The topic of non-fungible tokens (NFTs) has been gaining a lot of attention in the cryptocurrency space. But what are they and why should you care? NFTs are unique, digitally scarce assets that can be owned, traded, and even created by users. These digital assets can then be transferred from one user to another digitally or physically. This means that the same physical item could, in theory, exist on multiple different blockchains at the same time.

NFTs have many potential real-world use cases with gaming being just one example. With the rise of crypto collectibles like CryptoKitties, it’s clear that people are interested in using this new technology to do more than just buy and sell virtual items. To learn more about how NFTs work and their impact on modern society, keep reading!

What are non-fungible tokens?

Non-fungible tokens (NFTs) are a new type of digital asset. They are unique and cannot be replicated.

NFTs are made up of two parts: A token (like bitcoin or ether) and something called its "asset ID". This ID has an alphanumeric string that identifies the asset uniquely. The asset ID can be associated with any type of digital content, like a game character, song, piece of art, etc.

NFTs can be created by anyone with the right tools and knowledge to do so. However, creating NFT tokens with the same asset ID is not possible - just like how you can't have two copies of the Mona Lisa painting at once. NFTs are also highly secure due to their decentralized nature since they're stored on blockchain-based systems.

Why should you care?

NFTs are not new. They’ve been around for decades in the form of trading cards, badges, and other physical items that represent achievements. But with the advent of blockchain technology and cryptocurrency, they can now be digitized.

NFTs are digital assets that can be collected, traded, bought, or sold like any other item on an open market. You can also create your own NFTs using software like ERC-721 to give them custom attributes like color, rarity, and design.

There are many potential real-world use cases for NFTs. Some examples include: video games (like CryptoKitties), smart contracts (think about how rare collectibles could tie into a contract), or even digital art (like limited edition prints). The possibilities are endless!

How do NFTs work?

NFTs are a recent innovation in the world of digital assets. They allow for the creation and transfer of unique, digitally scarce assets on a blockchain. For example, you can make an NFT that represents your favorite music album and then sell it to someone else for cryptocurrency like Bitcoin or Ethereum. You can also give that same album away as a promotion to new customers!

The best part is that these non-fungible tokens can be transferred from one user to another digitally or physically. This means they don't have to stay on one blockchain and can exist on multiple different blockchains at the same time.

One of the most popular NFTs right now is CryptoKitties. But this is just the beginning! There are so many ways we could use this technology in our daily lives, especially when it comes to gaming! Imagine if you could trade your hard-earned items with other players without any hassle - that's what it would feel like to use an NFT in gaming!

What is the future of NFTs?

NFTs are still a relatively new concept. However, the potential for these digital assets is clear. The true future of NFTs is yet to be determined.

What will NFTs look like in 10 years? Perhaps 10 years from now, the digital ownership of items will be as common as owning physical items. This means that you could own something that exists purely on a blockchain or have an item that exists both on the blockchain and in the real world.

What are your thoughts? What do you think will happen with NFTs in 10 years?

Conclusion

Non-fungible tokens are the next big thing in the world of blockchain. Until recently, most tokens were fungible, meaning they could be used as currency or traded on exchanges. NFTs are different. They are an ownership token that represents ownership of something else.

NFTs are already impacting the gaming world with digital collectibles like CryptoKitties, but do not appear to be limited to the gaming industry. With ERC-721, the standard for NFTs, any digital asset can be represented as a token on the blockchain.

NFTs are not just the future of blockchain, but also the future of fintech, gaming and even real estate. The possibilities for their use are endless and growing by the day.

Furthermore, transitioning to digital currency and digital assets is a difficult thing to grasp (pun intended) given that we have gotten used to an economy where pretty much everything we own is tangible in one way or another.

People tend to lose sense of security when they are not able to grab what they own. Because of this, people who are interested in cryptoeconomy tend to doubt its integrity and often leaves them discouraged to join.

With this in mind, this article is written to answer the number one concern that most, if not all, interested people have in mind: HOW TRUE IS CRYPTOCURRENCY’S PROMISE OF SECURITY?

Before we proceed, let us first define what cryptocurrency basically is in order for us to go in-depth with cryptocurrency’s security properties.

What is Cryptocurrency?

• It is a virtual currency that has four significant properties:
• Decentralized
• Peer-to-peer
• Open source
• Cryptographically secured via blockchain

Since every piece of cryptocurrency is a blockchain in of itself, everyone has the copy of the same ledger, hence preventing the spread of fraudulent chains, once again due to the decentralized consensus.

Security Through the Power of Consensus

Decentralization is the key feature of cryptocurrency. Although we have gotten used to our money being regulated and circulated by banks and by the government, this system actually relies too much on our obligatory trust in a central entity that handles our properties and transactions.

Perhaps we may feel secure that there is some stronghold in which all our precious belongings rely on, however, it is not a 100% guarantee that these central entities are indeed strongholds. The current economy is plagued with countless needless fees, deductions and interference because of these central entities, but because of cryptocurrency, a decentralized, trust-free system has become possible.

In this way, all transactions are done instantly without the need for inconvenient verifications, fees and regulations, which saves a lot of time and resources that would have been used for middlemen if otherwise.

Peer-to-peer networks is what makes decentralization possible. As opposed to central regulation, everyone involved in cryptocurrency is involved in the machinery of cryptoeconomy.

Everyone is in charge. All transactions are verified via consensus instead of a single authority. In addition, since cryptocurrency is open-source, it is open to everyone, giving more credibility and integrity to the consensus as it increases in size.

This is the reason why digital currencies in the past have failed— because they are not decentralized. Overreliance to a central authority makes the system susceptible to bias and fraud.

Governments can make unfair laws, a bank may suddenly go bankrupt and authorities may turn against their people. With a consensus, on the other hand, everyone cooperates for the good of the system as everyone is a beneficiary of the system.

Given the case that a group of individuals choose to sabotage the system, such an attempt would not succeed as all processes rely on the power of consensus. And if, hypothetically, the consensus decides to sabotage itself, it would be nothing but economic suicide and an exercise in futility.

