Cryptocurrency FMI Final Project
Cryptocurrency FMI Final Project
Cryptocurrency FMI Final Project
Q. Select a financial market or institution and compile a 2000 word report on it.
Table of Contents
Introduction................................................................................................................................... 3
Block chains:............................................................................................................................. 4
Nodes:....................................................................................................................................... 5
Buying cryptocurrency:................................................................................................................6
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Spot and Future Trading........................................................................................................... 9
Conclusion:................................................................................................................................ 10
Cryptocurrency
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Introduction
Cryptocurrency is defined as:
“A digital assets that currency that can act as a medium of exchange for buying goods and
services. The name itself is derived from cryptography and currency.”
Cryptography refers to the advance math that is used for securing the funds and also making
sure that only you are the rightful owner getting to spend them. In cryptocurrency markets, an
individual coin ownership records are stored in a ledger that exist in a form of a computerized
database. These databases use mainly strong cryptography to:
There is an overall decentralized structure of the crypto market which means that the market is
not run by the government or any single person. Currently, Bitcoin is the largest cryptocurrency
of the world. However there are many other important alternatives to these which we shall
discuss later.
Cryptocurrency differs from the traditional fiat money. In fiat money the money backed by the
government and has reserves backing it up. While cryptocurrency works just by representing
itself without backing.
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Person to Person transaction (P2P)
A peer-to-peer (P2P) service is a decentralized platform whereby two individuals interact
directly with each other, without intermediation by a third party. Instead, the buyer and the seller
transact directly with each other via the P2P service. The P2P platform may provide services
such as search, screening, rating, payment processing, or escrow.
Nodes:
A node is a computer that functions to connect a cryptocurrency network. The node supports the
relevant cryptocurrency's network through either; relaying transactions, validation or hosting a
copy of the blockchain.
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Just like there are many kinds of fiat money types, crypto currency also has various types.
Usually bitcoin is assumed as the standard currency kind here. All those coins that serve as an
alternative for bitcoin are known as altcoins in the market.
Altcoins:
To relay a transaction, the “nodes” having a copy of the blockchain of the cryptocurrency it
supports, broadcasts details of the transaction using encryption to other nodes throughout the
node network so that the transaction (and every other transaction) is known. The transactions
made are all supported by the nodes and node network.
To prove the validity of these transactions, “time stamping “is done. Timestamping helps to
"prove" the validity of transactions added to the blockchain ledger without the need for a trusted
third party, hence supporting the decentralized system. The first timestamping scheme ever
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invented was the proof-of-work scheme. For its invention, hashing algorithms are used some of
which include: CryptoNight, Blake, SHA-3, and X11. All these are supposed to trace secure
transactions and ensure that there are no illegal emissions made.
Buying cryptocurrency:
There are several things that are required for buying bitcoin which include:
Choosing an Exchange
Signing up for a cryptocurrency exchange will allow the users to buy, sell, and hold
cryptocurrency. It is generally considered as best practice to use an exchange that allows its users
to also withdraw their crypto to their own personal online wallet for safer keeping. For those
individuals who are looking to trade Bitcoin or other cryptocurrencies, this feature may not
essentially matter however.
The most popular exchanges for cryptocurrency require KYC. In the US Coinbase, Kraken,
Gemini, and Binance are some to be named. They offer a variety of cryptocurrency to the users.
Once an exchange is chosen, it’s time to gather personal documents. These can vary per
requirement and type of exchange opted for. This process is almost the same as setting up a
brokerage account.
Once the exchange has ensured the individual’s identity and legitimacy it is possible to connect
a payment option. At most exchanges, one can connect their bank account directly or can
connect a debit or credit card. While it is possible to use a credit card to purchase
cryptocurrency, it is usually something that should be avoided due to the volatility that
cryptocurrencies can experience. These exchanges also charge fees per transaction which can
either be a flat fee or a percentage of trading amount.
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Place an Order
After the above two steps have been taken care of the individual can move on to buying the
currency.
Safe Storage
Safe storage of the bought crypto currency is essential as well. It is important to make sur that
the cryptocurrency bought is stored in a safe place. Since they do not have any physical value
therefore cryptocurrencies are stored in special cryptocurrency wallets. By storing the currency
in this one can preserve it and store it away from exchange.
The next big step is to consider which cryptocurrency to invest in. currently, the bitcoin is the
largest cryptocurrency to exist. However there are many other types each suiting to someone’s
need. It is advised to observe trends and see patiently which suits the person.
USA
Canada
Germany
France
Nigeria
India- however it has been currently banned now
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China- the currency is now banned
Japan
Australia
PROS CONS
Cryptocurrency is completely anonymous, It can be difficult to comprehend. especially
which is great for those that value their online with all the technological terms and tricks
privacy and are wary of handing over too
much of their digital data.
It is possible to spend or buy wherever you The market for it is highly volatile. Many use
are, and you don’t even need a computer to crypto for investments while some may even
use it. Everything can be managed on your use it for purchase, but the market is highly
mobile device volatile and you never know when a loss or
profit is coming up.
The transactions themselves are all stored There is no security in case of loss. Since the
on an open ledger (the blockchain). This crypto market is decentralized it can lead to
means that the data is available to view by scams and loss of cash with fraud crypto.
anyone at any time, and that’s a major
boon for those wishing for a more
transparent banking system.
Spot trading is the immediate order that is executed at a current price for buying and selling of a
coin.
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For example you have $1000 in your equity and you have a good analysis of a demand zone
insight of ADA (Cardano). You buy on spot setting a limit at the demand zone or at market
price. When the price action touches your demand zone limit your order would be executed. On
the other side, you can also set limit on the high where you want to offload your coins.
When the price action reaches to your desired level you may sell them on a set limit or at market
price.
In a futures market, prices on the exchange are not settled immediately, like in a spot market.
Instead, two counterparties will make a trade on the contract, with settlement on a future date. In
this market the coin is not directly bought or sold instead a contract is made for a relative date.
The price of the coin on that specific date would result in your Profit or Loss. Also in a futures
contract leverages can be used.
However there are many individuals who still are investing in this market despite the laws going
against it from the State bank.
Conclusion:
In conclusion for the cryptocurrency market, it can be stated that there is yet a lot of pros and
cons that need to be adjusted and looked after. Whether crypto is the future economy or not is
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not certain-but one thing is for sure; the digital currency has made its way into the economy and
shall continue to try so until and unless there is complete elimination.
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