CLASS: How CRYPTOCURRENCIES work | TRADERS

The Factory receives the visit of ALBERTO G. TORIBIO, specialist in Blockchain technology and Innovation, who comes to tell us how cryptocurrencies were created and how we can take advantage of this asset through trading.   Do not miss the full MASTER CLASS in the CLUB TRADER (https://canaltrader.com/members). If you have not subscribed yet we encourage you to do it, it's free 😉.

Video transcription

Cryptocurrencies are here to stay. We are talking about something that comes to change the way money is created and distributed around the world. Right now in the markets there are asset shortages that are as rich and active as cryptocurrencies are.

Trading is the main market or economic activity a...

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Cryptocurrencies are here to stay. We are talking about something that comes to change the way money is created and distributed around the world. Right now in the markets there are asset shortages that are as rich and active as cryptocurrencies are.

Trading is the main market or economic activity around cryptocurrencies, so I think you should know a little more about how cryptocurrencies work. It is something that you already know in reality, since it is about currencies. It turns out that the euro is something that creates in central banks and commercial banks, such as: Banco Santander, Bankia or la Caixa have the privilege of buying money at an interest rate from the European central bank, as if it were oil or any other merchandise, and sell it to the most expensive citizens. Why can only banks do it? Because it is the only mechanism we have found to put money into circulation. We couldn't throw it out of the planes and make it workable, so this is how it was put into circulation.

What happens to Bitcoin? In 2008, just in a financial crisis, a group of people, specifically one who calls himself Satoshi Nakamoto, we did not know their identity, set out to create digital money on the Internet.

The first thing we need to create digital money, he reflected, is an accounting book, a place where we notice the balance of each and every one of the people who, for example, are sitting here today. But in a place like the internet, where the only thing we have is people connected to each other with an installed computer program, as if it were emule or any other peer to peer program, we could not do, for example we could not make Eric have the Because we do not know who Eric is and hide behind Eric anonymity soon, despite the fact that he let us consult the book and write down the transactions, he would soon be encouraged to modify the book to make someone else have nothing or that he has a lot of money. The solution that Satoshi Nakamoto proposed is to make all the people who are part of the network, all have a complete copy of that accounting book and every time we need to write down a movement it will be necessary for all of you to see it, see that transaction that can be of one of you or another person, who is not part of the network but has annotations to his name in each and every one of those books. You will see the transaction and if it seems correct you will notice it in your local copy. If most of you do, that transaction is considered valid and so, with consensus, that's how blockchain works.

We are talking about something that comes to change the way money is created and distributed around the world. I have explained to you the way in which banks have a monopoly, on how money is bought and sold in the wholesale market, but Bitcoin works in a different way. The way to put this asset into circulation is through an algorithm that defines its scarcity as something by default. As you know scarcity is one of the things that make assets valuable. There is another fundamental aspect, and that is that Bitcoin is created in a predictable and stable way over time. Gold is a scarce asset, can you imagine that suddenly there was a great vein of gold under this building? It would be very good for its owners, but very bad for him in general because there would suddenly be an oversupply that would plunge the price.

So it's not just about being scarce, it's about releasing at a predictable and stable rate. And how do we create the money for you ?, you will ask. Without that monopoly that the banks currently hold, we will do it to reward the people who are acting as servers and you can be one of them if you want. By installing a computer program you will have a complete copy of that accounting book and you will become one of those people who see transactions and write them down on their crazy copy. So there are a lot of people around the world competing to generate the next page of that book and who gets it, write down the transactions, maybe yours, but also other people who have movements to their name in that book on that page By doing so you are allowed to generate new currency, you are allowed to enter a transaction at the beginning of that block of that page and you are currently circulating 12 and a half Bitcoin. What is happening? that the income for these people comes from two fundamental sources: one is the generation of new currency and the other is from the commissions that people like you and I pay when we make a transaction. It works the same way as when we go to a bar to order a coffee: if the bar is empty, there is no problem we can order the coffee the waiter will see us and attend to us. But imagine that the bar is full the bartender goes from one place to another without being able to attend to us and at a given moment the only thing that occurs to us to be served is: hey, I'll give you 50 euros if I'm the next one you put a coffee. The waiter will stop doing what he is doing for sure and will attend to you. The commissions serve so that your transaction, your order is inserted before in that blockchain is confirmed.

Why are they so volatile to cryptocurrencies? The answer to this question is the depth of market is not too high; In addition, we have segmentation, because we have different order books in no more than 30 or 40 large exchanges throughout the world. A cryptocurrency is actually an entry in that book to your name. How do cryptocurrencies actually work? Not so different from how traditional banking works. In traditional banking you have an account number and you also have a password with which you enter your online banking. Here is something similar. You have an address, it is the address of Bitcoin or Cerioum, in general of the cryptocurrency that you are using and that address is used to show it to another person and that they can send you cryptocurrencies.

Associated with that address, you have a password, which is what is known as a private key. Keep it well, because if you have in your possession the private key of an address with many Bitcoins, it is likely that you are the focus of certain attacks. Bitcoins can be purchased through brokers. In your I guess you will never buy through a broker, it is a page like coinbase, it makes it easy for you and charges you 8 or 9% commission. We have the exchange. The difference between a broker and an exchange is that in the broker there is a person or a company that is selling the asset to you and you buy it. Notice that it is different from the assets that you usually buy. Because here when I say shopping is that you really buy. It is as if the barrels of oil arrived at your house and you keep them in the kitchen. Here is something similar. They give you Bitcoins and they can keep them for you, but normally you have them. Then we have the exchanges, the difference is that in this case we have an order book. That's the main difference. You can position your limit orders and you can buy and sell. Then we have the exchange decks. It turns out that when you buy and sell cryptocurrencies in exchange for euros, you have a series of problems because normally the authorities require the exchanges to store with great zeal the information about the know your customer and prevention of money laundering of their clients. and this means that transferring 10,000 euros, for example, to an exchange and returning 100,000 euros back to the bank is an operation in which you are going to have to give many explanations and which is usually very slow. So some people decide to enter the crypto world but decide when to exit. But of course not go out because you want to sell and let's say put yourself in insurance, but because of course you want to retire. And for this reason the exchanges decks are very interesting because the change from cryptocurrency to cryptocurrency does not have any type of control at this time or at least not as many as those that have the fiat exchanges see cypto. because exchange decks work between users. How do we play Bitcoins? How are they purchased? My recommendation is that if you want to use this asset as part of your investment portfolio, you should do so through synthetic assets but, in any case, you are not buying bitcoins, you are benefiting from a replicated asset, a synthetic, an ETF or any other product. We can find cryptocurrencies: Bitcoin, Eternium, Riplpe, Bitcoin Cash ...

There are two types of cryptocurrencies: those that have a company behind that strengthens development and invests money in the cryptocurrency, such as the case of Ripple, and we have others such as the case of Bitcoin. My opinion is that Bitcoin is the first to arrive. The one who hits first, hits twice, and in the case of Bitcoin it is an interesting long-term bet, much more than others. But if you are looking for volatility, really, look at other options. Because the initial offers of currency those companies that decide to finance themselves by selling tickets, because they can be an interesting investment. So to finish I will tell you that cryptocurrencies are here to stay, that they are an asset that of course at this moment belongs to few portfolios for sure, but I invite you to explore closely because it has a very high volatility; and in investment options it is very interesting. I want you to know, although you probably already know, that money is made both when an asset rises and when it falls and at this moment in the markets there are shortages of assets that are as rich and active as cryptocurrencies are. So I invite you to explore them closely because I think you will like them.

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