Cryptography as the Tool for Data Security and Immutability

Yes, transactions are rest assured to be validated correctly via consensus, but how do we make sure that the records of the transactions can remain unforgeable and unaltered?

This is where the blockchain protocol comes into play.

Blockchain is an openly distributed ledger composed of a continuous chain of records, called blocks, which are secured by cryptography.

Each block, when successfully added by the consensus, contains a cryptographic hash of the previous block, making the alteration of single blocks impossible without altering the whole chain.

Furthermore, since every piece of cryptocurrency is a blockchain in of itself, everyone has the copy of the same ledger, hence preventing the spread of fraudulent chains, once again due to the decentralized consensus.

Timestamps and transaction data are also stored within each block in the blockchain, making blockchain not only an efficient security measure, but also a record-keeping tool that is useful for verifying and proving the validity of transactions.

So cryptocurrency seems to be safe and secure, after all. What now?

Hold your horses! Cryptocurrency’s basic foundations may seem foolproof, but we have only scratched the surface. Just like any other system, there are loopholes that exist that threaten the absolute security of cryptocurrency.

Anyone who would tell you that no such thing exists would be lying otherwise. After all, it’s not a perfect world. However, no problem is without a solution.

By identifying these hypothetical attacks beforehand, the system of cryptocurrencies is able to avert these threats before they even happen and provide countermeasures to ensure that no such event should ever happen.

Decentralized(ish) - The 51% Attack

Just as previously mentioned, decentralization is the key for a strong consensus which makes the validation of blocks in the blockchain possible.

However, what would potentially happen in case this decentralization is compromised? Case and point, The 51% Attack. Before we discuss The 51% Attack, however, let us first familiarize ourselves with the concept of mining pools.

The consensus which validates transactions is achieved with the collective effort the so-called ‘miners,’ which are individual users who contribute computing and processing power in order to validate these transactions and in return receive a piece of cryptocurrency which they ‘mine’ as a reward.

As transactions increase, however, they become harder and harder to process as the cryptocurrency available for mining decreases in quantity and increases in value.

As a consequence, these miners start to work collectively to comply with the increasing computing and processing power demands, thus forming ‘mining pools.’

Nowadays, transactions are impossible to process in solo effort and mining pools have grown into very large top-dollar operations.

As mining pools grow excessively large, this poses a threat to decentralization since the a large percentage of the hashrate, the processing power of the whole network, becomes concentrated on a single entity.

Once that mining pool reaches 51% of all the cryptocurrency supply, this instantly abolishes the consensus because a single entity has become the majority, technically making it the authority.

This grants the dominant mining pool the ability to manipulate the system by validating all transactions it wishes to validate as well as forking the blockchain according their will.

The blockchain, still remains immutable, however, and its blocks, once attached, can never be altered, which, on a positive note, is a testament to blockchain’s cryptography-based security.

This incident has happened once in the Bitcoin cryptocurrency when the mining pool GHash reached 55% back in 2014, an incident which they immediately took action within 24 hours, cutting down their operation to minimum, realizing that self-sabotage is useless suicide, as I have mentioned before.

Hypothetically, once an intentional 51% attack has been successful, the system is susceptible to the following risks:

• Double-Spending
• Random Forking
• Selfish Mining
• Transaction Manipulation

All these attacks, though varying on their approaches, have one goal—to steal more assets in the system by duplicating transactions and validating them simultaneously, ultimately breaking the system.

The Countermeasure: The Impracticality of Initiating a 51% Attack

The loophole of a hypothetical 51% attack may seem alarming at first, but when we look at the actual cost of successfully pulling off an assault, it would require resources too ridiculous in size that it’s laughable.

Just as Andreas Antonopoulos, one of the world’s foremost bitcoin and blockchain expert, said in a 2014 press conference when asked about the risk of a 51% attack,

"Bitcoin has achieved a level of computing that no single nation state can overthrow it through computation alone. The effort to do so would require a massive covert operation of chip fabrication then the coordinated assault that would give them dominance over the next block for the next ten minutes until we kick those bastards off the network, rework the protocol around them. They would be revealed. They would have lost a billion dollars doing this and all they got to do was one double spend... It would take a billion dollars to pull the most ridiculous keystone cops failure in history.”

To this day, the 51% threat remains hypothetical, even after four years after the statement has been given because of the near-impossible cost and the sheer impracticality of pulling off such an attack.

Proof of Stake: Eliminating the 51% Attack Risk Altogether

In order to eliminate the 51% Attack threat completely, developers have come up with a new system of block validation in order to eliminate the threat of centralization, specifically the threat of large mining pools on the decentralized cryptocurrency system.

This said system is the proof of stake. In this system, miners who are constantly competing to validate transactions are scrapped off. Instead, they are replaced by what are called validators. These validators are individuals who are randomly selected to be the next person who would validate the next block on the chain.

Validators are required to deposit a stake of a certain amount into the system, and the amount of stake placed is linearly correlated to chances of being selected. Once the transactions has been validated in the block, all the said fees in the block goes to the validator as a reward.

Furthermore, in order to assure that all validations are correct, the system penalizes the validator for validation mistakes by cutting off a portion of their stake.

In this way, the possibility of 51% attack would be exponentially more costly than previously stated, hence putting the threat out of the picture entirely.

No system is perfect. Like I have mentioned before, it’s not a perfect world. However, we can always compare which system is better by how well these systems adapt to threats and come up with countermeasures that outperform said risks.

Cryptocurrency, together with blockchain technology, provides a secure system that constantly evolves in order to provide a secure system which has the ability to fight ferociously against loopholes, and the fact that cryptoeconomy stands strong and thriving to this day is a testament to that feat.

What is Microeconomic Ritualism and How Does it Hinder a Fully-Digitized Economy?

Imagine a world where you can buy a house online instantly on the very couch you’re sitting on without the need for countless certifications and verifications of papers and contracts.

Imagine not needing any more lawyers to secure documents and not having the hassle of going to government offices and banks to settle taxes, mortgages and deed of sale.

