hard to become fully decentralized and remove itself from IOHK’s management.

Good To Know

If you invest in cryptocurrency, be ready for massive price swings. They’re fairly normal occurrences in this notoriously volatile market. Mentally preparing yourself for these wild investment fluctuations ensures you don’t act irrationally when they occur.

How To Invest in Cardano

Investing in Cardano requires a process akin to other cryptocurrency platforms.

Purchasing ADA

Buying ADA is a four-step process:

      1. Obtain one of Cardano’s wallets.
      2. Locate your distinct ADA address.
      3. Buy ADA through an exchange.
      4. Withdraw ADA into your wallet.

Staking

Cardano now has staking rewards. These allow ADA holders to earn interest in addition to their market price gains.

The company even provides its own staking calculator, which can help predict your future awards if you delegate your stake to the same pool over a 365-day period.

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How Does Polkadot Work?

Polkadot cryptocurrency is set up as a blockchain — a way of storing information that works similarly to a database. Blockchain technology stores information to create:

    • A permanent timeline, without the need to purge data
    • Uneditable records, so Polkadot can’t be easily hacked
    • Transparency and visibility to anyone
    • Decentralized currency, not limited to control by a single bank or entity

Since blockchains are recorded but never edited, hacks can be easily traced. Even if your cryptocurrency is stolen, the blockchain continues tracing it through the system. The hacker may remain anonymous, but the cryptocurrency is easily transferred back to its rightful owner.

How Is Polkadot Different Than the Competition?

Polkadot is newer than other popular cryptocurrencies. Bitcoin was the first to emerge in the world of cryptocurrency. It offers basic abilities compared to the second-most popular cryptocurrency, Ethereum, which can complete more complex tasks.

However, there is a charge for each task with Ethereum, so the cost of more complex transactions adds up quickly. Ethereum has only one “lane” for transactions, which can lead to network congestion.

Parachains

Polkadot is different because it offers parachains, short for parallel chains, series of connected blockchains. These blockchains run alongside one another in a way that speeds up transactions. Having multiple lanes to complete transactions leaves less chance for network overload.

Additionally, Polkadot created protocols that allow its network to interact with other blockchains. Since its blockchain network is flexible, it has an increased ability to pivot and serve more specific needs.

Why Are Investors Choosing Polkadot?

Polkadot is gaining interest from investors because it is more interactive. Developers can link blockchains to the Polkadot system and even create entirely new blockchains. When investors see developers flocking to new technology, it catches their attention.

When it comes to Bitcoin and Ethereum, investors often have to buy fractions of coins based on their value. Polkadot is currently more affordable, making it a more enticing purchase.

The Strategy Behind Choosing Polkadot

As cryptocurrency becomes more popular, upstarts like Polkadot will take some of the market share from major players like Bitcoin and Ethereum. Ehtereum is up 266% in value this year. It is easily beating Bitcoin in growth even though Bitcoin has been around longer. Yet, many investors are turning toward up-and-coming blockchain networks like it.

Potential Benefits of Investing in Polkadot

In August 2020, Polkadot hit the stock market with a value of $2.69. In seven months, its value is up more than 1,200%. This growth is enticing to investors looking to see a return on their investment.

Some investors see Polkadot as an inevitable progression of cryptocurrency. It’s the next step in improving blockchain technology. It’s a scalable business model, leaving lots of room for growth. For investors, business growth means an increase in value.

Investor Contributions

It also has a foundation designed to reward true investors and weed out bad ones. Investors committed to its success have a real stake in the company. Not only are they financial investors, but they also contribute to decision-making for things like:

      • Network fees
      • Establishing or removing parachains
      • Network upgrades

Polkadot weeds out bad investors. If you invest in but aren’t engaged in how the system evolves, your DOT tokens are released and reinvested into the ecosystem. This leaves room for serious investors to help Polkadot improve the way it offers services.

Potential Risks of Investing in Polkadot

Investing in anything new carries risk. While something can happen to any of your investments at any time, some stocks are considered safe. If a business has a track record for steady growth or at least maintaining value over many years, you view it as a safe investment.

Polkadot was first introduced by its founder, Gavin Wood, in 2016 via a whitepaper. At fewer than five years old with less than a year in the stock market, it has no track record for comparison yet, which makes it significantly riskier.

Is Polkadot a Good Investment?

Polkadot is still very young. If you like taking risks, your investment could pay off big in the long run. But it could also go bust if a newer, better technology comes along in the form of a competitor and overtakes Polkadot.

While Polkadot has many projects in the pipeline, it will take some time for this new cryptocurrency to see true success. The good news is that it already has monetary value in exchanges, making it a stock worth watching.

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