Imagine having the whole transaction done from contract to payment in just one tap while at the same time being 100% assured that you are free from scams and fraudulent claims, and that all your assets would return to you right away in case your contract has been breached.

Everything you need to know and have is in your device, in a secure network that cannot be compromised.

Digital economy isn’t a problem in a macroeconomic standpoint as many large-scale corporations, markets and governments now rely on this system since it proves to be an exponentially effective system when it comes to dealing with such overwhelming numbers. The problem lies, however, in the very foundation of the economy itself—the household.

Seems like an ideal world, isn’t it?

But what if I told you that all this is already achievable with the existing technologies we have today? This is the concept of Smart Economy that NEO (formerly known as AntShares), the largest blockchain platform in China, is trying to advocate in the global market. NEO stated in their website that Smart Economy can be achieved with three factors: Smart Contracts, digital assets and digital identity.

All these are made possible by the blockchain protocol. Through blockchain technology, the decentralized and highly secure system of cryptocurrency, record-keeping and smart contracts have been deeply rooted on the ground and have created itself an economy comprised of various digital ecosystems.

So why isn’t it globally adopted, then?

Take cars, for example. Cars are one of the most widespread and universally-used technology in the world. Cars have become a vital part of the modern lifestyle. Everyone uses cars. The interesting thing, however, is that not everyone who uses cars knows how cars exactly work.

The thing that keeps cars relevant is that cars do what they’re supposed to do and they do it efficiently. Now let’s take a look at cryptocurrency: full understanding of cryptocurrency requires tremendous knowledge in computing, programming and economics, but it only takes a simple tap or click to use it.

Cryptocurrency, like cars, does what it’s supposed to do efficiently. So why isn’t cryptocurrency as widespread as cars? The reason may not be because of the complicated nature of cryptocurrency but instead because of the problem of tangibility.

Enter Microeconomic Ritualism

Ritualism is a sociological concept which refers to the constant observance of a practice or a ritual with no regard to its significance and/or function.

In a theological aspect, ritualism is often observed in religious people who are devoted in performing religious practices but fail to live their spiritual implications and moral significance, case and point the need for images and statues to represent deities and divine figures.

So what does ritualism have to do with cryptoeconomy?

Ritualism is the proof that it is human nature to have a need for a tangible representation (or equivalent) in order to grasp something that is abstract or intangible.

The brain is wired to have a stronger sense of reality in tangibility, which explains why it is easier to trust a paper dollar than a virtual bitcoin.

In the case of the car-cryptocurrency analogy, cars are easier to trust because cars are tangible. Tangibility is what gives the absolute assurance that cars are a technology that is real, making its service instantly trustworthy—an advantage that cryptocurrency does not possess.

Digital economy isn’t a problem in a macroeconomic standpoint as many large-scale corporations, markets and governments now rely on this system since it proves to be an exponentially effective system when it comes to dealing with such overwhelming numbers. The problem lies, however, in the very foundation of the economy itself—the household.

Households, unlike corporations and governments, have little knowledge in these economic concepts and thus are more susceptible to ritualism—hence the term microeconomic ritualism.

Smart economy struggles to find its way to the common folk because people have grown to trust centralization since the existing centralized tangible economic system provides a stronghold (the central authority) and tangible proof (tangible currency and paper documents) which give people a sense of security that their assets and transactions continue to exist.

Vis-a-vis, cryptoeconomy has its own stronghold (the decentralized blockchain) for people to rely on and irrefutable proof (each of the immutable blocks that secures all the records, assets and transactions) for them to trust.

But since these lack a tangible and observable form, despite being actually more secure than paper economy, it still loses its integrity in the eyes of the misinformed.

Let’s take a step back. When we look at a paper bill, it’s nothing more than a piece of paper with a promised value. It has no intrinsic value. It’s just paper.

But paper money circulates naturally in our daily lives to the point that questioning how currency works does not even occur to our minds. This is because the tangible proof (the piece of paper) has assured us that the bill represents a certain value that a central governing body owes us that we trust them to have (the gold standard; the actual value).

Now, if we put it side by side with cryptocurrency, what difference do they have other than the former is in physical form and the latter, digital? Both are just mere representations of a value yet we trust one more than the other. This is a clear case of microeconomic ritualism.

The lengthy processes of contracts, documents and middlemen adds even further to a sense of security by having a sense of achievement by going through frivolous and time-consuming processes and ‘formalities,’ and tangible proof which now have alternative and more efficient means of achieving.

With smart contracts, all these are possible in one click or tap, as a matter of fact, but the former method still dominates. Perhaps it’s because an observable process creates an illusion that it’s easier to understand. Perhaps it’s the comfort and security of conforming to tradition. Perhaps it’s both.

Nonetheless, these are all factors of microeconomic ritualism, which is why digital transition is difficult to achieve.

How do we solve this, then?

Finding The Sweet Spot Between Tangible And Digital Economy

If I keep on asserting that the digitalization of economy is obligatory to the modern society, I might as well just say that people should stop being humans. Although, undeniably, the concept of digital economy is the most efficient system out there, human nature cannot be altered.

People will always need to have tangible proof. Even at some point, digital economy enthusiasts will still need tangible evidence in order for them to trust. And so, perhaps, abolishing microeconomic ritualism isn’t the key for digitalization, but instead is the other way around.

The digital economy must find a way in order to satisfy ritualism by finding a bridge that would seamlessly connect the traditional system and the digital.

Just as the federally mandated adoption of Electronic Logging Devices (ELD) for trucking logistics in the US, a full compliance to a digital system isn’t done overnight.

There are phases to this in order to achieve a fully digitalized system and fully replace the preexisting traditional system. In the mandate, the first phase involves a nationwide campaign to raise awareness and understanding towards the existing technology as well as encouraging trucking companies to voluntarily use ELDs.

Second is the transition phase, implementing a partial implementation of ELDs alongside traditional methods. The final phase is the full compliance phase, wherein the traditional method is replaced entirely.

This takes a full 4 years (2015-2019) in order for a complete transition to take place. This kind of transition serves as a good example if we look forward to a modernized economy in the near future.

Digital economy must first synergize with tangible economy in order to abolish its alienating reputation towards the masses. After all, we already have a glimpse of digitalization in centralized economies with the emergence of online banking as well as debit/credit cards.

The use of traditional record-keeping techniques and paper contracts and documents can be used alongside digital transactions.

Though indeed trivial, redundant and unnecessary, traditional methods are maintained in digital economy for the sake of safekeeping and constant assurance of security.

Take it as “totems” from the movie “Inception,” which exists for the sole purpose of assuring the person that he/she is in reality and not in the dream world.

As we slowly make digital transactions as common as paper bill exchange, we also slowly erase tradition and build the common folk’s trust on the new system.

And when decentralized digital economy has proven itself incomparable with paper economy, this might even catch the attention of central governing bodies and markets, adopting it, and even possibly making it the mandated standard just like ELDs.

Winner Takes It All!

All Smart Economy needs is to prove itself as incomparably secure, accessible and efficient than all other forms of alternative economies, and it will, in no time, effortlessly make a fully-digitalized economy the norm of the modern society—even despite the challenge of microeconomic ritualism.

Every ICO, cryptocurrency and blockchain-based technology dream of one thing—mass adoption. However, achieving mass adoption of a technology doesn’t come easy peasy lemon squeezy.

For one, the alternative technology must surpass the existing paradigm it wishes to replace and this is where it gets tricky.

The blockchain protocol, which was initially built for Bitcoin in 2008, is the first and only system to achieve a completely decentralized, secure and immutable public ledger for digital currencies, and this is the very reason why it has become a strong economic contender against the traditional and widely-used fiat money and the systems that come along with it, which have remained unchallenged for a very long time.

Despite the many flaws of centralized digitized fiat currency, it still remains relevant in both micro- and macroeconomic levels.

Why is Crypto Still not Adopted, Then?

The thought of a fully-digital and nearly foolproof currency seem to be too good to be true, isn’t it? The promising technology is too good to be true as a matter of fact, that crypto-economy has grown to such a massive size that it’s estimated to grow up to $20 trillion by 2020, eating away most of the world’s economy.

However, despite its overwhelmingly gargantuan size, cryptocurrency doesn’t seem to create a lot of noise in a microeconomic level, in other words, the household.

When you eat at a restaurant, you don’t necessarily bring out a Bitcoin card and pay your bills in Satoshis. Instead, the paradigm still remains. Cash and digital transactions such as Visa and PayPal still remain to be the most-prefered and dominant mode of electronic transaction.

Despite the many flaws of centralized digitized fiat currency, it still remains relevant in both micro- and macroeconomic levels. Why is this so? Let’s look at the figures:

Visa, one of the world’s largest electronic payment network, claims to have the capacity to process 24,000 transactions-per-second, while on the other hand, Bitcoin, the gold standard of the crypto-economy, processes at roughly 3.3 to 7 transactions-per-second.

This comparison on the two throughputs alone explains why people still prefer fiat over crypto. However, there are plenty of factors that the common person fail to see in these figures alone that might make trusting the traditional payment methods regrettable in a larger scale.

Transaction Quantity - Visa “Transactions” aren’t Exactly Transactions

The 24,000 tps of Visa may seem to be mythical at scale, but this number is only theoretical. In reality, Visa processes around 1,700 tps.

Although significantly lower than the previous figure, it’s still undeniably higher as compared to Bitcoin’s 7 tps. However, the capacity of transactions processed alone does not dictate the quality of transactions.

For one, Visa and Bitcoin rely on entirely different systems. “Transactions” being processed by Visa aren’t exactly transactions, or at least not just yet.

What Visa does is that it tells the merchant that the transaction has been recorded in the ledger, but the payment itself has not yet happened, making the transaction technically incomplete.

The merchant still has to wait for the bank to pay him/her and the bank still has to wait for the credit card holder to pay them. And so, despite the whopping 1,700 tps throughput, transactions still takes at least 30 days to be truly complete.

Transaction Quality - Bitcoin’s Public Ledger is Bitcoin Itself

In Bitcoin, as well as all other blockchain-based cryptocurrencies, when a transaction has been successfully added as a block in the blockchain, all the transaction details and everyone involved in it are part of the blockchain forever and cannot be reversed.

This ensures that once the transaction has been processed, it is already complete, confirmed and rock-solid. This is because Bitcoin doesn’t technically have a currency unlike fiat.

The public ledger is the currency itself, containing all the records of what you have and what you owe. And so once a transaction has been recorded in the ledger, it has been set in stone, and all other ledgers in the consensus contain the same record, ensuring no chance of fraud to take place.

This is the reason behind Bitcoin’s 7 tps throughput. Its decentralization, security and immutability come at the price of scalability, and this is otherwise known as The Scalability Trilemma, as introduced by Etherium’s founder, Vitalik Buterin.

Buying a Carton of Milk with Bitcoin...

The central vision of crypto-economy is the implementation of Smart Economy wherein day-to-day transactions of products and services revolve around blockchain-based technologies, cryptocurrency and smart contracts.

However with the Scalability Trilemma, buying a carton of milk with Bitcoin still seems to be impossible in the near future.

Although some cryptos continue to find and introduce new ways of becoming a more scalable payment method than Visa and Paypal by means of integrating sharding technology, semi-decentralization, alternative consensus etc., it is still very apparent that achieving scalability is impossible without forfeiting one or both sides of the triangle.

Even Visa and Paypal are victims to this trilemma as they have given up decentralization and a bit of security in favor of large scalability. As it turns out, we really can’t have it all.

For now, Visa remains the victor for small transactions as you can trust a purchase of a simple small carton of milk to go under a system with a risk of uncertainty.

However, it is an entirely different story when selling a house-and-lot or a luxurious sports car with the same system. You can’t just trust to give up the keys to the buyer without confirming the transaction at least thrice. This time, cryptocurrency wins with its irrefutability.

Nowadays, it is an established fact: cryptocurrencies are volatile. Even Vitalik Buterin, the founder of Ethereum cryptocurrency, has said that cryptocurrencies are not the best place to keep your life savings.

This is because cryptocurrencies, as Vitalik describes them, are too “hyper-volatile:” the prices shift so drastically that there is no guarantee if the prices would increase or, in the worst case, suddenly hit near-zero in no time. With this, he said, keeping your wealth is better left to traditional assets instead.

A new type of asset-backed cryptocurrency, the stablecoin, has emerged in the market, which has the unique property of being pegged directly to specific fiat currencies, investors and enthusiasts alike have gone crazy with what just might be the key to the crypto worlds hyper-volatility dilemma.

The Emergence of the Need for Stability

Due to its hyper-volatile nature, cryptocurrency trading has become a very wild ride for investors and the risks have become higher than ever. As a result, investors are either very lucky or very unfortunate with their investments.

Undoubtedly, the cryptoeconomy is massive, having trillions of dollars of worth, which is even expected to surpass the worth of the US economy in two years time. However this trillion-dollar ecosystem, despite being the Goliath that it is, ironically still is in the verge of disappearing in a blink of an eye.

Even Bitcoin itself, the very foundation of the cryptoeconomy, still has the risk of hitting zero without notice, perhaps even without a probable cause.

Thankfully, no such events have happened just yet, although the crypto space has been facing quite a share of bad news since the beginning of this year. One such notable news was the sudden loss of $100 billion dollars in the cryptocurrency market in just 24 hours, in February.

Events such as this have investors wanting a bit more stability in the market, which led to the development of various ICOs that aim to resolve this drastic price-swing issues with cryptocurrency.

This brought forth the concept of asset-backed ICOs and, of course, the crypto trading platforms and wallets that allow its holders to avoid the volatility of cryptocurrencies by allowing them to trade between other values such as fiat, gold and other assets.

This is why when a new type of asset-backed cryptocurrency, the stablecoin, has emerged in the market, which has the unique property of being pegged directly to specific fiat currencies, investors and enthusiasts alike have gone crazy with what just might be the key to the crypto worlds hyper-volatility dilemma.

The Dollar, Tokenized—The Stablecoin Feature

One of the very reasons why cryptocurrencies are volatile is because their values are dependent on supply and demand, in contrast to the traditional fiat currency which the total value in circulation is backed up by gold standard.

Since the volume of trade in cryptocurrencies are drastically variable, this causes their prices to rise and fall at the same drastic rate with little to no anchorage, control and regulation, which leads to unpredictable price drops or overinflation.

The concept behind stablecoins is that they are resistant to such drastic price swings by means of automated regulation or being asset-backed. These two means of stabilizing coin value denotes the two types of stablecoins in existence, namely algorithmic and reserved-backed.

Stability by Mathematics

Algorithmic stablecoins are stabilized by means of software rules that controls the supply of coins in circulation relative to the current demand. In this way, price manipulation and fluctuation can be minimized (or even eradicated) since the value of the coin remains either the same or of minimal change.

In short, as the demands rise, the system also increases the supply of algorithmic coins in circulation and conversely, the system finds a way to decrease the supply when the demand drops. Furthermore, the value of the algorithmic coins will be pegged to a certain fiat currency such as USD.

This technology, although promising, still is under development and the concepts of this project remains theoretical to this day.

Stability by Standard Value

Reserve-backed stablecoins are the type of stablecoins that are currently widely used in the market. As compared to algorithm coins, reserve-backed coins have a more direct approach to being on-par with fiat value since they are backed up by fiat itself in such a way that fiat is backed by the gold standard.

Stablecoins such as Tether and UScoin have their coins pegged with USD with a 1:1 ratio. This means that wallet holders require to trade a dollar for a coin.

The dollars will then remain in the reserve until another coin exchange occurs. This ensures that the fiat currency value and cryptocurrency value will always remain the same—a direct tokenization of fiat, if you will.

A New Trading and Liquidity Option for Traders

As of now, there are over 57 existing stablecoins in the market in which approximately 22 are active and around 50 projects are currently in development around the world.

The emergence of stablecoins has enabled crypto trading platforms, most notably Bitfinex, to give investors a more stable and less-confusing option for trading, and perhaps a more trustworthy option to keep digital assets.

Furthermore, this opens the door for cryptocurrency neophytes for them to know and experience the basics of crypto without having to diving into the risky and convoluted cryptocurrency market right away.

Although critics and skeptics point out stablecoin’s problems when it comes to scalability and liquidity as well as other weaknesses due to it being more challengingly structured than the average crypto, many supporters and enthusiasts still believe that the blueprint of stablecoin may become the trading standard that would resolve the hyper-volatility dilemma as well as the bridge that the fiat and crypto economy needs.

Having invented by Satoshi Nakamoto back in 2008, blockchain serves as a record-keeping protocol for various transactions in a form of a distributable ledger secured by cryptography.

This has given birth to the first decentralized digital currency, Bitcoin, which is now the largest and most well known cryptocurrency in the market, hence kickstarting the age of digital trade and a slew of countless other coins and blockchain-based systems.

Blockchain technology, however, has proven itself useful outside cryptocurrency and is currently seen by many smart economy enthusiasts as the key to building a decentralized digital economy that is accessible for everyone and free from needless fees and government interference.

From currency, contracts, logistics, digital assets and even leisure, the economic applications and solutions that blockchain provides seem too good to be true, but are nonetheless possible and are currently making their way into the mainstream, and ultimately, our daily lifestyle as we know it.

Smart economy may seem too good to be true, but we are in the verge of attaining it. According to NEO, in order to fully achieve smart economy, three factors must be made possible: smart contracts, digital identity and digital assets, and through blockchain technology, all of these are now possible.

Blockchain Technology has made Decentralization Possible

No ‘Revolution’ without ‘Evolution’

DECENTRALIZATION is the very goal of blockchain when Satoshi was developing it for Bitcoin. The concept is ambitiously revolutionary in of itself— to create a currency that is free from the control of a single central entity— an entity, such as a bank or a government, which regulates all transactions and keeps their records, therefore requiring trust from all individuals involved in the system.

With blockchain, on the other hand, everyone gets a copy of a public ledger which is shared via Peer-to-Peer (P2P) network.

The transactions are approved by a consensus in order to prevent duplication and double spending, and each record of successful transactions are stored as a single block in the existing blockchain. The data in each block are secured by a cryptographic hash from the previous block, hence making all the data in each block credible and unalterable.

With this achievement in decentralization, security and storage of data, a trust-free monetary system has become possible for everyone without the interference of middlemen, banks, governments, geography and even territorial laws.

Secure Smart Contracts, Digital Records and Electronic Logistics are made Possible

Beyond ‘just currency’

Since blockchain functions primarily as a record-keeping tool, cryptocurrencies such as Etherium (ETH), Neo (NEO) and VeChain (VEN) utilize this feature as a means to create smart contacts and expand the application and versatility of their coins.

Through this, smart contracts and blockchain record-keeping come hand-in-hand when it comes with digital transactions. The automation of cancellation of transactions upon failure to comply with terms and conditions leaves no loophole for fraudulent activities, secures everyone’s assets and leaves no time wasted thanks to the instant verification of blockchain data.

Given that blockchain-based record-keeping and smart contracts are globally adopted, there would be no need to consume much time just for lawyers and/or other middlemen to confirm the verity of contracts and records, and allows for slick processing of transactions.

With the emergence of smart contracts, digital identities and digital assets brought by blockchain technology, we are a step ahead for a fully-digitalized decentralized smart economy.

ELD Implementation and Blockchain-Based Logistic Solutions

The Federal Motor Carrier Safety Administration (FMCSA) has mandated that as of late December 2019, all truck drivers and carriers in the US are subject to full compliance in using Electronic Logging Devices (ELDs) in their operations.

This serves as a major step in the digitalization of logistics and opens an opportunity for teams to develop blockchain-based systems such as Block Array (ARY) which aims to utilize the power of blockchain protocol for specific uses, case and point, the trucking industry.

The Block Array project has developed an application that would integrate into ELD hardware that would instantly provide all specific logistic information that truck drivers and companies need. The blockchain makes it able for truckers to settle detention payouts, which consume a large amount of time to prove, by providing the records of when and where the cargo arrived.

Furthermore, the system allows companies to track their cargo in real-time and manage their supplies whilst ensuring that nothing gets in or out of the system without permission. It’s an all-in-one solution from transaction, transport up to record-keeping.

Blockchain’s Versatility in Lifestyle Demands

Specific Coins for Specific Needs

Countless coins have emerged since the boom of Bitcoin and, of course, with such numbers, most coins are doomed to fail and as a matter of fact, most already have. This is because most cryptocurrencies struggle at being relevant in the market.

This is the very reason why neophytes in coin investment are always advised to be very prudent with their decisions as cryptoeconomy is wildly dynamic and everything is at stake. On a microconsumer standpoint, however, this competition for relevance proves to be beneficial as project developers aim to innovate blockchain-based systems that cater a specific need other than currency.

Specificity equals relevance, case and point the strategy of Block Array (ARY) that caters specifically to logistic needs of truck drivers in the US. Some blockchain-based systems also cater to leisure such as CoinPoker (CHP) which is a cryptocurrency-based poker platform that uses their own cryptocurrency coin as poker chips and Verasity (VERA) which is a video streaming platform that advertises itself as a YouTube alternative with cryptocoin benefits for both viewers and content creators.

With the emergence of these Decentralized Applications (DAPPS), decentralized operating systems dedicated to these applications are also developed such as EOS and Brahma OS.

Smart Economy: Decentralized, Open-sourced & Secure

Smart economy may seem too good to be true, but we are in the verge of attaining it. According to NEO, in order to fully achieve smart economy, three factors must be made possible: smart contracts, digital identity and digital assets, and through blockchain technology, all of these are now possible.

This automated system has already been around and is being used by enthusiasts all around the globe. All it needs for universality are sufficient public interest and widespread adoption.

However, one must always keep in mind that smart economy is not the holy grail that magically solves all problems in the system, and it doesn’t present itself as something that would overthrow the current economic system.

Instead, it is viewed as something that would go alongside the preexisting economy that has its own perks. Most problems in record-keeping and verification are made easy by blockchain technology, however, complex verbal terms and conditions for large contracts and transactions are still best observed with witnesses and legal process.

Of course it cannot be denied that many aspects of this existing economy pose a lot of inconveniences, particularly the inconveniences of centralization and the occasional insufficiency of security, and smart economy provides an efficient solution for these problems.

With the integration, synergy and constant evolution of preexisting systems and groundbreaking technologies such as the blockchain protocol, we are able to enjoy a highly efficient and convenient economy with the best interests in everyone’s needs.

Different types of market analysis

To begin, let's look at three ways on how you would analyze and develop ideas to trade the market. There are three basic types of market analysis:

• Technical Analysis
• Fundamental Analysis
• Sentiment Analysis

As crypto market demand increases, prices advance and as supply increases, prices decline. When supply and demand are equal, prices move sideways as bulls and bears slug it out for control.

Technical analysis

Technical Analysis is the forecasting of future financial price movements based on an examination of past price movements. Like weather forecasting, technical analysis does not result in absolute predictions about the future.

Instead, technical analysis can help investors anticipate what is "likely" to happen to prices over time. Technical analysis uses a wide variety of charts that show price over time.

Fundamental analysis

the price of any asset is determined by demand and supply.

So, if the demand becomes higher than the supply, then price starts to increase. If the supply becomes higher or, which is the same, demand becomes lower – then price starts to decrease.

So, the subject of fundamental analysis is the investigation of which factors can and do have influence on demand and supply, and, in turn, on price and make price to change.

Although there are a lot of such factors, all of them are well-known, as well as their possible effect on demand and supply.

Fundamental analysis is dedicated to the investigation of economic, political and social factors that have an effect on an underlying asset.

Sentiment Analysis

Sentimental analysis is a bit more delicate substance than Technical and Fundamental analysis.

Although technical analysis tells us that “price includes all available information” and that price is all trader’s need to make a deal decision – things are not so simple.

We will not debate now on does price really reflect all available information or not – let’s assume that it does, but this point doesn’t mean that all traders open positions in the same direction.

Of course every trader sees the direction of the market, but almost everyone has its own explanation why does market move particularly this way.

But take a look at this moment from different side – maybe the market moves in this particular way (up or down), because it just mirrors what all traders think about it.

Each trader opens positions according to his or her own thoughts and opinions about the market, and, it fact, all these positions create that substance that we call market sentiment.

So which one should I use?

There are lot of argues concerning what type of analysis is better. Although it will be perfect to have an excellent knowledge and practical skills for each type, Here in Crypto Intelligence Agency (CIA), we will not state that it is absolutely necessary.

Many market participants and authorities tell that it will be better if trader perfectly governs with all three ways of analysis. Well, it’s difficult to argue with this statement.

Theoretically – yes, but talking about real life - in general, depending on own tasks and trading way most traders make some particular type as primary and others types as supportive one.

It assumes that trader should have perfect knowledge and application skills at least in single type of analysis and have a common knowledge with the others.

But this common knowledge is absolutely necessary, because you should have at least general understanding of what is going on the market. I will be absolutely happy if you will become a master in all three types of analysis, but I suggest that you should start at least from one of them.

And later you can calmly choose preferable type and decide – do you really need perfect level for all of them, or just for one and familiar With others.

Support and resistance

Let’s explain shortly about support and resistance. Support- Support is the price level at which demand is thought to be strong enough to prevent the price from declining further.

Resistance- Support is the price level at which demand is thought to be strong enough to prevent the price from rising further.

Support and resistance represent key junctures where the forces of supply and demand meet. In the financial markets, prices are driven by excessive supply (down) and demand (up).

Supply is synonymous with bearish, bears and selling. Demand is synonymous with bullish, bulls and buying. These terms are used interchangeably throughout this and other articles.

As crypto market demand increases, prices advance and as supply increases, prices decline. When supply and demand are equal, prices move sideways as bulls and bears slug it out for control.

Economic Calendar

Calendar used by the financial community to determine when major economic reports on items such as unemployment or housing data are scheduled to be released.

Traders may shift the direction of the market as the release date approaches especially if the report has the possibility of being bad.

Professional traders pay close attention to global events by using an economic calendar. By having the release schedule for each economic indicator, a trader can foresee when major movements will happen.

The most influential events in crypto trading are market caps, trade volumes, circulating supplies and max supplies among other factors.

It's important to note that there are several free resources available online that traders can use to help them determine the date/time of future market-moving events.

What are the best Trading Hours?

Generally speaking, the most active traders trading hours, are between the London markets opening around 8:00 GMT and end with the markets in the US closing around 22:00 GMT.

The absolute busiest time in the markets are during the London to US overlap between 13:00 GMT to 16:00 GMT. These are the hours that are the most liquid or when the most traders are in the markets making trades. If your intention is to do day trading, these are key hours!

There are 3 major sessions each day in the forex markets that could also be applicable to the crypto market to a certain extent. They are the London session, the US session, and the Asian Session.

The London Session

The London session starts around 8:00 GMT and winds down around 1600 GMT. The digital assets that are the most active during these hours are the cryptocurrencies of: Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP). You will also find a big volume of other altcoins such as Bitcoin Cash (BCH), Cardano (ADA), Tron (TRX), Stellar (XLM) and many others.

The US Session

The US session starts around 1300 GMT and winds down around 22:00 GMT. The digital assets that are the most active during these hours are the same as the London session above.

The Asian Session

The Asian trading session is centered in Tokyo but spans many countries and covers the hours of 11pm and 8am GMT. The digital assets that are the most active during these hours are the same as the US session above.

Chart Types

There are a lot of different types of charts that have an application in the real market. The most popular are:

1. Line chart

2. Bar chart

3. Candlestick chart

Line chart

This is the simplest chart type; it looks like a simple line. There is time on the X-axis and price on the Y-axis. This line links close price of each trading period – on the daily time frame, the trading period is single day, on a weekly chart it is one week.

So, by linking together close prices for each trading period, we can see the price behavior during some period of time.

Bar chart

Besides just showing a close price for period like it was on line chart, bar chart also shows open price for trading period, as well as the high price and the low price.

The assignment of X and Y axis are the same. Here is how you read an OHLC bar. The tick on the left represents the opening price. The tick on the right represents the closing pricing.

The vertical bar displays the extreme high and low price movement for a particular stock during the day.

Now, don't get confused when looking at weekly OHLC charts. The only difference here is the time frame you are looking at. Same principles apply as mentioned above. Same goes for monthly time frames.

Candlestick chart

A candlestick chart is a style of bar-chart used primarily to describe price movements of a security, derivative, or currency over time.

It is a combination of a line-chart and a bar-chart, in that each bar represents the range of price movement over a given time interval. It is most often used in technical analysis of equity and currency price patterns. They appear superficially similar to box plots, but are unrelated.

Hedging

For a day trader, not only do crypto trading gives you the opportunity to make a great deal of money with a small move in the market, but they also give a trader an instrument to hedge cryptocurrency positions.

The concept of hedging is the act of reducing the amount of risk that you currently have on your books. For example, if you had a long call position, you could reduce your delta risk by shorting the same underlying asset.

Traders hedge their positions when the risks are not in their favor, or when a piece of news is about to come out and the information will create some uncertainty which might create volatility within the market.

So how can a trader use the crypto trading market to hedge some underlying risk? Let’s say an BTC cryptocurrency trader wanted to hedge his long exposure to the BTC/USD right before Binance crypto exchange announces their financial decisions.

The trader could purchase a below option for the period overlapping Binance exchange announcement with an amount that would allow him to make a percentage of the notional value of the BTC/USD position that is held.

If the announcement contained some information that caused the market to fall for a few hours (over even longer), the trader would be protected.

Use Technical Strategies

One of the many crypto trading tips to being successful is to have a well-planned strategy and of course to use a winning technical strategies.

This is essential if the account is to succeed. In today’s financial world, crypto trading is one of the easiest investment schemes used by traders.

Technical strategies are a great way for the trader to get into any position with high confidence and much more winning percentage. It should be used to help the investor become a successful trader.

The psychological aspect of trading is extremely important to understand, and the reason for that is fairly simple: A trader is often darting in and out of stocks on short notice, and is required to make quick decisions. Emotions simply can't get in the way.

You should periodically review and assess your performance. This means not only should you review their returns and their individual positions, but also how you prepared for a trading session, how abreast are you with the market information.

Emotions Can Rule the Trade

Emotions could be the trader's worst enemies; they often lead to misjudgement and loss of investment.

Greed

There's an old saying on Wall Street that "pigs get slaughtered." This greed in investors causes them to chase on the winning positions for too long, trying to get every last tick. This attribute is damaging to your trade plans as you are always running the risk of getting blown out of a position.

Greed is not easy to beat because we always want to do better and try to achieve a little more. A trader should recognize this instinct and create trade plans based upon rational decisions.

Fear

When your trades are in red or bad news comes about a certain stock or the general market, it's not unusual for the trader to get scared.

Sometimes we hold on to trades that we know are no good in fear of closing them and making the loss "real". It's ok to have a loss and walk away.

Sitting on bad trades just makes your losses larger and offsets any winning trading that you might be doing otherwise. If the trade isn't working out as expected, close it, and move on.

Paralysis by Analysis

Paralysis by analysis is an interesting phenomenon in which traders get so caught up in analysing everything about a potential investment, they never actually pull the trigger on the trade. In this case, what often happens is that the investor will constantly question all of the little details found in the analysis in an attempt to perfectly analyse a situation.

This is a truly unachievable task, which can prevent a trader both from making monetary gains and from making experiential gains by getting into the trade.

We are only human and, as such, perfection may not exist in trading. However, profitable trading can be achieved when you learn to manage our emotions.

Trading Discipline

To get your heads in the right place before you feel the emotional or psychological crunch, you can look at creating trading rules ahead of time. YOU can establish limits where you lay out guidelines based on your Return on Investment ratio and when will you exit a trade - regardless of emotions.

After a major loss, it's important that you take some time off. Avoid the need to immediately jump back in to get your profits back, it will surely come once implementing a distinctive working methods.

It is better to come back after you feel well rested, calm, and clear headed. Beating your emotions is the most difficult thing. If you are smart and recognize that you are being emotional, you can avoid compounding your mistake.

Decisiveness

Deciding when to enter and exit trades is one of the most basic functions of a day trader, and it is important that these decisions are made as efficiently as possible. Being decisive is vital to successful day trading, otherwise you will only sit and watch trades that you should have actually taken.

Being decisive does not mean being rash, and taking trades that you are not sure about, but it does mean acting promptly when a trade does come along. A common pitfall that many beginning day traders come across is seeing a trade occurring, but hesitating and waiting for the trade to start moving into profit before entering (waiting for confirmation that the trade is going to be a winning trade before they enter it).

This always results in an entry price that is not as good as it would have been with a prompt entry, and can turn a winning trade into a losing trade.

Calmness

Remaining calm during trading is one of the most important personality traits for a day trader, but it is also one of the most difficult to obtain and practice. As humans, the natural reactions to a winning trade are excitement and joy, and the natural reactions to a losing trade are panic and sadness, but day traders need to control these emotions, otherwise they will adversely affect their trading decisions (particularly the negative emotions).

For example, the panic that occurs after a losing trade might make you take a new trade almost immediately in an attempt to make the money back, even though there was no trade according to your trading system.

Trading Anxiety

Trading anxiety can be a problem for traders that have suffered from serious losses. Anxiety can cause a loss of confidence, fear of mistakes, and take away your ability to be objective

If you find yourself feeling sick and upset over your trading account, it's likely that your risk management is not tight enough. To overcome this, you have to make a plan.

Sit down and outline what you think you did that put you in the position that you are in. Once you have identified the mistake, make a trading plan to correct the mistake and make a note of how you will avoid this happening again in the future. No one is perfect, everyone makes mistakes.

The most important thing is that you learn from them. There are no perfect traders out there. Even professional traders take a heavy loss from time to time.

Trading without knowledge

Whilst very beneficial in many aspects of our lives over optimism can however be very dangerous in the trading environment. Over optimism and guessing is the result of two main reasons, the illusion of control and the self-attribution bias.

What prevalent amongst new traders is when initial trading success without a plan leads to more trading of a similar fashion and overconfidence in trading.

This problem is common especially when traders attribute random outcomes to skill, an issue known as ‘random reinforcement’. It is important not to confuse randomness with positive expectancy and recognize that working with technical indicators combined with the market sentiment and the fundamentals will give you the complete package to success.

In the process acknowledging that successful trading needs attention and a work plan. Just few winning trades is not the same as long term statistical validation.

Revenge Trading - What is it?

Revenge trading is when you get into an emotional tussle with the market and become overly aggressive with trading. You've suffered some losses and you are understandably upset about it, so you set out to get revenge on Mr. Market, The one who took your money away.

As hard as it can be to fight the emotional response, traders must refrain from revenge trading. Emotions are trader's enemy. The typical revenge trade will be double or triple the size of the previous losing trade.

The trader will reason this out as "I can make back what I lost and add a gain to it, and quickly". The only problem with this approach is, if the trader's hasty decision turns out to be wrong, they are going to add a double sized loss to what they already lost. This turns revenge trading into a never ending pit of bigger and bigger trades until a margin call occurs.

Although it's not a glamorous choice, it makes much more sense to accept defeat for the moment and admit your mistake. It's always slower climbing back up out of the hole than it is to fall down into it, but the long term rewards are much better.

Trading Plan

You should try to learn about your area of interest as much as possible. For example, if you are interested in currencies, it makes sense for you to become knowledgeable about currencies. Start by formulating a plan to educate yourself.

That means following our educational suite, studying and understanding charts, speaking with your account managers, reading the news and view the videos we publish or doing other background work.

You should periodically review and assess your performance. This means not only should you review their returns and their individual positions, but also how you prepared for a trading session, how abreast are you with the market information.